Wine and Spirits Distributors Said To Be Seeking Legislative Protections

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The Wheeler Report reported on Thursday that five trade associations have raised concerns to state legislators about rumored proposed amendments to Wisconsin’s Fair Dealership Law that would make it easier for wine and spirits distributors to transfer brand distribution agreements to third parties.

One letter to legislators dated May 14, 2015 was jointly authored by the Wisconsin Restaurant Association, the Wisconsin Petroleum Marketers & Convenience Store Association and the Wisconsin Grocers Association,  all representing retail sellers.  Another letter, also dated May 14, 2015, came from the Distilled Spirits Council of the United States and the Wine Institute, who advocate for manufacturers.

The associations allege that at least one wine and spirits wholesaler has sought amendments to the WFDL similar to changes that were enacted by the Wisconsin Legislature in 1999, but were significantly limited by a partial veto by then-Gov. Tommy Thompson.  That partial veto eliminated a section that would have provided that a change in management, ownership or control of a wholesaler would not be “good cause” under the WFDL for a grantor to terminate, cancel, fail to renew or substantially change the competitive circumstances of a wholesaler, as long as the successor wholesaler met the grantor’s reasonable and material qualification standards in effect at the time of the change.

Other provisions of the 1999 legislation expressly defined “dealer” to include liquor wholesalers, without reference to the “community of interest” requirement for dealer status under the WFDL. The expanded definition of dealer provided exceptions from WFDL coverage where the manufacturer had never produced more than 200,000 gallons of liquor in a single year, or where the distributor’s net revenues from sales of all brands produced by that grantor was less than 5% of all liquor sold by the distributor. These provisions survived the partial veto.  The original legislation, however, would have similarly expanded the definition of dealer to cover wine distributors.  A creative partial veto from then-Gov. Thompson removed wine distributors from that protected class.

Fore! Governmental Entities May Need To Consider Applicability Of WFDL

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If ultimately upheld on appeal, the trial court’s initial holdings in a lawsuit filed by four golf professionals against the City of Madison, alleging a breach of the Wisconsin Fair Dealership Law by the City, have the potential to establish that the WFDL applies to governmental entities as well as private businesses.  To date, no reported case law has addressed the potential application of the WFDL to governmental entities.

Beginning in 1976, the City of Madison had contracted with golf professionals to administer municipal golf courses on the City’s behalf.  Under these agreements, the golf professionals were responsible for operating and maintaining the courses, paying for all employees, golf carts, golf ranges, golf-related goods, services, food and beverages and golf-related merchandise available for purchase at the courses.  In December, 2012, existing agreements between the City and the golf professionals terminated and were not renewed by the City.  Last year, the golf professionals sued the City, alleging that the City’s non-renewal of their agreements violated the WFDL.

In asserting that the WFDL does not apply to the City or its relationship with the golf professionals in its motion to dismiss, the City advanced two principal arguments:

  • A municipality is not a “person” with the definitions contained in Chapter 135.  “Person” is defined under sec. 135.02(6), Wis. Stats., as “natural person, partnership, joint venture, corporation or other entity.”  The City contended that the City is a “municipal corporation” and that “municipal corporation” is not included within the statutory definition of “person.”
  • The City did not grant the golf professionals the right to sell goods or services, the right to distribute goods or services, or the right to use a trade name, trademark, service mark, logotype, advertising or other commercial symbol of the City, as required under the definition of “dealership” under sec. 135.02(3)(a), Wis. Stats.

As to the first argument, the trial court held that “[m]unicipal corporations, such as the City of Madison, form a subset of “corporations.”  If that were not the case, the City would nonetheless fall within the definition of “person” under the WFDL as an “other entity”.”  The trial court disagreed with the City’s contention that case law would require that statutory provisions that are written in general terms, without expressing a clear intention that the statute apply to a governmental entity, should not be imposed on a governmental entity.  The trial court also cited sec. 135.025(1), Wis. Stats., which requires that the WFDL “shall be liberally construed and applied to promote its underlying remedial purposes and policies.” Similarly, the trial court found that the plaintiffs had alleged facts that, if proven to be true or further developed, could be sufficient to show that the City had granted the plaintiffs the right to sell the City’s goods or services or to use the City’s trademark or other symbols.  Thus, the trial court held, dismissal of the golf professionals’ lawsuit was not proper either on these grounds nor based on other arguments advanced by the City in its motion to dismiss.

Both the plaintiffs and defendant have motions for summary judgment pending with the trial court.  If the court does not grant summary judgment to either party, and the parties do not settle their dispute, the lawsuit is scheduled to proceed to a jury trial during the first week of August, 2015.

(Benson et al v. City of Madison, Dane County Circuit Court Case No. 14 CV 180)