“Frankenstein” Veto Language Interpreted by Federal District Court

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A recent post on this blog noted that wine distributors were not covered by an expansion of the definition of “dealer” under 1999 amendments to the Wisconsin Fair Dealership Law (“WFDL”) due to “a creative partial veto from then-Gov. Thompson.”

That creative partial veto was front and center in a decision and order issued last week by the U.S. District Court for the Eastern District of Wisconsin, denying defendants’ motion to dismiss for failure to state a claim. The plaintiff, Winebow, Inc., had brought a declaratory judgment action seeking to affirm that it could terminate all wine distribution relationships with defendants Capitol-Husting Co., Inc., and L’eft Bank Wine Company Limited without violating the WFDL.

The crux of the defendants’ motion to dismiss was that the 1999 amendments to the WFDL should be interpreted to define wine distributors as “per se dealers” under the WFDL, subject only to limitations on small producers and sales lines constituting less than 5% of a distributor’s business. They contended that the statute covers distributors of “intoxicating liquor” as defined in section 125.02(8) of the Wisconsin Statutes, regardless of whether such distributors can meet the “community of interest” test ordinarily required for dealer status.  Defendants noted that the WFDL definition that provides per se dealer status to distributors of intoxicating liquor defines “wholesalers” with reference to section 125.02(21) of the Wisconsin Statutes, which definition does not exclude wine wholesalers.

The WFDL, however, defines “intoxicating liquor” as having “the meaning given in s. 125.02(8) minus wine.”  The words “minus wine” were inserted via Gov. Thompson’s use of what was dubbed a “Frankenstein veto,” with many other words in succeeding clauses of the legislation deleted by his veto pen, leaving only “minus” and “wine” in place. The District Court denied the motion to dismiss, finding that “[t]he statutory definition of “intoxicating liquor” is clear, and wine is expressly excluded.”

Other arguments in this case, however, may also prove to be instructive. The plaintiff’s complaint seemingly alleges that the “minus wine” language means that all wine distribution agreements are exempt from coverage under the WFDL – even if the parties’ relationship satisfies the community of interest test of section 135.02(3)(a).  The complaint states the defendants’ wholesale distribution of Winebow portfolio wines does not qualify for protection under the WFDL “as wine is expressly exempt from the WFDL.”  Plaintiff’s contention was not directly at issue in the defendants’ motion to dismiss, but presumably would be raised in a motion for summary judgment or for judgment on the pleadings.

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)