A Wisconsin-based supplier of hair products had an agreement with a foreign manufacturer for the exclusive rights to sell products in Wisconsin and Minnesota. The supplier filed suit for violations of the Wisconsin Fair Dealership Law (WFDL) and breach of contract when the manufacturer refused to allow the supplier to sell products in Florida and briefly allowed another supplier to sell the same products online to consumers. The case illustrates that a plaintiff will need to present specific evidence to demonstrate a change in competitive circumstances prohibited under the WFDL.
In 2015, Brava Salon Specialists, LLC and REF North America, Inc. entered an agreement in which Brava was the exclusive supplier of REF products in Wisconsin and Minnesota. Brava experienced success selling REF products, and REF allowed Brava to expand its sales territory to North Dakota and Iowa. In 2021, Brava—with REF's approval—started selling in Florida but without any formal agreement to do so or providing a formal business plan for the market despite REF's repeated requests for one.
In November 2022, REF notified Brava it was no longer allowed to sell products in Florida. Shortly thereafter, REF began supplying a third-party called Sayn Beauty for sale of REF products online through Amazon at-below market prices. REF promptly terminated the Sayn Beauty relationship when a member of the REF ownership group discovered it was occurring potentially in violation of Brava's right to be the exclusive provider of REF products in its designated markets.
The brief introduction of Sayn Beauty to the REF system and termination of its right to sell products in Florida prompted Brava to file suit in the U.S. District Court for the Western District of Wisconsin. Brava alleged REF's actions violated the WFDL and breached the parties' alleged agreement for the sale of products in Florida. The WFDL prohibits manufacturers from terminating, cancelling, failing to renew, and/or substantially changing the competitive circumstances of a supplier agreement without good cause, adequate notice, and compliance with other statutory requirements.
At summary judgment, the Court considered Brava's WFDL claim only for Wisconsin, North Dakota, Minnesota, and Iowa but not Florida. Wisconsin and Minnesota were territories in the original contract, and there was some evidence that the parties had agreed to make North Dakota and Iowa part of Brava's territory, too. Insufficient evidence existed for the inclusion of Florida due to Brava's tenure of sales there was short-lived and investment in the market minimal.
Brava alleged REF's authorization of Sayn Beauty to sell REF products online, prioritizing order of Sayn Beauty products over Brava's, changing the rewards programs without notice, demands that Brava provides monthly sales reports, terminating acceptance of credit card payments, and limiting Brava's ability to order REF products to specific weeks of each month all constituted changes to the competitive circumstances of the relationship in violation of the WFDL. The Court addressed each allegation and found there to be genuine issues of material fact precluding a grant of summary judgment.
There was evidence REF intended to discuss online sales with its suppliers before allowing Sayn Beauty to commence such sales and, thus, commencement of those sales was merely a mistake. Moreover, it terminated the Sayn Beauty relationship shortly after it began and never again authorized online direct sales. Brava also could not prove REF prioritized Sayn Beauty orders over Brava's. In fact, the two suppliers received their products from totally different REF entities.
Finally, REF imposed the other changes Brava complained about on a system-wide, non-discriminatory basis none of which resulted in constructive termination of the relationship. Such changes do not represent a "substantial change to the competitive circumstances" in violation of the WFDL. For these same reasons, the Court also denied Brava's motion for summary judgment on its claim for breach of contract.
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