Winebow Inc v. Capitol-Husting Co Inc et al

Filing 19

DECISION AND ORDER signed by Judge Rudolph T Randa on 6/18/2015 DENYING 4 Defendants' Motion to Dismiss for Failure to State a Claim (cc: all counsel) (Zik, Linda)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
WINEBOW, INC.,
Plaintiff,
-vs-

Case No. 15-CV-00225

CAPITOL-HUSTING CO., INC. and
L’EFT BANK WINE COMPANY LIMITED,
Defendants.

DECISION AND ORDER
The Plaintiff, Winebow, Inc. (“Winebow”), filed this action seeking
declaratory judgment, pursuant to 28 U.S.C. § 2201, that under the
Wisconsin Fair Dealership Law (“WFDL”), Chapter 135, Wis. Stats., its
newly appointed distributor for its wines may continue to distribute them;
Winebow may terminate any and all remaining wine distribution
relationships with Defendants Capitol-Husting Co., Inc. and L’eft Bank
Wine Company Limited (collectively the “Defendants”); and that it has no
continuing obligations to the Defendants, by way of contract, statute, or
otherwise.

Subject matter jurisdiction is based on 28 U.S.C. § 1332,

because the matter in controversy exceeds $75,000 exclusive of interest and
costs and, based on state of incorporation and principal place of business,
the Defendants are citizens of Wisconsin and Winebow is citizen of

Delaware and New Jersey.
Since the basis of jurisdiction is diversity, this Court is bound to
apply state substantive law and federal procedural law. Hanna v. Plumer,
380 U.S. 460, 465 (1965). The Court’s ultimate aim is to apply the WFDL
as it has been interpreted by the Wisconsin Supreme Court. See James
Michael Leasing Co. LLC v. PACCAR, Inc., 772 F.3d 815, 820 (7th Cir.
2014) (Regarding interpretation of Wisconsin’s Lemon Law.)

“In the

absence of an authoritative interpretation from the Wisconsin Supreme
Court,” the Court must interpret the WFDL “as [it] think[s] the state’s
highest court would construe it.” Laborers Local 236, AFL-CIO v. Walker,
749 F.3d 628, 634 (7th Cir. 2014).
This matter comes before the Court on Defendants’ motion to
dismiss for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6).
(Defs.’ Mot. Dismiss 1.) (ECF No. 4.)

In order to survive a motion to

dismiss, “a complaint must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007)).

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BACKGROUND
Winebow, a Delaware corporation with its principal place of
business in New Jersey, imports and distributes wine. (Compl. ¶ 1.) (ECF
No. 1.) The Defendants, Wisconsin corporations with their principal place
of business in Wisconsin, are wholesale distributors of wines in Wisconsin,
including some imported by Winebow. (Id. at ¶¶ 2-3.) Before initiating
this litigation, Winebow provided notice to the Defendants of the
termination of their business relationship.

(Id. at ¶ 18.)

Each of the

Defendants responded by letter, alleging that it is a protected “dealer”
under the WFDL due to its prior sales of Winebow wines. (Id. at ¶¶ 2122.) There is no written agreement between Winebow and either of the
Defendants. (Id. at ¶¶ 9, 14.) Since Winebow was in apprehension of
litigation, it sought a declaration from this Court that the Defendants
have no right to continue selling Winebow wines.

(Id. at ¶ 23.)

Underlying the action is Winebow’s contention that the relationships do
not qualify for protection under Wisconsin law because wine is exempt
from the WFDL. (Id. at ¶¶ 11, 16.)
ANALYSIS
The question presented is straightforward: Are the Defendants
protected dealerships under the WFDL? The question turns on whether
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wine, the principal product in the business relationships, is “intoxicating
liquor” in the context of the WFDL. If it is, the Defendants are protected
dealerships, Chapter 135 limitations on unilateral termination rights
apply, and the motion to dismiss should be granted.

If it is not, the

Defendants are not protected dealerships, Chapter 135 limitations do not
apply, and the motion to dismiss should be denied.
Some background on the WFDL sheds light on this inquiry. The
WFDL was passed in order to combat the substantial economic power
disparity between grantors and in-state dealers. See Wis. Stat. §
135.025(2)(b). It sought to significantly limit the ability of the grantor,
even in tough economic times, to change its business relationship with a
dealer. It did not, however, “intend to insulate dealers from all economic
reality at the expense of grantors.” Ziegler Co., Inc. v. Rexnord, Inc., 147
Wis. 2d 308, 433 N.W.2d 8, 12 (Wis. 1988).

Grantors’ economic and

business situations may constitute good cause to change the relationship,
“but such changes must be essential, reasonable and nondiscriminatory.”
433 N.W.2d at 11.

The WFDL prevents “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).
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The central question in this case is not whether this type of change
in the grantor-dealer relationship — termination — is permitted under the
WFDL, but rather whether the Defendant wine dealers are WFDLprotected businesses.

Several WFDL cases have addressed the

termination of a dealership involved in distributing wine. In Lee Beverage
Co. v. I.S.C. Wines of Cal., Inc., 623 F. Supp. 867, 869 (E.D. Wis. 1985) it
was undisputed that Chapter 135 governed the relationship between the
distributor that distributed wine and brandy to dealer.

See also Wine

Imports of Am., Ltd. v. Gerolmo’s Liquors, Ltd., 563 F. Supp. 163, 167
(E.D. Wis. 1983) (holding that based on the facts of record a dealer did not
have successor liability under the WFDL); Bruno Wine & Spirits, Inc. v.
Guimarra Vineyards, 573 F. Supp. 337, 340 (E.D. Wis. 1983) (regarding
the statutory exception to the notice requirement for termination or
change in dealership status under the WFDL).
However, 1999 amendments to the WFDL substantially altered the
provisions dealing with alcoholic beverages. 1 Wis. Stat. § 135.066. Under

1

Wis. Stat. § 135.066(1) sets forth the following legislative findings:
The legislature finds that a balanced and healthy 3-tier
system for distributing intoxicating liquor is in the best
interest of this state and its citizens; that the 3-tier system
for distributing intoxicating liquor has existed since the
1930's; that a balanced and healthy 3-tier system ensures a

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the current WFDL, intoxicating liquor dealerships are subject to unique
qualifications. Chief among these is the term “intoxicating liquor” itself,
the definition of which is the focus of this case. The parties have not cited,
nor has the Court’s research disclosed, Wisconsin or federal cases
addressing the issue of whether wine dealers such as the Defendants fall
within the scope of the current provisions of the WFDL.
As with every endeavor at statutory interpretation, the inquiry
”begin[s] with the language of the statute,” giving “words their common
and ordinary meaning unless those words are technical or specifically
defined.”

Bank Mut. v. S.J. Boyer Const., Inc., 326 Wis. 2d 521, 785

N.W.2d 462, 468 (Wis. 2010). Two statutory provisions speak directly to
level system between the manufacturer and wholesale tiers;
that a wholesale tier consisting of numerous healthy
competitors is necessary for a balanced and healthy 3-tier
system; that the number of intoxicating liquor wholesalers
in this state is in significant decline; that this decline
threatens the health and stability of the wholesale tier; that
the regulation of all intoxicating liquor dealerships,
regardless of when they were entered into, is necessary to
promote and maintain a wholesale tier consisting of
numerous healthy competitors; and that the maintenance
and promotion of the 3-tier system will promote the public
health, safety and welfare. The legislature further finds
that a stable and healthy wholesale tier provides an
efficient and effective means for tax collection. The
legislature further finds that dealerships between
intoxicating liquor wholesalers and manufacturers have
been subject to state regulation since the enactment of the
21st Amendment to the U.S. Constitution and that the
parties to those dealerships expect changes to state
legislation regarding those dealerships.

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the definition of “intoxicating liquor:” (1) § 125.02(8) defines intoxicating
liquor as “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’”; (2)
Section 135.066 defines intoxicating liquor as having “the meaning given
in s. 125.02(8) minus wine.” (Emphasis added.) Taken together, the scope
of the term is clear: “intoxicating liquor” explicitly excludes wine. Any
attempt to magically interpret the § 135.066 language to include wine
would render “minus wine” surplusage and, therefore, would be an
incorrect interpretation of the statute.
The first, and oftentimes only, step in statutory interpretation is to
determine the legislature’s intent as revealed through statutory language:
“[i]t is the enacted law, not the unenacted intent, that is binding on the
public.” State ex rel. Kalal v. Circuit Court for Dane Cnty., 271 Wis. 2d
633, 681 N.W.2d 110, 124 (Wis. 2004). This Court’s job is not to creatively
explore every available extrinsic source to shape the meaning of an
otherwise unambiguous term. “One cannot look to a statute's legislative
history to evaluate ambiguity; it is only after ambiguity is determined that
we resort to legislative history.”

Indus. to Indus., Inc. v. Hillsman
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Modular Molding, Inc., 247 Wis. 2d 136, 633 N.W.2d 245, 248 (Wis. Ct.
App. 2001) aff’d, 252 Wis. 2d 544, 644 N.W.2d 236 (Wis. 2002).

This

Court’s job is rather to give force to the unambiguous intent of the elected
legislature as expressed through the text of statutes.
Thus, if the text of a statute is unambiguous, as here, the statutory
interpretation inquiry is at an end. This approach prevents a distortion of
a complicated, and oftentimes messy, legislative process. It promotes the
integrity of the democratic system as a whole, and encourages careful
drafting of statutes by legislatures.
The Defendants’ contention that the § 125.02 definition of
“intoxicating liquor” is different from the § 135.066 definition strains
credulity.

They argue that if the subject matter of certain statutory

provisions are “disparate,” the meaning of the term may vary. (Reply Br.
Supp. Mot. Dismiss 2.) (ECF No. 18.) This argument, seeking to limit the
in pari materia canon of statutory interpretation, might carry weight for
statutes very distant in time and subject matter. But § 135.066 addresses
the benefits of a “healthy 3-tier system for distributing intoxicating liquor”
and § 125.02(8) offers definitions in a chapter of Wisconsin law dedicated
to the legal status of alcoholic beverages. This slight difference in topic
does not alter the reality that both provisions directly address intoxicating
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liquor and should be read in pari materia.

Moreover, § 135.066

specifically references § 125.02(8) in defining “intoxicating liquors,” just as
§

135.02(3)(b),

the

WDFL

definitions

section,

directly

businesses “as defined in s. 125.02(21).” Wis. Stat. § 135.02.

references
The two

statutory provisions therefore must be read together in order to ensure the
coherence of the statutory scheme as a whole.
The Defendants also urge the Court to consult common usage
despite the existence of a definition within the statute. They argue that
the word “liquor” in common parlance is ambiguous as to whether it
includes wine, and this very ambiguity makes the full statutory term,
“intoxicating liquor,” plain and unambiguous.
Dismiss 9-10.)

(Reply Br. Supp. Mot.

But controlling Wisconsin law prohibits the use of the

ordinary meaning canon when a term is specifically defined by statute. See
Wis. Citizens Concerned for Cranes & Doves v. Wis. Dep’t of Natural Res.,
270 Wis. 2d 318, 677 N.W.2d 612, 617 (Wis. 2004) (“Words that are
defined in the statute are given the definition that the legislature has
provided.”); Beard v. Lee Enters., Inc., 225 Wis. 2d 1, 591 N.W.2d 156, 165
(Wis. 1999) (“Where a word or phrase is specifically defined in a statute,
its meaning is as defined in the statute, and no other rule of statutory
construction need be applied.”); Republic Airlines, Inc. v. Wis. Dep’t of
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Revenue, 159 Wis. 2d 247, 464 N.W.2d 62, 64 (Wis. Ct. App. 1990) (“When
words are defined by statute, we look nowhere else for the meaning and
apply only the legislature’s definition.”). If courts can’t rely on definitions
contained within laws, whole swaths of the Wisconsin Statutes dedicated
to these definitions would be rendered meaningless. More importantly, the
clear mandate of a democratically-elected legislature would be thwarted.
Courts must accord the provided definitions with deference. Intoxicating
liquor is specifically defined to exclude wine; it does not matter how
ordinary citizens might understand the scope of the term.
CONCLUSION
This Court’s role is not to make policy judgments about the most
economically fair or effective classification of dealerships in the State of
Wisconsin. Its role is merely to give force to the unambiguous intent of
Wisconsin’s elected legislature as expressed through the text of statutes.
The statutory definition of “intoxicating liquor” is clear, and wine is
expressly excluded.

This Court declines to indulge in a needless

exploration of legislative history when the meaning of this key term is
explicit in the text. Wine is not intoxicating liquor in the context of the
WFDL, and thus the Defendants’ business relationship with Winebow is
not subject to the unilateral termination limitations of Chapter 135.
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NOW, THEREFORE, BASED ON THE FOREGOING, IT IS
HEREBY ORDERED THAT:
The Defendants’ motion to dismiss for failure to state a claim (ECF
No. 4) is DENIED.
Dated at Milwaukee, Wisconsin, this 18th day of June, 2015.
BY THE COURT:
__________________________
HON. RUDOLPH T. RANDA
U.S. District Judge

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