Wisconsin Supreme Court rules yellow pages damage clause enforceable.

Byline: David Ziemer

A liquidated damages clause in a yellow pages contract is enforceable, the Wisconsin Supreme Court held on Nov. 22.

In so holding, the court reaffirmed its 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 contract was contrary to public policy, but distinguished the case based on changes in the telecommunications industry, and the contract's language.

In 1999, Rainbow Country Rentals and Retail, Inc., contracted with Ameritech Publishing, Inc. (API), for the listing of its business in the Oconomowoc, Waukesha, and Watertown Ameritech Pages Plus Yellow Pages telephone directories. API subsequently omitted Rainbow's entire listing from each of the directories.

Rainbow brought suit against API, alleging breach of contract and negligence for lost business. API asserted, as an affirmative defense, its stipulated damages clause, barring liability for lost profits or consequential damages, and limiting damages to a full refund, plus an advertising credit in that amount in a future edition.

Waukesha County Circuit Court Judge Lee S. Dreyfus granted partial summary judgment to API. The court found Discount Fabric not controlling, because of the existence of competing yellow pages that did not exist when Discount Fabric was decided.

Rainbow appealed, and the court of appeals certified the case to the Supreme Court, which affirmed in a decision by Justice Jon P. Wilcox. Justice Ann Walsh Bradley dissented, and Chief Justice Shirley S. Abrahamson did not participate.

In Discount Fabric, as in the case at bar, the telephone company omitted the plaintiff's ad from the 1978 directory. The Supreme Court held an exculpatory damages clause unenforceable, because of Wisconsin Telephone's monopoly status.

Despite the similarities between the two cases, the Supreme Court in the case at bar found Discount Fabric not controlling, for two reasons: first, the defendant is no longer a state-approved monopoly; and second, the clause at issue is a stipulated damages clause, rather than an exculpatory clause.

The court noted that, on Jan. 1, 1984, AT&T suffered divestiture as a result of an antitrust suit by the Department of Justice. Subsequently, in 1986, the Wisconsin Legislature partially deregulated telecommunications services.

In doing so, the Legislature recognized that "[t]he telecommunications industry currently is in a state of...