FINE, J.
¶ 1 Ralph Gentile, Inc., d/b/a Gentile Nissan, appeals the circuit court order affirming a decision of the Division of Hearings and Appeals determining that Nissan North America lawfully terminated Ralph Gentile's Nissan dealership. See Wis. STAT. § 218.0114(7)(d) (Dealer may complain to
¶ 2 Nissan North America is a California corporation that, among other things, distributes its automobiles through dealers, and is licensed to do business in Wisconsin. As material to this appeal, Ralph Gentile owns both Gentile Nissan and Gentile Hyundai, and operated Gentile Nissan under a 2002 term dealership agreement between Nissan North America and Ralph Gentile's predecessor.
¶ 3 By letter dated June 30, 2006, Nissan North America sent Gentile Nissan a Notice of Default alleging breach of dealership performance standards. The notice gave Gentile Nissan 180 days to cure the alleged breach. By letter dated January 3, 2007, Nissan North America terminated Gentile Nissan's dealership agreement and gave the following reasons: (1) "Unsatisfactory Sales Penetration Performance," alleged to breach Section 3 of the dealership agreement; and (2) "Unsatisfactory Customer Satisfaction Performance," alleged to breach section 5F of the dealership agreement. (Bolding and underlining omitted.) As noted, the Division upheld Nissan North America's termination of Gentile Nissan's dealership agreement. The Division found that although Gentile Nissan breached Section 3 of the dealership agreement, Gentile Nissan did not breach Section 5F, which concerned the satisfaction of Gentile Nissan customers. Accordingly, we only discuss the Division's findings and conclusions in connection with Section 3.
¶ 4 Ralph Gentile's appeal attacks the Division's decision. Accordingly, we review that decision and not that of the circuit court. See Weston v. Wisconsin Dep't of Workforce Development, 2007 WI App 167, ¶ 11, 304 Wis.2d 418, 428, 737 N.W.2d 74, 78. The Division's findings of fact are binding on us if they are supported by "`substantial evidence.'" See Volvo Trucks North America v. State of Wisconsin Dep't of Transportation, 2010 WI 15, ¶ 19, 323 Wis.2d 294, 305, 779 N.W.2d 423,
Volvo Trucks, 2010 WI 15, ¶ 19, 323 Wis.2d at 306, 779 N.W.2d at 428-429 (footnotes and quoted source omitted). The parties agree, and so do we (as did the circuit court), that we should give "due weight" deference to the Division's interpretation of the applicable statutes.
Id., 2010 WI 15, ¶ 15, 323 Wis.2d at 304, 779 N.W.2d at 427-428 (footnotes omitted).
¶ 5 Although we thus give to the Division substantial deference in connection with its findings of fact and its interpretation of the applicable statutes, our review of the contracts in this case is de novo. See Wisconsin End-User Gas Ass'n v. Public Service Commission of Wisconsin, 218 Wis.2d 558, 566, 581 N.W.2d 556, 559 (Ct.App.1998). Whether a party to a contract has committed a "material breach" of that contract, however, is a question of fact. Volvo Trucks, 2010 WI 15, ¶ 50 n. 28, 323 Wis.2d at 315 n. 28, 779 N.W.2d at 433 n. 28 ("Whether a material breach of contract has occurred is a question of fact to be determined by the fact finder."). Unless there are no disputed material facts, whether a breaching party has cured the breach is also a question of fact. Id., 2010 WI 15, ¶ 50, 323 Wis.2d at 315-316, 779 N.W.2d at 433. With these standards in mind, we turn to the applicable statutes and Ralph Gentile's contentions.
¶ 6 Wisconsin STAT. 218.0114(7)(d), which concerns hearings before the Division on a dealer's complaint that its franchise was improperly cancelled, provides that the "manufacturer, distributor, or importer" has the burden to prove that the "cancellation was fair, for just provocation, and with due regard to the equities." WISCONSIN STAT. § 218.0116(1)(i)2 similarly provides that "[a] license" of a "manufacturer, importer or distributor" "may be denied, suspended or revoked" if it "unfairly, without due regard to the equities or without just provocation, directly or indirectly cancel[s] or fail[s] to renew the franchise of any motor vehicle dealer."
¶ 7 "`Due regard to the equities' means treatment in enforcing an agreement that is fair and equitable to a motor vehicle dealer ... and that is not discriminatory compared to similarly situated dealers." WIS. STAT. § 218.0116(1)(i)1.a. "`Just provocation' means a material breach by a motor vehicle dealer ... due to matters within the dealer's ... control, of a reasonable and necessary provision of an agreement and the breach is not cured within a reasonable time after written notice of the
WISCONSIN STAT. § 218.0114(7)(a)3 provides, as material, that "a manufacturer, distributor or importer shall notify a dealer ... of the ... cancellation of the [dealership] agreement ... together with the specific grounds for ... cancellation of the agreement."
¶ 8 Before we analyze Gentile Nissan's contentions we first look at the contract provisions Nissan North America accused Gentile Nissan of breaching, and the Division's findings of fact. As noted, we limit our analysis to Section 3 because the Division concluded that Gentile Nissan did not breach Section 5F.
¶ 9 Section 3A of the dealership agreement set out the dealer's "General Obligations":
Section 3B explained how the dealer's fulfillment of those obligations would be assessed:
Section 3C explained how a Dealer's location in an area where it had competition from other Nissan dealers affected the assessment process:
Section 3D acknowledged that the dealer's measured sales performance might be affected by matters beyond the dealer's control:
¶ 10 Further, Section 3 required that the dealer "organize and maintain a sales organization that includes a sufficient number of qualified and trained sales managers and sales people to enable Dealer to effectively fulfill its responsibilities under this Section 3." Finally, as material to this appeal, Section 3 required the dealer to "promptly take such action as may be required to correct any deficiencies in Dealer's performance of its responsibilities under this Section 3" when Nissan North America's periodic evaluations of the dealer disclosed problems with its fulfillment of the dealer's sales-performance obligations.
¶ 11 The Division made extensive findings. Given the extreme deference that we owe to those findings and the importance of those findings to this appeal, we set them out at some length.
The Division assessed the scope of "similarly situated dealers," used by Wis. STAT. § 218.0116(1)(i)1.a, as an overlay with which to determine whether a dealer's termination is "fair and equitable":
Based on its analysis of the Record before it, the Division found:
¶ 12 We now analyze Ralph Gentile's contentions that we should reverse the circuit court's order affirming the Division's dismissal of Ralph Gentile's complaint.
¶ 13 The January 3, 2007, letter terminating Gentile Nissan's dealership asserted that despite the June 30, 2006, notice to cure, and attempts by Nissan North America to help Gentile Nissan with what Nissan North America perceived as Gentile Nissan's "unsatisfactory sales performance," Gentile Nissan's "sales penetration continue[d] to fall significantly below regional average." Ralph Gentile tells us that it "does not dispute the Division's finding that `sales effectiveness' is a performance standard generally used in the motor vehicle industry."
¶ 14 In a largely unfocused argument, Ralph Gentile complains that the Division unfairly conflated the requirement in Section 3A that Gentile Nissan promote the sale of Nissan vehicles in its Primary Market Area with the sales assessment criteria in Section 3B. It contends that by using "dealer sales anywhere in the country, sales effectiveness does not measure the effectiveness of a dealer's promotional efforts within its own [Primary Market Area]." It argues that "[o]nly a sales performance standard based on Nissan sales within the [Primary Market Area] can accurately measure the effectiveness of Gentile's promotional activities within the [Primary Market Area]."
¶ 15 Further, the Division found, as we have also seen, that Gentile Nissan did not spend what "it was required to spend to effectively promote Nissan products." Significantly, there are charts in the Record that show Gentile Nissan near the bottom of "Nissan Dealers' Sales in Own [Primary Market Area]/Metro as a Percent of North Central Region Average
¶ 16 Ralph Gentile has not shown that sales effectiveness, as used by Nissan North America and accepted by the Division, was improper. Further, insofar as Ralph Gentile contends that the Chrysler factory in Kenosha County adversely affected Gentile Nissan's sales beyond Gentile Nissan's control, the Division found, as we have seen, that Kenosha Nissan, then located in Kenosha County, had better sales effectiveness than did Gentile Nissan when it took over the dealership and moved it to Racine, and also determined that the "local economy" was "not a factor in evaluating Gentile Nissan's sales performance."
¶ 17 The facts found by the Division clearly show that Gentile Nissan's sales performance was well below what it should have been. There is more than "substantial evidence" in the Record to support those findings. Indeed, as we have seen, Gentile Nissan's sales-effectiveness ratings were far below the Kenosha dealership from whom Ralph Gentile's corporate predecessor bought the Nissan franchise.
¶ 18 Ralph Gentile argues that Gentile Nissan did not have to successfully sell Nissan vehicles but only had to use its "best efforts" to do so. It bases this contention on a June 26, 2006, amendment to the term dealership agreement. The amendment provided, as material (all bolding and underlining in original):
Article Twelfth of the term dealership agreement reads as material:
The clause sets out in subparts (a) through (d) the specific preconditions to the offer by Nissan North America of a non-term, standard dealership agreement. Subpart (e) reads: "(e) Other conditions (if any): See Exhibit `A', which is incorporated by this reference into this Agreement for all purposes." The "Exhibit `A'" is the "best efforts" amendment, set out above.
¶ 19 As we have seen, we interpret and apply de novo the parties' contracts under the standards we have already explained. By its clear language, the "best efforts" clause was an amendment to
¶ 20 Ralph Gentile argues that the Division erroneously interpreted the "reasonable and necessary provision" of Wis. STAT. § 218.0116(1)(i)1.b. The essence of Ralph Gentile's complaint is that applying Section 3B (the criteria used to measure sales performance) of the term dealership agreement concurrently with Section 3A results in a faux breach of Section 3A because, as phrased by Ralph Gentile's brief, the criteria in Section 3B do "not accurately measure the dealer's performance of its obligations under" Section 3A.
¶ 21 Ralph Gentile also argues that the Division erred by focusing on Gentile Nissan's actual sales, rather than the total sales of Nissan vehicles in Gentile Nissan's Primary Market Area irrespective of whether those sales were made by Gentile Nissan or other Nissan dealers. Ralph Gentile contends that "[t]he only performance standard relevant to Gentile's compliance with § 3.A., for which there is evidence in the record, is `registration effectiveness.' As discussed, registration effectiveness is the ratio of the number of Nissan's sold to customers located in a dealer's [Primary Market Area] (i.e., registrations), regardless of which dealer sold them, to the expected registrations of Nissans in the [Primary Market Area]." (Emphasis by Ralph Gentile.) There are two main problems with this contention. First, the Division determined that sales effectiveness, not registration effectiveness, was the appropriate standard to measure Gentile Nissan's compliance with Section 3 of the term dealership agreement. That is certainly a reasonable construction of industry practice, and, therefore, under due-weight deference, is binding on us. Indeed, Ralph Gentile's expert witness at the hearing testified, albeit apparently reluctantly, that "[m]ost" automobile manufacturers "make, as far as I know, this [regional sales effectiveness] calculation in one form or another."
¶ 22 Second under our de novo review of the agreement, the whole thrust of Section 3 is, as the section's heading says, the dealer's
¶ 23 The Division properly found "just provocation."
¶ 24 Ralph Gentile argues that the Division misinterpreted the requirement in Wis. STAT. § 218.0116(1)(i)1.a that the "treatment in enforcing" the sales-effectiveness provisions in Gentile Nissan's term dealership agreement must "not [be] discriminatory compared to similarly situated dealers" by excluding non-Wisconsin Nissan dealers from the "similarly situated" population. It contends that "[s]everal [out-of-state] dealers had lower sales penetration than Gentile, but, unlike Gentile, were not terminated by Nissan for unsatisfactory sales." Ralph Gentile points out that the legislature did not specify in § 218.0116(1)(i)1.a that "similarly situated" was restricted to Wisconsin dealers, as it could have, and as it did in Wis. STAT. § 218.0125(5), by using the phrase "similarly situated franchised motor vehicle dealers in this state."
¶ 25 It may be, in light of the legislature's use of the phrase "in this state" in Wis. STAT. § 218.0125(5) but not in Wis. STAT. § 218.0116(1)(i)1.a, that the legislature meant to encompass out-of-state dealers in the due-regard-to-the-equities analysis. But our review, as we have already seen, is not de novo; under the applicable due-weight-deference standard of review, we must affirm the Division's interpretation of § 218.0116(1)(i)1a if it is "reasonable." In light of the serious federal commerce-clause problems that might result if a Wisconsin law forced an automobile company to either terminate dealerships in another state based on Wisconsin-law criteria, see Healy v. Beer Institute, Inc., 491 U.S. 324, 336-337, 109 S.Ct. 2491, 105 L.Ed.2d 275 (1989), or forego terminating a Wisconsin dealer that was not effectively selling cars, the Division's restriction of the "similarly situated" mandate to Wisconsin dealers is reasonable, "not contrary to the clear meaning of the statute," and Ralph Gentile's interpretation is not "more reasonable."
Order affirmed.
(Quoted sources and internal citations omitted; ellipsis in original.) Significantly, both Wisconsin Music Network, Inc. v. Muzak Ltd. Partnership, 822 F.Supp. 1332, 1337 (E.D.Wis.1992), aff'd 5 F.3d 218 (7th Cir. 1993) and Advanced Agri-Systems, Ltd. v. Southwestern Porcelain, Inc., No. 81-C-352, 1982 U.S. Dist. LEXIS 18400, *30 (W.D.Wis. 1982), relied on by Ralph Gentile, did not even discuss, no less decide, whether the commerce clause prohibited the extra-territorial reach of Wisconsin's Fair Dealership Law to affect out-of-state dealers. Ralph Gentile also cites Forest Home Dodge, Inc. v. Karns, 29 Wis.2d 78, 93-94, 138 N.W.2d 214, 222 (1965) (A statute that prohibited an automobile manufacturer from applying for a Wisconsin dealership did not place an "undue" burden on interstate commerce so as to violate the commerce clause when the manufacturer could accomplish the same thing by buying an existing dealership.), and Wisconsin Truck Center, Inc. v. Volvo White Truck Corp., 692 F.Supp. 1010, 1017-1018 (W.D.Wis.1988) (upholding the then existing Wisconsin Motor Vehicle Dealership Law against a challenge that it violated the commerce clause by limiting the rights of out-of-state distributors to terminate Wisconsin dealers) ("Volvo GM's absurd contention that the [Wisconsin Motor Vehicle Dealership Law] prohibits `newly appointed distributors' from ever terminating dealers is apparently the heart of this twisted analysis."), aff'd in part, rev'd in part, by unpublished order, 894 F.2d 1338 (Table) (7th Cir.1990) (affirming district court's ruling that non-discriminatory withdrawal from market did not violate Wisconsin's then-extant Motor Vehicle Dealer Law; reversing district court's denial of attorney fees) (constitutional issue not discussed) (unpublished order not available on Westlaw, but is on file with the clerk of the court of appeals), in support of its proposition that some Wisconsin laws can affect interstate commerce without violating the commerce clause. Of course. Unlike those cases (where the focus was mainly on what an out-of-state company could or could not do in affecting the rights of Wisconsin companies), however, if Ralph Gentile's "similarly situated" argument was applied here, Wisconsin's law would, as noted in the main body of this opinion, force an automobile company to either terminate dealerships in another state based on Wisconsin-law criteria, or forego terminating a Wisconsin dealer that could not sell cars. This would give Wisconsin law a more significant extra-territorial effect than there was in the cases upon which Ralph Gentile relies. We note, though, that we do not decide the constitutional issue; we merely hold that given the potential commerce-clause problems, the Division's interpretation of Wis. STAT. § 218.0116(1)(i)1.a was, in light of the section's clear language, "reasonable."
