619 F.3d 90 (1st Cir. 2010), 09-2163, Rafael Rodriguez Barril, Inc. v. Conbraco Industries, Inc.

Docket Nº:09-2163.
Citation:619 F.3d 90
Opinion Judge:BOUDIN, Circuit Judge.
Party Name:RAFAEL RODR
Attorney:Angelique Doble Bravo with whom Jos
Judge Panel:Before BOUDIN, SELYA and GAJARSA,[*] Circuit Judges.
Case Date:September 08, 2010
Court:United States Courts of Appeals, Court of Appeals for the First Circuit
 
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Page 90

619 F.3d 90 (1st Cir. 2010)

RAFAEL RODRÍGUEZ BARRIL, INC., Plaintiff, Appellant,

v.

CONBRACO INDUSTRIES, INC., Defendant, Appellee.

No. 09-2163.

United States Court of Appeals, First Circuit.

September 8, 2010

Heard July 27, 2010.

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Angelique Doble Bravo with whom JoséA. Gallart and Gallart Law Firm were on brief for appellant.

Annette Cortés Arcelay with whom Eric Pérez-Ochoa and Adsuar Muñiz Goyco Seda & Pérez-Ochoa, P.S.C. were on brief for appellee.

Before BOUDIN, SELYA and GAJARSA,[*] Circuit Judges.

BOUDIN, Circuit Judge.

The question in this case is whether a forum selection clause in a contract between the parties is displaced by Puerto Rico's Sales Representatives Act of 1990, P.R. Laws Ann. tit. 10, §§ 279-279h (2009) ( " Law 21" ). The district court held that it was not displaced and dismissed the suit without prejudice. Although there are disputed facts as to a supposed breach of contract, the facts relating to the forum selection clause are not disputed, and that issue is dispositive on this appeal.

Conbraco Industries, Inc. (" Conbraco" ), based in North Carolina, manufactures valves and other industrial products. On January 1, 1999, Conbraco and Rafael Rodríguez Barril, Inc. (" RRB" ) executed a Sales Representative Agreement (" the agreement" ) in North Carolina, appointing the latter as a Conbraco sales representative in Puerto Rico. One provision required RRB and its staff to " refrain from any activities which may reflect adversely upon the reputation or credibility of Conbraco or the Products." Conbraco terminated the contract on June 27, 2008, claiming a breach of this provision by RRB several days earlier. 1

On August 11, 2008, RRB sued Conbraco in Puerto Rico Superior Court under Puerto Rico's Law 21. Law 21 provides inter alia that regardless of any contractual language to the contrary, (1) sales representation contracts covering the geographic territory of Puerto Rico " shall be construed pursuant to, and shall be governed by" Puerto Rico law, P.R. Laws Ann. tit. 10, § 279f, and (2) no principal may terminate a contract with a sales representative absent " just cause," id. § 279a. RRB alleged that Conbraco terminated the

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contract without cause and requested a declaratory judgment, specific performance of the contract, and compensation for Conbraco's allegedly tortious conduct.

However, the agreement contains a forum selection clause, a choice of law clause, and a severability clause. The first provides: " In the event that either party brings suit to enforce the terms of this [a]greement both [RRB] and Conbraco consent and agree that jurisdiction for such action will lie only in the state and federal courts sitting in Mecklenburg County, North Carolina" ; the second, that the contract " shall be governed and construed in all respects" according to North Carolina law; and the third, that if any provision is held unlawful or unenforceable, " the remaining portions of the [a]greement shall remain in full force and effect."

After removing the action to federal court, Conbraco sought to enforce the forum selection clause by filing a motion to dismiss. Fed.R.Civ.P. 12(b)(6). The magistrate judge, to whom the matter was referred, recommended that the motion be granted, finding the forum selection clause to be valid and stating that an attack under Law 21 on the validity of the choice of law clause was properly to be presented in the North Carolina forum specified in the forum selection clause. The district court adopted the magistrate judge's Report and Recommendation, and granted Conbraco's motion to dismiss without prejudice. RRB now appeals.

We review de novo a district court's Rule 12(b)(6) dismissal based on a forum selection clause. Rivera v. Centro Médico de Turabo, Inc., 575 F.3d 10, 15 (1st Cir.2009). This being a case based on diversity jurisdiction, the initial question is whether for Erie purposes, see Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), we treat the issue of whether a forum selection clause is enforceable as " procedural" and look to a federal test of validity or instead treat it as " substantive" and look to pertinent state law, starting with the choice of law rules that would be followed by the local court in the jurisdiction where the district court sits.

The Erie question has been...

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