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

867 F.3d 862, 2017 WL 3496377, 2017 U.S. App. LEXIS 15355
CourtCourt of Appeals for the Seventh Circuit
DecidedAugust 16, 2017
Docket16-3682
StatusPublished
Cited by5 cases

This text of 867 F.3d 862 (Winebow, Inc. v. Capitol-Husting Co., 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
Winebow, Inc. v. Capitol-Husting Co., Inc., 867 F.3d 862, 2017 WL 3496377, 2017 U.S. App. LEXIS 15355 (7th Cir. 2017).

Opinion

WOOD, Chief Judge.

Eighteen years ago, Wisconsin Governor Tommy Thompson vetoed portions of an appropriations bill that imposed new regulations on alcohol dealers and distributors. In doing so, the governor hoped to diminish the regulatory burden on wine dealerships. In the present case, which pits an upstream wine business against two whole *864 sale wine distributors, the question is whether Governor Thompson achieved that goal. The answer turns on the proper understanding of state law. Because there is no guiding precedent and the issue is of great practical importance, we respectfully certify to the Supreme Court of Wisconsin the question whether wine dealerships are automatically to be considered as “intoxicating liquor” dealerships for purposes of the Wisconsin Fair Dealership Law. See Wis. Stat. § 821.01; Cir. R. 52.

I

Plaintiff Winebow, Inc., imports and distributes wines to downstream wholesalers. It wants to cut its ties with two wholesale distributors, defendants Capitol-Husting and L’Eft Bank Wine, to whom we refer collectively as the Distributors. Winebow began using Capitol-Husting as a distributor of its wines in 2004; it added L’Eft Bank in 2009. Over the years, Winebow granted the Distributors the exclusive right to sell and distribute Winebow products within specified regions of Wisconsin. Evidently the relationship suited the Distributors, who bought “substantial amounts” of Winebow’s wine in recent years. Winebow, however, became dissatisfied, and in February 2015 it abruptly terminated both distributorships. No express agreement with either counterparty stood in its way, but the Distributors took the position that the Wisconsin Fair Dealership Law bars Winebow from doing so— at least without any financial penalty. Whether they are correct depends on the language of that statute, to which we now turn.

The Wisconsin Fair Dealership Law (“the Law”) restricts the circumstances under which certain sellers (termed “grantors,” see Wis. Stat. § 135.02(5)) unilaterally may stop doing business with them existing distributors (known as “dealers,” , per Wis. Stat. § 135.02(2)—we call them distributors here). Grantors may take this step only if they have “good cause” to do so. See Wis. Stat. § 135.03; see also Wis. Stat. § 135.02(4) (defining “good cause”); Ziegler Co., Inc. v. Rexnord, Inc., 147 Wis.2d 308, 433 N.W.2d 8, 12-14 (1988) (interpreting the statutory definition). The Law is premised on the idea that dealer-grantors have “inherently .., superior economic power.” Wis. Stat. § 135.025(2)(b). It seeks to “prevent[ ] suppliers from behaving opportunistically once franchisees or other dealers have sunk substantial resources into' tailoring their business around, and promoting, a brand.” Kenosha Liquor Co. v. Heublein, Inc., 895 F.2d 418, 419 (7th Cir. 1990). It does so by supplementing the contractual and common law obligations that grantors owe to their distributors. See Wis. Stat. § 135.025(2)(c) & (3). If a grantor contravenes the law by terminating or substantially impairing an. existing relationship with a distributor, that distributor may recover damages, injunctive relief, and attorney’s fees. Wis. Stat. § 135.06.

The Law does not regulate all grantor-distributor relationships, however. Initially, it addressed only business relationships (defined as “dealerships”) in which there was a “community of interest” between'the grantor and the distributor. Wis. Stat. § 135.02(3)(a), A “community of interest” was defined in the statute as a “continuing financial interest between the grantor and grantee in either the operation of the dealership business or the marketing of such goods or services.” Wis. Stat. § 135.02(1). These are hardly crisp standards, and so it is not surprising that courts are frequently asked to decide whether such an interest is present. See Note, Kevin Scott Dittmar, Foerster, Inc. v. Atlas Metal Parts: The Wisconsin Supreme Court Takes a Narrow View of the Dealer’s Financial Inter *865 est Protected by the Wisconsin Fair Dealership Law, 1985 Wis. L. Rev. 155, 156 (1985); see also Ziegler, 407 N.W.2d at 877 (“The community of interest requirement has been difficult to delimit with any precision.”).

In 1999, the Wisconsin General Assembly sought to broaden the Law to ensure that all “intoxicating liquor” dealerships were protected. To that end, it eliminated the need to prove “community of interest” for those businesses. It included changes to this effect in the state’s budget bill, Act 9.

Two of those changes are central here. First, the General Assembly amended the definition of a “dealership” so that large-volume distributors of “intoxicating liquor” were brought under the umbrella of the statute’s definition of a protected “dealership.” This revised definition of a “dealership” expressly incorporates the definition of “intoxicating liquor” in the chapter regulating alcohol ' sales, Wis. Stat. § 125.02(8), which includes wine:

... all ardent, spirituous, distilled' or vinous liquors, liquids or compounds, whether medicated, proprietary, patented or not, and by whatever name called, containing 0.5% or more of alcohol by volume, which are beverages, but does, not include “fermented malt beverages.”

Wis. Stat. § 125.02(8) (emphasis added).

Second, the legislature created an entirely new section in the Law: Wis. Stat. § 135.066. This new provision expressed the legislature’s desire for a competitive and stable wholesale market and the need for new rules governing a party’s acquisition of an entity that has an existing intoxicating liquor dealership. These industry-specific rules were to supplement, rather than replace, the other regulations in the Law. The new section expressly incorporated the definition of “intoxicating liquor” from the. pre-existing Wis. Stat.

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Cite This Page — Counsel Stack

Bluebook (online)
867 F.3d 862, 2017 WL 3496377, 2017 U.S. App. LEXIS 15355, Counsel Stack Legal Research, https://law.counselstack.com/opinion/winebow-inc-v-capitol-husting-co-inc-ca7-2017.