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American Dairy Queen Corp. v. Universal Investment Corp.

United States District Court, W.D. Wisconsin

September 15, 2017

AMERICAN DAIRY QUEEN CORPORATION, Plaintiff and Counter Defendant,


          WILLIAM M. CONLEY, District Judge

         This case is set for a jury trial commencing September 25, 2017, on the parties' cross-claims under the Wisconsin Fair Dealership Law (“WFDL”), Wis.Stat. § 135.01 et seq., plaintiff's claims under the Lanham Act, 15 U.S.C. §§ 1141, 1125(a)(1), and defendant's counterclaims for breach of certain licensing agreements under Iowa law. In advance of the final pretrial conference, the court issues the following opinion and order on the parties' respective motions in limine.


         I. Plaintiff's Motions in Limine[1]

         A. Motion in limine to exclude evidence relating to other Dairy Queen franchisees (dkt. #128)

         In its first motion in limine, plaintiff seeks to exclude evidence of non-compliance with its brand standards by approximately 40 other Dairy Queen Stores under Fed.R.Evid. 401, 402 and 403. Specifically, ADQ predicts that Universal will likely attempt to introduce: (1) expert witness testimony by Elizabeth Feagles of 30 stores that she visited in Iowa, Minnesota and Wisconsin that offered off-brand products and menu items; (2) photos taken by Universal's counsel of five other franchisees' non-compliant menu items; (3) testimony from other franchisees about their off-brand offerings; and (4) similar testimony from operational employees who provide support services yet to other franchisees. (Pl.'s Mot. (dkt. #128) 5.)

         Fundamentally, ADQ argues that this evidence is not relevant to the WFDL claims because these other franchisees are not “similarly situated” for purposes of determining whether the termination was non-discriminatory (which is in turn one of the relevant factors in assessing whether ADQ acted with good cause under the WFDL).[2] Among other reasons, ADQ contends that these franchisees are not similarly situated to Universal because: (1) they do not have the same “mix of non-compliance . . . or pervasive level of non-compliance”; (2) they do not have the same contract or licensing relationship with ADQ; and (3) some are not located in Wisconsin. (Id. at 7.) In addition, ADQ argues that even if this evidence were relevant, it should be excluded under Rule 403 because it will create 40 mini-trials within the trial.

         Regardless of whether such evidence is admissible for purposes of arguing that the termination was discriminatory, Universal points out in response that this evidence is material to whether the requirements were “essential and reasonable” also a part of the statutory definition of “good cause.” At minimum, the court agrees with defendant that evidence ADQ tolerates variance from a requirement “may” bear upon whether the requirement is truly reasonable and essential. (Def.'s Opp'n (dkt. #150 2.)

         Still, plaintiff's position as to what constitutes a “similarly situated franchisee” for purposes of the jury determining whether ADQ's requirements were non-discriminatory is too narrow. As the Seventh Circuit recently cautioned in a franchise claim brought under Indiana law, in considering whether another franchisee is “similarly situated, ” “precise equivalence is not required; the parties must be comparable, not clones.” Andy Mohr Truck Ctr., Inc. v. Volvo Trucks N. Am., No. 16-2788, 2017 WL 3695355, at *4 (7th Cir. Aug. 28, 2017). ADQ may, of course, argue that these stores were more in compliance than Universal or that their respective licensing agreements allowed for greater non-conformity with brand standards (although this latter argument may be a double-edged sword for plaintiff), but that is the jury's to decide, as is the larger determination as to whether Universal's license was terminated for good cause. See Andy Mohr, 2017 WL 3695355, at *4 (explaining that “similarly situated” question is one for the jury).

         ADQ also raised an interesting, unresolved, as far as the court can tell, question as to whether dealers in other states are “similarly situated” within the meaning of the WFDL. See generally Michael A. Bowen et al., The Wisconsin Fair Dealership Law § 6.45 (4th ed. 2012). Certainly, Ralph Gentile, Inc. v. State Div. of Hearing & Appeals, 2011 WI.App. 98, ¶ 25, 334 Wis.2d 712, 700 N.W.2d 555, is not dispositive on this issue as it only references the potential for a Commerce Clause concern to affirm the narrow construction by an administrative agency of the underlying statute. See Id. at ¶ 25 n.10 (“We note, though, that we do not decide the constitutional issue; we merely hold that given the potential commerce-clause problems, the Division's interpretation of Wis.Stat. § 218.0116(1)(i)1.a was, in light of the section's clear language, ‘reasonable.'”). Moreover, the other case cited by ADQ, Morley-Murphy Co. v. Zenith Elecs. Corp., 142 F.3d 373, 379 (7th Cir. 1998), presented a far broader Commerce Clause concern than that possibly implicated here.

         The court, however, need not resolve this issue for purposes of determining whether the evidence is admissible. For the reasons explained above, the evidence of non-compliance by franchisees in other states is relevant to plaintiff's claim that the requirements were “reasonable and essential.” As such, the only question is whether Universal may rely on this evidence to argue that ADQ's termination of Universal's license was discriminatory. The court, therefore, will reserve on this portion of the motion, and take it up with the parties at the final pretrial conference.

         This leaves defendant's challenge under 403, asserting its concern that the evidence “would be overwhelmed by the undue delay, unfair prejudice to ADQ, and the confusion to the jury to decide how ADQ considered each DAIRY QUEEN® franchisee's ‘situation.'” (Pl.'s Mot. (dkt. #128) 17.) Though ADQ's description appears exaggerated, the court shares plaintiff's concern that this trial not turn into a series of mini-trials. As such, the court also will take up with the parties at the final pretrial conference how best to present this evidence efficiently and fairly for both sides.

         B. Motion in limine to exclude expert testimony of James Devine

         Plaintiff seeks to exclude the expert testimony of defendant's damages expert. The admissibility of expert testimony in federal courts is governed principally by Rule 702 and Daubert v. Merrell Dow ...

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