Girl Scouts of Manitou Council, Inc. v. Girl Scouts of the USA

As the first appellate court in the country to address the issue, the United States Court of Appeals for the Seventh Circuit ruled that a nonprofit organization, in this case a local Girl Scouts council, should be afforded the same protections available to a for-profit business under a state’s franchise/dealer protection statue. In a unanimous decision, the court ruled that Wisconsin’s Fair Dealership Law (WFDL), which protects “dealerships” from grantors who wish to “terminate, cancel, fail to renew or substantially change the competitive circumstances of a dealership agreement without good cause,” was fully applicable to the efforts of Girl Scouts of the United States of America to unilaterally remove sixty percent of the territory of a local, Wisconsin council, Girl Scouts of Manitou Council.

The court ruled that the “WFDL expresses no concern for the ‘mission’ or other motivation underlying the sales in question; it asks only whether sales occur. Nor does the statute draw any distinction between ‘for-profit’ and ‘not-for-profit’ entities. Its stated concern is with ‘fair business relations,’ and it is beyond dispute that nonprofit corporations can be substantial businesses. Indeed, both GSUSA and Manitou, notwithstanding their status as nonprofits, are multimillion-dollar businesses possessing substantial assets and liabilities.”

Gary Leydig pursued this emergency, interlocutory appeal following the district court’s denial of the motion for preliminary injunction. After ordering an expedited briefing schedule and just three days after hearing oral argument, the appellate court reversed the district court and ordered the preliminary injunction in favor of Mr. Leydig’s client. Click here to read the court’s opinion.

On remand, the lower court adhered to the Court of Appeal’s conclusion that the WFDL applied to the parties’ relationship, but still entered summary judgment against the local council on the ground that application of the WFDL here unconstitutionally interfered with the national organization’s First Amendment right of expressive association. The case was again appealed to the Seventh Circuit and the Court of Appeals reversed the judgment entered against the local council on its WFDL claim. The appellate court found, among other things, that “[f]rom a commercial standpoint the Girl Scouts are not distinguishable from Dunkin’ Donuts.”  The district court was directed to enter summary judgment in the council’s favor on its WFDL claim, to order appropriate relief in favor of the council and, pending all that, to reinstate the preliminary injunction that had previously been ordered by the Court of Appeals. Click here to read the court’s opinion from this second appeal.