Author: Attorney Elizabeth Spencer
The Wisconsin Fair Dealership Law (WFDL), Chapter 135 of the Wisconsin Statutes, is a far reaching collection of regulatory laws that govern supplier and dealer relationships and provides numerous protections to the dealers. Unlike, the majority of states with industry specific dealership laws, the WFDL covers almost all industries with a few exceptions. The breadth of the WFD: can result in business relationships being deemed dealerships and the dealers subject to the appropriate protections, as most recently seen in Benson v. City of Madison, 2017 WI 65, 376 Wis. 2d 35, 897 N.W.2d 16.
The WFDL establishes standards that the supplier of a good or service must follow preceding termination of an agreement or changing the competitive circumstances of a dealer. The WFDL is applicable to a supplier-distributor relationship when there (1) is an agreement between 2 more parties; (2) one is granted the right to sell or distribute goods or services, or use a trade name, trademark, service mark etc., and; (3) there is a community interest in the business. If the WFDL is applicable to a relationship, prior to termination the supplier is required to establish good cause for termination, provide at least 90 days written notice that includes the reasons for termination with the opportunity for the dealer to rectify any claimed deficiency, and repurchase inventory.
Benson v. City of Madison
In Benson v. City of Madison, the breadth of industries covered by the WFDL was addressed. Four golf professionals were hired for several years by the City to oversee the clubhouse operations at the City’s four public golf courses. The City subsequently failed to renew the agreements. The golf professionals then sued the City alleging that the termination failed to comply with the WFDL. The City argued that the WFDL was not applicable as the relationship was not a dealership. The circuit court and court of appeals agreed with the City and the case was reviewed by the Supreme Court.
The Wisconsin Supreme Court first addressed whether the WFDL applied to the City. The WFDL defines a dealer as a “person who is a grantee of a dealership situated in this stated.” Wis. Stat. § 135.02(2). The definition of a dealership includes that it is a “contract or agreement…between 2 or more persons…” Wis. Stat. § 135.02(3)(a).Whether the WFDL applied to the City depended on whether the City constituted a person under the statute. The WFDL does define person and includes a corporation as a person. Wis. Stat. § 135.02(6). The Court has previously held that city is a municipal corporation and numerous courts have similar concluded that statutes referring to corporations include municipal corporations. Additionally, cities do not fall under any of the exclusions to the WFDL. Thus, the Court concluded that the WFDL applied to the City.
Next, the court addressed whether the relationships between the golf professionals and the City were dealerships under the WFDL. Case law has divided the statutory language of § 135.02(3)(a) defining a dealership into 3 parts that must be satisfied, “(1) the existence of a contract or agreement between two or more persons; (2) by which a person is granted one of the rights specified; (3) in which there is the requisite “community of interest”.” Benson at ¶ 35. Noting that they had already addressed that the City was a person and that the agreements between the parties were obvious contracts or agreements, the Court focused its inquiry on the second and third parts of the test.
The lower courts acknowledged that there was difficulty in identifying whether there was an actual selling or distribution of any City goods or services. The Court noted that in order to make golf course available to the public it had to perform numerous tasks to create, maintain and operate the courses. The City then granted the golf professionals the right to sell this service. The public would schedule usage of the course through the golf professionals and the city provided the equipment to process payments. Additionally the City had other requirements including the operation of a club and cart rental services. Benson at ¶¶ 42-43. The Court concluded that the Agreements granted the golf professional the right to sell the City’s service. Id. at ¶ 47.
Finally, the Court addressed the existence of a community of interest. The Court has previously identified two factors to be used in determining the existence of a community of interest. First, “a shared financial interest in the operation of the dealership or the marketing of a good or service” and “the degree to which the dealer and grantor cooperate, coordinate their activities and share common goals in their business relationship.” Benson at ¶ 49. The Court concluded that there was a community of interest as the golf professional sunk substantial resources into the relationship, contained licenses to perform all the required services, they were authorized to sell the City’s services, both parties shared in profitability, and they shared in duties to maintain the course. Id. at ¶ 52.
While the WFDL is relatively short, it is broad law with a high level of nuance. Businesses or any party looking into entering into agreements licensing their goods or services should be alert that:
1.) The WFDL covers more than just businesses.
As noted in Benson, the city qualified as a corporation and thus was covered by the WFDL. It is beneficial to have an attorney who is familiar with the WFDL to review any agreement to determine whether it will apply.
2.) There must be a community of interest.
Arguably the trickiest aspect of the WFDL, in order for it to apply there must a be “a shared financial interest in the operation of the dealership or the marketing of a good or service” and “the degree to which the dealer and grantor cooperate, coordinate their activities and share common goals in their business relationship.”
3.) The WFDL has strict guidelines regarding termination.
In order to protect dealers, the WFDL makes it difficult for a grantor to terminate the relationship or significantly change the competitive circumstances. This limitation will affect the typical termination clauses in agreements.
Before entering into any agreement, consider consulting with an attorney to ensure that the contract is in compliance with the WFDL and what areas are not covered by the WFDL and can be negotiated.