Moodie v. School Book Fairs, Inc.

• Decision Date: 09 November 1989
• Docket Number: Nos. 88-3442,88-3493,s. 88-3442
• Citation: 889 F.2d 739
• Parties: Lynn MOODIE, Plaintiff-Appellant, Cross-Appellee, v. SCHOOL BOOK FAIRS, INC., a corporation, Defendant-Appellee, Cross-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 739

889 F.2d 739

Lynn MOODIE, Plaintiff-Appellant, Cross-Appellee, v. SCHOOL BOOK FAIRS, INC., a corporation, Defendant-Appellee,

Cross-Appellant.

Nos. 88-3442, 88-3493.

United States Court of Appeals, Seventh Circuit.

Argued Sept. 11, 1989.

Decided Nov. 9, 1989.

David Goluba, Ripon, Wis., for Lynn Moodie.

Andrew O. Riteris, David V. Meaney, Joshua L. Gimbel, Michael, Best & Friedrich, Milwaukee, Wis., for School Book Fairs, Inc., a Corp.

Before BAUER, Chief Judge, WOOD, Jr., and FLAUM, Circuit Judges.

FLAUM, Circuit Judge.

The Wisconsin Fair Dealership Law, Wis.Stat. ch. 135 ("WFDL"), requires a 90 day notice and cure period and good cause for termination of "dealerships" in Wisconsin. This case presents two issues under the WFDL: (1) Does the relationship at issue qualify as a dealership; and (2) Was the district court clearly erroneous in its determination of damages for termination of a dealership without notice.

Defendant School Book Fairs ("SBF") is in the business of selling books to school children through book fairs set up at schools around the country. A book fair is a school sponsored event through which books are sold to students for educational purposes or for fundraising. SBF supplies the books which are sold to the students by the parents or school officials supervising the fair.

Moodie's job was essentially to deliver the books to the book fairs. Under his contract with SBF, Moodie was designated exclusive area "distributor" for 13 counties in Wisconsin and was responsible for delivering books to three schools a day within that area as well as rescheduling those schools for future fairs. Additionally, he would resupply the schools with books from his inventory, and pick up the unsold books after the fairs were over.

To perform his functions, Moodie was required to maintain a place to store the books (though title to the books remained with SBF) and a truck to haul the trailer which contained the books. Moodie built a customized, waterproof shed, at a cost of about $20,000, to hold the books and spent over $26,000 on three different trucks ¹ to fulfill these requirements. The district court also found a significant investment in "goodwill." In the course of performing his duties, Moodie also had occasion to use business cards printed with the SBF trademark which were generally supplied by SBF. ² He also used instructional pamphlets and order forms printed with the SBF trademark. He did not, however, spend any money on advertising.

Moodie delivered books for SBF for almost five years. During that time, he worked at this job nine months out of the year at a pace of 70 hours a week. All of his income during those nine months was derived from commissions from his book deliveries and from rescheduling fairs.

There were two events leading up to Moodie's eventual termination. First, at some point in time, SBF requested that Moodie increase his workload from three to four deliveries a day. Later, Moodie was required by SBF to come "on-line" with a computer system provided by SBF, which involved signing a lease agreement for the computer. Moodie was reluctant to make either of these changes and adamantly refused to sign the lease agreement, although he did state that he would agree to use the computer subject to a lease renegotiated on his terms. After a series of attempts were made to make him comply with the requests, SBF terminated Moodie without a formal 90-day notice and cure period as required under the WFDL.

Moodie brought suit against SBF in Wisconsin state court for money damages claiming he was a dealer under the WFDL. The case was removed to federal district court based on diversity jurisdiction. The district judge granted partial summary judgement to Moodie holding that Moodie was a dealer and that he had been terminated without notice in violation of the WFDL. A trial was held to determine the extent of the damages. Moodie presented an expert witness who claimed that Moodie could have worked for another twenty years delivering books. The expert calculated that the present discounted value of the difference between what he would have earned during the 20 year period working for SBF and what he could earn having been wrongfully terminated was, after taxes, about $206,000. ³ SBF presented evidence that the value of the "distributorship" was about $6,500 on the market. The district judge, rejecting both of these theories, awarded Moodie $7,155, representing lost profits during the required 90 day notice period based on a finding that Moodie would have remained employed only for that required period as he adamantly refused to sign the computer lease agreement, which constituted good cause for dismissal.

Both parties appeal this decision. Moodie, appealing the damages award, claims that he is entitled to the 90-day notice period as a matter of law and the trial court was not entitled to determine that he would not have cured the defects in that period. In addition, Moodie claims that even if the court could make that determination, it did so erroneously, i.e., there was no good cause for dismissal. SBF, on cross-appeal, claims that Moodie was not a dealer. It argues, in essence, that Moodie was merely a delivery person and, therefore, an employee, and not a true dealer as defined by the WFDL. For the reasons stated below, we reject the claims of both parties and affirm the district court.

A.

To determine if Moodie was a dealer, we turn directly to the definition of the term "dealership" in the WFDL. A relationship must exhibit three characteristics to be considered a dealership within the WFDL. It must contain: (1) a contract, which is either express or implied; (2) "by which a person is granted the right to sell or distribute goods or services, or use a trade name, trademark, service mark, logotype, advertising or other commercial symbol;" (3) "in which there is a community of interest." WFDL Sec. 135.02(3).

Since its enactment, courts have wrestled with this definition. ⁴ "The dilemma courts face in resolving this question is formulating a definition sufficiently broad to encompass non-traditional business relationships which in fact fall under the dealership rubric, yet restrictive enough to avoid 'including every vendor/vendee relationship under the protective veil of ch. 135....' " Bush v. National School Studios, Inc., 139 Wis.2d 635, 407 N.W.2d 883 (1987) (quoting Kania v. Airborne Freight Corp., 99 Wis.2d 746, 769, 300 N.W.2d 63 (1981)). In each case, the facts must be carefully examined for indicia of dealerships. See Ziegler Co. v. Rexnord, Inc., 139 Wis.2d 593, 407 N.W.2d 873 (1987) (requiring examination of ten different factors in each case to determine if the requirements for a dealership are met).

The stated purpose of the WFDL is to "protect dealers against unfair treatment by grantors, who inherently have superior economic power and superior bargaining power in the negotiation of dealerships." Wis.Stat. Sec. 135.025. The premise underlying this statutory purpose is that the grantor may be able to change the terms of the dealership towards his advantage after a firm-specific investment has been made in such items as training, specialized products, or goodwill. See Moore v. Tandy Corp., 819 F.2d 820, 822 (7th Cir.1987); Fleet Wholesale Supply Co. Inc. v. Remington Arms Co., Inc., 846 F.2d 1095, 1097 (7th Cir.1988) (Easterbrook, J. concurring). Once the dealer has made this investment, the grantor may extract concessions from the dealer through threats of termination. The purpose of the law, in this light, is to correct a "market failure" by protecting dealers who have made such an investment--those faced with inherently "superior bargaining power." ⁵ Wis.Stat. Sec. 135.025.

The Wisconsin Supreme Court has apparently adopted this view of the statute. In Foerster, Inc. v. Atlas Metal Parts Co., 105 Wis.2d 17, 313 N.W.2d 60, 63 (1981), the court stated that "the law was meant to protect only those small businessmen who make a substantial financial investment in inventory, physical facilities or "goodwill".... It is these types of businesses whose economic livelihood would be imperiled by the termination of their dealership without good cause or adequate notice." The Wisconsin Supreme Court more recently confirmed this view in Zeigler where it stated that the law requires "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." 407 N.W.2d at 879. See also Bush, 407 N.W.2d at 890 ("courts should consider the overriding principle of whether the business' status is dependent upon the relationship with the grantor for its economic livelihood.")

With this interpretation of the statute in mind, we apply this law to the facts at issue. Our standard of review is well established. We review the district court's determination of a summary judgment motion de novo, using the same standard of decisionmaking as that employed by the district court. See Christianson v. Colt Indus. Operating Corp., 870 F.2d 1292, 1299 (7th Cir.1989). SBF concedes that there is no genuine issue of material fact, and accordingly, we must determine whether Moodie qualifies as a dealer as a matter of law under the three requirements of the WFDL. Fed.R.Civ.P. 56(c).

The first requirement, a contract between the parties, is not in dispute. Indeed, in virtually every employment relationship there is an express or implied contract between the parties. A written contract was present here.

The second requirement mandates that to qualify as a dealer, Moodie either sell SBF's products or services, use their trademark, or distribute their products. Applying this test, it is clear that Moodie did not sell books, so he cannot satisfy the sales prong of the test. ⁶

Moreover, Moodie had only de minimus use of SBF's trademark, which is not sufficient to satisfy the WFDL. In Foerster, ...