Morley-Murphy Co. v. Zenith Electronics Corp.

942 F. Supp. 419, 1996 U.S. Dist. LEXIS 14806, 1996 WL 566660
District Court, W.D. Wisconsin·Decided September 30, 1996·No. 95-C-255-C·Published·Cited by 1 cases

Opinion

OPINION AND ORDER

CRABB, District Judge.

This civil action for money damages arises out of defendant Zenith Corporation’s termination of its dealership relationship with plaintiff Morley-Murphy Company. The ease is before the court on defendant’s post-judgment motions for amendment of the judgment and for entry of judgment as a matter of law. Trial was limited to the question of damages after plaintiffs motion for partial summary judgment was granted on the ground that plaintiff had shown as a matter of law that defendant had terminated the parties’ relationship without good cause, in violation of the Wisconsin Fair Dealership Law, Wis.Stat. §§ 135.01.-07. The jury awarded plaintiff damages of $2,374,629: $687,647 as compensation for out-of-pocket expenses resulting from the unlawful termination; $605,590 as compensation for lost future profits on sales of defendant’s products from plaintiffs Milwaukee and Green Bay locations; and $1,081,392 as lost future profits on sales of defendant’s products from plaintiffs Iowa and Minnesota locations.

In its post-judgment motions, defendant contends first that the damage amounts awarded by the jury are not supported by the evidence, that the amount awarded for out-of-pócket expenses should be reduced from $687,647 to $256,072 and that the amount awarded for future lost profits should be reduced to $0. In addition, defendant contends that awarding damages for future lost profits on sales from plaintiffs Iowa and Minnesota locations would extend the Wisconsin Fair Dealership Law beyond the borders of the state in violation of the dormant commerce clause of the United States Constitution. Accordingly, defendant argues, the amounts awarded for loss of future profits on sales at those out-of-state locations should be reduced to $0.

I conclude that defendant’s post-judgment motions must be denied. The jury had sufficient evidence before it to sustain the damages it awarded and granting plaintiff monetary damages for the loss of future sales from its Iowa and Minnesota locations does not violate the dormant' commerce clause.

A. Sufficiency of Evidence as to Damage Amounts Awarded

1. Out-of-pocket expenses

The jury awarded plaintiff $687,647 as compensation for out-of-pocket expenses resulting from the unlawful termination. Defendant takes issue with the portion of that award that is attributable to the contribution to profit approach advanced by plaintiffs expert, Ralph Ells. Ells testified that out-of-pocket expenses should include those expenses plaintiff incurred that would have been covered with money generated from sales of Zenith products had- the unlawful termination not taken place. Included in these expenses were executive compensation, corporate office overhead,- professional fees and accounting, computer operations and office' space. Ells identified the percentage of *422 these expenses covered by Zenith revenue and phased out the costs over a five-year period. Defendant argues that this approach puts plaintiff in a better position than it would have been. in without the unlawful termination (because plaintiff would have incurred these expenses even if the relationship continued) and that Ells did not make an appropriate allocation of the costs attributable to defendant’s portion of plaintiffs overall business, making his conclusion too speculative to support the jury’s verdict in this respect.

Under Wisconsin’s dealership law, plaintiff is entitled to recover the damages it sustained as a consequence of defendant’s violation of the act. Wis.Stat. § 135.06.' The jury could have found reasonably from Elis’s testimony that as; a consequence of defendant’s termination, plaintiff had lost the Zenith sales revenue that had covered a portion of its fixed costs, that it could not reduce or eliminate these costs immediately and that it had to pay the expenses out of other revenue sources, thereby incurring an expense recoverable under the act over and above any lost future profits. Elis’s allocation of a portion of the fixed costs to- defendant was not so inexact as to reduce his actual numbers to sheer speculation. Ells testified that he arrived at an actual number by allocating a percentage of the fixed costs that had been covered by Zenith revenue. The jury could have relied reasonably on this testimony in making its award. I am persuaded that defendant has faded to show that it is entitled to judgment as a matter of law on plaintiffs claim for out-of-pocket expenses.

2. Likelihood of future profits

Defendant maintains that the jury’s award of lost future profits is fatally flawed because the jury must have assumed, as Ells did in calculating lost future profits, that defendant would continue giving pricing subsidies to plaintiff on Zenith products. Defendant argues that the jury could have found that plaintiff would have made profits on Zenith sales in future years only if it believed defendant would have continued giving subsidies to plaintiff. Defendant maintains that such a finding would be nonsensical in light of defendant’s decision to go to a one-step distribution system that eliminated distributors like plaintiff. Although defendant cites extensive evidence to support its position, the question is not whether everyone who heard the evidence would have reached the same conclusion the jury did; the question is whether the jury’s conclusion was unreasonable. Defendant has failed to show that it was. The jury’s award shows that the jury did not assume that the subsidies would continue at historical levels for the full ten-year period. It awarded plaintiff only $1,686,982, although plaintiff had asked for over $10 million in lost future profits. Plaintiff adduced credible evidence that the price subsidy was simply a method of determining the price for which defendant was willing to sell its product and that defendant has continued to offer several special pricing programs in its new “one-step” distribution system. It was not unreasonable for the jury to find from this evidence that if defendant had continued its relationship with plaintiff, the relationship would have included some type of price subsidy or special pricing program.

B. Commerce Clause Implications

The most interesting question defendant raises is whether the jury’s award of lost future profits based on plaintiffs projected sales of Zenith products from its Iowa and Minnesota locations extends the application of the Wisconsin Fair Dealership Law into other states, in violation of the dormant commerce clause.. U.S. Const, art. I, § 8. . The dormant commerce clause is the corollary of the commerce clause’s delegation to Congress of the power to regulate commerce among the several states. “[TJhis affirmative grant of authority to Congress also encompasses an implicit or ‘dormant’ limitation on the authority of the states to enact legislation affecting interstate commerce.” Healy v. Beer Institute, 491- U.S. 324, 326 n. 1, 109 S.Ct. 2491, 2494 n. 1, 105 L.Ed.2d 275 (1989).

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Morley-Murphy Co. v. Zenith Electronics Corp., 942 F. Supp. 419, 1996 U.S. Dist. LEXIS 14806, 1996 WL 566660 (W.D. Wis. 1996).

942 F. Supp. 419 (Morley-Murphy Co. v. Zenith Electronics Corp.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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