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Winebow, Inc. v. Capitol-Husting Co., Inc.

Supreme Court of Wisconsin

June 5, 2018

Winebow, Inc., Plaintiff-Appellee,
v.
Capitol-Husting Co., Inc. and L'Eft Bank Wine Co. Limited, Defendants-Appellants.

         ON CERTIFIED QUESTION FROM THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT

         CERTIFICATION of question of law from the United States Court of Appeals for the Seventh Circuit. Certified question answered in the negative and cause remanded.

          For the defendants-appellants, there were briefs filed by Thomas L. Shriner, Jr., Gregory N. Heinen, and Foley & Lardner LLP, Milwaukee. There was an oral argument by Thomas L. Shriner, Jr.

          For the plaintiff-appellee, there was a brief filed by E. King Poor (pro hac vice) and Quarles & Brady LLP, Chicago, Illinois, with whom on the brief were Daniel M. Janssen, and Quarles & Brady LLP, Milwaukee.

          ANN WALSH BRADLEY, J.

         ¶1 This case is before the court on a certified question from the United States Court of Appeals for the Seventh Circuit. Winebow, Inc. v. Capitol-Husting Co., Inc., 867 F.3d 862 (7th Cir. 2017); see Wis.Stat. § 821.01 (2015-16), [1] It certified the following question: "Does the definition of a dealership contained in Wis.Stat. § 135.02(3) (b) include wine grantor-dealer relationships?" Winebow, 867 F.3d at 871.

         ¶2 Our answer to this certified question will aid the Seventh Circuit in determining whether Winebow, Inc.'s (Winebow) attempt to end its business relationship with two wine distributors is governed by the unilateral termination limitations of the Wisconsin Fair Dealership Law (WFDL) . See Wis. Stat. § 135.03.

         ¶3 Winebow unilaterally terminated its relationship with Capitol-Husting Co., Inc. and L'Eft Bank Wine Co. Limited (the Distributors) after becoming dissatisfied. It argues that the action was permissible because the parties' business relationship is not an "intoxicating liquor" dealership entitled to the protections of the WFDL. See §§ 135.02 (3) (b), 135.066. On the other hand, the Distributors contend that a wine grantor-dealer relationship is a "dealership" entitled to such protections and thus Winebow cannot unilaterally terminate its relationship with the Distributors absent a showing of good cause.

         ¶4 We conclude that a wine grantor-dealer relationship is not included within the definition of a dealership in Wis.Stat. § 135.02(3)(b). Section 135.066(2) provides the operative definition of "intoxicating liquor" for purposes of ch. 135, and such definition explicitly excludes wine.

         ¶5 Accordingly, we answer the certified question in the negative.

         I

         ¶6 Winebow is engaged in the business of importing and distributing wine to downstream wholesalers. Since 2004, Winebow has used Capitol-Husting as a distributor of its wines, and in 2009 it commenced a similar relationship with L'Eft Bank.

         ¶7 After becoming dissatisfied with the Distributors, Winebow abruptly terminated its relationship with them in February of 2015. The parties did not have any express written agreement that would prevent Winebow from unilaterally terminating their relationships.

         ¶8 The Distributors responded to Winebow's termination by letter, indicating their belief that they are entitled to the protections of the WFDL. Such protections would prevent Winebow from terminating their relationships absent "good cause." See Wis. Stat. § 135.03.

         ¶9 Winebow countered by filing a declaratory judgment action in the United States District Court for the Eastern District of Wisconsin. Winebow, Inc. v. Capitol-Husting Co., Inc., No. 15-CV-225, slip op. at *1 (E.D. Wis. June 18, 2015) . It sought a declaration that it has no continuing obligations to the Distributors. Id.

         ¶10 The District Court ruled in Winebow's favor. It determined that "[w]ine is not intoxicating liquor in the context of the WFDL, and thus the [Distributors'] business relationship with Winebow is not subject to the unilateral termination limitations of Chapter 135." Id. at *4.

         ¶11 The Distributors appealed to the United States Court of Appeals for the Seventh Circuit, contending that wine dealerships are per se "intoxicating liquor" dealerships entitled to the protections of the WFDL. Winebow, 867 F.3d at 867. The Seventh Circuit certified to this court the question of whether the definition of "dealership" contained in Wis.Stat. § 135.02(3)(b) includes wine grantor-dealer relationships. Id. at 870-71.

         II

         ¶12 Underlying this case are proposed statutory changes to the WFDL and the governor's partial veto of some of these changes. See 1999 Wis. Act 9, §§ 2166m, 2166s. We thus provide brief background on the WFDL, the proposed changes to it, and the partial veto.

         ¶13 The WFDL provides in part that a grantor of a dealership may not terminate a dealership agreement without good cause. Wis.Stat. § 135.03; see Ziegler Co., Inc. v. Rexnord, Inc., 139 Wis.2d 593, 594, 407 N.W.2d 873 (1987) . Its underlying purposes and policies include "[t]o promote the compelling interest of the public in fair business relations between dealers and grantors, and in the continuation of dealerships on a fair basis." § 135.025(2) (a) . Additionally, it aims "[t]o protect dealers against unfair treatment by grantors, who inherently have superior economic power and superior bargaining power in the negotiation of dealerships[.]" § 135.025(2)(b).

         ¶14 A grantor who violates the WFDL may be subject to an action for "damages sustained by the dealer as a consequence of the grantor's violation, together with the actual costs of the action, including reasonable attorney fees." Wis.Stat. § 135.06. Further, a "dealer also may be granted injunctive relief against unlawful termination, cancellation, nonrenewal or substantial change of competitive circumstances." Id.

         ¶15 However, the WFDL does not apply to all business relationships, but only to those defined as "dealerships." In 1999, the legislature sought to broaden the WFDL's reach to ensure that "intoxicating liquor" dealers were protected. See 1999 Wis. Act 9, §§ 2166m, 2166s.

         ¶16 It did so by making two significant changes. First, it amended the definition of a "dealership" to include distributors of "intoxicating liquors." 1999 Wis. Act 9, § 2166m. The new definition, codified at Wis.Stat. § 135.02(3) (b), included within a "dealership":

A contract or agreement, either expressed or implied, whether oral or written, between 2 or more persons by which a wholesaler, as defined in s. 125.02(21), is granted the right to sell or distribute intoxicating liquor or use a trade name, trademark, service mark, logotype, advertising or other commercial symbol related to intoxicating liquor. This paragraph does not apply to dealerships described in s. 135.066(5) (a) and (b).

1999 Wis. Act 9, § 2166m.

         ¶17 This revised "dealership" definition explicitly incorporated the definition of "intoxicating liquor" found in Wis.Stat. ch. 125, which regulates alcohol beverages. Pursuant to Wis.Stat. § 125.02(8), "vinous liquors, " or in other words "wine, " is expressly included under the umbrella of "intoxicating liquor":

"Intoxicating liquor" means all ardent, spirituous, distilled or vinous liquors, liquids or compounds, whether medicated, proprietary, patented or not, and by whatever name called, containing 0.5 percent or more of alcohol by volume, which are beverages, but does not include "fermented malt beverages."

§ 125.02(8).

         ¶18 Second, the legislature created Wis.Stat. § 135.066. 1999 Wis. Act 9, § 2166s. This new provision expressed the legislature's desire for a competitive and stable wholesale liquor market. See § 135.066(1) . Like the legislature's revised definition of "dealership, " the newly enacted § 135.066 imported the definition of "intoxicating liquor" from § 125.02 (8) . § 135.066 (2) .

         ¶19 Both of these changes were included in the 1999 budget bill. See 1999 Wis. Act 9. However, Governor Tommy Thompson used his partial veto power to alter the revisions passed by the legislature.[2]

         ¶20 Specifically, the governor struck language proposed by the legislature from both Wis.Stat. §§ 135.02(3) (b) and 135.066. With respect to § 135.02(3) (b), he deleted the cross-reference to the existing definition of "intoxicating liquor" found in ch. 125.[3]

         ¶21 Edits to Wis.Stat. § 135.066 were much more extensive. The governor eliminated large portions of § 135.066 (2) - (4) . What remained was the sole sentence, "'Intoxicating liquor' has the same meaning given in s. 125.02(8) minus wine."[4]

         ¶22 Legislative findings enumerated in Wis.Stat. § 135.066(1) and a severability provision in sub. (6) escaped the veto pen, but the governor struck several references to wine in sub. (5), a nonapplicability ...


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