WisBar News: Wine Distributor Agreements Not Intoxicating Liquor Dealerships Under Fair Dealership Law:

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  • WisBar News
    June
    13
    2018

    Wine Distributor Agreements Not Intoxicating Liquor Dealerships Under Fair Dealership Law

    Joe Forward

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    Author's note: This article was updated on June 26, 2018 at 5:15 p.m. to clarify the court's ruling.

    June 13, 2018 – In an unusual certification from the U.S. Court of Appeals for the Seventh Circuit, the Wisconsin Supreme Court has ruled (4-3) that wine distribution agreements are not intoxicating liquor dealerships subject to special provisions under the Wisconsin Fair Dealership Law (WFDL).

    Capitol-Husting Co. Inc. and another wine distributor argued that importer Winebow Inc. could not unilaterally terminate their business relationship under the WFDL, Wis. Stat. chapter 135, which says intoxicating liquor dealerships cannot be cancelled unless the grantor shows good cause to cancel the agreement.

    But Winebow argued that showing good cause was not needed because the wine distributors are not protected by the WFDL provisions related to “intoxicating liquor” dealerships, since wine is not considered an "intoxicating liquor.

    The Seventh Circuit Court of Appeals certified the case to the state Supreme Court to ask whether the definition of a “dealership” includes wine grantor-dealer relationships.

    Recently, in Winebow Inc. v. Capitol-Husting Co., Inc., 2018 WI 60 (June 5, 2018), a 4-3 majority concluded that wine grantor-dealer relationships are not included.

    Attorney Mike Wittenwyler, who filed an amicus brief on the case in the Seventh Circuit, said the Supreme Court's decision maintains the status quo in that the WFDL will only apply to wine under the so-called community of interest test, and not the 5 percent test.

    Wis. Stat. section 135.02(3)(b) says a “dealership” includes contracts or agreements by which a wholesaler “is granted the right to sell or distribute intoxicating liquor. …”

    Under section 135.066(2)(a), “intoxicating liquor” has the meaning given in s. 125.02(8), “minus wine.” Section 125.02(8) includes “vinous liquors,” but Winebow argued that the “minus wine” language trumped the “vinous liquors” language in the cross reference.

    The Supreme Court majority agreed. “[S]uch definition explicitly excludes wine,” wrote Justice Ann Walsh Bradley. “[W]e answer the certified question in the negative.”

    “If the court here were to decide that it is acceptable to effectuate a definition from ch. 125 that is not referenced within ch. 135, there would be no clear stopping point to such a practice,” wrote Justice A.W. Bradley.

    The U.S. District Court for the Eastern District of Wisconsin ruled that Winebow could terminate the agreements unilaterally without cause because the WFDL did not apply. The Seventh Circuit Appeals Court asked the state Supreme Court to weigh in.

    The Supreme Court noted that the state legislature, in 1999, broadened the WFDL’s protections to include distributors of “intoxicating liquors,” but then-Gov. Tommy Thompson used his veto pen to expressly exclude wine from the definition.

    Dissent

    Justice Rebecca Bradley wrote a dissent, joined by Justices Shirley Abrahamson and Daniel Kelly, concluding that the legislature clearly intended to include wine distributers within the WFDL and Gov. Thompson clearly intended to exclude them.

    “But legislative intent behind enactment of a law – or executive intent motivating the exercise of a veto – cannot govern statutory interpretation,” Justice R. Bradley wrote.

    The dissenters said the provision at section 135.066(2)(a), which includes the “minus wine” language, does not apply to the whole chapter.

    “Everyone agrees that vinous liquors include wine,” R. Bradley wrote. “Construing the text of these statutes leads us to the inexorable conclusion that the wine distributors are wholesalers whose agreements with Winebow create dealerships protected by ch. 135.

    “The majority adopts a statutory construction that rewrites ch. 135 by subtracting language from it, rather than giving effect to every word. The majority errs.”