Winebow Inc v. Capitol-Husting Co Inc et al

Filing 36

ORDER signed by Magistrate Judge David E. Jones on 9/9/2016. 27 Plaintiff's Motion for Judgment on the Pleadings GRANTED as to § 135.02(3)(b) and DENIED with respect to § 135.02(3)(a). June 2015 decision clarified to include the foll owing italicized language: "Wine is not intoxicating liquor in the context of the WFDL, and thus the Defendants' business relationship with Winebow does not constitute a dealership under § 135.02(3)(b) and is not subject to the unilateral termination limitations of Chapter 135 on that basis." (cc: all counsel) (cb)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
WINEBOW INC.,
Plaintiff-Counterclaim-Defendant,
v.

Case No. 15-CV-225

CAPITOL-HUSTING CO INC., and
L'EFT BANK WINE COMPANY LTD.,1
Defendants-Counterclaimants.

ORDER

Procedural Background
The plaintiff, Winebow, Inc., filed this action seeking declaratory
judgment pursuant to 28 U.S.C. § 2201 that under the Wisconsin Fair
Dealership Law (WFDL), Wis. Stat. ch. 135, (1) Winebow’s newly appointed
distributor may continue to distribute its wines; (2) Winebow may terminate any
and all remaining wine distribution relationships with defendants CapitolHusting Co., Inc. and L’Eft Bank Wine Company Ltd; and (3) Winebow has no
continuing obligations to the defendants, by way of contract, statute, or
otherwise.

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The Court has amended the caption to reflect that the correct name of this entity is L’Eft Bank
Wine Company Ltd. (See Ans. & CounterCl. ¶ 1-3, ECF No. 22.) Winebow is in apparent agreement
regarding the entity’s name. (See Ans. to CounterCl. at 1, ECF No. 23.)

On June 18, 2015, Judge Rudolph T. Randa denied the defendants’ motion
to dismiss for failure to state a claim, holding that “[w]ine 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.” (ECF No. 19, 10.)
In the wake of that decision, the defendants filed an answer and
counterclaims alleging that the relationship between each of them and Winebow
was a dealership under Wis. Stat. §§ 135.02(3)(a) and 135.02(3)(b), and that
Winebow violated the WFDL and was liable for monetary damages. (ECF No.
22.) Winebow filed an answer to the counterclaims and a motion for judgment on
the pleadings, seeking dismissal of the defendants’ counterclaims with prejudice
and entry of judgment in its favor. (ECF Nos. 23, 27).
After briefing was completed on the motion, the action was randomly
reassigned to this Court due to the unavailability of Judge Randa, and the
parties consented to magistrate judge jurisdiction over this action for all
purposes including entry of final judgment in accordance with 28 U.S.C. § 636(c)
and Fed. R. Civ. P. 73(b).
Having provided this procedural background, the Court addresses the
motion for judgment on the pleadings. The motion is based largely on an
expansive reading of Judge Randa’s June 2015 decision, asserting that the
WFDL’s definition of intoxicating liquor precludes the defendants from having
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any dealership relationship with Winebow. But such an expansive reading is
unwarranted, particularly as the issue now raised by Winebow was not before
the Court at the time of the June 2015 decision. Accordingly, the Court denies
the motion and clarifies the June 2015 decision to remove any possible
ambiguity as to the ability of defendants to pursue counterclaims under
§ 135.02(3)(a).
Legal Standard
Rule 12(c) “permits a party to move for judgment after the complaint and
answer have been filed by the parties.” Buchanan-Moore v. Cnty. of Milwaukee,
570 F.3d 824, 827 (7th Cir. 2009). The standard for judgment on the pleadings
under Rule 12(c) is straightforward; judgment may be granted if the
counterclaim fails to state “a claim that is plausible on its face,” St. John v.
Cach, LLC, 822 F.3d 388, 389 (7th Cir. 2016), meaning that the counterclaim
needs “factual content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged,” see id. (quoting Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009)). Consideration of a motion under Fed. R. Civ.
P. 12(c) requires “accepting the well-pleaded allegations in the complaint as true
and drawing all reasonable inferences in favor of the [counterclaimants].” Id.
Facts
Winebow, a Delaware corporation with its principal place of business in
New Jersey, imports and distributes wine. Capitol-Husting and L’Eft-Bank are
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Wisconsin corporations; each has its principal place of business in Wisconsin and
is a wholesale distributor of wines in Wisconsin, including some imported by
Winebow.
Pursuant to the parties’ agreements, formed orally and through the course
of business, Winebow granted Capitol-Husting and L’Eft Bank the exclusive
right to sell and distribute specified Winebow products within particular
geographic areas of Wisconsin and to specific customers. Capitol-Husting and
L’Eft Bank, at Winebow’s request, focused on a defined group of such products
and on the development of the market for that group.
Winebow’s products represented a commercially material percentage of
each defendant’s purchases, sales, and profits. Each defendant made substantial
investments in its relationship with Winebow including, among other things:
***
(b) Maintenance of a substantial inventory of Winebow wine
products, with the substantial carrying charges that such
maintenance entails, including wine products that [the
defendant] would not have carried but for Winebow’s desire
that [the defendant] make a complete representation of the
specified categories of [Winebow’s] products available;
(c) Engagement in promotional efforts in specific support of
Winebow products, both in express collaboration with
Winebow and on its own initiative;
(d) Refusal to pursue certain other lines of wine products, in
order to provide the level of commitment to, and focus upon,
Winebow products that Winebow desired; and

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(e) Aggressive expansion of Winebow’s presence in the
geographic areas and product markets for which [the
defendant] undertook the responsibility of selling Winebow
wine products.
(ECF No. 22, 5-6.) At Winebow’s request, Capitol-Husting also made payment to
a third party to facilitate Winebow’s effective access to parts of Wisconsin.
Eventually, Winebow changed its distribution structure and appointed
new wholesaler importers for the wines the defendants had previously
distributed. At that time, and before initiating this litigation, Winebow provided
notice to Capitol-Husting and L’Eft Bank that it was terminating all business
relationships with the company. Winebow did not provide either defendant with
90 days written notice of termination or with 60 days within which to cure any
claimed deficiencies. Capitol-Husting had been a Winebow distributor for at
least nine years; L’Eft Bank had been a distributor for more than six years.
Analysis
Winebow asserts that defendants’ counterclaims are foreclosed under law
of the case doctrine. Specifically, Winebow characterizes the June 2015 decision
in this case as holding that wine is not an intoxicating liquor under the WFDL
and that, therefore, the business relationships between Winebow and defendants
are not subject to the WFDL’s unilateral termination provisions. Winebow also
notes that defendants acknowledged as much in the Introduction to their
counterclaims, which states that they “depend entirely on the premise that the
Court’s holding was mistaken.” (Id. at 1.)
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Defendants counter that the Court should reconsider or further explain
the June 2015 decision. They contend that their business relationships were
subject to the WFDL, or at least subject to its unilateral termination provisions.
They also argue that to the extent the decision intended to encompass claims
under §§ 135.02(3)(a) and (3)(b), it was mistaken.
Law of the case doctrine generally discourages courts from reopening
issues decided in earlier stages of the same litigation. Musacchio v. United
States, 136 S.Ct. 709, 716 (2016). But the doctrine only applies where a court
actually decided the issue in question. Universal Guar. Life Ins. Co. v. Coughlin,
481 F.3d 458, 462 (7th Cir. 2007). See also Zamora-Mallari v. Mukasey, 514 F.3d
679, 695 (7th Cir. 2008); Key v. Sullivan, 925 F.2d 1056, 1061 (7th Cir. 1991).
Here, the briefs on the motion to dismiss and the June 2015 decision itself
show that the issue before the Court at that time was limited to whether wine
was an intoxicating liquor and thereby excluded from one of the definitions of
“Dealership” found in the WFDL, Wis. Stat. § 135.02(3)(b). Not addressed by the
Court was the issue now raised by defendants’ counterclaim: Whether
defendants can obtain relief under the WFDL by falling within a different part
of the WFDL’s definition of “Dealership,” Wis. Stat. § 135.02(3)(a). The Court
resolves this issue in favor of defendants.
As Winebow properly acknowledged in its brief opposing defendants’
motion to dismiss, “[a]n entity that buys and resells wine, as Defendants here,
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may only potentially qualify as a ‘dealer’ under § 135.02(3)(a), the sole definition
of a ‘dealership’ prior to the [1999] Budget Bill.” (ECF No. 15, 5.) This is true.
The WFDL’s definition of “Dealership” contains two provisions, one that
generally includes dealers of any products or services who have a community of
interest, and a second, later-added provision that is limited to dealers of
intoxicating liquors. Wis. Stat. §§ 135.02(3)(a) & (3)(b). As such, whether wine
dealers are excluded from the definition of intoxicating liquor, the sole issue
addressed in the June 2015 decision, is irrelevant for purposes of applying
§ 135.02(3)(a), which makes no reference at all to intoxicating liquor. A plain
reading of the statute confirms that wine dealers are not excluded from falling
within § 135.02(3)(a), though there may be an issue down the road as to whether
there existed here a “community of interest,” an issue not addressed or resolved
today.
To remove any potential ambiguity, the Court directs that its June 2015
decision be read as follows (edits in italics): “Wine is not intoxicating liquor in
the context of the WFDL, and thus the Defendants’ business relationship with
Winebow does not constitute a dealership under § 135.02(3)(b) and is not subject
to the unilateral termination limitations of Chapter 135 on that basis.”
Accordingly, Winebow’s motion for judgment on the pleadings is granted
as to its reliance on § 135.02(3)(b), and denied with respect to its reliance on
§ 135.02(3)(a).
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NOW, THEREFORE, IT IS HEREBY ORDERED that Winebow’s
motion for judgment on the pleadings (ECF No. 27) is granted as to
§ 135.02(3)(b), and denied with respect to § 135.02(3)(a); and
IT IS ALSO ORDERED that the June 2015 decision is clarified to
include the following italicized language:
“Wine is not intoxicating liquor in the context of the WFDL, and thus the
Defendants’ business relationship with Winebow does not constitute a dealership
under § 135.02(3)(b) and is not subject to the unilateral termination limitations
of Chapter 135 on that basis.”
Dated at Milwaukee, Wisconsin, this 9th day of September, 2016.
BY THE COURT:
s/ David E. Jones
DAVID E. JONES
United States Magistrate Judge

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