Seahorse Marine Supplies v. Puerto Rico Sun Oil

• Decision Date: 09 July 2002
• Docket Number: No. 01-1791.,No. 01-1792.,01-1791.,01-1792.
• Parties: SEAHORSE MARINE SUPPLIES, INC., Plaintiff, Appellee, v. PUERTO RICO SUN OIL COMPANY, Defendant, Appellant. Seahorse Marine Supplies, Inc., Plaintiff, Appellant, v. Puerto Rico Sun Oil Company, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

295 F.3d 68

SEAHORSE MARINE SUPPLIES, INC., Plaintiff, Appellee, v. PUERTO RICO SUN OIL COMPANY, Defendant, Appellant.

Seahorse Marine Supplies, Inc., Plaintiff, Appellant, v. Puerto Rico Sun Oil Company, Defendant, Appellee.

No. 01-1791.

No. 01-1792.

United States Court of Appeals, First Circuit.

Heard March 6, 2002.

Decided July 9, 2002.

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Carlos A. Rodriguez-Vidal, with whom Goldman, Antonetti & Cordova was on brief, for Puerto Rico Sun Oil Company.

Luis A. Oliver-Fraticelli, with whom Fiddler, Gonzalez & Rodriguez was on brief, for Seahorse Marine Supplies, Inc.

Before SELYA, Circuit Judge, COFFIN, Senior Circuit Judge, and LIPEZ, Circuit Judge.

COFFIN, Senior Circuit Judge.

These appeals are the latest chapter in a decade-long conflict between appellant/cross-appellee Puerto Rico Sun Oil Company ("Sun Oil") and appellee/cross-appellant Seahorse Marine Supplies, Inc. ("Seahorse"). The dispute arose at the end of a long relationship between the parties, during which Sun Oil had provided fuel, predominantly diesel, to Seahorse. Seahorse sued Sun Oil, invoking the protections of the Petroleum Marketing Practices Act ("PMPA"), 15 U.S.C. §§ 2801-41, and contending that Sun Oil improperly terminated the parties' relationship in violation of that statute. Seahorse prevailed at trial, and Sun Oil now challenges the district court's finding of subject matter jurisdiction, the jury instructions, the admission of certain expert testimony, and the denial of a motion for a new trial. Seahorse cross-appeals and disputes the sufficiency of the evidence as to its purported failure to mitigate damages. We affirm in all respects.

I. Factual Background

Sun Oil, an oil refinery operating in Yabucoa, Puerto Rico, and Seahorse, a marine supplies distributor and ship repair/maintenance service, began their business relationship in 1983, when Seahorse started selling Sun Oil's unbranded fuel oil.¹ On July 23, 1988, the parties executed a trial franchise agreement expressly governed by the PMPA. Pursuant to that agreement, Sun Oil authorized Seahorse to use and display Sun Oil's trademark for the purpose of identifying and advertising the source of the product. In April 1989, Sun Oil terminated the trial franchise agreement pursuant to the terms of the PMPA. The parties negotiated during the following several months, and on September 30, 1989, entered a one-year agreement permitting Seahorse to continue to sell the same fuel products under Sun Oil's trademark. The agreement did not specifically mention the PMPA, but it provided that it was "subject to interpretation and enforceability under the laws of the Commonwealth of Puerto Rico and the laws of the United States of America."²

As that agreement neared its end date, the parties agreed to extend the agreement while they negotiated its renewal, and they continued in that fashion through September 1991. On September 18, 1991, Sun Oil changed its price posting method from a weekly pricing formula to a daily one.³ In November, Sun Oil began rationing the fuel it would sell to Seahorse. It later stopped all delivery of its product to Seahorse on credit. In January 1992, Seahorse stopped buying fuel from Sun Oil. On February 17, Sun Oil sent Seahorse a letter demanding that Seahorse discontinue use of Sun Oil's trademark. The parties' relationship ended, this litigation ensued, and a short time later Seahorse shut down its operations.

II. Procedural Background

Seahorse filed suit on March 12, 1992, invoking the protections of the PMPA and alleging wrongful termination or nonrenewal of its franchise by Sun Oil. On May 7, Sun Oil filed a motion to dismiss, challenging subject matter jurisdiction on both diversity and federal question grounds. The district court (Pérez-Giménez, J.) granted the motion to dismiss on diversity grounds, but concluded that subject matter jurisdiction was present under a "liberal construction" of the PMPA. Specifically, the district court concluded that the PMPA's definition of "motor fuel" includes "maritime and industrial motor fuels, used by any type of motor vehicles, including trucks and boats, in public roads or any type of way, including the seas." On November 29, the district court denied Sun Oil's request for reconsideration, or, alternatively, for certification of an immediate appeal under 28 U.S.C. § 1292(b). The case was subsequently transferred to Judge Domínguez.

On February 16, 1995, Seahorse filed a motion for partial summary judgment based on Sun Oil's alleged failure to provide the PMPA's requisite notice to terminate the relationship. That motion was referred to a magistrate judge, who recommended that it be denied and concluded that

there exists a plethora of evidence in the form of communications between the parties (which includes letters and faxes), which could lead a reasonable trier of fact to conclude that Seahorse was on actual notice of the particulars required by the Act, and that additional written notice would have been an exercise in futility as it would [have] merely equat[ed] with an elevation of form over substance.

(Internal quotations omitted.) On August 7, 1997, the district court rejected the magistrate judge's recommendation that summary judgment be denied. Instead, it concluded that because Sun Oil's February 17, 1992 letter to Seahorse did not comply with the Act's notice requirements, Sun Oil was strictly liable to Seahorse under the PMPA.

On August 21, 1997, Sun Oil moved to alter, amend or clarify the August 7 order, and, inter alia, again requested that the court certify the order for interlocutory appeal under 28 U.S.C. § 1292(b). On December 30, 1997, the court reversed its prior grant of summary judgment, finding that a reasonable jury could conclude that Seahorse voluntarily had abandoned its relationship with Sun Oil, but left intact the finding that if there was no voluntary abandonment, Sun Oil was liable. The district court also certified the jurisdictional question for appeal to this court. Despite this certification, we denied Sun Oil's petition on February 27, 1998.

Trial began on October 4, 1999 and continued through December 21. The court limited the triable issues to (1) whether Sun Oil had terminated or non-renewed, or whether Seahorse had voluntarily abandoned, the franchise; and (2) if Sun Oil had terminated or non-renewed, the amount of damages to which Seahorse was entitled.

On November 2 and 3, 1999, the court held a hearing under Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), and Kumho Tire Co. v. Carmichael, 526 U.S. 137, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999), regarding Sun Oil's challenges to Seahorse's expert testimony. The court concluded that the expert testimony was admissible and its strength should hinge on the jury's credibility findings.

The jury concluded that Sun Oil had illegally terminated or non-renewed the parties' relationship and awarded Seahorse $2.5 million.⁴ On December 30, 1999, the district court entered judgment pursuant to the verdict. The court later denied a variety of post-judgment motions and reentered judgment on March 30, 2001. Sun Oil and Seahorse subsequently timely filed their respective notices of appeal.

III. Subject Matter Jurisdiction Under the PMPA

At the outset, Sun Oil challenges the district court's conclusion that it possessed subject matter jurisdiction over this case. The district court concluded that Congress contemplated protection for distributors like Seahorse in contractual relationships with refiners like Sun Oil. We review that determination de novo, Bull HN Info. Sys., Inc. v. Hutson, 229 F.3d 321, 328 (1st Cir.2000), and conclude that subject matter jurisdiction is present.

The PMPA is a remedial statute, and as such, "merits a relatively expansive construction," C.K. Smith & Co. v. Motiva Enters., 269 F.3d 70, 76 (1st Cir.2001). We are mindful, however, that the statute is in derogation of common law rights, and therefore "should not be interpreted to reach beyond its original language and purpose." Id. (quoting Chestnut Hill Gulf, Inc. v. Cumberland Farms, Inc., 940 F.2d 744, 750 (1st Cir.1991)).

With these principles in mind, we turn to the text of the statute, as the "starting point for interpretation of a statute is the language of the statute itself." Kaiser Aluminum & Chem. Corp. v. Bonjorno, 494 U.S. 827, 835, 110 S.Ct. 1570, 108 L.Ed.2d 842 (1990) (internal quotation marks omitted). We give effect to the statute's plain meaning "unless it would produce an absurd result or one manifestly at odds with the statute's intended effect," Parisi by Cooney v. Chater, 69 F.3d 614, 617 (1st Cir.1995); see also United States v. Puerto Rico, 287 F.3d 212, 217 (1st Cir.2002); Arnold v. United Parcel Serv., 136 F.3d 854, 857-58 (1st Cir.1998), and we interpret the plain language "in light of the purposes Congress sought to serve." See Arnold, 136 F.3d at 858 (citing Dickerson v. New Banner Inst., Inc., 460 U.S. 103, 118, 103 S.Ct. 986, 74 L.Ed.2d 845 (1983)). Under the PMPA,

[t]he term "franchise" means any contract —

(i) between a refiner and a distributor,

(ii) between a refiner and a retailer,

(iii) between a distributor and another distributor, or

(iv) between a distributor and a retailer, under which a refiner or distributor (as the case may be) authorizes or permits a retailer or distributor to use, in connection with the sale, consignment, or distribution of motor fuel, a trademark which is owned or controlled by such refiner or by a refiner which supplies motor fuel to the distributor which authorizes or permits such use.

15 U.S.C. § 2801(1) (emphasis added).

"Motor fuel" is defined as "gasoline and diesel fuel of a type distributed for use as a fuel in self-propelled vehicles designed primarily for use on public streets, roads and highways." 15 U.S.C. § 2801(12) (emphasis added). Building on those...