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COURT OF APPEALS DECISION DATED AND FILED July 23, 2003 Cornelia G. Clark Clerk of Court of Appeals |
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This opinion is subject to further editing.� If published, the official version will appear in the bound volume of the Official Reports.� A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals.� See Wis. Stat. � 808.10 and Rule 809.62.� |
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����������� APPEAL from a judgment of the circuit court for Winnebago County:� william h. carver, Judge.� Affirmed.�
����������� Before Nettesheim, P.J., Brown and Anderson, JJ.
�1������� PER CURIAM. Central Corporation appeals from a judgment dismissing its Wis. Stat. ch. 135 (2001-02)[1] Wisconsin Fair Dealership Law (WFDL) claim against Research Products Corporation.� Because the circuit court correctly determined on summary judgment that Central and Research Products did not have a ch. 135 dealership relationship, we affirm.
�2������� Research manufactures heating, ventilating and air conditioning equipment and sells its products to distributors such as Central.� The distributors re-sell the products at wholesale to installing contractors.� The contractors then sell the products to homeowners and commercial builders.� Research uses its district managers to develop relationships with installing contractors.� Research markets to installing contractors and does not contractually obligate its distributors (like Central) to market to contractors or to attempt to increase sales of Research�s products.�
�3������� Central has been distributing Research�s products for over twenty years.� Central sells many brands and some of those brands compete with Research�s products.� Central accepts returns of defective Research products for credit or replacement to the installing contractor.� Central then receives a credit from Research for the returned products.�
�4������� When Research gave notice that it was terminating its business relationship with Central, Central sued Research claiming that the parties had a Wis. Stat. ch. 135 dealership relationship.� On summary judgment, the circuit court concluded that Central would not suffer substantial harm if Research terminated it as a distributor because Central and Research were not sufficiently interdependent as required by the WFDL.� Research also did not require Central to perform in specific ways in the areas of marketing, advertising, inventory or sales floor space in order to sell Research�s products.� The average amount of Research products sold by Central over the last five years�8% of Central�s gross revenues and 5% of Central�s gross profits�was not sufficient to demonstrate interdependence.
�5������� We
review decisions on summary judgment by applying the same methodology as the
circuit court.� M & I First
Nat�l Bank v. Episcopal Homes Mgmt., Inc., 195 Wis. 2d 485, 496, 536
N.W.2d 175 (Ct. App. 1995).� Summary
judgment is appropriate when there is no genuine issue of material fact and the
moving party is entitled to judgment as a matter of law.� Id. at 496-97.� As a
leading WFDL treatise notes, �In practice, the material facts [in WFDL cases]
are almost always undisputed.�� Michael A. Bowen & Brian E. Butler,
The Wisconsin Fair Dealership Law
� 4.4 at 4-7 (2d ed. 1995).�
�6������� Under the WFDL, a dealership exists if a party has a contract to sell or distribute goods or services or to use a commercial symbol, and the parties have a community of interest in the business of selling or distributing goods or services.� Wis. Stat. � 135.02(3)(a).� A community of interest� is a �significant economic relationship between the parties.�� Ziegler Co. v. Rexnord, Inc., 139 Wis. 2d 593, 601, 407 N.W.2d 873 (1987) (quoted source omitted).� A community of interest consists of:� (1) a continuing financial interest; and (2) interdependence, i.e., �the degree to which the dealer and grantor cooperate, coordinate their activities and share common goals in their business relationship.�� Id. at 604-05.� To show a community of interest, a party must �demonstrate a stake in the relationship large enough to make the grantor�s power to terminate, cancel or not renew a threat to the economic health of the person � [such that the end of the] business relationship would have a significant economic impact on the alleged dealer.�� Id. at 605.� In evaluating the parties� business relationship, the court must consider �a wide variety of facets� of the relationship, including:
[H]ow long the parties have dealt with each other; the extent and nature of the obligations imposed on the parties in the contract or agreement between them; what percentage of time or revenue the alleged dealer devotes to the alleged grantor�s products or services; what percentage of the gross proceeds or profits of the alleged dealer derives from the alleged grantor�s products or services; the extent and nature of the alleged grantor�s grant of territory to the alleged dealer; the extent and nature of the alleged dealer�s uses of the alleged grantor�s proprietary marks (such as trademarks or logos); the extent and nature of the alleged dealer�s financial investment in inventory, facilities, and good will of the alleged dealership; the personnel which the alleged dealer devotes to the alleged dealership; how much the alleged dealer spends on advertising or promotional expenditures for the alleged grantor�s products or services; the extent and nature of any supplementary services provided by the alleged dealer to consumers of the alleged grantor�s products or services.�
Id. at 606.
�7������� Central argues that there are material facts in dispute which should have precluded summary judgment.� We disagree.� Our review of the summary judgment record confirms that there are no disputed material facts demonstrating a continuing financial interest and interdependence as required by the WFDL.� What is in dispute between the parties is the application of the WFDL to the undisputed facts.� The question before us is whether the undisputed facts are sufficient to constitute a dealership under the WFDL.�
�8������� Central argues on appeal that it provided ample proof of a continuing financial interest in its relationship with Research and the requisite level of interdependence.� On the question of interdependence, the focus is on whether the relationship was �more coordinated and interrelated than a typical vendor-vendee relationship.�� Id. at 610.� Here, the relationship was not sufficiently coordinated and interrelated to take it out of the realm of the typical vendor-vendee relationship.
�9������� Central argues that it is interdependent with Research because Research has many requirements of it in terms of sales, inventory, promotion, warranty work, and employee training.� While Central has identified categories in which its activities benefit Research, Central has not demonstrated that Research required these activities at a level which would make Central a dealer.� In deposition testimony, John Geurts, Central�s president, testified that the only obligation Research placed on Central was that Central pay its Research account by the tenth of the month.� Geurts specifically stated that Central was not obligated to perform per Research�s direction in the areas of facilities, showroom, inventory levels, demonstration, minimum purchases, territory, repair and installation, use of logos, sales levels, marketing efforts, or dedicated employees or sales staff.� Geurts testified that none of the warehouse area was specialized or unalterably dedicated to Research�s products.� Central does not use Research�s logo on its uniforms or its trucks and only incidentally uses the logo on its flyers advertising specials.�
�10����� The summary judgment record further reveals that Research does its own marketing and does not expect Central to market or advertise.� While Central has cooperated in advertising, Central has not paid for that advertising.� Central does not have an exclusive territory in which to sell Research�s products, and Research has not limited Central�s ability to sell competing products.� Central has not made any specific investment in inventory or facilities to accommodate Research�s products.[2]� Research does not require Central or its employees to undergo any training or provide sales reports.� Central did not identify how much time or expense it devotes to the sale of Research�s products and does not contend that any of its employees were dedicated to Research�s product line.� The summary judgment record reveals that Central and Research do not coordinate their activities or that Research expects Central to cooperate in specific ways.� The Central-Research relationship is a typical vendor-vendee relationship, not an interdependent relationship for purposes of the WFDL.
�11����� A low percentage of revenue argues against the existence of a continuing financial interest.� It is undisputed that on the average, Central derives 8% of its gross revenues and 5% of its gross profits from its relationship with Research.� Where other facets of an interdependent business relationship are absent, a low percentage of revenue does not demonstrate a continuing financial interest for purposes of the WFDL.� See Kenosha Liquor Co. v. Heublein, Inc., 895 F.2d 418, 420 (7th Cir. 1990) (5.8% of sales� �is still too small, when the firm has no assets dedicated to serving the brand in question�); cf. Frieburg Farm Equip., Inc. v. Van Dale, Inc., 978 F.2d 395, 400 (7th Cir. 1992) (sales as low as 11% could suffice if the relationship exhibits other features of a community of interest).
�12����� We reject Central�s claim that terminating its relationship with Research will have a significant and adverse impact on its financial health.� We have already held that the average sales and profits associated with Research�s products are not sufficient under the WFDL.� Although Central speculates that the loss of Research�s products will cause a loss of other business or increased competition with other distributors, Central did not substantiate these potential consequences.�
�13����� Terminating the relationship will not adversely affect Research�s financial health.� Central�s sales account for 6% of Research�s sales in the area, and Research has several other distributors in the area who can sell to customers formerly purchasing from Central.�
�14����� Central argues that it has substantial Research-related inventory, yet Central concedes that Research did not expressly require that it maintain a certain level of inventory.� Rather, Central keeps a level of inventory it feels it needs to sell Research�s products.� Central conceded that this inventory could be sold if it is terminated as a distributor.� Therefore, the inventory is not an unrecoverable investment by Central.� We also reject Central�s claims that its $5000 inventory of spare parts demonstrates the importance of Research�s products to Central�s business and that Central�s warehouse space is an investment made solely to accommodate Research.�
�15����� Central argues that it has no other supplier for Research�s Aprilaire products.� While this may be true, we have already held that the percentage of sales and gross profits generated by the relationship with Research is not substantial.
�16����� The WFDL is designed to protect a dealer with a significant financial stake and interdependence with the grantor.� See Ziegler, 139 Wis. 2d at 605.� No reasonable person could conclude that Central demonstrated a community of interest with Research.� This summary judgment record reveals that the parties were not interdependent as the WFDL requires, and Central did not have a continuing financial interest in its relationship with Research.� Therefore, we affirm the circuit court�s grant of summary judgment dismissing Central�s WFDL claim against Research.
����������� By the Court.�Judgment affirmed.
����������� This opinion will not be published.� See Wis. Stat. Rule 809.23(1)(b)5.