How Preemption Limits the Scope of the Wisconsin Fair Dealership Law

In an earlier blog post on the Wisconsin Fair Dealership Law’s excluded relationships, we discussed that while the WFDL is arguably the most expansive and encompassing dealership or franchise statute in the country, its scope is not unlimited. There are exceptions to its application enumerated in the statute’s text and recognized in the case law, such as motor vehicle dealerships protected by the Wisconsin Motor Vehicle Dealer Law, manufacturers’ representatives, and dealerships entered into prior to April 5, 1974. Furthermore, federal preemption poses another potential limitation to the WFDL’s scope.

Generally, preemption occurs where a state law conflicts with a federal law that was enacted by Congress to control a particular area. The federal preemption doctrine has grown out of the Supremacy Clause of the United States Constitution, which provides that the laws of the United States, which shall be made in pursuance of the Constitution, shall be the supreme law of the land. U.S. Const., art. VI, § 2. When such a conflict exists, the federal law preempts the state law and controls. It follows that, in some limited instances, the WFDL will be set aside in favor of a federal law.

Arbitration is one instance where the WFDL could be preempted by a federal statute. The WFDL provides that the statute will not apply to provisions for binding arbitration, so long as “the criteria for determining whether good cause existed for a termination, cancellation, nonrenewal or substantial change of competitive circumstances, and the relief provided is no less than that provided” by the WFDL. Wis. Stat. § 135.05. However, Wisconsin courts have recognized that the Federal Arbitration Act (“FAA”) preempts the WFDL and would control the arbitration of a particular dispute.

The Petroleum Marketing Practices Act (the “PMPA”) is another example of where the WFDL could be preempted by a federal statute. The PMPA, like the WFDL, is a trade statute controlling when a company may terminate a dealership relationship. However, unlike the WFDL, the PMPA is limited to franchised distributors and retailers of petroleum fuel. Thus, where a gas station is faced with discontinuation, it cannot claim protection under the WFDL, but may be able to pursue protection under the PMPA. In some circumstances, the WFDL may offer complementary coverage to gas stations when a station’s right to sell gasoline is not at issue.

In these limited circumstances, and others, preemption may pose a barrier to a business seeking protection under the WFDL, but it is rarely the be-all, end-all. As with much of the WFDL, there is significant nuance to these issues. For that reason, it is important for prospective and existing grantors and dealers to consult with experienced counsel to assess their options.

For over 50 years, Stafford Rosenbaum’s Dealership and Franchise Law Team has been preeminent in helping grantors and dealers navigate their obligations under the WFDL and the franchise and dealership laws of other states. As a full-service law firm, we are uniquely positioned to advise, counsel, and problem-solve for grantors and dealers in both transactional and litigation matters, and we pride ourselves on our ability to find innovative solutions for the most complex relationships.

Stafford Rosenbaum LLP is a full-service law firm with two convenient office locations in Madison and Milwaukee, Wisconsin. 145 years of dedication to businesses, governments, nonprofits, and individuals has proven that effective client communication continues to be the heart of our practice.

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