The Water Quality Store LLC. v. Dynasty Spas Inc., 2009AP1731.

Decision Date15 July 2010
Docket NumberNo. 2009AP1731.,2009AP1731.
Citation789 N.W.2d 595,2010 WI App 112
PartiesThe WATER QUALITY STORE, LLC, Plaintiff-Respondent, v. DYNASTY SPAS, INC., Defendant-Appellant.
CourtWisconsin Court of Appeals


789 N.W.2d 595
2010 WI App 112

The WATER QUALITY STORE, LLC, Plaintiff-Respondent,
v.
DYNASTY SPAS, INC., Defendant-Appellant.

No. 2009AP1731.

Court of Appeals of Wisconsin.

Submitted on Briefs March 8, 2010.
Opinion Filed July 15, 2010.


COPYRIGHT MATERIAL OMITTED.

789 N.W.2d 597

COPYRIGHT MATERIAL OMITTED.

789 N.W.2d 598

On behalf of the defendant-appellant, the cause was submitted on the briefs of Kim Grimmer of Solheim Billing & Grimmer, S.C., Madison.

On behalf of the plaintiff-respondent, the cause was submitted on the brief of Gregory J. Strasser and Justin J. Bates of Strasser & Yde, S.C., Wausau.

Before DYKMAN, P.J., VERGERONT and HIGGINBOTHAM, JJ.

VERGERONT, J.

¶ 1 In this action Water Quality Store, LLC, claims that Dynasty Spas, Inc., violated the Wisconsin Fair Dealership Law, Wis. Stat. ch. 135 (2007-08), 1 when Dynasty terminated the agreement under which Water Quality sold and serviced spas manufactured by Dynasty. Dynasty appeals the judgment entered on the jury verdict finding there was a dealership covered by the statute and awarding Water Quality $264,800 in damages for termination of the dealership. Dynasty contends: (1) the circuit

789 N.W.2d 599

court erred in denying Dynasty's motion to dismiss at the close of evidence because, Dynasty asserts, Water Quality failed to establish a community of interest between Dynasty and Water Quality as required by the Wisconsin Fair Dealership Law (WFDL); (2) the jury instruction on community of interest did not fairly instruct the jury; (3) there is no credible evidence to support the jury's award of damages; and (4) Dynasty should be granted a new trial because the damage award was excessive and contrary to the greater weight and clear preponderance of the evidence.

¶ 2 We affirm the jury's verdict. First, we conclude the court properly denied Dynasty's motion for dismissal at the close of evidence on the issue of a community of interest under the WFDL. We reject Dynasty's argument that Home Protective Services, Inc. v. ADT Security Services, Inc., 438 F.3d 716, 720 (7th Cir.2006), provides the applicable standard for determining a community of interest under the WFDL because, we conclude, it is inconsistent with

Ziegler Co. v. Rexnord, Inc., 139 Wis.2d 593, 407 N.W.2d 873 (1987), as recently applied in Central Corp. v. Research Products Corp., 2004 WI 76, 272 Wis.2d 561, 681 N.W.2d 178.

¶ 3 Second, we conclude the circuit court properly exercised its discretion in declining to give Dynasty's proposed jury instructions on the community of interest. For the reasons we explain below, we do not decide whether the instruction actually given was an erroneous exercise of discretion.

¶ 4 Finally, we reject Dynasty's challenges to the damages award and decline to order a new trial in the interests of justice.

BACKGROUND

¶ 5 Water Quality is a business located in Wisconsin Rapids that sells and services spas and also sells water conditioning equipment. Sixty to seventy percent of its business is selling spas as opposed to water conditioning equipment. Dynasty is a Tennessee corporation engaged in the business of manufacturing and distributing spas to retailers. In 2000 Dynasty entered into a “letter of intent/dealer agreement” under which Water Quality was to sell and service spas manufactured by Dynasty. Water Quality sold and serviced Dynasty spas until July 2007, when Dynasty terminated the agreement. With a few exceptions early in the relationship, Water Quality promoted and sold only Dynasty spas.

¶ 6 The termination letter stated that, although Water Quality had “represented our company in a most professional manner and we have the utmost respect for you both as an individual and as a professional dealer ... we have decided to ... accommodate [a] new high volume dealer and give him an exclusive selling

territory.” More specifically, Dynasty explained at trial that a business that sold Dynasty spas in its Chippewa Falls, Rhinelander, and Schofield stores, and had initially agreed not to sell them at its Stevens Point store, told Dynasty in 2007 that, if it could not sell Dynasty spas in Stevens Point, it would no longer sell them in the other three stores.

¶ 7 Water Quality filed this action alleging a violation of the WFDL and seeking damages. After the circuit court denied Dynasty's motion for summary judgment, the case was tried to a jury. The jury was asked to answer two questions: (1) Did a dealership covered by the WFDL exist between Water Quality and Dynasty? (2) If so, what sum of money will fairly and reasonably compensate Water Quality for the termination of the dealership agreement by Dynasty? The jury answered the

789 N.W.2d 600

first question “yes” and awarded $264,800 in compensatory damages.

¶ 8 Dynasty filed a number of motions for post-verdict relief, which the circuit court denied. The court entered an order and judgment awarding Water Quality $264,800 in compensatory damages plus interest, taxable statutory costs, and attorney fees and costs under Wis. Stat. § 135.06.

DISCUSSION

¶ 9 On appeal Dynasty contends: (1) the circuit court erred in denying Dynasty's motion to dismiss at the close of evidence because, according to Dynasty, Water Quality failed to establish a community of interest; (2) the jury instruction on the community of interest did not fairly instruct the jury; (3) there is no credible evidence to support the jury's award of damages; and (4) Dynasty should be granted a new trial

because the damage award was excessive and contrary to the greater weight and clear preponderance of the evidence. We first set forth some background on the WFDL and then address the four issues.

I. Wisconsin Fair Dealership Law

¶ 10 The purpose of the WFDL is to promote the public's interest in fair relationships between dealers and grantors and to protect dealers from unfair treatment by grantors, who may use their superior economic and bargaining powers to the disadvantage of small business owners. Wis. Stat. § 135.025(2)(a) and (b); Central Corp., 272 Wis.2d 561, ¶ 28, 681 N.W.2d 178. A dealership, as defined in § 135.02(3)(a), is comprised of the following elements: “(1) a contract or agreement; (2) which grants the right to sell or distribute goods or services, or which 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.” Central Corp., 272 Wis.2d 561, ¶ 29, 681 N.W.2d 178 (citations omitted). 2

¶ 11 The WFDL imposes several requirements upon grantors attempting to terminate or substantially change the terms of a dealership. Under Wis. Stat. § 135.04, a grantor must give written notice of a termination or change in the dealership at least ninety days prior to the action, state the reasons for its decision, and provide the dealer sixty days in which to remedy any claimed deficiency. Because there is no dispute in

this case that Dynasty did not do this, if there is a dealership under the WFDL, then Dynasty violated the statute.

¶ 12 In Ziegler the supreme court established two guideposts, which, “if satisfied, would lead to the conclusion that the parties shared a community of interest”: a continuing financial interest and interdependence. Central Corp., 272 Wis.2d 561, ¶ 31-32, 681 N.W.2d 178 (citing Ziegler, 139 Wis.2d at 604-605, 407 N.W.2d 873). Interdependence is “the degree to which the dealer and grantor cooperate, coordinate their activities and share common goals in their business relationship.” Ziegler, 139 Wis.2d at 605, 407 N.W.2d 873. “When construed together, these guideposts must reveal an interest in a business relationship great enough to threaten the financial health of the dealer, if the grantor were to decide to exercise its power to terminate.” Central Corp., 272 Wis.2d 561, ¶ 32, 681 N.W.2d 178 (citing

789 N.W.2d 601

Ziegler, 139 Wis.2d at 605, 407 N.W.2d 873).

¶ 13 The Ziegler court also identified the facets of the business relationship courts are to consider in determining whether there is a continuing financial interest and interdependence. These ten facets include:

how long the parties have dealt with each other; [2] the extent and nature of the obligations imposed on the parties in the contract or agreement between them; [3] what percentage of time or revenue the alleged dealer devotes to the alleged grantor's products or services; [4] what percentage of the gross proceeds or profits of the alleged dealer derives from the alleged grantor's products or services; [5] the extent and nature of the alleged grantor's grant of territory to the alleged dealer; [6] the extent and nature of the alleged dealer's uses of the alleged grantor's proprietary marks (such as

trademarks or logos); [7] the extent and nature of the alleged dealer's financial investment in inventory, facilities, and good will of the alleged dealership; [8] the personnel which the alleged dealer devotes to the alleged dealership; [9] how much the alleged dealer spends on advertising or promotional expenditures for the alleged grantor's products or services; [and] [10] the extent and nature of any supplementary services provided by the alleged dealer to consumers of the alleged grantor's products or services.

Ziegler, 139 Wis.2d at 606, 407 N.W.2d 873. This list is not exhaustive and each of these facets may relate to one or both of the guideposts. Id. In considering these facets, the court is not limited to the agreement between the parties but is also to take into account the manner in which the parties actually operated under the agreement. Id. at 609 n. 11, 407 N.W.2d 873.

II. Dismissal at the Close of Evidence A. Correct legal standard

¶ 14 Dynasty contends the circuit court erred in denying its motion to dismiss at the close of the evidence. According to Dynasty, the undisputed evidence showed there was no community of interest. Dynasty's primary argument is that, as a matter of law, Water Quality was not...

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