Winebow, Inc. v. Capitol-Husting Co.
| Decision Date | 16 August 2017 |
| Docket Number | No. 16-3682,16-3682 |
| Citation | 867 F.3d 862 |
| Parties | WINEBOW, INC., Plaintiff–Appellee, v. CAPITOL–HUSTING CO., INC. & L'Eft Bank Wine Co. Limited, Defendants–Appellants. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Andrew P. Beilfuss, Attorney, Milwaukee, WI, Edward King Poor, Attorney, Chicago, IL, Quarles & Brady LLP, for Plaintiff–Appellee.
Thomas L. Shriner, Jr., Attorney, Gregory Neil Heinen, Attorney, Foley & Lardner LLP, Milwaukee, WI, for Defendants–Appellants.
Kendall W. Harrison, Attorney, Mike B. Wittenwyler, Attorney, Godfrey & Kahn S.C., Madison, WI, for Amicus Curiae Wisconsin Wine and Spirit Institute.
Before Wood, Chief Judge, and Flaum and Easterbrook, Circuit Judges.
Eighteen years ago, Wisconsin Governor Tommy Thompson vetoed portions of an appropriations bill that imposed new regulations on alcohol dealers and distributors. In doing so, the governor hoped to diminish the regulatory burden on wine dealerships. In the present case, which pits an upstream wine business against two wholesale wine distributors, the question is whether Governor Thompson achieved that goal. The answer turns on the proper understanding of state law. Because there is no guiding precedent and the issue is of great practical importance, we respectfully certify to the Supreme Court of Wisconsin the question whether wine dealerships are automatically to be considered as "intoxicating liquor" dealerships for purposes of the Wisconsin Fair Dealership Law. See Wis. Stat. § 821.01 ; Cir. R. 52.
Plaintiff Winebow, Inc., imports and distributes wines to downstream wholesalers. It wants to cut its ties with two wholesale distributors, defendants Capitol–Husting and L'Eft Bank Wine, to whom we refer collectively as the Distributors. Winebow began using Capitol–Husting as a distributor of its wines in 2004; it added L'Eft Bank in 2009. Over the years, Winebow granted the Distributors the exclusive right to sell and distribute Winebow products within specified regions of Wisconsin. Evidently the relationship suited the Distributors, who bought "substantial amounts" of Winebow's wine in recent years. Winebow, however, became dissatisfied, and in February 2015 it abruptly terminated both distributorships. No express agreement with either counterparty stood in its way, but the Distributors took the position that the Wisconsin Fair Dealership Law bars Winebow from doing so—at least without any financial penalty. Whether they are correct depends on the language of that statute, to which we now turn.
The Wisconsin Fair Dealership Law ("the Law") restricts the circumstances under which certain sellers (termed "grantors," see Wis. Stat. § 135.02(5) ) unilaterally may stop doing business with their existing distributors (known as "dealers," per Wis. Stat. § 135.02(2) —we call them distributors here). Grantors may take this step only if they have "good cause" to do so. See Wis. Stat. § 135.03 ; see also Wis. Stat. § 135.02(4) (defining "good cause"); Ziegler Co., Inc. v. Rexnord, Inc. , 147 Wis.2d 308, 433 N.W.2d 8, 12–14 (1988) (). The Law is premised on the idea that dealer-grantors have "inherently ... superior economic power." Wis. Stat. § 135.025(2)(b). It seeks to "prevent [ ] suppliers from behaving opportunistically once franchisees or other dealers have sunk substantial resources into tailoring their business around, and promoting, a brand." Kenosha Liquor Co. v. Heublein, Inc. , 895 F.2d 418, 419 (7th Cir. 1990). It does so by supplementing the contractual and common law obligations that grantors owe to their distributors. See Wis. Stat. § 135.025(2)(c) & (3). If a grantor contravenes the law by terminating or substantially impairing an existing relationship with a distributor, that distributor may recover damages, injunctive relief, and attorney's fees. Wis. Stat. § 135.06.
The Law does not regulate all grantor-distributor relationships, however. Initially, it addressed only business relationships (defined as "dealerships") in which there was a "community of interest" between the grantor and the distributor. Wis. Stat. § 135.02(3)(a). A "community of interest" was defined in the statute 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. § 135.02(1). These are hardly crisp standards, and so it is not surprising that courts are frequently asked to decide whether such an interest is present. See Note, Kevin Scott Dittmar, Foerster, Inc. v. Atlas Metal Parts: The Wisconsin Supreme Court Takes a Narrow View of the Dealer's Financial Interest Protected by the Wisconsin Fair Dealership Law , 1985 WIS. L. REV. 155, 156 (1985) ; see also Ziegler , 407 N.W.2d at 877 ().
In 1999, the Wisconsin General Assembly sought to broaden the Law to ensure that all "intoxicating liquor" dealerships were protected. To that end, it eliminated the need to prove "community of interest" for those businesses. It included changes to this effect in the state's budget bill, Act 9.
Two of those changes are central here. First, the General Assembly amended the definition of a "dealership" so that large-volume distributors of "intoxicating liquor" were brought under the umbrella of the statute's definition of a protected "dealership." This revised definition of a "dealership" expressly incorporates the definition of "intoxicating liquor" in the chapter regulating alcohol sales, Wis. Stat. § 125.02(8), which includes wine:
... all ardent, spirituous, distilled or vinous liquors, liquids or compounds, whether medicated, proprietary, patented or not, and by whatever name called, containing 0.5% or more of alcohol by volume, which are beverages, but does not include "fermented malt beverages."
Wis. Stat. § 125.02(8) (emphasis added).
Second, the legislature created an entirely new section in the Law: Wis. Stat. § 135.066. This new provision expressed the legislature's desire for a competitive and stable wholesale market and the need for new rules governing a party's acquisition of an entity that has an existing intoxicating liquor dealership. These industry-specific rules were to supplement, rather than replace, the other regulations in the Law. The new section expressly incorporated the definition of "intoxicating liquor" from the pre-existing Wis. Stat. § 125.02(8).
Several of these changes never came into effect, because Governor Thompson objected to the idea of treating wine dealerships the same as other alcohol dealerships. On October 27, 1999, he partially vetoed the appropriations bill, striking a significant portion of the legislature's changes to the Law. Wisconsin grants its governors power to strike out significant language in appropriations measures, even when doing so alters the meaning of the statute, but they may not add new language. See State ex rel. Wis. Senate v. Thompson , 144 Wis.2d 429, 424 N.W.2d 385, 388, 393 (1988) (). Governor Thompson thus had to work with the language the lawmakers sent him. This required some legerdemain.
First, the governor struck the cross-reference to the existing regulatory definition of "intoxicating liquor" in the provision creating the new definition of a protected dealership:
[ Wis. Stat. §] 135.02(3)(b) [] [a] contract or agreement, either expressed or implied, whether oral or written, between 2 or more persons by which a wholesaler, as defined in s. 125.02(21), is granted the right to sell or distribute intoxicating liquor, as defined in s. 125.02(8),or use a trade name, trademark, service mark, logotype, advertising or other commercial symbol related to intoxicating liquor....
We will refer to this language, as altered by the governor's veto, as the "categorical" provision or "per se " definition of a dealership entitled to the protections of the Law.
In addition, he vetoed significant portions of the new industry-specific sections.
He struck the bulk of the definitions and regulations in subsections (2)–(4), leaving on the books only the following:
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