Home Protective Services, Inc. v. Adt Security Services, Inc.

438 F.3d 716, 2006 U.S. App. LEXIS 3365, 2006 WL 318937
CourtCourt of Appeals for the Seventh Circuit
DecidedFebruary 13, 2006
Docket05-1074
StatusPublished
Cited by15 cases

This text of 438 F.3d 716 (Home Protective Services, Inc. v. Adt Security Services, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Home Protective Services, Inc. v. Adt Security Services, Inc., 438 F.3d 716, 2006 U.S. App. LEXIS 3365, 2006 WL 318937 (7th Cir. 2006).

Opinion

WILLIAMS, Circuit Judge.

Home Protective Services, Inc. (“HPS”) sued ADT Security Services, Inc. (“ADT”) for damages under the Wisconsin Fair Dealership Law (“WFDL”). The district court granted summary judgment in favor of ADT on the theory that there was no community of interest between the parties. Because we agree with the district court *718 that the parties did not share a community of interest within the meaning of the WFDL, we reject HPS’ argument that summary judgment was improperly granted and affirm the ruling.

I. BACKGROUND

The facts in this case are not in dispute. Plaintiff-appellant HPS is a small, family-owned business that sells, installs, and repairs residential and small business security systems. In this industry, local dealers like HPS typically solicit customers, sign them to service contracts, and tender the contracts to large alarm companies like defendant-appellee ADT for a fee. The alarm companies choose which contracts to accept and which to reject. If the contract is accepted, then the dealer installs the alarm system, and the customer pays a monthly fee to the alarm company, which monitors the system and contacts local authorities if there is a break-in or fire. Defendant ADT is the leading alarm monitoring company in the United States. ADT markets its products through both an internal sales force and through its relationships with small dealers like HPS (the “ADT Authorized Dealer Program”).

HPS was an ADT dealer from 1996 until its contract was suddenly terminated by ADT in August 2002. At the time of termination, the parties’ relationship was governed by a document referred to as the 1998 ADT Authorized Dealer Agreement (the “Agreement”). The Agreement contained exclusivity and non-competition provisions which prevented HPS from working with any ADT competitors unless ADT first rejected the customer’s contract. Once ADT accepted a contract, the account became ADT property, and HPS was not permitted to contact the customer for twenty-five years without written permission from ADT. HPS received a one-time net payment of $800 for each customer contract it tendered. HPS would then install the electronic security system, which had to bear the ADT logo and meet ADT specifications. If a customer renewed a contract upon expiration, HPS shared in the renewal income, which was $200-$1100 per month. If a customer canceled or defaulted, HPS paid ADT an attrition chargeback. HPS was required to advertise itself exclusively as an ADT authorized dealer. During the relationship, HPS devoted 95% of its time and derived 95% of its revenues from its ADT business. It spent about 10% of its annual revenues, or about $32,000 per year, on ADT-specific direct mail advertising.

In August 2002, following a corporate restructuring, ADT ended its relationships with about 200 of its 700 Authorized Dealers. No notice or opportunity to cure was provided. According to HPS’s expert, HPS incurred over $63,000 in one-time losses while it searched for a new partner and over $14,000 in recurring monthly losses once it began a less profitable relationship with one of ADT’s competitors. As a result, HPS was forced to lay off most of its workforce and become a “mom- and-pop” operation. At the time of termination, HPS possessed about $10,000 worth of ADT promotional materials it could no longer use. HPS sued ADT, alleging that ADT had violated the WFDL by terminating the Agreement without providing notice or an opportunity for HPS to improve its performance. The district court granted summary judgment in favor of ADT, and HPS appeals.

II. ANALYSIS

The District Court Properly Granted Summary Judgment in Favor of ADT Because HPS Failed to Show That There Was a Community of Interest between the Parties.

We generally review a district court’s grant of summary judgment de *719 novo. McCoy v. Gilbert, 270 F.3d 503, 508 (7th Cir.2001). However, although the parties here characterize this action as an appeal from a grant of summary judgment, there is no dispute as to either the facts or the law; the sole question is whether the agreed facts come within the ambit of the agreed law. This invites the question whether this case is more akin to bench trial on stipulated facts (in which case we would review the application of fact to law for clear error) or to a ruling on summary judgment (in which case we would review the same questions de novo). Hess v. Hartford Life & Accident Ins. Co., 274 F.3d 456, 461 (7th Cir.2001) (judgment on stipulated facts more akin to a bench trial than to summary judgment, and therefore the district court’s application of law to the facts should be reviewed for clear error). As the parties have not briefed the issue, and as our conclusion in this case would be the same under either standard, we think it best to reserve the question for another day. See Cook, Inc. v. Boston Scientific Corp., 333 F.3d 737, 742 (7th Cir.2003) (“No matter. The district judge’s ruling [on stipulated facts] was not erroneous at all, and so the precise standard of review is unimportant”).

The WFDL provides certain protections (the right to three months’ notice and an opportunity to cure) to grantees “of a dealership situated in this state.” Wis. Stat. §§ 135.04, 135.02(2). A dealership as defined by the statute contains three elements:

[1]A contract or agreement ... [2] between 2 or more persons, by which a person is granted the right to sell or distribute goods or services, or use a trade name ... or other commercial symbol, [3] in which there is a community of interest in the business of offering, selling or distributing goods or services.

Wis. Stat. § 135.02(3)(a). The first two elements are clearly met here; the case turns on the third.

There is no bright-line test for determining whether community of interest exists. The two primary guideposts Wisconsin courts have established are (1) continuing financial interest and (2) interdependence, which must be great enough to threaten the financial health of the dealer if the grantor exercises its power to terminate. Cent. Corp. v. Research Prods. Corp., 272 Wis.2d 561, 681 N.W.2d 178, 186 (2004). The Wisconsin Supreme Court has identified a long list of factors courts should consider in evaluating interdependence:

[1] How long the parties have dealt with each other;
[2] the extent and nature of the obligations imposed on the parties in the contract or agreement between them;
[3] what percentage of time or revenue the alleged dealer devotes to the alleged grantor’s products or services;
[4] what percentage of the gross proceeds or profits of the alleged dealer derives from the alleged grantor’s products or services;

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Bluebook (online)
438 F.3d 716, 2006 U.S. App. LEXIS 3365, 2006 WL 318937, Counsel Stack Legal Research, https://law.counselstack.com/opinion/home-protective-services-inc-v-adt-security-services-inc-ca7-2006.