Pollack v. Calimag
1990 Wisc. App. LEXIS 541, 458 N.W.2d 591, 157 Wis. 2d 222 (1990)
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Rule of Law:
An independent contractor agreement where a professional provides their own services and pays a percentage of collections for the use of facilities and support staff does not constitute a 'dealership' under the Wisconsin Fair Dealership Law (WFDL) because it lacks a grant of the right to sell the grantor's services and the requisite 'community of interest'.
Facts:
- Dr. David Calimag owned the Pain Relief Clinic of Racine (PRC).
- In July 1986, Dr. Richard Pollack, an osteopathic physician, began working at PRC.
- In December 1986, Calimag and Pollack signed a one-year agreement establishing Pollack as an independent contractor.
- Under the contract, PRC provided space, equipment, support staff, and billing services in exchange for 65% of Pollack's net collections.
- In January 1987, the parties signed a covenant not to compete, restricting Pollack from practicing within a 20-mile radius for one year after leaving PRC and from soliciting PRC patients for two years.
- Pollack's contract was not renewed after it expired on December 15, 1987, and his association with PRC ended on December 21, 1987.
- In January 1988, Pollack joined a competing practice, and in February, an advertisement appeared in a local guide announcing his new association and listing its Racine and Elm Grove addresses.
Procedural Posture:
- Dr. Pollack sued Dr. Calimag and PRC in the Wisconsin circuit court (trial court), alleging his contract termination violated the Wisconsin Fair Dealership Law (WFDL) and seeking to invalidate a restrictive covenant.
- Dr. Calimag filed an amended counterclaim alleging Dr. Pollack had breached the covenant not to compete.
- The trial court granted summary judgment in favor of Pollack, ruling that the business arrangement was a dealership under the WFDL.
- Following a trial, a jury found that Pollack had breached the covenant not to compete and awarded Calimag $25,000 in liquidated damages.
- The jury also awarded Pollack damages and attorney's fees on his successful dealership claim.
- Calimag (appellant) appealed the trial court's dealership ruling to the Wisconsin Court of Appeals.
- Pollack (cross-appellant) appealed the jury's finding that the covenant not to compete was valid and had been breached.
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Issue:
Does a contractual arrangement where an independent contractor physician provides their own professional services at a clinic, paying the clinic a percentage of collections for space, staff, and billing services, constitute a 'dealership' under the Wisconsin Fair Dealership Law?
Opinions:
Majority - Scott, J.
No, the arrangement does not constitute a dealership. To qualify as a dealership under the Wisconsin Fair Dealership Law (WFDL), a business relationship must meet three criteria: 1) a contract or agreement, 2) a grant of the right to sell or distribute goods or services or use a trade name, and 3) a community of interest. While a contract existed, the other two elements were absent. Pollack was not granted the right to sell PRC's services; rather, he provided his own professional osteopathic services as an independent contractor, as explicitly stated in the agreement. Furthermore, the relationship lacked the 'community of interest' required by the statute, which signifies a continuing financial interest and interdependence beyond that of a typical contract. Pollack made no financial investment in PRC, bore none of its financial risks for advertising or equipment, and the payment structure meant PRC profited from Pollack, not that they shared in the clinic's profits. The arrangement was a standard independent contractor agreement, not a protected dealership.
Analysis:
This decision significantly clarifies the scope of the Wisconsin Fair Dealership Law (WFDL), preventing its application to common independent contractor relationships in professional fields. By strictly interpreting the 'right to sell services' and 'community of interest' requirements, the court distinguishes protected dealerships, like franchises, from arrangements where professionals merely pay for overhead and administrative support. The ruling establishes that a substantial financial investment and a high degree of interdependence are necessary for a community of interest, setting a precedent that protects business owners from expansive liability under the WFDL when engaging independent professionals. This case serves as a key guidepost for structuring service agreements to avoid inadvertently creating a statutory dealership.
