In the Trenches

OPEC, Gas Lines, and the Wisconsin Fair Dealership Law

The story of the 1974 retail gas dealers' march on the State Capitol is a true legend of the birth of the Wisconsin Fair Dealership Law. The WFDL no longer protects gasoline dealers - their rights as state "dealers" having been preempted by the Federal Petroleum Marketing Practices Act - but the origin of the WFDL may be relevant to defining who is a dealer.

By Robert B. Corris

Paul Bunyan and John Henry are mythological legends - the stuff of folklore and folksong. Emory T. Clark, on the other hand, was the real deal. According to our sources, he was one of the last of a breed - a self-made millionaire who had begun as a roughneck in the Texas oil fields and had risen to prominence in the petroleum industry. Mr. Clark, we had been told by other Clark employees, could drink men 40 years younger under the table. He could close the bar, being the last to leave, but the first to rise, often by 6 a.m. Woe be to the subordinates who did not match his pace - and few could. So we had been told.

"We" were Raymond R. Krueger, now the cochair of Michael, Best & Friedrich's environmental practice area and still a franchise lawyer on the side, and me - both of us then, in 1974, associates at Charne, Glassner, Tehan, Clancy & Taitelman S.C.

Early one Friday evening, Ray and I stood outside the John Ernst cafe, armed only with process for which there was some urgency of service. Our efforts to serve the company that bore Mr. Clark's name - Clark Oil & Refining Corporation - had failed when we arrived at Clark's West Allis headquarters a few minutes past the 4:30 p.m. closing time. No one answered the door. Plan B, hastily formed, was to retreat to our offices on the top floor of the Midland Bank Building, where, after a few well-placed telephone calls, we were able to identify Emory Clark's favorite "watering hole." Within the hour, our senses heightened by competing emotions of trepidation and excitement, we strode into the John Ernst cafe and inquired whether Mr. Clark was present. A white-haired gentlemen, square-jawed and field-hardened, promptly identified himself, courteously accepted our process, and graciously bought us a round of drinks.¹

The process we served that night on Emory Clark, and others like it - primarily a series of temporary restraining orders that U.S. District Court Judge John W. Reynolds had issued to prevent Clark from cutting off supplies of gasoline to our clients - were precursors of the passage of the Wisconsin Fair Dealership Law (WFDL). In October 1973 the Oil Petroleum Exporting Countries (OPEC) had imposed an embargo. Retail gasoline prices climbed by 40 percent in a matter of months; prices at the pump could and did rise on a daily basis, and in some parts of the country, stations ran out of gas.² Motorists endured lengthening "gas lines" that wound into the streets in order to top off their tanks, even if only for a $1 purchase.³

It was Clark's misfortune to have had bad timing. Earlier in 1973, Clark had wanted to change its distribution practices and sought to impose new terms and conditions upon its dealers. It should have been easy to do so. Most dealers enjoyed possession of their stations pursuant to one-year leases. According to standard practice, the representative would show up annually with a new lease and present it on a take-it-or-leave-it basis - sign the lease or be terminated.

Clark, however, hadn't counted on William E. Glassner Jr. - "Wild Bill" as we associates affectionately called him behind his back - the Arab oil embargo, and a few very courageous Clark dealers. In the days before Continental TV Inc. v. GTE Sylvania Inc.,⁴ Bill successfully challenged intrabrand restrictions in the pizza (Shakey's), fast food (Golden Chicken), and oil (Clark) industries. After the dealers rejected Clark's new leases and commenced a class action antitrust lawsuit, Clark responded with a series of eviction actions. It found some success in the state court system,⁵ but the dealers were able to block the evictions with restraining orders obtained in their federal class action.⁶ By the time the court issued its injunctions and, thereafter, the Wisconsin Legislature considered the WFDL, the public had begun to view the oil companies as avaricious villains who had been using the embargo as an excuse to gouge the public with skyrocketing prices.

How many young associates would get to handle a class action lawsuit today like we did then? Bill was the general; Ray, F. Thomas Olson (now of Hall, Patterson & Charne), and I were the foot soldiers. Bill permitted us to do most of the day-to-day work. We took the depositions, obtained the restraining orders, wrote the briefs, argued the class motion, negotiated the settlement, conducted the settlement hearing, and - with Bill as our leader - participated in two extraordinary lawyering activities.

As the relationship between Clark and its dealers deteriorated during the litigation, Bill located an alternative supply of gasoline - no mean feat in those days of shortage. After an all-night covert operation, a good number of Clark dealerships in the greater Milwaukee area opened for business one morning sporting new trademarks and offering a new brand of gasoline - "TRO GAS" - named in honor of Judge Reynolds' protectionist orders. The traditional Clark orange and white colors had disappeared. TRO GAS signs adorned the globes and pumps with bright yellow lettering on a field of emerald green.

The second extraordinary activity was the drafting of legislation to protect gasoline dealers. Early in 1974 gasoline dealers from around the state packed the galleries of the Capitol in Madison. Clark dealers had sought support from the state petroleum dealers association, and the small business owners who petitioned the government that day represented a wide array of brands. Bill, Ray, and I had originally drafted an industry-specific bill for gasoline dealers, but our version was soon replaced by one of more generic application.

Taking advantage of the gasoline dealers' presence, later-to-be Gov. Tony Earl, then Assembly majority leader, revived a long languishing fair franchise law, which - once resurrected and amended to protect "dealers," instead of "franchisees" - passed through the Legislature. Gov. Earl recalls how U.S. District Judge John C. Shabaz, then Assembly minority leader, looking at the dealers in the gallery and, with a smile, telling Earl what a "lucky s.o.b." Earl was.

In the state senate, however, the bill ran into procedural difficulties. Bill Nelson, who represented the liquor wholesalers, provides the following account: The bill could not be voted on unless a two-thirds majority agreed to suspend the rules to advance it ahead of all then-pending bills. Nelson and Tom Coenen, executive director of the gasoline dealers association, deliberately announced to the dealers, in very loud voices, that the bill could not be advanced and would not be voted on. The dealers, they said, should go home. Then the proponents of the legislation undertook an effort to convince the senate members who were opposed to the bill to suspend the rules to put the WFDL bill at the bottom of the contest calendar. The senate was about to adjourn, and the WFDL, being at the bottom of a long list of bills, would never be reached for a vote. This, Nelson and Coenen argued, would appease the dealers and send them home thinking they had accomplished something. The opponents agreed.

Their votes provided the two-thirds majority necessary to suspend the rules. Lieutenant Governor Martin J. Schrieber, in his capacity as senate president, then cited a precedent from the 1930s and held that the suspension of the rules for any purpose was a suspension for all and every purpose. Immediately, a proponent offered a motion to take the bill out of order - which only required a simple majority to pass. The opposition, which before the suspension had had the requisite numbers to keep the bill from coming to a vote, could not defeat the motion, and the bill passed the senate. Thus, according to legend, did the Wisconsin Fair Dealership Law come into existence.⁷ The efforts of the gasoline dealers - spearheaded by the Clark dealers - provided the impetus for passage of a bill whose original beneficiaries, according to the drafters of the fair "franchise" legislation, were intended to be farm implement dealers and liquor wholesalers.

A declaration of the Legislature's intended beneficiaries is found in Foerster Inc. v. Atlas Metal Parts Co.,⁸ which quotes a press release issued by the Governor's Office immediately after the passage of the law:

"This bill is intended to protect the thousands of small businessmen in Wisconsin who are franchisees. These businessmen operate filling stations, building materials and supply houses, lumber yards, sports equipment stores, motels, hotels, and restaurant chains. They sell farm implements, clothing, furniture, and many other types of goods under a franchise system. The intent in this legislation is to protect these Wisconsin businessmen from pressure from a franchisor which is not in their best interest."⁹

Foerster relates that the WFDL was originally entitled the "Wisconsin Fair Franchising Law."¹⁰ The bill subsequently was amended to refer to the protected business relationships as "dealerships" rather than "franchises."¹¹ A letter referred to as an interdepartmental correspondence found in the drafting file of the Wisconsin Legislative Reference Bureau relating to 1973 Assembly Bill 837 indicates that this amendment to the bill was made only to avoid a possible conflict between the bill and the Wisconsin Franchise Investment Law.¹²

Why this story? Of what interest is it, almost 25 years later, to retell this story? Gasoline dealers are no longer protected by the WFDL, their rights as state "dealers" having been preempted more than 20 years ago by the federal Petroleum Marketing Practices Act.¹³ Liquor wholesalers have been construed more often than not to not be dealers.¹⁴ Farm implement dealers have fared better.¹⁵

The WFDL, according to its terms, was enacted to "promote the compelling interest of the public in fair business relations between dealers and grantors, and in the continuation of dealerships on a fair basis."¹⁶ A threshold question is whether the person claiming WFDL protection is a "dealer" or, more precisely, whether the agreement between a "grantor" and a "dealer" is a "dealership" agreement.

This author suggests that standards currently employed in the state and federal courts should be tested against the agreements and practices imposed on gasoline dealers in the early 1970s - particularly Clark dealers. It is also fair, this author submits, to consider "sweat equity," a facet to which the courts apparently give little attention or value.¹⁷

In the context of that April day in Madison, 1974, it was the American Dream that was being protected - the sweat of the small business owners who churned their livelihoods out of 12-hour days and 70-hour weeks. The story of the dealers' march on the Capitol is a true legend of the birth of the Wisconsin Fair Dealership Law.

Endnotes

¹ Although we found Mr. Clark to be a perfect gentleman that night, attorney William F. Nelson relates a story of when Mr. Clark was a dinner guest at the governor's mansion around the time of the passage of the Wisconsin Fair Dealership Law. Mr. Clark, despite Gov. Patrick Lucey's repeated admonition that dinner was an inappropriate occasion for lobbying, repeatedly tried to convince the governor of the evils of a dealership law. Finally, Gov. Lucey stood up, walked to Mr. Clark's seat, took him by the elbow, and escorted him from the room.

² D. Yergin, The Prize, 616-17 (New York, NY: Simon & Schuster, 1991).

³ Id.

⁴ 433 U.S. 36 (1977).

⁵ See Clark Oil & Refining Corp. v. Leistikow, 69 Wis. 2d 226, 230 N.W.2d 736 (1975).

⁶ See In re Clark Oil & Refining Corp. Antitrust Litigation, 391 F. Supp. 1057 (E.D. Wis. 1975) (denying in part a restraining order, but restraining Clark from terminating the dealer who was the subject of the motion without good cause, and continuing restraining orders previously entered).

⁷ According to Nelson, the law was taken directly to the governor and an immediate signing ceremony occurred. The next day, the new law was walked over to the Wisconsin State Journal for publication.

⁸ 105 Wis. 2d 17, 24, 313 N.W.2d 60 (1981).

⁹ Press Release, Office of Governor, April 6, 1973. Former Gov. Earl remembers that the bill was always intended to be generic and that one of the practices that led to its drafting was the use by "grantors" of superior bargaining power to force dealers to buy products the dealers did not want to purchase. He recalls one instance in which a noted liquor company required its wholesalers to take unwanted brands if they wanted the premium label product. Another time, a certain manufacturer made its farm implement dealers buy snowmobiles. Gov. Earl also states that gasoline dealers were always intended to be covered because of a similar abuse, the requirement that dealers buy certain quantitites of "TBA" (tires, batteries, and accessories). Bill Nelson attributes the birth of the concept of a "fair franchise" law to when Lawrence Weinstein's father died. Weinstein's father owned General Beverage Sales, which had had a long and successful relationship with a certain liquor manufacturer. According to Nelson, when Weinstein grieved at his father's funeral, the manufacturer thought his tears were not manly and terminated its relationship with the wholesaler.

¹⁰ 1973 Assembly Bill 837A, 105 Wis. 2d at 23.

¹¹ Assembly Substitute Amendment 1 to 1973 Assembly Bill 837. Id.

¹² Id.

¹³ 15 U.S.C. §§ 2601 et seq.

¹⁴ See Beloit Beverage Co. v. Winterbrook Corp., 900 F. Supp. 1097 (E.D. Wis. 1995); Kenosha Liquor Co. v. Heublein Inc., 895 F.2d 418 (7th Cir. 1990).

¹⁵ See Frieburg Farm Equip. Inc. v. Van Dale Inc., 978 F.2d 395 (7th Cir. 1992); JPM Inc. v. John Deere Indus. Equip. Co., 94 F.3d 270 (7th Cir. 1996).

¹⁶ Wis. Stat. § 135.025(2)(a).

¹⁷ See the discussion of "human capital" as a nonfinancial investment in M.A. Bowen and B.E. Butler, The Wisconsin Fair Dealership Law, § 4.28.

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