Moore v. Tandy Corp.
| Decision Date | 18 May 1987 |
| Docket Number | No. 86-2313,86-2313 |
| Citation | 819 F.2d 820 |
| Parties | Richard E. MOORE, Plaintiff-Appellant, v. TANDY CORPORATION, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Stephen P. Hurley, Aagaard, Hurley, Burish & Milliken, Madison, Wis., for plaintiff-appellant.
Thomas Pyper, Stafford, Rosenbaum, Rieser & Hansen, Madison, Wis., for defendant-appellee.
Before POSNER, FLAUM, and MANION, Circuit Judges.
The appeal in this diversity case requires us to decide whether the plaintiff, although nominally an employee of the defendant, was a "dealer" within the meaning of the Wisconsin Fair Dealership Law, Wis.Stat. Secs. 135.01 et seq., in which event he could be terminated only for "good cause." Wis.Stat. Sec. 135.03; see Remus v. Amoco Oil Co., 794 F.2d 1238, 1240 (7th Cir.1986).
Shortly before the law was passed in 1973, Radio Shack (Tandy Corporation), a nationwide retail distributor of consumer electronic goods, abandoned its system of franchised outlets and replaced them with stores it owned itself, managed by employees. It offered the store managers a "special manager incentive agreement." Radio Shack would pick the site for a store, lease the store premises from the owner, equip the store, select and supply the inventory, establish pricing directives, pay all the store's expenses (though the variable expenses would be subtracted from the manager's compensation, as we shall see), maintain all financial records, employ all store personnel, and determine store hours, while the special manager would train and supervise the sales staff, maintain daily sales and inventory records, set prices (in accordance, however, with Radio Shack's directives), and authorize returns, exchanges, and repairs of goods. The special manager would not receive a fixed wage, but instead one half of the store's revenues (after adjustments unnecessary to dwell on here), minus the store's variable expenses. (This is the same arrangement as in a standard sharecropping contract, with the manager corresponding to the sharecropper and Radio Shack to the owner of the sharecropped land.) If the variable expenses exceeded the manager's share of the store's monthly revenues, the difference would be subtracted from the manager's compensation in subsequent months, but he would never have to dig into his own pocket to make good any loss resulting from the operation of the store. For tax purposes the parties designated the compensation received by the manager as employee income, and the agreement is emphatic that the manager is an "employee" --though of course these labels are not decisive. The term of the agreement is two years, and the agreement expires automatically when the term is up, unless renewed.
We do not understand Moore to be arguing that if this were all there was to the special manager incentive program he would be a dealer under the Wisconsin Fair Dealership Law. The critical wrinkle is the requirement that the special manager put up a security deposit equal to half the value of the store's inventory. The deposit is retained by Radio Shack and earns no interest for the special manager; but if and when the agreement is terminated, Radio Shack must return the deposit to him. Consistent with the concept of a security deposit, Radio Shack may debit the special manager's deposit to cover losses caused by his dishonesty, breach of contract, gross mismanagement, or failure to manage the store with "a reasonable degree of care, skill, and judgment."
Moore signed his first special manager incentive agreement in 1973. Ten years later, after several renewals, he was terminated because Radio Shack was disappointed by his sales performance. Moore's initial security deposit had been $15,000, but as his inventory grew, so did his deposit, and by the time he was terminated it was a shade over $70,000. Radio Shack had never debited the deposit, and it returned it to him in full. Radio Shack does not contend that it had "cause" within the meaning of the Wisconsin Fair Dealership Law to terminate Moore, while Moore on his part does not contend that the termination violated the agreement. Hence it is critical to decide whether the relationship described above made him a dealer within the meaning of the Fair Dealership Law.
Anyone who has a contractual "right to sell or distribute goods or services" is a dealer, provided "there is a community of interest in the business of ... selling or distributing goods or services." Wis.Stat. Secs. 135.02(2), (3). The term "community of interest" is defined 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. Sec. 135.02(1). Were it not for the security deposit, Moore would not have had the requisite community of interest with Radio Shack, because he would have had no investment (other than of his human capital) in the common enterprise--the sale at retail of goods distributed by Radio Shack. To be a "dealer," you must have made a financial investment in the "dealership." See, e.g., Foerster, Inc. v. Atlas Metal Parts Co., 105 Wis.2d 17, 24-25, 313 N.W.2d 60, 63-64 (1981); Kania v. Airborne Freight Corp., 99 Wis.2d 746, 767-71, 300 N.W.2d 63, 72-73 (1981); Bush v. National School Studios, Inc., 131 Wis.2d 435, 440-41, 389 N.W.2d 49, 52 (App.1986); Wilburn v. Jack Cartwright, Inc., 719 F.2d 262 (7th Cir.1983). Moore argues that the security deposit is all the financial stake he needs. The district judge, who granted summary judgment for Radio Shack, 631 F.Supp. 1037 (W.D.Wis.1986). disagreed, reasoning that because Radio Shack's obligation to return the security deposit was conditioned only on Moore's refraining from injuring Radio Shack by negligence or worse, Moore bore no investment risk.
The language of the statute is not illuminating; and to observe that the statute's purpose is to help dealers at the expense of their suppliers is as unhelpful as it is obvious. The question is whether Moore was a dealer, and always the question about a "remedial" statute is, how much help was it intended to give the benefited group? But we can get some aid in our interpretive task merely by asking why the statute protects dealers but not employees. The cynical answer (which may not be untrue on that account) is that dealers but not employees have the political muscle to obtain protectionist legislation of this type, which is to say legislation designed to give a class of persons more than they could get from arm's-length bargaining in a free market. A related, less cynical, but incomplete answer is that a person who makes an ill-liquid investment in a joint enterprise may unknowingly be placing himself at the mercy of his joint venturer. Suppose that, as is common in franchise arrangements, Moore had been authorized or required to invest his own money in modifying the store premises to Radio Shack's specifications, and had done so; and suppose that the premises would not be suitable for any other use without additional modifications that would be expensive. Then Moore would be at Radio Shack's mercy, for if Radio Shack terminated the franchise Moore would lose the investment he had...
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