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Great Lakes Beverages, LLC v. Wochinski

Court of Appeals of Wisconsin, District III

January 18, 2017

Great Lakes Beverages, LLC, Plaintiff,
v.
Keith R. Wochinski d/b/a New London Bottling Company, d/b/a New London Kist Bottling Company, d/b/a Kist Bottling Company, NLKB LLC/New London Keith's Bottling, LLC, Derek J. Wochinski and NLD New London Distributing, LLC, Defendants-Third-Party Plaintiffs-Appellants,
v.
K-Way Systems, GLB Acquisition, LLC, Dr. Jeffrey Wierichs, Timothy Carpenter, John Doe, ABC Insurance Company, DEF Insurance Company, Richard Knutson, Steven Lowney, Jim Carter, GHI Insurance Company, JKL Insurance Company, MNO Insurance Company, PQR Insurance Company, STU Insurance Company, VWX Insurance Company and YZ Insurance Company, Third-Party Defendants, AMCO Insurance Company, Intervening-Defendant-Respondent, Erie Insurance Exchange and Pekin Insurance Company, Intervenors.

         APPEAL from an order of the circuit court for Outagamie County, No. 2011CV434 MICHAEL W. GAGE, Judge. Affirmed.

          Before Stark, P. J., Hruz and Seidl, JJ.

          STARK, P.J.

         ¶1 We review a decision of the circuit court declaring that insurance policies AMCO Insurance Company issued to GLB Acquisition, LLC (GLBA) excluded coverage to GLBA for third-party claims brought by Keith Wochinski and several related parties (collectively, Wochinski). The circuit court concluded the policies' "breach of contract" exclusions barred coverage for Wochinski's claims. We agree that the breach of contract exclusions apply, and we therefore affirm the order dismissing AMCO from this action.

         BACKGROUND

         ¶2 Wochinski worked in the beverage industry, doing business as New London Bottling Company, New London Kist Bottling Company, and Kist Bottling Company. He manufactured and sold specialty sodas and juices, and sold national brand beverage products as well.

         ¶3 In June 2009, K-Way Systems contracted with Wochinski to purchase his beverage distribution business. The purchase agreement consisted of three parts: an asset purchase agreement, a covenant not to compete, and a supply agreement. Under the asset purchase agreement, K-Way purchased Wochinski's customer lists, formulas, trade names, goodwill, and other business assets. Under the covenant not to compete, Wochinski agreed not to compete with K-Way in the beverage distribution business for a specified period of time. Under the supply agreement, K-Way agreed to purchase beverage products from Wochinski to sell to its customers.

         ¶4 The business relationship between Wochinski and K-Way quickly soured. According to Wochinski, K-Way ordered only a small amount of product from him, failed to pay him for that product, and thereafter stopped buying product from him altogether. Wochinski asserts he sent multiple letters to K-Way demanding payment and compliance with the supply agreement, but K-Way did not respond. Wochinski therefore wrote to K-Way stating he considered K-Way to be in breach of the supply agreement, and all parts of the purchase agreement were therefore void.

         ¶5 K-Way later sold its business to GLBA. Thereafter, Wochinski began working with his son in the beverage distribution industry. According to Wochinski, GLBA did not honor his rescission of the purchase agreement and, instead, "threatened and harassed [him] in an attempt to enforce the non-compete." GLBA subsequently filed the underlying lawsuit against Wochinski, seeking to enforce the non-compete agreement and also alleging that Wochinski had mislabeled products and misused trade names, resulting in unfair competition. GLBA ultimately sold its assets to Great Lakes Beverages, LLC, and assigned its rights in this lawsuit to Great Lakes Beverages.

         ¶6 Wochinski subsequently filed a counterclaim against Great Lakes Beverages and a third-party complaint against GLBA and several other parties. He also moved for summary judgment on Great Lakes Beverages' claims. The circuit court granted Wochinski's summary judgment motion in part in January 2014. The court concluded the non-compete agreement was unenforceable because Wochinski validly rescinded the purchase agreement in October 2010 as a result of K-Way's breach. However, the court determined material issues of fact remained regarding Great Lakes Beverages' unfair competition claim against Wochinski.

         ¶7 In February 2014, Wochinski filed an amended third-party complaint, which asserted multiple claims against GLBA, including a claim for tortious interference with contracts or prospective contracts. The tortious interference claim alleged that GLBA and other third-party defendants "intentionally interfered with Wochinski's actual and prospective contractual relationships" by "harassing and threatening Wochinski and other actions to enforce a non-compete they knew or should have known was rescinded and by telling actual and prospective customers that the non-compete was in effect when it was not."

         ¶8 AMCO had issued to GLBA a "Premier Businessowners Policy" and a commercial umbrella liability policy that were in effect from September 17, 2010, to September 17, 2011.[1] In March 2014, GLBA's insurance agent faxed a copy of Wochinski's amended third-party complaint to AMCO, along with a letter stating, "I am not sure that the contractual arrangements that the client may or may not have taken part in are a covered peril in the policy. I am sending this information to you so that you may review and respond to the client." AMCO responded on April 18, 2014, stating, "[I]t is AMCO's position that it does not owe [GLBA] a defense against, or indemnification for, the claims asserted in the" amended third-party complaint.

         ¶9 In the meantime, Pekin Insurance Company and Erie Insurance Exchange, both of which insured Great Lakes Beverages during the relevant time period, intervened in this lawsuit and moved for declaratory/summary judgment that their policies did not provide coverage for Wochinski's claims against Great Lakes Beverages. On January 13, 2015, the circuit court held that the Pekin and Erie policies provided potential coverage for Wochinski's tortious interference claim against Great Lakes Beverages, but not for his other claims. The court further held that, because Wochinski had alleged one potentially covered claim, Pekin and Erie were "obligated to defend the entire action."

         ¶10 GLBA provided AMCO with a copy of the circuit court's January 13, 2015 decision. On January 29, 2015, AMCO wrote GLBA's attorney indicating AMCO would provide a defense for GLBA, subject to a reservation of rights, and would pay GLBA's defense costs dating back to March 25, 2014. On the same date, AMCO moved to intervene in this lawsuit, seeking an adjudication of its coverage obligations. The circuit court granted AMCO's motion, and AMCO then moved for declaratory/summary judgment on the coverage issue, arguing: (1) its policies did not provide an initial grant of coverage for Wochinski's claims against GLBA; and (2) even if the ...


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