July/August 2017 Issue

Also in this issue: Conditional Use Zoning Law in Flux     |     Limitations on Interior Property Inspections for Property Tax Assessments     |     Supreme Court Decides Wisconsin Regulatory Takings Case     |     County’s Courthouse Access Policy Violated First Amendment     |     Wisconsin Supreme Court Addresses Open Meetings Law And Committees

Wisconsin Supreme Court Expands Fair Dealership Law to Municipalities

Anita T. Gallucci | 08.07.17

In a case of first impression, the Wisconsin Supreme Court expanded the Wisconsin Fair Dealership Law (WFDL) to apply to municipalities. Benson v. City of Madison, 2017 WI 65. The decision marks the first time any court in the nation has applied fair dealership law to a local governmental body. The ruling is certain to have a huge impact on municipal contracts with third parties for the provision of municipal services and may give rise to a bevy of new claims against municipalities.

At issue was the contractual relationship between the City of Madison and its golf pros. The City owns four public golf courses and had entered into ​“operating agreements” with four golf pros to oversee the clubhouse operations at the courses. The City maintained the physical golf courses, while the golf pros performed such tasks as collecting greens fees, hiring and managing attendants, supervising golfing, operating the clubhouse and pro shop, selling concessions, and giving lessons. The golf pros were paid a base contract amount in addition to receiving a percentage of the revenue from concessions, sale of merchandise, golf instruction, and club and cart rentals.

In August 2012, a few months before the contracts were to expire, the City asked the golf pros for new proposals on clubhouse operations for the next contract term. The following October, the City informed the golf pros that the contracts would not be renewed. The golf pros subsequently brought a fair dealership claim against the City, alleging that the City’s failure to renew the contracts violated the WFDL. The circuit court sided with the City and ruled the golf pros’ contracts were not dealership agreements under the WFDL. The court of appeals affirmed.

The Wisconsin Supreme Court ruled that the contractual relationship between the City and the golf pros constituted dealerships under the WFDL. Wis. Stat. Chapter 135. Writing for the majority, Justice Ziegler found that a dealership relationship was created because: (1) the contracts were between two or more ​“persons;” (2) they granted the golf pros the right to sell or distribute a municipal service (in this case, access to the City’s golf courses); and (3) the golf pros’ business of selling City services created a ​“community of interest.” Thus, according to the Court, all necessary elements of a dealership relationship were present.

The cornerstone of the Court’s ruling is its conclusion that a municipality is a ​“person” within the meaning of the WFDL, which defines ​“person” as ​“a natural person, partnership, joint venture, corporation or other entity.” Wis. Stat. § 135.02(6) (emphasis added). Based on facile reasoning, the Court concludes that, because a municipality is referred to in statutes as a ​“body corporate” and as a ​“municipal corporation” in many court decisions, the City of Madison is obviously a ​“corporation” under the WFDL.

According to Justice Abrahamson’s dissent, the majority opinion fails to address the relationship of the WFDL, municipal constitutional and statutory home rule, and other statutes governing governmental entities. The dissent notes that the majority fails to consider that ​“it is establishing a far-reaching precedent that will produce unreasonable results” and that will have ​“widespread ramifications for all municipalities in this state and the many contracts on diverse topics to which they are parties.”

After this ruling, any municipal contract that creates a dealership relationship may, under the WFDL, only be terminated for cause after at least 90 days’ prior notice. Municipalities would be wise to re-examine contracts with third parties to determine whether they may be subject to the WFDL and should take care not to inadvertently create new dealership relationships with third parties in the provision of municipal services.

— Anita T. Gallucci