Home Protective Services v. Adt Security

Decision Date13 February 2006
Docket NumberNo. 05-1074.,05-1074.
Citation438 F.3d 716
PartiesHOME PROTECTIVE SERVICES, INC., Plaintiff-Appellant, v. ADT SECURITY SERVICES, INC., Defendant-Appellee.
CourtU.S. Court of Appeals — Seventh Circuit

David P. Lowe (argued), Paul R. Jacquart, Jacquart & Lowe, Milwaukee, WI, for Plaintiff-Appellant.

Joseph P. Wright (argued), Michelle M. Affatati, Stafford Rosenbaum, Madison, WI, for Defendant-Appellee.

Before EASTERBROOK, EVANS, and WILLIAMS, Circuit Judges.

WILLIAMS, Circuit Judge.

Home Protective Services, Inc. ("HPS") sued ADT Security Services, Inc. ("ADT") for damages under the Wisconsin Fair Dealership Law ("WFDL"). The district court granted summary judgment in favor of ADT on the theory that there was no community of interest between the parties. Because we agree with the district court that the parties did not share a community of interest within the meaning of the WFDL, we reject HPS' argument that summary judgment was improperly granted and affirm the ruling.


The facts in this case are not in dispute. Plaintiff-appellant HPS is a small, family-owned business that sells, installs, and repairs residential and small business security systems. In this industry, local dealers like HPS typically solicit customers, sign them to service contracts, and tender the contracts to large alarm companies like defendant-appellee ADT for a fee. The alarm companies choose which contracts to accept and which to reject. If the contract is accepted, then the dealer installs the alarm system, and the customer pays a monthly fee to the alarm company, which monitors the system and contacts local authorities if there is a break-in or fire. Defendant ADT is the leading alarm monitoring company in the United States. ADT markets its products through both an internal sales force and through its relationships with small dealers like HPS (the "ADT Authorized Dealer Program").

HPS was an ADT dealer from 1996 until its contract was suddenly terminated by ADT in August 2002. At the time of termination, the parties' relationship was governed by a document referred to as the 1998 ADT Authorized Dealer Agreement (the "Agreement"). The Agreement contained exclusivity and non-competition provisions which prevented HPS from working with any ADT competitors unless ADT first rejected the customer's contract. Once ADT accepted a contract, the account became ADT property, and HPS was not permitted to contact the customer for twenty-five years without written permission from ADT. HPS received a one-time net payment of $800 for each customer contract it tendered. HPS would then install the electronic security system, which had to bear the ADT logo and meet ADT specifications. If a customer renewed a contract upon expiration, HPS shared in the renewal income, which was $200-$1100 per month. If a customer canceled or defaulted, HPS paid ADT an attrition chargeback. HPS was required to advertise itself exclusively as an ADT authorized dealer. During the relationship, HPS devoted 95% of its time and derived 95% of its revenues from its ADT business. It spent about 10% of its annual revenues, or about $32,000 per year, on ADT-specific direct mail advertising.

In August 2002, following a corporate restructuring, ADT ended its relationships with about 200 of its 700 Authorized Dealers. No notice or opportunity to cure was provided. According to HPS's expert, HPS incurred over $63,000 in one-time losses while it searched for a new partner and over $14,000 in recurring monthly losses once it began a less profitable relationship with one of ADT's competitors. As a result, HPS was forced to lay off most of its workforce and become a "mom-and-pop" operation. At the time of termination, HPS possessed about $10,000 worth of ADT promotional materials it could no longer use. HPS sued ADT, alleging that ADT had violated the WFDL by terminating the Agreement without providing notice or an opportunity for HPS to improve its performance. The district court granted summary judgment in favor of ADT, and HPS appeals.


The District Court Properly Granted Summary Judgment in Favor of ADT Because HPS Failed to Show That There Was a Community of Interest between the Parties.

We generally review a district court's grant of summary judgment de novo. McCoy v. Gilbert, 270 F.3d 503, 508 (7th Cir.2001). However, although the parties here characterize this action as an appeal from a grant of summary judgment, there is no dispute as to either the facts or the law; the sole question is whether the agreed facts come within the ambit of the agreed law. This invites the question whether this case is more akin to bench trial on stipulated facts (in which case we would review the application of fact to law for clear error) or to a ruling on summary judgment (in which case we would review the same questions de novo). Hess v. Hartford Life & Accident Ins. Co., 274 F.3d 456, 461 (7th Cir.2001) (judgment on stipulated facts more akin to a bench trial than to summary judgment, and therefore the district court's application of law to the facts should be reviewed for clear error). As the parties have not briefed the issue, and as our conclusion in this case would be the same under either standard, we think it best to reserve the question for another day. See Cook, Inc. v. Boston Scientific Corp., 333 F.3d 737, 742 (7th Cir.2003) ("No matter. The district judge's ruling [on stipulated facts] was not erroneous at all, and so the precise standard of review is unimportant").

The WFDL provides certain protections (the right to three months' notice and an opportunity to cure) to grantees "of a dealership situated in this state." WIS. STAT. §§ 135.04, 135.02(2). A dealership as defined by the statute contains three elements:

[1]A contract or agreement ... [2] between 2 or more persons, by which a person is granted the right to sell or distribute goods or services, or use a trade name ... or other commercial symbol, [3] in which there is a community of interest in the business of offering, selling or distributing goods or services.

WIS. STAT. § 135.02(3)(a). The first two elements are clearly met here; the case turns on the third.

There is no bright-line test for determining whether community of interest exists. The two primary guideposts Wisconsin courts have established are (...

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  • Benson v. City of Madison
    • United States
    • Wisconsin Supreme Court
    • June 22, 2017
    ...in addressing the overriding community of interest question, not an unwieldy burden. See generally Home Protective Servs., Inc. v. ADT Sec. Servs., Inc. , 438 F.3d 716, 719-20 (7th Cir. 2006) (characterizing the list as "long" and attempting to "distill[ ]" it). It remains true, however, th......
  • The Water Quality Store LLC. v. Dynasty Spas Inc., 2009AP1731.
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    • Wisconsin Court of Appeals
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    ...a community of interest under the WFDL. We reject Dynasty's argument that Home Protective Services, Inc. v. ADT Security Services, Inc., 438 F.3d 716, 720 (7th Cir.2006), provides the applicable standard for determining a community of interest under the WFDL because, we conclude, it is inco......
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    • U.S. District Court — Eastern District of Wisconsin
    • February 10, 2010
    ...the grantor and (2) the amount of time and money an alleged dealer has sunk into the relationship." Home Protective Servs., Inc. v. ADT Sec. Servs., Inc., 438 F.3d 716, 719 (7th Cir.2006) (citing Baldewein Co. v. Tri-Clover, Inc., 233 Wis.2d 57, 606 N.W.2d 145, 151 (2000)). The Seventh Circ......
  • Girl Scouts of Manitou v. Girl Scouts, America, 08-2488.
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    • September 11, 2008
    ...of interest exists within a business relationship. See Ziegler I, 407 N.W.2d at 878-79; see also Home Protective Servs., Inc. v. ADT Sec. Servs., Inc., 438 F.3d 716, 719 (7th Cir.2006). The first is a "continuing financial interest" between the parties. Cent. Corp. v. Research Prods. Corp.,......
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    • United States
    • ABA General Library Fundamentals of Franchising. Third edition
    • July 5, 2008
    ...220 n.141 Holloway v. Bristol-Meyers Corp ., 485 F.2d 986 (D.C. Cir. 1973) 169 n.117 Home Protective Svcs., Inc. v. ADT Sec. Svcs. Inc., 438 F.3d 716, Bus. Franchise Guide (CCH) ¶ 13,266 (7th Cir. 2006) 191 n.17 Homeware, Inc. v. Rexair, Inc., Bus. Franchise Guide (CCH) ¶ 9147, 1988-1 Trade......
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