Eisencorp Inc v. Rocky Mountain Radar

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 04-2331
EISENCORP, INC.,
Plaintiff-Appellant,
v.
ROCKY MOUNTAIN RADAR, INC. and
MICHAEL CHURCHMAN,
Defendants-Appellees.
____________
Appeal from the United States District Court
for the Western District of Wisconsin.
No. 03 C 157—Barbara B. Crabb, Chief Judge.
____________
ARGUED DECEMBER 3, 2004—DECIDED MARCH 1, 2005
____________
Before FLAUM, Chief Judge, and EASTERBROOK and
WILLIAMS, Circuit Judges.
FLAUM, Chief Judge. Plaintiff-appellant Eisencorp, Inc.
filed suit in diversity against defendants-appellees Rocky
Mountain Radar, Inc. (“RMR”) and its president Michael
Churchman, alleging, among other things, that they
terminated the parties’ dealership agreement in violation of
the Wisconsin Fair Dealership Law, Wis. Stat. § 135.03(“WFDL”). The district court granted summary judgment to
defendants, and plaintiff appeals. Because we agree with
the district court’s well-reasoned decision finding
no genuine issues of material fact for trial, we affirm.
2 No. 04-2331
I. Background
In September 1999, Ryan Eisenhut founded Eisencorp,
Inc. as a sole proprietorship in the business of selling
various consumer goods. Eisencorp was incorporated in
Wisconsin in 2001, and Eisenhut remained the sole em-
ployee and sole shareholder of the company.
RMR is a Colorado corporation which manufactures and
sells radar detectors, laser detectors, and scramblers
designed for use by automobile and commercial truck
drivers. Churchman has been president of RMR since 1990.
Eisencorp sold RMR’s products pursuant to a written
“dealer agreement” between Eisencorp and RMR dated
September 23, 1999. Under this agreement, Eisencorp
purchased goods from RMR and then resold them to others.
Eisencorp did not maintain an inventory of RMR products.
Rather, it solicited orders from third-party customers and
then placed orders for those products with RMR. RMR then
shipped the products to Eisencorp with payment due on
delivery. The dealer agreement allowed Eisencorp to
advertise RMR products but specifically stated that
Eisencorp was an “independent dealer and may not repre-
sent itself as Rocky Mountain Radar in any capacity.” (Ex.
5.) Eisencorp made an initial investment in marketing,
spending $5,450 to advertise various products, including
RMR’s. Some of these print advertisements included the
names and pictures of RMR goods. In early 2003, Eisencorp
spent an additional $1,000 to place an advertisement for
one of RMR’s radio scramblers in a trucking magazine.
In May 2001, Eisenhut approached Churchman to discuss
a potential customer named Barjan Products, LLC, a
distributor of products for commercial truck drivers.
Eisencorp lacked sufficient financing to purchase and then
resell products to Barjan, as it had with other customers
No. 04-2331 3
under the dealer agreement. RMR and Eisenhut1 agreed
orally on the following arrangement. Eisencorp would solicit
orders from Barjan for RMR products and negotiate prices
with Barjan directly. If RMR accepted the order at the
agreed-upon price, it would ship the product directly to
Barjan with an RMR invoice. Upon receiving the product,
Barjan would pay RMR. Eisencorp would then receive a
commission, which was originally calculated as the differ-
ence between the price Eisencorp had negotiated with
Barjan and the distributor price, less returns and shipping
costs.
RMR sold products to Barjan in accordance with this
arrangement, and RMR issued checks payable to Eisencorp
(at Eisenhut’s specific request), identifying these payments
as “commission.” This arrangement for selling products to
Barjan was never reduced to writing.
Defendants contend that this separate arrangement for
sales to Barjan did not affect Eisencorp’s existing relation-
ship with RMR as provided in the earlier dealer agreement.
It is undisputed that after May 2001, Eisencorp continued
to buy and then resell RMR products directly to other
customers pursuant to this written dealer agreement.
In early January 2002, the parties modified the agree-
ment concerning sales to Barjan. Although they described
different events leading up to this modification, it is
undisputed that the parties ultimately agreed that
Eisencorp would continue to solicit sales from Barjan; that
RMR would sell to Barjan at a fixed distributor price of
1
The parties dispute whether this arrangement was made on
behalf of Eisenhut individually or Eisencorp, Inc. Because
we must draw all reasonable inferences in favor of plaintiff, we
will assume that Eisenhut was acting on behalf of plaintiff
Eisencorp, Inc. when he made this arrangement.
4 No. 04-2331
$153 per unit; and that RMR would pay Eisencorp its
standard 6% commission on Barjan sales.
RMR allowed plaintiff to send it returns of some of the
newer products Barjan had purchased. In January 2003,
however, Douglas Jones, RMR’s vice president of market-
ing, complained to Eisenhut about his attempts to return
obsolete product from Barjan by mislabeling it in the
shipping documents as current product. After this com-
plaint, Eisenhut continued to misrepresent the contents
of Barjan return shipments.
On February 5, 2003, shortly after Eisenhut again sent a
shipment of mislabeled returns, Jones wrote a letter
addressed to Eisenhut stating: “Pursuant to the Rocky
Mountain Radar Sales Representative Agreement, this
letter will serve as your official 30-day notification for
termination. As stated this can be without cause and is
official 30 days from the date of this letter.” (Def. App. at
149.) Jones called Eisenhut the same day to explain that he
was terminating the sales agreement. Eisenhut testified in
his deposition that Jones told him: “I’m just going to get rid
of you now.” (R. 25, ¶ 10.) Eisenhut apparently understood
this to mean that RMR had terminated any relationships
that he or Eisencorp had with RMR. After receiving this
letter, neither Eisencorp nor Eisenhut did any further
business with RMR.
On February 5, 2003, the same day he spoke with Jones,
and again the following day, Eisenhut called RMR, attempt-
ing to reach Churchman. His phone calls were not returned.
Two months later, on April 7, 2003, Churchman sent a
letter to Eisencorp’s attorney—apparently in response to a
threatened lawsuit—attempting to clarify the parties’
relationship. Churchman wrote: “At all times, the distinc-
tion was always very clear that Mr. Eisenhut had two
relationships with Rocky Mountain Radar: one as sales
representative and a second as a dealer.” (Ex. 10.) The
No. 04-2331 5
letter further explained: “Mr. Eisenhut is guilty of at-
tempted fraud and insubordination and his sales rep-
resentative relationship was terminated. At all times
Eisencorp, Inc. was able to order and receive product.” (Id.)
Examining the evidence in the record, the district court
concluded that two separate agreements existed between
the parties: the original dealer agreement and the sales
representative agreement. The court determined as a
matter of law that defendants had terminated the sales
representative agreement but left the dealer agreement
intact. Because plaintiff did not argue that the sales
representative agreement qualified as a “dealership” under
the WFDL, the district court reasoned, it failed to show
its entitlement to protection under the Act.
II. Discussion
Summary judgment is appropriate if the evidence pre-
sented by the parties “show[s] that there is no genuine issue
of material fact and that the moving party is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(c). In
evaluating the district court’s decision, we must construe all
facts in the light most favorable to the non-moving party
and draw all reasonable and justifiable inferences in favor
of that party. Russell v. Harms, No. 04-2065, slip op. at 5
(7th Cir. Feb. 2, 2005). We review the district court’s grant
of summary judgment de novo. Id.A. Wisconsin Fair Dealership Law
The WFDL was enacted “[t]o protect dealers against
unfair treatment by grantors, who inherently have superior
economic power and superior bargaining power in the
negotiation of dealerships[.]” Wis. Stat. § 135.025(b); see
also Moodie v. School Book Fairs, Inc., 889 F.2d 739, 742
(7th Cir. 1989). The statute provides:
6 No. 04-2331
No grantor, directly or through any officer, agent or
employee, may terminate, cancel, fail to renew or
substantially change the competitive circumstances of a
dealership agreement without good cause. The burden
of proving good cause is on the grantor.
§ 135.03. Examining the legislative history of the statute,
the Wisconsin Supreme Court has found that the law:
was meant to protect only those small businessmen who
make a substantial financial investment in inventory,
physical facilities or “good will” as part of their associa-
tion with the grantor of the dealership and is, thus,
consistent with common or accepted perceptions of the
words franchise or dealership.
Foerster, Inc. v. Atlas Metal Parts Co., 313 N.W.2d 60, 63
(Wis. 1981). “It is these types of businesses whose economic
livelihood would be imperiled by the termination of their
dealership without good cause and adequate notice.” Id.The statute requires a grantor to “provide a dealer at
least 90 days’ prior written notice of termination, cancella-
tion, nonrenewal or substantial change in competitive
circumstances.” § 135.04. “The notice shall state all the
reasons for termination, cancellation, nonrenewal or
substantial change in competitive circumstances and
shall provide that the dealer has 60 days in which to rectify
any claimed deficiency. If the deficiency is rectified within
60 days the notice shall be void.” Id. The WFDL further
authorizes a wrongfully terminated dealer to bring an
action for damages and injunctive relief. § 135.06.
The statute defines dealership, in relevant part, as:
[a] contract or agreement, either expressed or implied,
whether oral or written, 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, trademark,
service mark, logotype, advertising or other commercial
symbol, in which there is a community of interest in the
No. 04-2331 7
business of offering, selling or distributing goods or
services at wholesale, retail, by lease, agreement or
otherwise.
§ 135.02(3)(a).
B. The Terminated Agreement
It is undisputed that RMR terminated an agreement with
Eisencorp or Eisenhut in February 2003. The relevant
question is whether that agreement was a dealership
agreement protected by the WFDL. Plaintiff asserts that
the district court erred in granting summary judgment
because there was a genuine issue of material fact as to
whether there were two separate agreements, rather than
one. Plaintiff argues that the arrangement by which it
sold RMR products to Barjan was not a separate sales
agreement but merely a modification of the parties’ existing
dealer agreement. Therefore, plaintiff argues, a reasonable
jury could have found that a dealership agreement pro-
tected by the WFDL was terminated in February 2003.
The district court was correct in granting summary
judgment to defendants. The undisputed facts in the record
reveal that the parties entered into two distinct agreements
as a matter of law: the written dealer agreement signed in
1999, and the sales agreement reached orally in May 2001
and modified in the beginning of 2002. The parties had to
establish an agreement concerning sales to Barjan precisely
because Eisencorp’s method of selling to other customers
under the dealer agreement would not work with respect to
Barjan. Eisencorp concedes that it lacked the financing to
purchase the relatively large volume of product it intended
to resell to Barjan. The parties therefore negotiated and
ultimately decided upon a separate arrangement for dealing
with this customer.
Plaintiff’s argument that the sales agreement was merely
8 No. 04-2331
a modification of the earlier dealer agreement is belied by
the terms of the agreements and the parties’ conduct
thereunder. Under the dealer agreement, Eisencorp had the
right to buy and resell RMR goods, but RMR never paid
Eisencorp directly. Eisencorp took physical possession of
RMR product and bore the risk of the transaction. Under
the Barjan sales agreement, by contrast, Eisencorp never
took physical possession of RMR goods; RMR shipped
Barjan’s order directly to Barjan, was paid directly by
Barjan, and paid plaintiff a commission. Moreover, under
the sales agreement, RMR always retained authority to
accept or reject any order. We therefore agree with the
district court’s determination that two separate agreements
existed as a matter of law.
Plaintiff also contends that there is a factual dispute as to
which agreement was terminated. Relying primarily on the
phone conversation between Eisenhut and Jones and the
fact that Churchman did not return Eisenhut’s phone calls,
plaintiff argues that this termination was ambiguous, and
that a reasonable jury could have found that RMR effec-
tively terminated all relationships with Eisencorp.
Several undisputed facts in the record undermine plaintiff
’s
argument. First, the February 5 letter was directed to
Eisenhut and did not refer to Eisencorp or the written
dealer agreement between Eisencorp and RMR. Upon
receiving this letter, Eisenhut wrote across his copy of the
dealer agreement, “This is not a sales rep. agreement.” (Ex.
7.) While his subjective belief is not dispositive of what
actually was terminated, this evidence strongly suggests
that Eisenhut understood that the dealer agreement was
separate from the sales agreement, and that the February
5 letter did not terminate the dealer agreement. Finally,
even if Eisenhut had been confused about precisely which
agreement defendants had terminated in February, any
remaining ambiguity should have been eliminated by
Churchman’s April 7, 2003 letter to Eisencorp’s attorney,
No. 04-2331 9
expressly stating that Eisencorp remained free to “order
and receive product” under the dealer agreement. The
undisputed facts reveal, as a matter of law, that RMR
terminated only the sales agreement, leaving its written
dealer agreement with Eisencorp intact.
Plaintiff did not argue below that the sales agreement
standing alone created a “dealership” under the WFDL
and makes this argument only perfunctorily on appeal.
Therefore, we need not examine whether this agreement fits
within the statutory framework of the WFDL. McGoffney v.
Vigo County Div. of Family & Children, 389 F.3d 750, 753
(7th Cir. 2004) (“the requirement that parties may raise on
appeal only issues which have been presented to the district
court maintains the efficiency, fairness, and integrity of the
judicial system for all parties”).
III. Conclusion
For the foregoing reasons, the decision of the district
court is AFFIRMED.
10 No. 04-2331
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—3-1-05