MEMBER ARTICLE | North Ame ri ca
A Warning to the Unwary: Examine Local Law Closely Before Making COVID-Related Distributor Changes COVID-19 has turned the business world
For instance, consider Wisconsin’s Fair
in the relationship without good cause, is a
upside down in a myriad of ways. Some
Dealership Law, Wis. Stat. § 135.01, et seq.
violation of the WFDL, requiring the grantor
markets have dried up, while others are
(WFDL). For distributor relationships that
to pay damages and the dealer’s attorneys’
booming. Supply chains have shifted as
fall under the WFDL (dealerships), the
fees. With respect to damages, WFDL cases
companies go out of business or change
party who engages a distributor (grantor)
are generally brought after a dealer has been
priorities. Given this turmoil, many
can terminate, cancel, fail to renew or
terminated, and the dealer argues that if the
businesses are considering making changes
substantially change the nature of the
grantor had obeyed the statute, the dealer
to their distributor relationships, whether by
dealership only upon proper notice and with
would have cured any purported deficiency
terminating distributors, changing territories
good cause. To be proper under the statute,
and performed satisfactorily for an indefinite
or revising compensation structures. But
the notice must:
period. Damages therefore are the profits
beware. In the U.S. and elsewhere, local
(a) be in writing;
the dealer could have expected to earn over
laws may constrain the changes a company can legally make to its distributor network, the timeframe under which those changes
(b) detail all of the reasons for the change; (c) be received at least 90 days before the change; and
can be made, and the permissible grounds for making a change. As the penalties for non-compliance can be severe, any business
(d) in cases involving performance deficiencies, provide the distributor at
looking to make a change should consult
least 60 days to cure any deficiency.
with competent counsel who is licensed in
Good cause means either that the
the distributor’s jurisdiction.
distributor (dealer) has acted in bad faith or has failed to comply substantially
Kohner, Mann & Kailas, S.C.
with the essential, reasonable and
Washington Building, Barnabas Business Center 4650 North Port Washington Road Milwaukee, Wisconsin 53212
grantor.
Tel: 414.962.5110
non-discriminatory requirements of the
Any failure to provide the statutorily-
required notice, or any substantial change
the foreseeable course of the dealership relationship.
For instance, if a dealer was making $10
million in annual profits and the dealership could be expected to last another 25 years, the dealer could seek the present value of $250 million in damages, plus its attorneys’ fees in pursuing violation of the statute. Further, because the 90-day notice requirement is inflexible (except in the cases of bankruptcy or non-payment by the dealership for orders or other purchased goods), a simple failure to provide the required 90 days’ notice and 60 days to cure could expose a grantor to liability for
Ryan M. Billings rbillings@kmksc.com kmksc.com
Ryan M. Billings is a shareholder and deputy chair of litigation with Kohner, Mann & Kailas, S.C. He practices complex litigation, representing business entities across a broad spectrum of matters, from simple contract disputes to class action antitrust claims. Ryan regularly advises clients concerning Wisconsin’s Fair Dealership Law and unfair competition laws.
Primerus Member Since: 2008
Learn more at primerus.com Ryan M. Billings
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