Wisconsin Music Network v. Muzak Ltd. Partnership

• Decision Date: 04 December 1992
• Docket Number: No. 92-C-874.,92-C-874.
• Citation: 822 F. Supp. 1332
• Parties: WISCONSIN MUSIC NETWORK, INC., Plaintiff, v. MUZAK LIMITED PARTNERSHIP, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

822 F. Supp. 1332

WISCONSIN MUSIC NETWORK, INC., Plaintiff, v. MUZAK LIMITED PARTNERSHIP, Defendant.

No. 92-C-874.

United States District Court, E.D. Wisconsin.

December 4, 1992.

COPYRIGHT MATERIAL OMITTED

W. Stuart Parsons and James Brennan, Quarles & Brady, Milwaukee, WI, for plaintiff.

Andrew Riteris and Joshua Gimbel, Michael, Best & Friedrich, Milwaukee, WI, George E. Greer, Heller, Ehrman, White & McAuliffe, Seattle, WA, for defendant.

DECISION AND ORDER

RANDA, District Judge.

Before the Court is Wisconsin Music Network Inc.'s ("WMNI") motion for a temporary restraining order and preliminary injunction to prevent the cessation of its forty-seven year relationship with Muzak Limited Partnership ("Muzak"). Before a preliminary injunction will issue, the movant must show, as a threshold matter, that: 1) they have no adequate remedy at law; 2) they will suffer irreparable harm if the injunction is not granted; and 3) they have some likelihood of success on the merits in the sense that their "chances are better than negligible." National People's Action v. Wilmette, 914 F.2d 1008, 1010 (7th Cir.1990) (quoting Roland Machinery Co. v. Dresser Industries, Inc., 749 F.2d 380, 386-87 (7th Cir.1984)). Because WMNI has failed to show that it has some likelihood of success on its claim that Muzak has terminated it in violation of the Wisconsin Fair Dealership Law ("WFDL"), WMNI has not met its required burden for the issuance of a preliminary injunction and its motion must be denied.

I Procedural Background

On August 17, 1992 WMNI filed suit against Muzak in the circuit court of Milwaukee county seeking injunctive relief for various alleged violations of the WFDL, Chapter 135, Wis.Stats. (Count I), Federal and Wisconsin antitrust laws (Counts II & III), contractual duties (Count IV), and tortious interference by Muzak with WMNI's contractual duties (Count V).¹ On August 18, 1992, Muzak filed its Notice of Removal invoking this Court's diversity jurisdiction pursuant to 28 U.S.C. §§ 1332, 1441, 1446 and its original jurisdiction pursuant to 28 U.S.C. § 1331. In addition to the briefs filed, oral argument was heard on October 28, 1992 and posthearing briefs were submitted by both parties.

II Factual Background

While WMNI and Muzak have been doing business with one another for almost half a century, this Court's review of their relationship need only extend as far back as 1980. The 1980 "License Agreement", by its terms, expired on March 31, 1989. See 1980 Agreement, § 3 p. 10, Exhibit A of WMNI's Complaint Index ("1980 Agreement"). The 1980 Agreement stated in part that if Muzak failed to give notice two years prior to March 31, 1989 that it intended not to renew WMNI, Muzak was required to offer WMNI a new license agreement which it was then offering to like situated licensees.² 1980 Agreement, § 3 p. 13. At the time of expiration, Muzak was involved in negotiations with the International Planned Music Association ("IPMA"), an association of Muzak affiliates. The purpose of these negotiations was to draft a new system-wide license agreement which would reflect changes both in technology and in the market place. Because of these negotiations, Muzak could not offer any of its affiliates a new agreement, but instead continued expired agreements on a month to month basis. Jester Declaration, ¶ 11.

In September of 1990, the new form of agreement was unanimously approved by the Board of the IPMA. It was also approved by the Wisconsin Department of Securities on January 15, 1991. On January 31, 1991, Muzak offered the new agreement to WMNI. Jester Declaration, ¶ 19. That letter, which Muzak sent to all similarly situated affiliates, advised WMNI that if it did not sign the new agreement, Muzak would assume that WMNI did not desire to continue the relationship. With the exception of WMNI and Washington, D.C., all similarly situated affiliates accepted the new agreement.³ Jester Declaration, ¶ 18. On February 12, 1991, Muzak advised WMNI, then being continued on a month to month basis, that it would be terminated unless the new agreement was signed. After more than a year of negotiating, Muzak, by letter dated June 23, 1992, advised WMNI of its intention to terminate the relationship 60 days from receipt of the letter, unless the new agreement was signed. Jester Declaration, ¶ 29. On August 17, 1992, WMNI filed this action. The parties have since agreed that the effective date of termination will be December 7, 1992. (October 5, 1992 letter to the Court from Muzak's counsel Andrew Riteris)

III Statute of Limitations

As a preliminary matter, the Court shall address Muzak's argument that WMNI's claim is barred by the WFDL's 1 year statute of limitations. Wis.Stat. § 893.93(3) provides:

"Miscellaneous Actions ... The following actions shall be commenced within one year after the cause of action accrues or be barred: ... (b) An action under ch. 135."

Muzak cites as authority Les Moise, Inc. v. Rossignol Ski Co., 122 Wis.2d 51, 361 N.W.2d 653 (1985). Muzak argues that the February 12, 1991 letter notice is the date this cause of action accrued. That letter stated that the relationship would end on April 30, 1991 if WMNI did not sign the new agreement. The Court agrees that Les Moise would control this case if, in fact, Muzak had terminated WMNI on April 30, 1991.⁴ Les Moise holds that a cause of action accrues upon notice of termination, but because Muzak did not terminate WMNI on April 30, 1991, the February 12, 1991 notice was, in effect, no notice at all. WMNI's action would be untimely only if Muzak had terminated the relationship on April 30, 1991.

IV Wisconsin Fair Dealership Law

WMNI's argues that Muzak has "terminated" it without good cause in violation of the WFDL.⁵ The Court must first determine the character of this dispute. WMNI claims this is a termination case. It has argued extensively that Muzak and WMNI currently have a valid agreement, identical in form to the 1980 Agreement.⁶ (WMNI's Post-Hearing Brief, p. 20, § C.) Muzak argues that WMNI simply refuses to sign onto the new agreement.

Under the terms of the 1980 Agreement, Muzak was required to offer WMNI a new agreement in March of 1989 which "shall correspond to the form of license agreement which Licensor (Muzak) was then bona fide offering to licensees or prospective licensees....". (1980 Agreement, § 3, p. 13) Because Muzak had no agreement to offer at that time, it extended WMNI's franchise on a month to month basis (as it did with other affiliates) according to the terms of the 1980 Agreement. Because the parties agreed to operate under the terms of the 1980 Agreement, on a month to month basis until a new agreement could be offered to all like situated affiliates, the 1980 Agreement expired upon appearance of the new agreement. No other conclusion can be drawn from these facts. Now that the new agreement has been presented, WMNI cannot claim that it is being terminated. In relation to the proposition that the offer of a new contract with different terms amounts to a termination, Judge Shabaz, in Meyer v. Kero-Sun, Inc. stated, "Although interesting and novel, the theory is nonsense." 570 F.Supp. 402, 406 (W.D.Wis.1983) The Wisconsin Supreme Court, on similar facts, concluded in Ziegler v. Rexnord:

"This case does not involve a termination of the original contract, but rather a failure to renew the relationship because the dealer allegedly refuses to substantially comply with essential, reasonable and non-discriminatory requirements sought to be imposed on the dealer by the grantor."

147 Wis.2d 308, 433 N.W.2d 8, 14 (1988).

The only logical interpretation of the facts is that Muzak is failing to renew WMNI because of WMNI's refusal to sign onto the new agreement. Ziegler examined § 135.03 of the WFDL and determined that a grantor may fail to renew a dealer if it can show good cause.⁷ Accordingly, Muzak must shoulder the burden of establishing good cause for its failure to renew. See ftn. 5, Wis.Stat. § 135.03.

Good cause pursuant to § 135.02 focuses on the dealer's refusal to comply with non-discriminatory, essential and reasonable requirements imposed or sought to be imposed by the grantor. Since WMNI's refusal to comply is established, the Court must now determine whether the proposed changes contained in the new agreement are 1) non-discriminatory, 2) essential, and 3) reasonable. If they are, The WFDL does not afford WMNI any relief.

Muzak's Treatment of likesituated Affiliates

WMNI contends that Muzak is discriminating against it because only one hundred (100) of one hundred and sixty (160) affiliates have been required to sign the new agreement. (WMNI's Reply Memoranda, p. 5) Further, of these remaining sixty (60), there are affiliates with expired agreements that have not been forced by Muzak to sign the new agreement. The affiliates referenced by WMNI are Washington, D.C., and those owned by Comcast. (WMNI's Reply Memoranda, p. 5) However, with the exception of the Washington, D.C. affiliate, the remaining affiliates are not similarly situated because their agreements with Muzak have not expired.

Per a 1979 letter agreement with Muzak, Comcast acquired or could acquire various affiliates. Paragraph 7 of that agreement provides that "Anything in the Agreement notwithstanding, the term of the Agreement shall be 15 years from the date thereof." (Muzak's Preliminary Hearing Exhibit 130, p. 3, see also Jester Testimony, p. 24, L. 8-12 and p. 30, L. 3-9) Therefore, the agreements of these Comcast affiliates do not expire until 1994. (Jester Testimony, P. 68, L. 10-19 and L. 20-25) Thus, Washington, D.C. is the only "like-situated" affiliate not to have signed the new agreement.

For purposes of the WFDL, Muzak must treat the Washington, D.C. affiliate as it is treating WMNI. The evidence shows that it has done so. The Washington, D.C. affiliate, (Music, Inc.) is required, as is WMNI, to sign the new agreement or not be...