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A & B Distributing, Inc. v. Heggie's Pizza, LLC

United States District Court, W.D. Wisconsin

November 18, 2019

A & B DISTRIBUTING, INC., Plaintiff,
v.
HEGGIE'S PIZZA, LLC, Defendant.

          OPINION AND ORDER

          WILLIAM M. CONLEY, DISTRICT JUDGE.

         In this civil lawsuit, plaintiff A & B Distributing, Inc. (“A&B”), alleges that defendant Heggie's Pizza, LLC, violated the Wisconsin Fair Dealership Law (“WFDL”), Wis.Stat. § 135.01 et seq., when it terminated its dealership agreement without notice, good cause or right to cure. Before the court are the parties' cross-motions for summary judgment. (Dkt. ##21, 30.) For the reasons that follow, the court will grant in part and deny in part plaintiff's motion for partial summary judgment, finding that the undisputed record establishes that plaintiff was a dealer and, therefore, the WFDL governs the parties' business arrangement, but will deny the rest of the motion, finding disputes of material fact as to whether the WFDL was violated. For these same reasons, the court will deny defendant's motion for summary judgment in full.

         UNDISPUTED FACTS[1]

         A. Overview of the Parties

         Plaintiff A&B is a Wisconsin corporation with its principal place of business located in Danbury, Wisconsin. A&B's owner and sole employee is Alexander (“Al”) Vucicevic. Until August 2018, A&B sold defendant Heggie's pizzas to convenience stores, resorts, grocery stores, golf courses and taverns. At that time, A&B had approximately 132 customers.[2] At its high point, A&B had over 160 customers. Throughout their business relationship, A&B would place orders for Heggie's pizzas on a weekly basis and would pick up the pizzas at Heggie's facility in Minnesota typically on Mondays. While A&B could sell other products, Vucicevic avers that sales of Heggie's pizzas accounted for 99% of A&B's business.

         Defendant Heggie's is a limited liability company formed in Minnesota, with its principal place of business also in Minnesota.[3] Heggie's was originally founded in 1989 by Don and Polly Hegedus, who began the business in their garage, selling pizzas to resorts and bars in Minnesota and Wisconsin. In 2004, Shawn Dockter and a group of investors purchased Heggie's from the Hegeduses. At that time, Dockter became the President of Heggie's and has served in that role during all times relevant to plaintiff's complaint. Since 2004, in addition to Minnesota and Wisconsin, Heggie's has also grown its business to serve North Dakota, South Dakota, Nebraska, Kansas, Missouri, Iowa, Illinois and Indiana. During the course of the parties' relationship, Heggie's used both employee drivers and outside sales persons to distribute its pizzas. As a result, Heggie's maintains that A&B's sales have comprised only a small percentage of Heggie's total sales revenue.

         B. 2004 Agreement

         Before it sold defendant's pizzas, A&B sold pizzas for Square One Foods from roughly May 2004 through December 2004 with initial fixed costs of $25, 000 to cover the purchase of a truck and freezer. During that roughly seven-month period, A&B had to knock on doors to generate business, resulting in it doubling or tripling its business.

         In December 2004, A&B contacted Heggie's about the possibility of selling Heggie's pizzas, purportedly based on its quality. As Heggie's new President, Dockter met Vucicevic in person to “outline the terms of what [their] agreement would be.” (Dockter Dep. (dkt. #28) 32.) The parties never entered into a formal written buyer/seller agreement, although plaintiff maintains that they entered into a “gentleman's agreement and/or verbal agreement as to A&B's rights to distribute Heggie's pizzas.” (Pl.'s PFOFs (dkt. #25) ¶¶ 10-11.) While defendant argues that whether there was a “gentleman's agreement, ” or whether A&B “distribute[d]” Heggie's pizzas, are both legal conclusions, Heggie's President Dockter acknowledged at his deposition that the parties entered into a “handshake agreement.” (Dockter Dep. (dkt. #28) 32.)

         Moreover, there appears no dispute that Heggie's agreed to sell its pizzas to A&B at a rate of 20% to 22% below its set wholesale price initially, eventually increasing to 25% below, and A&B in turn agreed to sell the pizzas at that wholesale price. As such, A&B calculates it “gross profit” was 25% on each pizza sold.[4] Of course, Heggie also made a profit on the sale of pizzas to A&B. Indeed, Heggie's points out that its arrangement with A&B was similar to the arrangement with other customers who took possession of their pizzas at Heggie's plant in Milaca, Minnesota.

         In their initial December 2004 conversation, the parties did not discuss how to handle customer complaints, revenue expectations or what would happen if Vucicevic wanted to sell A&B. The parties also did not set a minimum or required number of pizzas that A&B was required to purchase, nor the number of customers it was required to serve.

         C. Ongoing Relationship from 2005 through July 2018

         Not one of the customers to which A&B sold Heggie's pizzas was a prior customer of Heggie's. A&B contends that Heggie's assigned it an agreed upon sales territory of northwestern Wisconsin, south of Highway 8.[5] Heggie's disputes that A&B was ever assigned a “territory, ” and in particular, disputes that the parties ever coordinated or agreed to a set territory. Nonetheless, at least at times, if a potential northwestern Wisconsin customer called Heggie's, Heggie's would contact A&B to alert it of a potential new customer. Moreover, Heggie's instructed its drivers not to target existing customers, including those serviced by A&B. In 2015, Heggie's President Dockter even asked Vucicevic for the list of customers on the south end of A&B's territory so Heggie's would not approach A&B customers.

         Initially, Heggie's sold A&B bar signs and menu boards stating, “Heggie's available here, ” or similar language to distribute to A&B's customers. At some point, Heggie's stopped charging A&B for these signs, meaning Vucicevic was free to take bar signs and menu boards and distribute them to his customers.[6] In developing its customer base, A&B also purchased approximately 150 pizza ovens from Heggie's at $65 each to provide to A&B's customers.

         Eventually, A&B also purchased a new delivery truck for approximately $60, 000, and a walk-in freezer for $5, 500, which was installed in a storage facility that A&B built for $75, 000. Heggie's would dispute the freezer and storage building expenses on the basis that: (1) A&B has not provided documentation, although A&B's owner Vucicevic averred as much in his deposition; and (2) A&B has not demonstrated that the freezer is used solely to store pizzas, even though A&B's representation that sales of Heggie's pizzas accounted for 99% of A&B's sales gives rise to a reasonable inference that the freezer was used to store Heggie's pizzas should the jury accept Vucicevic's testimony to that effect.

         Vucicevic avers further that “A&B created a market of over $425, 000 in [annual] sales of Heggie's pizzas that did not otherwise exist previously.” (Vucicevic Aff. (dkt. #23-1) ¶ 9.) Defendant again challenges this figure on the basis that plaintiff submitted no proof of sales, but there is no dispute that Heggie's President Shawn Dockter testified during his deposition that in 2014, which A&B acknowledges was the height of its sales of Heggie's pizzas, A&B sold approximately $440, 000 worth of Heggie's pizzas to its customers. (Dockter's Dep. (dkt. #23-2) 65-66.) Defendant further maintains that whatever A&B's sales may have been, they made up only a small percentage of Heggie's total revenue.

         A&B contends that Heggie's never established expectations as to sales protocols, inventory management requirements or legal requirements relating to the handling of food products. Heggie's disputes this pointing to its president's testimony that at the time the parties' entered into an oral agreement in 2004, they “verbally talked about making sure [Vucicevic] represented the brand well, [and] making sure[ he] followed USDA, FDA guidelines in his actions.” (Dockter Dep. (dkt. #28) 32.) Heggie's also maintains that as a separate company, A&B was further required to follow food handling and safety regulations, citing various regulations. (Def.'s Resp. to Pl.'s PFOFs (dkt. #38) ¶ 31.) Still, the parties appear to agree that no “written policies” existed, nor was A&B required to submit business plans or written reports detailing compliance with any policies. Regarding the lack of any written plans or policies, Heggie's contends that there were no such requirements because A&B was simply a customer and not an employee. (See Dockter Dep. (dkt. #28) 47-48 (acknowledging that there are no written documents requiring A&B to comply with procedures).)

         D. Transition Discussions

         As early as 2013, Heggie's maintains, and A&B does not dispute, that Vucicevic began to express a desire to sell the company and retire. Heggie's further contends that around that time, A&B's sales also began to decline because it stopped pursing new business. In contrast, A&B represents that the downturn in sales after 2014 was attributable to Heggie's “start[ing] to invade A&B's territory” and “A&B ha[ving] no further room for growth.” (Pl.'s Resp. to Def.'s PFOFs (dkt. #43) ¶ 19.)

         Regardless, in late July 2018, Dockter and Vucicevic met formally to discuss A&B's plans to continue to sell Heggie's pizza. A&B contends that during that conversation, Vucicevic told Dockter that A&B intended to continue selling Heggie's pizza through at least October 2019, and that this would give Heggie's time to determine how it would compensate A&B for its “sales route.” (Pl.'s PFOFs (dkt. #25) ¶ 40.) While Heggie's purports to dispute this fact, it only claims to have “disagreed with A&B's characterization of its business and valuation” (Def.'s Resp. to Pl.'s PFOFs (dkt. #38) ¶ 40), at least allowing the inference that Vucicevic and Dockter discussed the possibility of Heggie's compensating A&B for its territory. Finally, Heggie's maintains that “nothing (no agreement or law) required Heggie's to buy anything from A&B if Vucicevic decided to retire.” (Id.)

         E. August 2018 Events

         By August 2018, the parties had been in a business relationship for almost 14 years. At that point, A&B maintains it was the last “outside distributor” to sell Heggie's pizzas. (Pl.'s PFOFs (dkt. #25) ¶ 38.) Heggie's both objects to the use of the term “distributor” to the extent it is intended to have any legal implications, and maintains that “Heggie's has other custo[m]ers who order pizza in bulk and sell the pizzas.” (Def.'s Resp. to Pl.'s PFOFs (dkt. #38) ¶ 38.) Nonetheless, Heggie's Sales and Logistics Coordinator Marshall Pointer testified at his deposition that since the time he started with Heggie's in 2016, he does not recall any “nonemployee salespersons . . . like Al [Vucicevic] who would come in and buy pizzas and deliver it to their customers.” (Pointer Dep. (dkt. #29) 11.)

         On August 1 or 2, 2018, Heggie's received a customer complaint about a bad tasting pizza sold by one of A&B's customers, Almena Meats in Almena, Wisconsin. Pointer asked A&B to look into the complaint. In turn, A&B discovered that Almena Meats had a bad freezer, leading to the conclusion that the pizza in question may have thawed and refroze. Heggie's does not dispute this, but contends that A&B failed to ensure that its customers operated their freezers properly.[7] Vucicevic shared in a follow-up call with Pointer that other customers who purchased Heggie's pizza from Almena Meats also had complained about issues with pizzas, but Heggie's never followed up with those customers. (See Pointer Dep. (dkt. #29) 14 (“And did you follow up with Almena Meats after that at all to find out who the other customers were who might have been at issue?”).)

         On August 14, 2018, Dockter and Vucicevic spoke again by telephone. During that conversation, Vucicevic shared that he would sometimes take pizzas from one customer with only a month of shelf life before expiring and deliver it to a tavern where A&B knew the pizzas would be eaten before their expiration date. After Dockter expressed dissatisfaction with this practice, Vucicevic assured him during the same call, that A&B would adhere to Heggie's requests regarding transferring of pizzas from one customer account to another.

         Despite this assurance, Heggie's maintains that Dockter requested a follow-up telephone call on August 17, 2018, to “continue the dialogue, discuss in detail the corrective action plan A&B planned to take, and detail plans A&B claimed it would implement.” (Def.'s Resp. to Pl.'s PFOFs (dkt. #38) ¶ 47 (citing Dockter Aff. (dkt. #39) ¶ 23).) During that call, Heggie's also contends Dockter told Vucicevic that A&B would be required to comply with new procedures and complete paperwork to ensure that it was in compliance with government regulations. Heggie's further contends that Vucicevic became enraged and would not allow Dockter to complete a sentence. A&B does not dispute that this was Vucicevic's reaction during the call, but further represents that Dockter told him that A&B was no longer allowed to sell Heggie's pizzas.

         Heggie's purports to deny that A&B's relationship with Heggie's was terminated during the August 17 call, but offers only that Vucicevic would not allow Dockter to finish a sentence during the call and that prevented Dockter from discussing any corrective action A&B could take. For his part, Dockter acknowledged at his deposition that he told Vucicevic that “we can't continue to do business [] as we have been currently doing it. We can't do business together like this.” (Dockter Dep. (dkt. #28) 61.) However, at the end of that conversation, Dockter also testified that “Al was still authorized to sell pizzas, ” but “[w]e literally didn't know if we would see Al on Monday, whether he was going to pick up an invoice or not.” (Id. at 62.) Vucicevic ended the conversation by telling Dockter that he would hear from his attorney. Whatever the outcome of the August 17 call, the parties agree that A&B was not provided a written notice at that time.

         On Monday, August 20, A&B did not pick up any pizzas. Instead, on or about that day, Heggie's contacted one of A&B's larger customer, Holiday gas stations, to arrange pizza deliveries because, Heggie's maintains, it had a responsibility as a corporate managed vendor to serve that account.

         F. Written Notice

         In a letter dated August 20, 2018, Attorney Ryan Benson wrote on behalf of A&B to inform Dockter that he had been retained on matters relating “to your telephone conversation that took place on August 17, 2017, wherein you terminated your business relationship with Mr. Vucicevic with no notice or reason.” (Benson Aff., Ex. D (dkt. #42-1) 1.) In the letter, Benson also advised that under the Wisconsin Fair Dealership Law, Heggie's is ...


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