Super Valu Stores, Inc. v. D-Mart Food Stores, Inc.

STORES, INC., Delaware VALU SUPER Plaintiff-respondent, corporation,

v. INC., STORES, a Wisconsin D-MART FOOD Cahak, C. and William corporation, Defendants-Appellants, BANK, a STATE PORT EDWARDS NEKOOSA institution, banking Defendant.† Appeals Court 24, June 1988.—Decided on No. Submitted 87-1633. briefs September 1988. 721.) (Also reported 431 N.W.2d denied. Petition to review † was cause sub- defendants-appellants For A. Schroeder William mitted on briefs Schroeder, Sommer, of Rhinelander. Oik & the cause sub- plaintiff-respondent For Terwilliger and Terwil- on the brief of Herbert mitted S.C., Wausau, Wakeen, Conway, Piehler & liger, Stroud, Willink, Stroud, Thompson A. Myers Rhea Howard, of counsel, of Madison. & Sundby, JJ. Eich and Dykman,

Before Cahak, through his EICH, William Appellant J. Stores, Inc., D-Mart Food corporation, wholly-owned Rapids in Wisconsin under grocery store operated a respondent, Super with agreement” "retail sales Inc., Stores, nationwide wholesaler. grocery Valu D-Mart, seeking money Super Valu sued Cahak and for and open merchandise damages on an account agreement. the store under supplied services to counterclaimed, asserting several Cahak and granted partial court The trial causes of action. counterclaims, dismissing the and summary judgment issues irrelevant trial on several proceeded the case to this appeal. to challenge the dismissal and D-Mart

Cahak judgment of the final portion also a counterclaims obliga D-Mart’s liable for holding personally Cahak (1) Super whether The issues are: Super to Valu. tions Rapids in Wisconsin to another store plan open Valu’s Law, 135, Dealership the Wisconsin Fair ch. violated (2) Stats.; plan "duty violated the of good whether D-Mart as a to the Super party faith” Valu owed to (3) agreement; sales whether Cahak’s counter retail was barred reason of his by claim for defamation written notice of the claim give Super failure to 895.05(2), Stats.; (4) whether, required sec. agreements, under the terms of their several Cahak held liable for D-mart’s debt may personally be All open questions Valu on the account. are owing decide no defer independently, law which we Dental Muggli trial court’s decision. ence to the 696, 699, 419 Taylor, Studio v. 2d N.W.2d Wis. (Ct. 1987). App. dealership agreement Because Cahak’s was non- Valu, exclusive and allowed its sole discre- tion, dealerships, other we see no viola- franchise law, and no violation tion of the fair obligation good Valu’s to deal with Cahak faith. We are also satisfied that Cahak’s counterclaim defamation was barred for failure to with comply for 895.05(2), Stats., requirements the notice of sec. Finally, was otherwise insufficient. we con- legally clude that the trial court ruled that Cahak correctly D-Mart’s personally guaranteed payments open Valu on the account. We therefore affirm judgment.

Super Valu is a nationwide franchisor of both large and "warehouse”-type grocery "conventional” 1976, Valu, Super stores. In D-Mart and Cahak agreements entered into a series of under which D- open operate grocery Mart would and a conventional Rapids. store in Wisconsin contract, agreement,” The basic the "retail sales "Super allowed D-Mart to advertise itself as a Valu” insignia Super and emblems Valu to use the and store purchase It D-Mart to also allowed its in business. Super from Valu. related services and merchandise grant the exclusive D-Mart did The Super operate right in Valu store Wisconsin a Super given territory. Rapids Rather, other "right its to choose and select Valu retained Agree- Super Retailer into Valu and to enter retailers Super parties sole choice at Valu’s with other ments ....” discretion and parties agreement, to the

In retail addition building signed and sublease for the store a also personal guaranty a "unconditional- executed Cahak guaranteeing] continually ly, absolutely full and performance payment ... of all the faithful terms, [the] in covenants contained conditions and Among things, the sublease ....” other Sublease required comply with the to "enter into D-Mart provisions business of, all times to conduct its and at agreement] ....” [the retail under[,] developed plan years later, a Valu Several large "warehouse”-type grocery a store to franchise September, Rapids. In Valu newspaper, plans to a local and an article disclosed announcing appeared that a new store was soon planned for the area. The article stated that Cahak given operate it. "first chance” to The would be negotiate acceptable agreement parties an could not however, store, to take the new and at for Cahak over date, his later Cahak closed store. some owing open D-Mart to recover amounts on an sued The also account for merchandise. action asserted against personal guaranty. under the claim Cahak alleging filed counterclaims and Cahak plans open Valu’s second store Rapids fair violated the law and duty "good dealing” a breach of its faith constituted indi- under the contract. Cahak also counterclaimed alleging Super vidually, Valu had defamed him that publica- which when it released the information led announcing planned newspaper article the tion of the Super opening of the new store. Valu moved for dismissing partial summary judgment the counter- granted claims and the trial court remaining the motion. The among jury and, issues were tried things, jury the awarded other open $142,743.28 on the account claim. On motions verdict, after the trial court ruled that Cahak was payment personally under liable for of the account guaranty. terms addressing issues,

Before we should note that though jury, even the case was tried to a the heart of appeal granting pretrial is the Valu’s summary judgment. motions for Those motions were undisputed presented on facts heard and decided result, at the time. As a whatever to the court happen happened or did not at trial is irrelevant of the motions. We address them on our consideration they by the record as it existed when were decided expanded by testimony court, trial not on a record at trial. presenting arguing summary judg-

In parties agreed general motions, the to the facts ment agreed They the Wisconsin recited above. also relationship, Dealership applied to their Fair Law a full Valu continued to treat nothing denying dealer, to which it was entitled store, until under the Cahak closed large open a warehouse Valu intended to from Cahak’s four blocks approximately store grocery as necessary. be referred to facts will store. Other FAIR THE DEALERSHIP I. VIOLATION OF LAW Law, Dealership Fair ch. The Stats., "promote compelling [pub- the was enacted to ... in fair business relations between interest lic] "protect against and to dealers grantors” dealers 135.025(2)(a) —” Sec. grantors treatment unfair (b). goals, In furtherance these sec. 135.03 ... grantor may provides substantially that "[n]o of a competitive dealership the circumstances change cause.” agreement good without that Valu’s announcement argues Cahak open another store in the planning that it was area the changed competitive circumstances "substantially 135.03, in violation of sec. Stats. We of D-Mart” disagree. court, to the trial argument

Cahak made the same it, Judge on rejected and the court Warren’s relying case, in a federal district court Brauman rationale (E.D. F. 1 Corp., Supp. v. 563 Wis. Paper Congoleum Co. 1981). Brauman, case, dealer, attempted In the licensor, Congoleum, awarding from enjoin dealership party, claiming to a third this would 135.03, claim, sec. The court rejected violate Stats. dealership between Brau- noting exclusive, holding: Congoleum man and was not exclusive, dealership agreement If the is not then appointment not Congoleum’s of a new dealer will change competitive "substantially circum- agreement.” "Dealer- dealership stances of 135.02, ship,” in section "means as defined agreement...Thus, contract or appointment of a new dealer will change competitive circumstances agreement of an existing agreement provides dealer unless that for Brauman, exclusivity. 563 F. Súpp. at 3 (emphasis omitted). original; citation Cahak has referred us to three other federal Meyer cases, Kero-Sun, district Supp. Inc., court v. 570 F. (W.D. 1983), Joseph Equipment Wis. St. v. (W.D. Massey-Ferguson, Supp. Inc., 546 F. Wis. 1982), Corp., Supp. and Van v. Oil 515 Mobile F. 487 (E.D. 1981), claiming they compel Wis. that opposite them, however, result. Two of are irrelevant any, little, to this case and the third has precedent. Meyer if value as inapposite because the agreement provided there the dealer with an exclusive operations. agreement area of Cahak’s was nonexclu- Joseph, Massey-Ferguson, licensor, In sive. St. product withdrew its entire line from sale in North remarking court, America. The while that such action could be considered "a de termination of the facto Dealership Agreement” meaning within the of the prohibition against 135.03, Stats., in sec. "termi- nating dealerships] good cause,” such ... without apply Massey- nonetheless held that statute did not Ferguson’s Joseph, withdrawal from the market. St. Supp. F. 546 at 1247. unilaterally case, Van,

In the third the licensor requiring pay credit, cancelled the him dealer’s gasoline cash for all future deliveries of to his station. summary The court denied the licensor’s motion for judgment, rejecting argument that, of as matter change law, the in terms did not constitute a credit change competitive in the dealer’s circumstances dealership agreement. did not alter While there is might language inconsis- that be considered in Van quoted excerpt above—even Brauman tent with judge though were written same both —we reasoning Brauman, case, in a more recent think appropriate. note, too, We that is the more reasoning support other, recent, still more finds e.g., Computronics, Computer, Apple See, Inc. v. cases. (W.D. 1985); Supp. 809, Inc., Wis. Kinn v. 600 F. (E.D. Corp., Supp. 682, F. Wis. Coast Catamaran 1984). change other the credit Valu did agreement D-mart; nor did it of its with

terms any product other action lines or take withdraw agreement. amounting to a de termination facto Indeed, facts before the one of the uncontroverted judgment summary motions was court on the trial to treat D-Mart as a dealer Valu continued respects until Cahak closed the store. all important, retail sales More free to Under terms Valu was nonexclusive. agreements many with other retailers as into as enter agree with the author the dissent wished. We pro- liberally Stats., 135, construed to should be ch. policies. underlying purposes But here mote specific plain language Value of the statute alleged prohibit more than does no to have violated competitive "chang[ing] circumstances it from of Stats, dealership agreement 135.03, —” Sec. [the] added). (emphasis Valu’s dealer- And because specifically ship agreement authorizes with Cahak whenever and other stores franchise wishes, how the issuance of it we do see wherever change competitive would "the another franchise agreement” dealership of in viola- [the] circumstances 576 tion of the law. To so read the statute would involve interpretation much more than a liberal would —we it, have to rewrite this completely we not do. may Compliance with the express terms of the dealership cannot, agreement under the circumstances of this case, give rise to a 135.03. violation of sec.

II. THE DUTY OF FAITH GOOD

PERFORMANCE Cahak contends that even if Super Valu’s conduct comported with the agreement, terms of the Wiscon- imposes sin law an "independent good of faith” duty contract, parties on all required and this duty Super Valu not franchise a second store Cahak’s market area.

Wisconsin law recognize does con "[ejvery tract faith implies good dealing and fair between the it, parties to and a of duty cooperation part on the of 102, Chayka, Estate parties.” both 47 Wis. 2d 7, 176 561, (1970), n. N.W.2d quoting 17 Am. Jur. 2d Contracts, (1964) (footnote omitted). 256, sec. at where, here, But contracting complains party acts of the other which are party specifically autho agreement, rized their we do not how see there can Indeed, be breach of the good covenant of faith. would be a contradiction in terms to characterize an contemplated plain language parties’ act contract as a "bad faith” breach of that contract. argument

Nor has in the Cahak’s found favor St. In Joseph, Supp. courts. 546 F. at reserved to Massey-Ferguson right without replace "discontinue Products obligation liability incurring any whatsoever to Dealer_” company’s decision to cease Because marketing products it was entitled to was one language contract, of the court under the make that "it more the decision that follows without held implied duty cooperate not be a breach of could perform permitting its duties [dealer] under And, at 1251. in Amoco Oil Co. the contract.” Id. v. (E.D. Supp. 661, Inc., Co., F. 666-67 Oil Cardinal 1982), examining court, the Wisconsin after Wis. "good duty cases, that a fact such faith” held [the franchisor-franchisee] ... exists "does not relationship make primarily fiduciary is '[I]t one. ... a relationship governed by business standard language (Citation omitted.) ] of We the[ contract.’” duty good agree, no of the faith and we see breach dealing in case. this 895.05(2), STATS., SEC.

III. APPLICABILITY OF CLAIM TO CAHAK’S DEFAMATION alleged he of Cahak’s counterclaims One given press by Super to the defamed information open relating plans store. to its new He newspaper’s to him in the claimed the references public ... to conclude that article would "cause the his the business of D- [he] would cease affiliation with [Super Mart, Valu’s] with ... and become associated operation_” alleged that, ... He as a result of new being public light information made this —in closing eventual of his store—he "suffered a public management confidence his loss ....” abilities newspaper only made

The article brief reference plans outlining store, new to Cahak. After for the existing Super simply "An stated: in retailer Rapids, given Cahak, will William be first store_Cahak operates chance at the new D-Mart Eighth Valu at 2561 Street.... If he turns down operating offer, Cahak will be to free continue his store_” paragraph The trial court concluded that the was capable meaning, conveying defamatory of a but grounds dismissed the counterclaim on that Cahak give 895.05(2), required by had failed to notice sec. provides part any that, That section in "[b]efore Stats. any civil action shall be commenced on account of publication newspaper, magazine libelous periodical, person give

the libeled shall first those alleged responsible publication to be or liable for the opportunity reasonable to correct the matter libelous [giving] writing specifying notice in the article and the statements therein which are claimed to be defamatory false and and a statement of what are claimed to be the true facts.” argues applicable only

Cahak statute is required defendants, thus he was not media provide notice to Valu. We to the held contrary Brewing Co., v. 100 Wis. Hucko Jos. Schütz (Ct. 1981), App. 372, 377-81, 72-74 2d N.W.2d depart holding and see no reason to from that in this case. publication capable so,

Even whether a meaning question conveying defamatory is a of law County, Ballenger for the court. v. Door 131 Wis. 2d 1986). (Ct. App. 422, 427, 388 624, 628 We have N.W.2d single paragraph in the article that is the set forth the subject counterclaim; and, of Cahak’s defamation paragraph, considering we are of that contents disagreement compelled with the trial state our capable conveying a that it was conclusion court’s way paragraph meaning. defamatory see no We reasonably do and conclude that read to so could be subject to dismissal on that the counterclaim ground as well. LIABILITY

IV. PERSONAL CAHAK’S correctly held that the retail sales The court trial guaranty, agreement, and the each one the sublease referring the others and all three executed contem- to part single transaction, poraneously a should be together. Acceptance Corp. v. Milwaukee construed Kuper, 517, 256, 515, 42 167 N.W.2d 258 Wis. 2d (1969). Doing personal so, held the court that Cahak’s past payments guaranty the due to covered purchased by D- for and services merchandise dealership agreement. the the Mart under terms of argues that this was error because Cahak duty to to him at the time that Valu had "a disclose by ... documents were executed the various executing guaranty obligating ... was he also pay charges [under ... to ... himself fees argument dealership agreement].” on Cahak bases the Notte, 207, Wis. Nat. & Trust Co. v. 2d First Bank (1980), 530, 293 N.W.2d which he cites for the duty proposition has to that a creditor to disclose a surety by known the creditor but unknown to the facts surety, surety’s The case is which increase risk. inapposite, however. "duty case;

First was to disclose” National misrepresentation by the involved active creditor. suggest Here, does not Valu misre- Cahak point to him at anything presented that he should have been argues only He transaction. the three documents signed at the time he told signing guaran- were all related and that they obligating pay himself for merchandise he ty, Valu under the retail supplied by Super services agreement. sales under obligations

But the extent of Cahak’s documents, the extent relationship, their various him, signing were clear. they By to which bound ... "unconditionally absolutely Cahak guaranty, [and] ... performance the full and faithful guarantee^] terms, conditions and covenants contained of all the sublease_” sublease, D- the terms of the By [the] to "enter into and with the required comply Mart was of, to conduct its business and at all times provisions under[, agreement].” retail sales And the retail required "[p]ay sales charges for merchandise and services Valu fees and plain Valu ....” It was on the face provided by Super required full guaranty documents required and the sublease of the sublease performance agreement. sales Taken performance full of the retail D-Mart’s guarantee Cahak to together, obligated they The trial agreement. under the retail sales obligations obligation, as do we. held him to that court By the Court. — Judgment affirmed.

SUNDBY, a appeal presents This (dissenting). J. Does the great public issue of concern: first-impression grantor a dealership by termination of a constructive 135.03, Stats.? violate sec. good without cause Stores, Inc., D-Mart Food had a nonexclusive Valu with Valu retailer’s wife Stores, Cahak and his are sole Inc. William dispute no that ch. of D-Mart. There is shareholders agreement. applies 135, Stats., to the provides: 135.03, Stats., Section terminate, cancel, fail renew grantor may No competitive substantially change the circum- good agreement without dealership of a stances proving good cause on the The cause. burden grantor. 135.02(4) only deals

"Good cause” is defined sec. Thus, bad faith a dealer. a with failures and grantor may dealership agreement for not terminate a grantor appear reasons which be business Kealey Pharmacy Walgreen justified. Co., 761 See v. (7th 1985) (evenhanded F.2d 345 Cir. nationwide WFDL). dealerships "[T]he termination of all violates Dealership parties Fair Law forces on the [long-term dealership] equivalent contract, a of... prohibition against of nonwaivable the form a terminating franchisor’s without (7th Tandy Corp., 820, 822 819 F.2d cause.” Moore v. 1987). Cir. question presents of whether a

This case grantor by may a termination avoid the constructive consequences explicit termination a of an dealer- ship 135.03, sec. Stats. Valu intends to under open square County 50,000 Market four blocks foot County It from will Market to a D-Mart’s store. lease predicted survey Valu’s market retailer.1 1Super presented analysis It its market to Cahak. - $400,000 $500,000 cash of would indicated that "unencumbered” necessary project reality. be to make The estimated approximately necessary two million dollars. total investment was Super willing as Apparently Valu consider Cahak to Rapids presence County in Wisconsin Market of Super unprofitable. store render the D-Mart would agreement with D-Mart is its Valu contends permits into retailer it to enter and nonexclusive agreements parties at its sole choice and other with County Therefore, Market the fact that the discretion. simply put is irrelevant D-Mart out of business will policy statute, which no decision because there is puts Super it, the tide D-Mart, Valu "from insulates highly competitive industry.” progress I in a of however, is a dike which conclude, the WFDL being protects flood of drowned from a dealer grantor. generated by competition its economic liberally is to be construed The WFDL purposes promote underlying applied remedial its 135.025(1), policies. Stats. of those Sec. One and purposes against protect unfair treat- "[t]o is dealers superior grantors, inherently by have ment who bargaining power power superior in the economic negotiation 135.025(2)(b). dealerships.” Sec. Super argue that because its Valu seems to it has no is nonexclusive with responsibility vitality for the economic or survival ignores Super wholly the benefits D-Mart. Valu obligations from the D-Mart undertook received products.2 name its Under advance Valu’s County financial resources. for Market but he lacked the retailer that an offer to Cahak would have Valu does not contend compliance excused with ch. Stats. D-Mart, undoubtedly bitterly and William 2It ironic to guarantor, compelled pay Super they Cahak as are now furniture, merchandise, inventory, trade Valu the value of the purchased equipment Valu which fixtures and from reduced to destruction of D-Mart’s has bankruptcy value. agreed identify D-Mart retailer’s by Super a retailer the use as Valu

and advertise itself insignia, Super name, and trade emblem Valu purchased from It merchandise services colors. agreed all to observe standards Valu and protection requirements for the of all conditions trade names. Valu trademarks and "substantially change however, claims, it not did dealership competitive circumstances” the agreement in free to continue because privileges enjoys the same as before and business It that sec. other Valu retailer. claims prevent adversely 135.03, Stats., it from does affecting compete ability by its actions D-Mart’s dealership agreement. directly which do not affect majority adopts 135.03, of sec. The relying that construction Paper Congoleum Corp., 563 v.

on Brauman Co. Brauman, (E.D. 1981). Supp. however, did not F. Wis. change competitive in circumstances with a deal in a constructive termination of which resulted (7th dealership. Cir.), Co., 794 F.2d 1238 v.Amoco Oil Remus — (1986), —, dismissed, 93 L.Ed.2d cert. U.S. grantor’s competi suggests when the correct result a accomplish termination of actions a constructive tive dealership. gasoline Amoco dealer Remus was a franchised charged action, who, in class Amoco with violating adopting by for cash” the WFDL a "discount program. that Remus and his class The court assumed pro- money lost under the consisted of dealers who gram. that Amoco did not While the court found program, by discount consid- violate the WFDL might be if a substantial in dicta what the effect ered change competitive circumstances termination. effected a constructive pointed that, First, out "The the court statute’s give purpose Stats.] main is to dealers a kind [135.03, judges, teachers, federal or workers of tenure —like bargaining collective in establishments covered Remus, 794 1240. It F.2d at further stated: contracts.” provision about "substantially The changing] competitive circumstances of the the dealership” may simply protect intended to be the termination,” is, against dealer "constructive that against making the franchisor’s the dealer’s com- desperate petitive circumstances so that the dealer gives up franchise. "voluntarily” the Constructive problem employee is a in some tenure termination cases, treated, be, where it should as Dealership termination. The Wisconsin Fair Law explicit. equation only may Not the makes to franchisor not terminate or fail renew the outright; may the franchisor not drive franchise say by doubling the dealer out of business — price only, him so that he cannot wholesale to against prod- [compete] other dealers the same ... uct. gomay

The statute somewhat further than we against suggested protect dealers new have competition substantially that has adverse al- though primarily not lethal effects. The statute is designed existing to benefit dealers and what anything most dealers fear more than else is that will of intra- the franchisor increase the amount outlets, placing competition by brand new whether franchisor-owned, franchised or too close to the existing But if the outlet for comfort. even Wiscon- Dealership designed give sin Fair Law is fran- protection in Wisconsin some chised dealers (an against such moves franchisors issue we decide), help Remus. Amoco need not this cannot up open or number of dealers increase the did not stations. company-owned omitted.] new [Citation Id. at 1240-41. Kealey, where court held court considered

The from terminat- prohibited Walgreen the WFDL Remus, dealerships. 794 F.2d at its Wisconsin ing all Kealey Walgreen court found that was In 1241. reputa- who had eliminate dealers built trying Wisconsin, open it could its own stores so tion goodwill had dealers appropriate Remus As court said: to this created. just the sort of conduct that Wiscon-

This prevent. legislature had wanted to There is sin nothing Amoco trying like that in this case. isn’t its dealers out business even make life drive them; although some more difficult for dealers change policy that Remus may lose from attacks, gain. others will Id., 794 F.2d at 1241. in this that suggested

It is not case eliminate dealers in policy a deliberate adopted has that its Market will Rapids County so new financially attractive and successful dealer- be more however, If, the narrow construction of ship. adopt we 135.03, Stats., which "dealership agreement” of sec. expose proposes, exactly we dealers majority A grantor such as Valu could possibility. opening goodwill of its dealers appropriate by could not grantor-owned stores with which dealers Remus, Judge As this is compete. Posner observed the kind of misconduct the WFDL is exactly economic Remus, 794 F.2d designed against. dealers protect at 1241. if

Even in this case Valu is motivated simply rugged entrepreneurism, may American superior power use economic to make its competitive desperate dealers’ circumstances so consequences are fatal to the dealer. Because I protects against believe the WFDL this respectfully result, I dissent.

Case Details

Case Name: Super Valu Stores, Inc. v. D-Mart Food Stores, Inc.

Court Name: Court of Appeals of Wisconsin

Date Published: Sep 22, 1988

Citation: 431 N.W.2d 721

Docket Number: 87-1633

Court Abbreviation: Wis. Ct. App.