A Wisconsin pizza maker, Heggie’s Pizza (Heggie’s) argued that its relationship with a purported pizza distributor A & B Distribution (A&B), did not meet the Wisconsin Fair Dealership Law (WFDL) definition of a “dealership.” The court disagreed and found the relationship was a “dealership.” This meant that, under the WFDL, to terminate the relationship, the manufacturer had to give the distributor an opportunity to cure, provide sufficient notice of termination, and have good cause to terminate.
Heggie’s sold frozen pizzas to A&B at a discounted wholesale rate. A&B in turn sold them to convenience stores, resorts and other local businesses in northern Wisconsin. A&B sold them at Heggie’s specified wholesale rate for almost 14 years. A dispute arose between Heggie’s (the manufacturer) and A&B (the distributor) after A&B’s customers complained to Heggie’s about A&B’s food safety and distribution practices. After a heated call, both parties claimed the other party terminated the relationship.
Heggie’s attorney sent A&B a notice of termination that referenced Heggie’s compliance with the WFDL. A&B sued, claiming Heggie’s termination violated the WFDL. Heggie’s argued WFDL did not apply because the relationship was not a “dealership” under the WFDL and, in any event, A&B terminated the relationship.
To determine if the WFDL definition of a dealership applies, Wisconsin courts evaluate (1) the existence of a contract or agreement between two or more persons; (2) which grants one of the rights specified; and (3) in which there is a “community of interest” or a continuing financial interest. The first two elements were met because the parties had a verbal agreement that let A&B distribute Heggie’s pizzas and use its trade name in advertising.
Regarding the community of interest, the court noted it was undisputed that Heggie’s and A&B had a business relationship over thirteen-years; 99 percent of A&B sales were Heggie’s pizzas; almost all A&B’s owner’s work related to selling Heggie’s pizzas; Heggie’s provided A&B signs so its customers could advertise that they sold Heggie’s pizzas; and A&B made substantial financial investments by buying a new truck, freezer, and rental space in a storage facility for Heggie’s pizzas and pizza ovens for its customers. The court found a community of interest because (1) A&B would suffer a severe financial impact if terminated on limited notice and (2) A&B spent significant time and effort developing goodwill for Heggie’s, for which it would not be compensated.
The fact that the relationship was a WFDL “dealership” did not end the litigation. Heggie’s denied terminating the agreement. The court ruled that a reasonable jury could differ as to which party terminated the relationship and whether or not the food safety claims, which are legitimate reasons to terminate a distributor, were reliable accusations by Heggie’s.
Many states have relationship laws to protect distributors from impulsive or otherwise unfair termination. Some statutes require manufacturers to compensate terminated distributors for the fair market value of their business. Even if a business operates under an oral agreement to distribute products from a manufacturer, as in this case, the facts and course of dealing can suffice to let the business invoke protection under applicable state statutes. This case demonstrates that dealers who are wrongly terminated by a manufacturer can use the state’s franchise or dealership’s laws as a tool to bring viable claims they would not otherwise have.
A & B Distributing, Inc. v. Heggie’s Pizza, LLC, W.D. Wis., ¶16,553
