Pollack v. Calimag

• Decision Date: 27 June 1990
• Docket Number: No. 89-0691,89-0691
• Citation: 458 N.W.2d 591,157 Wis.2d 222
• Parties: Dr. Richard POLLACK, and Deborah Pollack, Plaintiffs-Respondents-Cross Appellants, d v. David CALIMAG, d/b/a Pain Relief Clinic of Racine, Defendant-Appellant-Cross Respondent. d d
• Court: Wisconsin Court of Appeals

Page 591

458 N.W.2d 591

157 Wis.2d 222

Dr. Richard POLLACK, and Deborah Pollack, Plaintiffs-Respondents-Cross Appellants, d v. David CALIMAG, d/b/a Pain Relief Clinic of Racine,

Defendant-Appellant-Cross Respondent.

^dd

No. 89-0691.

Court of Appeals of Wisconsin.

Submitted on Briefs Feb. 23, 1990.

Opinion Released June 27, 1990.

Opinion Filed June 27, 1990.

Jeffery R. Brodek of DeMark, Kolbe & Brodek, S.C., Racine, for defendant-appellant-cross respondent.

James W. Hill, Thomas M. Devine, and Ronald P. Brockman of Thompson & Coates, Ltd., Racine, for plaintiffs-respondents-cross appellants.

Before NETTESHEIM, P.J., and BROWN and SCOTT, JJ.

SCOTT, Judge.

Dr. David Calimag, owner of the Pain Relief Clinic of Racine (PRC), appeals the trial court's ruling that the business arrangement between him and Dr. Richard Pollack was a dealership under the Wisconsin Fair Dealership Law (WFDL), ch. 135, Stats. Because the arrangement lacked crucial elements of a dealership, we reverse that portion of the judgment.

Pollack cross appeals, mainly challenging the jury's finding that the parties' covenant not to compete was valid and enforceable. We conclude that the covenant, a reasonable and enforceable one, was breached. We therefore affirm this portion of the judgment. We will address the parties' other issues in the body of the opinion.

I. FACTS

Other than the circumstances under which Pollack left PRC, the facts of the case are largely undisputed. PRC is a clinic in Racine, Wisconsin, specializing in the treatment and management of pain. Pollack, an osteopathic physician, began working at PRC in July of 1986. The next month, Calimag, a neurologist, bought the clinic. On December 15, 1986, Pollack and Calimag signed a one-year contract under which Pollack agreed to work at PRC as an independent contractor. The agreement provided that PRC would assign patients to Pollack and also would provide space, medical equipment, support staff and billing services for him. In return, Pollack would pay sixty-five percent of his net collections for those services and facilities.

In January 1987, Pollack and Calimag signed a covenant not to compete. By its terms, Pollack agreed that while in association with PRC and for one year afterward, he would refrain from "compet[ing] with or engag[ing] in the type of business conducted by PRC" within a twenty-mile radius of Racine. Pollack also agreed to refrain from contacting or soliciting former PRC patients for two years after ceasing his association with PRC. Finally, the agreement included a liquidated damages clause under which PRC would receive $25,000 damages plus attorney's fees if Pollack violated the covenant.

Pollack's contract was not renewed when the first term ended on December 15, 1987. Pollack continued working at PRC, however, until December 21. Two days later he filed suit, alleging termination of a dealership without cause. ¹ He also sought to have the restrictive covenant declared invalid.

In January of 1988, Pollack joined the practice of the Center for Pain Control in Racine. He worked out of its branch office, however, in Elm Grove, Wisconsin--more than twenty miles from Racine. On February 24, a Racine shoppers' guide carried an advertisement announcing Pollack's association with the Center for Pain Control, giving both the Racine and Elm Grove addresses. The Elm Grove address was printed beneath Pollack's name, but the ad did not state that Pollack would work in the Elm Grove office only.

On March 9, Calimag filed an amended counterclaim alleging breach of the covenant not to compete. Three months later, he filed a motion for default judgment because Pollack had not answered either the initial or the amended counterclaim. Pollack finally answered the counterclaim on July 15, the day of the default judgment hearing. Calimag's motion for default judgment was denied.

At trial, the jury found that Pollack had breached the covenant and the court assessed $25,000 liquidated damages and attorney's fees in favor of Calimag as stipulated in the agreement. On the dealership claim, the jury awarded Pollack $33,200 on collections for unpaid services and $64,400 for lost earnings through the date of the trial. Pollack was also awarded $20,520 in attorney's fees and costs on the dealership claim.

II. THE APPEAL

A. Dealership

Prior to trial, the court ruled by summary judgment that the business arrangement between Pollack and Calimag was a dealership within the meaning of WFDL. Neither party now contends that the jury instead should have made that determination. They only dispute whether the court was correct in concluding that their agreement was a dealership arrangement. This presents a question of law which we decide without deference to the trial court's determination. Bush v. National School Studios, Inc., 139 Wis.2d 635, 645-46, 407 N.W.2d 883, 888 (1987).

"Dealership" is defined in sec. 135.02(3), Stats. "Dealership" means a contract or agreement, either expressed or implied, whether oral or written, 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, trademark, service mark, logotype, advertising or other commercial symbol, in which there is a community of interest in the business of offering, selling or distributing goods or services at wholesale, retail, by lease, agreement or otherwise.

Thus, for a business relationship to constitute a protected dealership under WFDL, the following criteria must be present: (1) a contract or agreement; (2) by which is granted the right to sell or distribute goods or services or use a trade name or commercial symbol; and (3) in which there is a community of interest. Id.; see also Bush, 139 Wis.2d at 651-52, 407 N.W.2d at 890-91.

The parties agree that a contract exists but disagree whether the other elements exist so as to bring their contractual agreement within the purview of WFDL. We conclude that the Pollack-Calimag agreement was not a dealership because it lacked two of the three characteristics essential to a dealership: the grant of a right to sell or distribute services on PRC's behalf and community of interest. We address each in order.

1. Right to Sell or Distribute PRC's Services

Calimag contends that, rather than a dealership, the relationship was simply an agreement between an independent contractor (Pollack) and a sole proprietor (Calimag). We agree. The relationship between the doctors was not an arrangement whereby Calimag gave Pollack either a right to sell or distribute goods or services or the right to use PRC's trade name, service mark, logo or other commercial symbol. Calimag did not provide goods or services to Pollack for further delivery to the consumer. On the contrary, Pollack already had his own "goods and services"--his licensed ability to deliver osteopathic services.

Nor was Pollack granted the right to use PRC's name. Pollack himself testified that Calimag did not give him that right. The agreement clarifies, too, that Pollack was never authorized to use PRC's name. It provides:

Independent Contractor. It is understood and agreed that Pollack is at all times acting and performing as an independent contractor, and not as a servant or agent of PRC.... Pollack shall not hold himself out as a partner, shareholder or principal of PRC.

In view of the contract's express language and Pollack's testimony, Pollack's assertion that the contract establishes an "implicit" agreement allowing him to use the PRC service name is unpersuasive.

2. Community of Interest

We also conclude that the relationship between Pollack and Calimag did not exhibit a "community of interest." Community of interest is the criterion which most distinguishes dealerships from other forms of business agreements, Ziegler Co. v. Rexnord, Inc., 139 Wis.2d 593, 600, 407 N.W.2d 873, 877 (1987), and implies a significant economic relationship between the parties. Id. at 601, 407 N.W.2d at 877. It connotes shared goals and cooperative, coordinated efforts to an extent more significant than the modicum of shared interests present in every contractual relationship. Id. at 604, 407 N.W.2d at 879.

Two closely related guideposts help refine and confine the term so as to make it meaningful. One is a "continuing financial interest," which contemplates a shared financial interest in the operation of the dealership or in the marketing of the good or service. Id. at 604, 407 N.W.2d at 878. The other is "interdependence," or the degree to which the dealer and grantor cooperate, coordinate their activities and share common goals in their business relationship. Id. at 605, 407 N.W.2d at 879.

In determining whether a community of interest exists, a court should not restrict its inquiry to any one facet of the business relationship. Id. Rather, it must examine numerous factors, separately and together, as shown by the actual dealing of the parties and in their contract. Id. at 605-06, 407 N.W.2d at 879. Some factors include the length, extent and nature of the parties' dealings and obligations; time or revenue devoted to, and gross proceeds derived from, the product or service; extent and nature of the grant of territory; use of proprietary marks; the alleged dealer's financial investment in inventory, facilities and goodwill; and expenditures by the alleged dealer for advertising or supplementary services. Id. at 606, 407 N.W.2d at 879-80.

Calimag contends a full analysis of the Ziegler factors demonstrates the lack of a community of interest. He argues that the trial court erred by considering only two factors--Pollack's investment in good will during his year association with PRC and the payment arrangement under which Pollack paid sixty-five percent of his charges to PRC for staff and office support.

Pollack, on the other hand, contends that the arrangement evinced a community of interest through its shared goals and cooperative efforts, shown by the...