OLDE POPCORN WAGONS v. FESTIVAL POPCORN WAGONS

• Decision Date: 16 June 2004
• Docket Number: No. 03-0773.,03-0773.
• Citation: 685 N.W.2d 853,275 Wis.2d 397,2004 WI App 129
• Parties: KOEPSELL'S OLDE POPCORN WAGONS, INC. and Dennis Koepsell, Plaintiffs-Appellants, v. KOEPSELL'S FESTIVAL POPCORN WAGONS, LTD. and James Kocovsky, Defendants-Respondents.
• Court: Wisconsin Court of Appeals

275 Wis.2d 397

2004 WI App 129

685 N.W.2d 853

KOEPSELL'S OLDE POPCORN WAGONS, INC. and Dennis Koepsell, Plaintiffs-Appellants, v. KOEPSELL'S FESTIVAL POPCORN WAGONS, LTD. and James Kocovsky, Defendants-Respondents.

No. 03-0773.

Court of Appeals of Wisconsin.

Oral argument March 25, 2004.

Decided June 16, 2004.

On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Robert B. Moodie and Lori J. Fabian of Hippenmeyer, Reilly, Moodie & Blum, S.C., Waukesha. There was oral argument by Robert B. Moodie and Lori J. Fabian.

On behalf of the defendants-respondents, the cause was submitted on the brief of Nicholas C. Zales of Zales Law Office, Milwaukee. There was oral argument by Nicholas C. Zales.

Before Anderson, P.J., Brown and Nettesheim, JJ.

¶ 1. ANDERSON, P.J.

Koepsell's Olde Popcorn Wagons, Inc. and Dennis Koepsell (collectively "Koepsell") appeal from a decision granting summary judgment to Koepsell's Festival Popcorn Wagons, Ltd. and James Kocovsky (collectively "Kocovsky"), dismissing Koepsell's breach of contract claim, declaring that Kocovsky is the owner of the trademark, and finding that the breach of contract action was frivolous. We affirm the trial court's dismissal of the breach of contract claim. However, because there are material issues of fact with regard to ownership of the Koepsell trademark, we reverse and remand the trademark issue to the trial court. In addition, we reverse the trial court's finding that the breach of contract claim was frivolous, and direct the court on remand to clarify which statutory criteria were present for its finding. If this is done, the frivolous finding shall be reinstated.

Standards of Review

¶ 2. This court reviews summary judgment decisions de novo, applying the same method employed by the trial court. Brownelli v. McCaughtry, 182 Wis. 2d 367, 372, 514 N.W.2d 48 (Ct. App. 1994). That method is well established and need not be repeated here. See, e.g., id. at 372-73.

¶ 3. A claim is frivolous if there is no reasonable basis in law or equity or if it is commenced solely for the purposes of harassing or maliciously injuring another. WIS. STAT. § 814.025(3) (2001-02).¹ A determination that a claim was frivolous presents a mixed question of fact and law. Stern v. Thompson & Coates, Ltd., 185 Wis. 2d 220, 236, 517 N.W.2d 658 (1994). We will review the trial court's factual findings regarding what occurred under the clearly erroneous standard but will independently consider whether those facts fulfill the legal standard. Id.

¶ 4. Under WIS. STAT. § 814.025(3), the trial judge is not allowed to conclude frivolousness or lack of it without findings stating which statutory criteria were present, harassment, intent to maliciously injure, or knowledge or imputed knowledge that there was not any reasonable basis in law or equity for the position taken. Sommer v. Carr, 99 Wis. 2d 789, 792, 299 N.W.2d 856 (1981).

¶ 5. The inquiry under WIS. STAT. § 814.025(3)(b) is an objective one, focusing on what a reasonable attorney or party should have known. Stern, 185 Wis. 2d at 241. Even though a party may have conducted a reasonable inquiry into the law or facts before filing an action given the time limits or other constraints, under § 814.025 there is a continuing obligation to ensure the action is well grounded in fact and law. Jandrt v. Jerome Foods, Inc., 227 Wis. 2d 531, 563, 597 N.W.2d 744 (1999). Once a party or attorney knows or should have known that a claim is not supported by fact or law, it must dismiss or risk sanctions. See id.

¶ 6. We review a trial court's decision on a motion for reconsideration under the erroneous exercise of discretion standard. State v. Alonzo R., 230 Wis. 2d 17, 21, 601 N.W.2d 328 (Ct. App. 1999).

DISCUSSION

¶ 7. Koepsell owns Koepsell's Olde Popcorn Wagons, Inc. and Kocovsky owns Koepsell's Festival Popcorn Wagons, Ltd. Since 1993, Koepsell and Kocovsky have entered into multiple asset purchase agreements. The first agreement, in 1993, stated that Koepsell (the seller) owned five popcorn wagons, which, by agreement with Summerfest/Milwaukee World Festival Inc., were located on the Summerfest grounds in Milwaukee, Wisconsin, and Kocovsky (the buyer) would purchase from the seller the five wagons for $100,000. It declared that buyer agreed to pay seller a total of $61,500 in periodic payments, which would constitute an ordinary business expense to buyer and be taxable income to seller. The agreement contained a provision stating: "Quality Of Popcorn: Buyer will sell only the best quality white popcorn, the specifications of which shall be determined by Seller."

¶ 8. The April 1997 and June 1997 agreements were virtually identical except for the purchase price that was listed on the agreement. They both stated that seller (Koepsell) agreed to allow buyer (Kocovsky) the ability to maintain and continue contracts with the following festivals in the Milwaukee metropolitan area: Riversplash, Lakefront Festival of the Arts, Circus Parade grounds, Riverfest, Maritime, and Harvest Fair. The "Purchase Price" clause in each stated: "The purchase price for the goodwill as developed from past years of maintaining contracts of these festivals shall be [$42,000 for the April 1997 agreement and $40,000 for the June 1997 agreement]." Both agreements contained a provision stating: "Quality of Popcorn. Buyer will sell only the best quality white popcorn, the specifications of which shall be determined by Seller."

¶ 9. The 1999 agreement stated that, in exchange for paying Koepsell $8000 per year, Kocovsky could manage and operate "the Wisconsin State Fair operation" during the 2000 and 2001 state fair. The agreement contained a provision stating: "Dennis Koepsell has the right to specify the type and brand of popcorn to be used during this time period."

¶ 10. On July 11, 2001, Koepsell brought two causes of action against Kocovsky: a breach of contract claim and, in the alternative, a request that the trial court issue a declaratory judgment to clarify the rights of the parties in using the name "Koepsell" and any "logo or other trademark associated therewith as it relates to the sale of popcorn and popcorn related products in the greater Milwaukee area."

¶ 11. Breach of Contract. Koepsell's breach of contract claim alleged that Kocovsky breached their asset purchase agreements by using an inferior product, which affected product quality, by not selling the best quality white popcorn product available and by not complying with the specifications, type and brand of popcorn required to be used by Koepsell.

¶ 12. Although the language in the asset purchase agreements differs slightly, the parties agree that their contract included an agreement between the parties that Kocovsky would "sell only the best quality white popcorn, the specifications of which shall be determined by [Koepsell]."

¶ 13. In response to Koepsell's breach of contract claim, Kocovsky submitted a motion for summary judgment on May 5, 2002. His brief in support of his motion complained that, despite discovery requests and interrogatories, Koepsell did not provide a description of what constitutes an "inferior product" or what standard was used to judge the popcorn quality; Koepsell did not provide evidence of complaints about the quality of popcorn Kocovsky used; Koepsell did not invoke his right to specify the type or brand of popcorn that was acceptable and, Koepsell had no evidence that Kocovsky's popcorn was of inferior quality. Kocovsky also asked the trial court to find Koepsell's claim to be frivolous under WIS. STAT. § 814.025.

¶ 14. In Koepsell's brief in opposition to Kocovsky's motion for summary judgment, he argued that his own opinion and testimony was all that was required on the quality of popcorn issue to make a prima facie case that Kocovsky breached the agreements by not selling "quality white popcorn."

¶ 15. After this briefing by the parties to the trial court, the court granted Kocovsky's summary judgment motion, reasoning "there has been nothing shown that there was ever a denial by the defendant of the plaintiff's ability to designate or denominate popcorn that was to be used." The trial court went on to say:

Clearly, under the agreements that were entered into . . . [Kocovsky] agreed to sell only, you know, first quality popcorn through the wagons at the various festivals that they had the right to do and that, essentially, the determination of the quality was to be under the—at the discretion, if you will, of Mr. Koepsell, the plaintiff.

The problem we have here, as I've indicated, there's never—there was never any showing through affidavits or the depositions that were part of—that were made a part of the Summary Judgment Motions that Koepsell, one, denominated specific popcorn to be used and it wasn't being used by [Kocovsky]; that [Koepsell] requested the ability to use specific popcorn—that specific popcorn should be used and that was denied. In fact, there isn't any showing that [Koepsell] at any point in time even requested or made any reference to the kind of popcorn to be used. It simply didn't happen, though certainly that ability—and the right was there as related to [Koepsell], [Koepsell] never exercised it, so on that basis there can be no breach by the defendant under those circumstances.

I would note that [Koepsell] as well has never designated what popcorn should be used, even in answer to interrogatories or deposition, has not designated specifically the kind or type of popcorn to be used.

On that basis I'm satisfied there simply is no breach under those circumstances and will grant [Kocovsky's] motion and dismiss that cause of action.

Koepsell appeals the court's dismissal of his breach of contract claim.

¶ 16. On appeal, Koepsell seems to suggest that the trial court blindsided him by deciding the breach of contract claim "primarily on the basis that nothing had been shown that there was ever a...