Rainbow Country Rentals and Retail, Inc. V. Ameritech Publishing, Inc
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2005 WI 153 SUPREME COURT OF WISCONSIN CASE NO.: 2004AP239 COMPLETE TITLE : Rainbow Country Rentals and Retail, Inc., d/b/a Oconomowoc Rental Center, Plaintiff-Appellant, v. Ameritech Publishing, Inc., d/b/a Ameritech Advertising Services, Defendant-Respondent. ON CERTIFICATION FROM THE COURT OF APPEALS OPINION FILED : November 22, 2005 SUBMITTED ON BRIEFS : ORAL ARGUMENT : September 7, 2005 SOURCE OF APPEAL : COURT : Circuit COUNTY : Waukesha JUDGE : Lee S. Dreyfus, Jr. JUSTICES : CONCURRED : DISSENTED : BRADLEY, J., dissents (opinion filed). NOT PARTICIPATING : ABRAHAMSON, C.J., did not participate. ATTORNEYS : For the plaintiff-appellant there were briefs (in the court of appeals and the supreme court) by Jonathan P. Groth and Pitman, Kyle & Sicula, S.C. , Milwaukee, and oral argument by Jonathan P. Groth . For the defendant-respondent there were briefs (in the court of appeals and the supreme court) by Terry E. Johnson, Peter F. Mullaney and Peterson, Johnson & Murray, S.C., Milwaukee, and oral argument by Terry E. Johnson. 2005 WI 153 NOTICE This opinion is subject to further editing and modification. The final version will appear in the bound volume of the official reports. No. 2004AP239 (L.C. No. 2002CV63) STATE OF WISCONSIN : IN SUPREME COURT Rainbow Country Rentals and Retail, Inc. d/b/a Oconomowoc Rental Center, Plaintiff-Appellant, FILED v. NOV 22, 2005 Ameritech Publishing, Inc. d/b/a Ameritech Advertising Services, Cornelia G. Clark Clerk of Supreme Court Defendant-Respondent. APPEAL from an order of the Circuit Court for Waukesha County, Lee S. Dreyfus, Jr., Judge. Affirmed. ¶1 JON P. WILCOX, J. This case comes to us on certification from the court of appeals. The appellant, Rainbow Country Rentals and Retail, Inc., d/b/a Oconomowoc Rental Center (Rainbow), appealed an order of the Circuit Court for Waukesha County, Lee S. Dreyfus, Jr., Judge, granting summary judgment to Ameritech Publishing, Inc., d/b/a Ameritech Advertising Services (API). No. 2004AP239 I. ISSUE ¶2 The court of appeals certified the following question: Whether this court’s holding in Discount Fabric House of Racine, Inc. v. Wisconsin Telephone Co. , 117 Wis. 2d 587, 345 N.W.2d 417 (1984), that an exculpatory clause in a yellow pages advertising contract was unconscionable as against public policy is still viable today given the changes that have occurred in the telecommunications industry in the two decades since that decision. ¶3 We conclude that Discount Fabric is still viable today. However, the case presented to us is factually distinct from Discount Fabric in two important ways. First, Ameritech does not possess a monopoly as Wisconsin Telephone did when Discount Fabric was decided. Second, when comparing all of the circumstances of this case with Discount Fabric , the clause at issue is not exculpatory, but rather, a valid and enforceable stipulated damages clause. Therefore, we affirm the circuit court’s grant of summary judgment in favor of API. II. FACTUAL BACKGROUND AND PROCEDURAL POSTURE ¶4 On August 8, 1999, Rainbow contracted with API for the listing of its business in the November 1, 1999, edition of the Oconomowoc and Waukesha Ameritech Pages Plus Yellow Pages telephone directories, in addition to the May 1, 2000, edition of the Watertown Ameritech Pages Plus Yellow Pages telephone directory. API subsequently omitted Rainbow's entire listing from each of the directories. 2 No. 2004AP239 ¶5 On January 7, 2002, Rainbow filed a complaint against API in the Circuit Court for Waukesha County alleging breach of contract and negligence for business losses resulting from API's omission of Rainbow's advertisement in the directories. As an affirmative defense, API contended that if a contract did exist between the parties, the contract contained a liquidated damages provision limiting the liability of API on the contract. This provision reads as follows: 8. ERRORS IN OR OMISSIONS OF ADVERTISING SOMETIMES OCCUR. ANY ERRORS OR OMISSIONS MUST BE REPORTED TO US WITHIN ONE HUNDRED TWENTY (120) DAYS AFTER THE ISSUE DATE OF THE DIRECTORY; OTHERWISE, WE WILL HAVE NO LIABILITY TO YOU. IN ORDER TO MAINTAIN OUR PRICING SCHEDULES, WE CANNOT AND DO NOT ACCEPT LIABILITY FOR LOST PROFITS OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF ERRORS OR OMISSIONS. WE ARE ALSO NOT RESPONSIBLE FOR ERRORS OR OMISSIONS CAUSED BY ACTS OF GOD, GOVERNMENTAL AUTHORITY OR OTHER ACTS BEYOND OUR REASONABLE CONTROL. IF AN ERROR OR OMISSION SHOULD OCCUR, UNLESS A GREATER LIMIT TO OUR LIABILITY HAS BEEN AGREED TO BY US IN WRITING FOR WHICH YOU HAVE AGREED TO PAY ADDITIONAL CHARGES FOR OUR TAKING A GREATER RISK OF LOSS, YOU AGREE THAT THE FOLLOWING MAXIMUM ADJUSTMENTS TO THE INVOICED AMOUNTS WILL APPLY AS A FINAL RESOLUTION: a. All other content errors (other than those specified in this paragraph). 10% b. Incorrect spelling of a word (other than business name). 10% c. Incorrect sequencing of display advertisement. 20% d. Wrong alternate phone number, e-mail address or other identification. 25% e. Incorrect spelling of a business name. 65% f. Wrong address. 65% 3 No. 2004AP239 g. Wrong primary telephone number. 100% h. Complete omission of an advertising unit. 100% plus a future PAGESPLUS advertising credit of like amount i. Wrong color. amount invoiced for the requested color j. No adjustments will be made on advertising units (either display or listing) which were free to you or for which no charge was made or invoiced. UNDER NO CIRCUMSTANCES (1) WILL OUR LIABILITY FOR ANY ADVERTISING UNIT EXCEED THE AMOUNT YOU HAVE ACTUALLY PAID FOR IT TOGETHER WITH FUTURE PAGESPLUS ADVERTISING CREDIT OF LIKE AMOUNT NOR (2) WILL WE HAVE ANY OBLIGATION TO RECALL, SUPPLEMENT OR OTHERWISE AMEND DIRECTORIES. ¶6 Prior to the omissions, Frank Paoletti, an API representative, and Kim Gradinjan, one of Rainbow's co-owners, signed an Ameritech Customer Receipt. The document consisted of a front and back page. The front page listed the directories that Rainbow's advertisement was to appear in, along with the monthly charge for each advertisement. The back page listed the terms of the agreement. Immediately above the signature line on the front page, the contract included the following language: I HAVE READ AND UNDERSTAND THE TERMS AND CONDITIONS ON THE FACE AND REVERSE SIDE, PARTICULARLY THE PARAGRAPH WHICH LIMITS MY REMEDIES AND PUBLISHER'S MAXIMUM LIABILITY IN THE EVENT OF ANY ERROR OR OMISSION. ¶7 Rainbow does not dispute that the omitted advertising was subject to the contract. Furthermore, Rainbow admitted that Gradinjan signed the contract and read the contract prior to signing it. 4 No. 2004AP239 ¶8 On June 2, 2003, API filed a partial summary judgment motion to limit the contract damages to the amount set forth in the schedule of potential damages within the contract and to dismiss the negligence claim. In response, Rainbow argued that the damage limitation provision was void and unenforceable under this court's decision in Discount Fabric , 117 Wis. 2d 587. Additionally, Rainbow conceded that the economic loss doctrine barred its negligence claim, and it agreed to dismiss that cause of action. ¶9 In support of its motion, API submitted an affidavit from Craig Cerqua, one of API's Wisconsin regional marketing managers. Cerqua made the following pertinent assertions: (1) API's competitors, including USXchange and Yellow Book USA, publish their own version of yellow pages telephone directories in all of the major directory markets throughout Wisconsin; (2) Beginning approximately 20 years ago, companies such as Community Directories, Inc. (which was purchased by Sprint in the early 1990s and is now known as Yellow Book USA), have competed with API in most of the major directory markets throughout Wisconsin; (3) Since 1998, USXchange has annually published the "Milwaukee One Book" covering the greater Milwaukee metropolitan area; (4) Consumers in the Waukesha area consulted API's competitors 9 percent of the time in 1998, compared to 41 percent of the time in 2002; (5) Consumers in the Milwaukee area consulted API's competitors four percent of the time in 1998, compared to 33 percent of the time in 2002; (6) For several years, USXchange has invested substantial sums of 5 No. 2004AP239 advertising money in various media outlets; and (7) Yellow pages directories are available on the Internet, and several competitors currently publish such information on the Internet. ¶10 In response, Rainbow submitted the affidavit of Frank Paoletti, API's representative to the transaction. Paoletti made the following assertions: (1) Although other books sold ads that were distributed throughout the relevant areas, there was no other book that had the depth of distribution comparable to that of API's publication; (2) API had no real competitors in the market during the relevant time frame; and (3) During the negotiations with Rainbow, he was not authorized to change the terms of the contract between the parties. ¶11 On August 4, 2003, the circuit court issued an oral decision and order granting API's motion for partial summary judgment, which effectively enforced the terms of the contract as stated. The court determined that the circumstances that existed when Discount Fabric was decided were significantly distinguishable from the circumstances that are present in this case. The court recognized that during the relevant time frame in Discount Fabric , Wisconsin Telephone had a monopoly on local telephone service; there were no other service options available to the plaintiff in Racine in 1978. In contrast, Rainbow had other local telephone service providers and other yellow pages providers available to take its business. Furthermore, the court determined that the provisions of API's advertising contract were clearly stated on a one-page, two-sided document. The court also noted that these kinds of business contracts 6 No. 2004AP239 where the parties stipulate to the damages in the event some kind of harm occurs have been approved by the courts with great regularity.