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Court Finds Franchisor’s Hauling Agreement Is Not Governed by Wisconsin Fair Dealership Law

A Wisconsin federal court recently granted summary judgment in favor of Dean Foods on the plaintiff’s claim that a hauling agreement between the parties was governed by the Wisconsin Fair Dealership Law (“WFDL”). Andrea Distrib., Inc. v. Dean Foods of Wis., LLC, 2016 WL 3199544 (W.D. Wis. June 8, 2016). Dean Foods and Andrea Distributing were parties to two agreements: (1) a hauling agreement, under which Andrea Distributing hauled Dean Foods’ products directly to Dean Foods’ customers, and (2) a distribution agreement, under which Andrea Distributing purchased products from Dean Foods to resell to its own customers. Dean Foods terminated the hauling agreement when Andrea Distributing began to have financial difficulties and insisted on raising its hauling rates. A few months later, Dean Foods also terminated the distribution agreement when Andrea Distributing failed to cure a past-due balance. Andrea Distributing filed suit, claiming that both agreements were part of a unified distribution agreement and, therefore, had to be terminated in accordance with the WFDL, which requires 90 days’ notice and good cause for termination. Dean Foods moved for summary judgment on the grounds that the agreements were separate and distinct and that only the distribution agreement was subject to the WFDL.

In granting the motion, the court held that the hauling agreement was not covered by the WFDL because the parties structured and treated the two agreements as separate components of their business relationship. The court further determined that the hauling agreement did not independently constitute a distribution agreement because it did not require Andrea Distributing to purchase equipment, build facilities, use Dean Foods’ trademark, or make other substantial investments in the business. Because the hauling agreement did not create a dealership under the WFDL, the statute did not apply to its termination. With regard to the distribution agreement, the court concluded that Andrea Distributing’s uncured past-due balance provided good cause for termination and that Dean Foods had complied with the WFDL.

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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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