42 F.3d 53 (1st Cir. 1994), 93-2374, Pritzker v. Yari

Docket Nº:93-2374, 94-1128 and 94-1129.
Citation:42 F.3d 53
Party Name:Jay A. PRITZKER, Plaintiff, Appellee, v. Bob YARI, et al., Defendants, Appellants.
Case Date:December 13, 1994
Court:United States Courts of Appeals, Court of Appeals for the First Circuit
 
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42 F.3d 53 (1st Cir. 1994)

Jay A. PRITZKER, Plaintiff, Appellee,

v.

Bob YARI, et al., Defendants, Appellants.

Nos. 93-2374, 94-1128 and 94-1129.

United States Court of Appeals, First Circuit

December 13, 1994

Heard Aug. 4, 1994.

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Roger R. Crane, with whom Bachner, Tally, Polevoy & Misher, New York City, Roberto Boneta, Munoz Boneta Gonzalez Arbona Benitez & Peral, Hato Rey, PR, Jose Trias-Monge, and Trias & Melendez, San Juan, PR, were on brief, for defendant Bob Yari.

Martin I. Kaminsky, with whom W. Hans Kobelt and Pollack & Kaminsky, New York City, were on brief, for defendant Baird, Patrick & Co.

Benjamin Rodriguez-Ramon, Rodriguez-Ramon & Rodriguez-Hernandez, and Emigdio R. Seles, San Juan, PR, on brief, for defendant Lincoln Realty, Inc.

Ruben T. Nigaglioni, with whom Diana Mendez-Ondina and Ledesma, Palcu & Miranda, Hato Rey, PR, were on brief, for defendant Paul S. Dopp.

Gael Mahony, with whom Frances S. Cohen, David A. Hoffman, Joshua M. Davis, Hill & Barlow, Boston, MA, Salvador Antonetti-Zequeira, Ricardo Ortiz-Colon, and Fiddler, Gonzalez & Rodriguez, San Juan, PR, were on brief, for plaintiff Jay A. Pritzker.

Before SELYA and CYR, Circuit Judges, and ZOBEL, [*] District Judge.

SELYA, Circuit Judge.

In this troika of appeals, we address several questions arising collaterally from a bitterly fought breach-of-contract suit between Paul S. Dopp and Jay A. Pritzker (the D/P Litigation) concerning the ownership of two hotels, situated on approximately 1,000 beachfront acres, in the Commonwealth of Puerto Rico. The engine of high-stakes litigation runs on money, and at various times during the course of the D/P Litigation Dopp forged financing agreements with three different financiers, namely, Bob Yari, Lincoln Realty, Inc. (Lincoln), and Baird, Patrick & Co. (BPC), for the apparent purpose of fueling his prosecution of the suit.

Although we first must address BPC's jurisdictional challenge, our principal task today is to resolve the contested legal status of these financing agreements. Having carefully examined the relevant law and the facts of the case, we hold that all three financing agreements involve "litigated credits" within the meaning of article 1425 of the Civil Code of Puerto Rico, P.R.Laws Ann. tit. 31, Sec. 3950 (1991); that all are, therefore, subject to redemption by Pritzker under Puerto Rico law; and that Pritzker properly perfected his rights to redemption. We also hold that the lower court's trimming of Pritzker's right to redeem Yari's litigated credit lacked any legal basis. Consequently, we affirm in part and reverse in part.

I. BACKGROUND

The facts relating to the underlying breach of contract and the protracted litigation emanating from it are chronicled in a series of opinions, see Dopp v. Pritzker, 38 F.3d 1239, 1239-43 (1st Cir.1994) (Dopp IV ); Dopp v. HTP Corp., 947 F.2d 506, 508-09 (1st Cir.1991) (Dopp II ); Dopp v. HTP Corp., 831 F.Supp. 939, 941-92 (D.P.R.1993) (Dopp III ); Dopp v. HTP Corp., 755 F.Supp. 491,

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492-94 (D.P.R.1991) (Dopp I ), and need not be rehearsed. Hence, we confine our account to the facts that are needed to place the instant appeals into workable perspective. 1

  1. The Financing Agreements.

    In March 1990, a jury sitting in the United States District Court for the District of Puerto Rico found Pritzker liable to Dopp in the sum of $2,000,000 for breach of an oral contract concerning the purchase of the Dorado Beach Hotel Corporation (DBHC). The district court entered judgment in the D/P Litigation, see Dopp I, 755 F.Supp. at 504, and a firestorm of appeals ensued. We eventually upheld the liability finding but vacated the damage award and ordered a new trial limited to questions of remediation. See Dopp II, 947 F.2d at 520.

    As these events were unfolding, Dopp launched a collateral enterprise, assigning various portions of the anticipated proceeds of the D/P Litigation to third parties. He undertook this effort, in his words, "to meet some of the litigation and personal expenses ... incurred during the years of this intense litigation and in connection therewith." All told, Dopp entered into three separate nonuniform financing agreements with three distinct financiers.

    Dopp signed the first financing agreement, styled as a "Judgment or Settlement Purchase Agreement," on June 26, 1990. In this transaction, Lincoln agreed to provide $50,000 in exchange for an 8% interest in the proceeds of the D/P Litigation above a stipulated floor. The agreement obliged Dopp to apprise Lincoln of developments in the litigation on a current basis.

    Dopp entered into the second financing agreement on October 16, 1991. In it, BPC agreed to provide $100,000 in exchange for a 5% interest in the proceeds of the D/P Litigation over a floor different from that negotiated between Dopp and Lincoln. Moreover, the BPC agreement mandated certain minimum repayments to the financier. These minima varied depending upon the date on which, in the words of the contracting parties, the D/P Litigation might eventually be "settled or otherwise decided." Like the Lincoln agreement, the BPC agreement obliged Dopp to keep the financier seasonably informed of litigatory developments.

    Dopp entered into the third and last financing agreement on July 23, 1992. In consideration of $250,000 in cash and a promise to obtain, or at least to assist in obtaining, a $2,500,000 to $3,000,000 line of credit for one year, Dopp agreed to allocate the remainder of the proceeds of the D/P Litigation according to a preset formula: "(i) first, to repayment of all indebtedness in relation to the line of credit to have been obtained in Dopp's name; (ii) second, $2,500,000 to Yari; (iii) third, $12,000,000 to Dopp; (iv) fourth, $7,000,000 to Yari; and (v) fifth, the remaining amount, if any, to be divided equally between Dopp and Yari." Dopp III, 831 F.Supp. at 954. 2 The Yari agreement also set in place virtual joint control of the litigation. Although Yari ultimately provided less funding (somewhere between $500,000 and $625,000) than Dopp claims was due, the district court found that Yari "complied with all of his obligations under his agreements...." Id. at 956.

  2. Pertinent Proceedings Below.

    On October 9, 1992, Dopp disclosed the existence of the financing agreements in the midst of a new discovery round. Exactly one week later, Pritzker wrote to Lincoln, offering to tender the amount paid to Dopp in exchange for Lincoln's rights and beneficial interests under its financing agreement. On

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    the same date, Pritzker sent substantially identical missives to BPC and Yari, 3 and notified the district court of his letter-writing spree.

    When his communiques drew no meaningful response, Pritzker promptly filed a complaint in the district court. He named Dopp and the three financiers as defendants, along with an ostensible partnership between Dopp and Yari. Pritzker averred that each of the financing agreements involved the sale of a litigated credit within the meaning of article 1425 and, hence, was subject to extinguishment. Between December 18, 1992, and June 1, 1993, Pritzker, through a series of motions, deposited with the district court the funds that he believed were necessary to redeem the financiers' interests in the proceeds of the D/P Litigation.

    BPC moved to dismiss Pritzker's complaint against it for want of in personam jurisdiction, but the district court demurred. 4 After all defendants had answered the complaint, the court consolidated Pritzker's suit with Dopp's suit against Pritzker. See id. at 942-43. In an opinion dated March 5, 1993, the court held that all three financing agreements involved litigated credits within the reach of article 1425, and that Pritzker was entitled, pursuant to that statute, to extinguish such credits through full reimbursement of the amounts advanced (together with interest and costs). See Pritzker v. Yari, Civ. No. 92-2825, 1993 WL 71760, at * 5-7, slip op. at 11-17 (D.P.R. Mar. 5, 1993). In a later, end-of-case opinion, the court reaffirmed this holding, see Dopp III, 831 F.Supp. at 952, carved out a partial exception applicable to Yari, see id. at 957-58, and determined the monetary amounts each party stood to lose or gain, see id. at 958-59.

    Following the entry of final judgment, the three financiers filed notices of appeal. Lincoln and Yari contested the application of article 1425 to their agreements. BPC piggybacked on this argument, but focused its appeal mainly on jurisdictional questions. Dopp joined the chorus, but, as he contributed no arguments that were both novel and substantial, we subsume his views in our ensuing discussion of the financiers' points on appeal. Pritzker cross-appealed, excoriating the district court's determination that he could redeem only one-half of Yari's litigated credit.

    II. PERSONAL JURISDICTION

    Before proceeding to the main event, we must first jump through a jurisdictional hoop and determine whether the district court properly exercised in personam jurisdiction over BPC. The hoop does not present an impenetrable obstacle.

  3. Charting a Course.

    In its simplest formulation, in personam jurisdiction relates to the power of a court over a defendant. It is of two varieties, general and specific. General personal jurisdiction, as its name implies, is broad in its ambit: it is the power of a forum-based court, whether state or federal, over a defendant "which may be asserted in connection with suits not directly founded on [that defendant's] forum-based conduct...." Donatelli v. National Hockey League, 893 F.2d 459, 462-63 (1st Cir.1990). Put another way,

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    "[g]eneral jurisdiction exists when the litigation is not directly founded on the defendant's forum-based contacts, but the defendant has nevertheless...

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