A recent decision by the Wisconsin Supreme Court (“Court”) has potentially far-reaching consequences for municipalities and how they conduct certain business. In Benson v. City of Madison, the Court analyzed whether the Wisconsin Fair Dealership Law (“WFDL”) applied to the arrangement between the City of Madison (“City”) and multiple entities, collectively (“Golf Pros”).
The City entered into contracts with Golf Pros to operate, manage and provide certain services at the golf courses owned by the City. The City paid Golf Pros a set fee for its services plus a portion of the additional revenue Golf Pros collected at the golf courses. Both the circuit court and court of appeals sided with the City and held that the parties did not have a dealership that fell within the definition of the WFDL.
The Court first examined whether the City was a “person” under the WFDL. In the WFDL, a “person” is defined as a “natural person, joint venture, corporation or other entity.” Here, the Court held that upon a plain reading of the statute, the City is a municipal corporation, which specifically falls within the “person” definition. As such, the City is subject to the WFDL if its arrangement constitutes a dealership. The Court also held the City could not avoid this designation by including language in the contract that expressly stated it was not subject to the terms of the WFDL.
Under the WFDL, a dealership has three distinct elements, which include a (1) contractual agreement, (2) that grants the right to sell or distribute goods or services, and (3) has the requisite “community of interest.” The Court held that it is undisputed that there is a contractual agreement between the parties. In holding that the provision of access to the golf courses was a “service”, the Court noted that the City expended time and effort to produce the golf course for public use and the public paid the City for the use of golf course, which fulfilled the definition of a “service”. Further, the City granted Golf Pros the right to sell this “service” to the public. As such, the dealership arrangement fulfilled the second prong of the rule.
In determining whether a “community of interest” existed, the Court held that two factors must be present, namely, (1) a shared financial interest, and (2) cooperation and coordination of the parties’ activities and shared common goals in the relationship. The Court held that a “community of interest” existed between the parties because the parties coordinated in the completion of the duties to operate the golf courses (common goal) and each party benefited from the revenue earned from such coordination (shared financial interest). As such, the Court reversed the prior courts’ decisions and held that the dealership arrangement was subject to the WFDL. Of further note, two of the Court’s justices wrote a lengthy dissenting opinion that focused on the issue of whether the City was a “person” under the WFDL. The dissenting opinion outlined several interpretive rules that all pointed to agreement with the court of appeals’ decision that the City is not a “person” under the WFDL.
With the WFDL being one of the oldest dealership laws and consistently used as a guidepost for other states in the interpretation of their own dealership laws, it will be notable to see if other states take Wisconsin’s lead. It will be especially telling given the extensive dissenting opinion. If this decision stands, it is extremely important to ensure that an entity structures its arrangements appropriately if they want to avoid being subject to the restrictions of various state dealership laws.