Kelley Supply, Inc. v. Chr. Hansen, Inc.

Decision Date28 February 2012
Docket NumberNo. 2011AP433.,2011AP433.
Citation2012 WI App 40,812 N.W.2d 539,340 Wis.2d 497
PartiesKELLEY SUPPLY, INC., Plaintiff–Respondent, v. CHR. HANSEN, INC., Defendant–Appellant.
CourtWisconsin Court of Appeals

OPINION TEXT STARTS HEREAppeal from a judgment of the circuit court for Marathon County: Vincent K. Howard, Judge. Affirmed.

Before HOOVER, P.J., PETERSON and MANGERSON, JJ.¶ 1HOOVER, P.J.

Chr. Hansen, Inc., appeals a judgment granting an injunction and litigation costs after a bench trial. The circuit court concluded Hansen violated the Wisconsin Fair Dealership Law (WFDL), Wis. Stat. ch. 135, by improperly terminating Kelley Supply, Inc.'s dealership.1 Hansen first argues the circuit court erroneously determined Kelley was a dealer under the WFDL. Hansen next contends the circuit court erroneously failed to dismiss claims on summary judgment because Hansen never terminated its relationship with Kelley. Finally, Hansen argues that, because it complied with the temporary injunction, the court erred by ordering a permanent injunction and payment of attorney fees Kelley incurred after the temporary injunction issued. We reject Hansen's arguments and affirm.2

BACKGROUND

¶ 2 Kelley is a Wisconsin corporation located in Colby. It supplies cleaning, safety, chemical, and packaging products to a variety of businesses. It also distributes food ingredients to the dairy and food industry. The business began in the 1950s. Bernard Alberts purchased Kelley in July 1981, and has been its corporate president ever since. Of interest here, Kelley supplies cheese producers with coagulants, cultures, colorings and other ingredients necessary to make cheese. It distributes to cheese manufacturers throughout North America, but particularly in Wisconsin and the Midwest.

¶ 3 Hansen is a foreign corporation with its United States offices in Milwaukee. Hansen develops natural ingredient solutions for the food, pharmaceutical, nutritional, and agricultural industries.

¶ 4 As part of his purchase of Kelley in 1981, Alberts made two visits to Hansen's Milwaukee office to inquire whether his new company would be appointed distributor for Hansen and be allowed to continue selling Hansen products. Hansen agreed, and Kelley has been a Hansen distributor ever since. Additionally, Hansen agreed to teach Alberts the art of cheese making and how to sell Hansen's product, and to supply the technical support for the product. By July 1987, Hansen's national sales manager wanted “to discuss ... how we could grow the business together ... selling [Hansen] product.”

¶ 5 In 1989, Pfizer invented Chy–Max, a fermentation produced chymosin (FPC) type of coagulant for turning milk into cheese. FPCs are the coagulant of choice for most cheese makers because they provide higher yields and a better product. Kelley became a Chy–Max distributor for Pfizer in 1991. In 1996, Pfizer sold its Chy–Max product line to Hansen, and Hansen requested that Kelley continue to distribute the product. Hansen's president traveled to Colby to meet with Alberts and requested assistance converting Pfizer's Chy–Max customers to Hansen.

¶ 6 Hansen and Kelley ultimately entered into two written agreements, a letter of understanding dated January 9, 2003, and a product purchase agreement dated April 3, 2006. The letter of understanding indicated it was for an initial period of thirty to ninety days, after which “a more complete and detailed agreement may or may not be issued.” The purchase agreement ran from February 15, 2006 through December 31, 2007. The circuit court observed that the letter of understanding “is, in fact, the more complete and detailed agreement between the parties.” Further, the court found that [w]hile the purchase agreement contained an integration clause, in their actual practices they continued to operate in many significant respects as if the more detailed [letter of] understanding still governed their relationship.”

¶ 7 On November 15, 2007, Hansen representatives traveled to Colby and informed Kelley that Hansen would not renew the purchase agreement beyond December 31, 2007. The oral notice was not accompanied by any indications of cause or deficiencies, or provision for cure. In response to Kelley's objections to nonrenewal, Hansen offered to extend the relationship to February 28, 2008 and make a cash payment. Kelley declined the offer and commenced the present action on December 13, 2007, resulting in a temporary restraining order. The order prohibited Hansen from “terminating, cancelling, failing to renew, or substantially changing the competitive circumstances” of the relationship.

¶ 8 On January 7, 2008, Hansen stipulated that the temporary restraining order would remain in effect as a temporary injunction until otherwise ordered by the circuit court. Hansen obtained a partial summary judgment, dismissing Kelley's claim for monetary damages. Following a four-day bench trial, the court issued a nineteen-page Findings of Facts and Conclusions of Law and a thirty-three page Decision Following Trial. It also issued a decision regarding costs and attorney fees. The court later entered a judgment granting a seven-year injunction and costs and attorney fees to Kelley. Hansen now appeals.

DISCUSSION
Whether Kelley was a “dealer” under the WFDL

¶ 9 The circuit court determined that Wis. Stat. § 135.04 of the WFDL required Hansen to give Kelley written notice of a termination of the dealership at least ninety days prior to the action, state the reasons for Hansen's decision, and provide Kelley sixty days to remedy any claimed deficiency. That section operates in tandem with Wis. Stat. § 135.03, which provides that the grantor of a dealership may not “terminate, cancel, fail to renew or substantially change the competitive circumstances of a dealership agreement without good cause. The burden of proving good cause is on the grantor.”

¶ 10 Hansen argues, however, that Kelley was not a dealer for purposes of the WFDL.3 A dealership exists when there is: (1) a contract or agreement, either expressed or implied, whether oral or written; (2) which grants the right to sell or distribute goods or services, or grants the right to use a trade name, logo, advertising or other commercial symbol; and (3) a community of interest in the business of offering, selling or distributing goods or services. Wis. Stat. § 135.02(3)(a); Central Corp. v. Research Prods. Corp., 2004 WI 76, ¶ 29, 272 Wis.2d 561, 681 N.W.2d 178. Here, Hansen disputes the third element, that the companies shared a community of interest.

¶ 11 The WFDL defines community of interest as “a continuing financial interest between the grantor and grantee in either the operation of the dealership business or the marketing of such goods or services.” Wis. Stat. § 135.02(1). The supreme court established two “guideposts” to assist courts in determining whether a community of interest exists in a given case. See Ziegler Co. v. Rexnord, Inc., 139 Wis.2d 593, 604–05, 407 N.W.2d 873 (1987). The first guidepost is a continuing financial interest, and the second is interdependence, which the court defined as “the degree to which the dealer and grantor cooperate, coordinate their activities and share common goals in their business relationship.” Id. at 604–05, 407 N.W.2d 873.

¶ 12 When considered in light of the WFDL's purpose to protect dealers from unfair practices of powerful grantors, Ziegler explains that “continuing financial interest” and “interdependence” “require a person to demonstrate a stake in the relationship large enough to make the grantor's power to terminate, cancel or not renew a threat to the economic health of the person (thus giving the grantor inherently superior bargaining power).” Id. at 605, 407 N.W.2d 873. This requirement is satisfied if the grantor's adverse action “would have a significant economic impact,” id., on the dealer, and is “intended to weed out the typical vendor-vendee relationship[,] Central Corp., 272 Wis.2d 561, ¶ 32, 681 N.W.2d 178.

¶ 13 To determine whether a community of interest exists, the business relationship must be examined in its totality, as evidenced by the conduct of the parties and the terms of their agreement. Ziegler, 139 Wis.2d at 605–06, 407 N.W.2d 873.Ziegler provided the following nonexclusive list of ten factors that “shall” be examined when considering the two guideposts:

how long the parties have dealt with each other;

the extent and nature of the obligations imposed on the parties in the contract or agreement between them;

what percentage of time or revenue the alleged dealer devotes to the alleged grantor's products or services;

what percentage of the gross proceeds or profits of the alleged dealer derives from the alleged grantor's products or services;

the extent and nature of the alleged grantor's grant of territory to the alleged dealer;

the extent and nature of the alleged dealer's uses of the alleged grantor's proprietary marks (such as trademarks or logos);

the extent and nature of the alleged dealer's financial investment in inventory, facilities, and good will of the alleged dealership;

the personnel which the alleged dealer devotes to the alleged dealership;

how much the alleged dealer spends on advertising or promotional expenditures for the alleged grantor's products or services; [and]

the extent and nature of any supplementary services provided by the alleged dealer to consumers of the alleged grantor's products or services.

Id. at 606, 407 N.W.2d 873 (formatting modified).

¶ 14 Hansen premises its argument with the assertion that [d]ealers' have been defined to be limited to that group of distributors who are so dependent on the product of a particular supplier, that such supplier figuratively has the dealer ‘over a barrel’ based upon that dependence.” Hansen is wrong. A dealership is identified as set forth in the preceding paragraphs, Hansen's reliance on conflicting, nonprecedential federal cases notwithstanding. See Water Quality Store, LLC v....

To continue reading

Request your trial
1 cases
  • Detemple v. Leica Geosystems Inc.
    • United States
    • U.S. District Court — Northern District of Georgia
    • February 9, 2015
    ...Seventh Circuit and lower federal courts, Wisconsin state courts have rejected the strict "over a barrel" analysis. Kelley Supply, Inc. v. Chr. Hansen, Inc., 2012 WI App 40, ¶¶14-15, 340 Wis. 2d 497, 812 N.W.2d 539 (citing Water Quality Store, LLC v. Dynasty Spas, Inc., 2010 WI App. 112, ¶ ......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT