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Court Finds Distributor Is Not a Dealership Under Wisconsin Fair Dealership Law

In another case involving the Wisconsin dealership statute, a federal court granted a manufacturer’s motion for summary judgment after finding that a distributor was not a “dealership” under the Wisconsin Fair Dealership Law (WFDL). PMT Machinery Sales, Inc. v. Yama Seiki USA, Inc., 2018 WL 5775919 (E.D. Wis. Nov. 2, 2018). In October 2015, PMT was incorporated to sell Yama Seiki machines and immediately contacted Yama Seiki seeking to become an exclusive distributor in eastern Wisconsin. The general manager of Yama Seiki sent PMT an “exclusive letter of dealership,” but PMT rejected the offer for fear it could not meet sales requirements outlined in the letter. Instead, PMT continued to sell Yama Seiki machines in eastern Wisconsin under the belief, based on prior communications with Yama Seiki, that it had exclusive territorial rights. In October 2017, PMT learned that other parties were selling Yama Seiki machines in the same area. After discussions between the parties, PMT filed its complaint alleging that Yama Seiki violated the WFDL by substantially changing the allegedly exclusive dealership arrangement and by not giving the required 90-day notice prior to termination.

The court granted Yama Seiki’s motion for summary judgment, holding that PMT did not meet the definition of a “dealership” under the WFDL. Courts apply a three-part test to determine whether a party meets the definition, analyzing whether: (1) there was a contract, (2) which granted the right to sell or distribute goods or services or to use a trademark, and (3) the parties have a requisite “community of interests.” The court found that PMT did not satisfy the second element because it did not have the right to use Yama Seiki’s trademark in a meaningful way, did not directly sell Yama Seiki machines to customers but rather negotiated orders that customers would place directly with Yama Seiki, did not have the right to sell Yama Seiki machines to customers, and did not have the right to bind Yama Seiki to any sales. The court concluded that PMT effectively served as a manufacturer’s representative rather than as a “dealership” selling Yama Seiki’s machines. The court declined to analyze whether PMT satisfied the other two elements of the definition. PMT has now appealed the district court’s decision.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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