Medina & Medina v. Country Pride Foods Ltd.
| Decision Date | 30 April 1986 |
| Docket Number | Civ. No. 81-2310 (RLA). |
| Citation | 631 F. Supp. 293 |
| Parties | MEDINA & MEDINA, Plaintiff, v. COUNTRY PRIDE FOODS LTD., Defendant. |
| Court | U.S. District Court — District of Puerto Rico |
Luis E. Dubón, Jr., Dubón, Dubón & Vázquez, San Juan, P.R., for plaintiff.
Diego A. Ramos and Salvador Antonetti, Fiddler, González & Rodríguez, San Juan, P.R., for defendant.
This is a diversity of citizenship suit commenced by Medina & Medina (Medina) against Country Pride Foods Ltd. (Country Pride) seeking damages for alleged breach of a distribution agreement in violation of Act 75 of June 24, 1964, as amended, 10 L.P.R.A. § 278, et seq. (Act 75), unjust enrichment and conversion.
Country Pride counterclaimed on grounds of fraudulent misrepresentation and intentional interference with prospective economic advantages.
Present before us for disposition are defendant's motion for summary judgment filed on June 20, 1984 (Docket No. 43) and plaintiff's cross-motion for summary judgment of July 19, 1984 (Docket No. 45), together with their respective oppositions and replies.
1. Medina is a mercantile partnership established since May 1, 1979.
2. Country Pride is a corporation organized under the laws of the United Kingdom, with offices in Arkansas.
3. On July 19, 1977, J-M Poultry Packing Company Limited, Country Pride's predecessor, appointed Medina its "exclusive agent and distributor for all (their) products in (Puerto Rico)".
4. The Country Pride program in Puerto Rico consisted of selling Grade A frozen poultry items (whole bird legs, breasts, gizzards, etc.) labeled under the Country Pride trade name and supported by an aggressive advertising campaign (point of sale and otherwise).
5. From the time the Country Pride program was introduced in Puerto Rico, a formula price structure based on the Georgia dock prices was used for chicken items and open market pricing was used for other poultry items.
6. From time to time adjustments were made to the formula price structure by mutual agreement.
7. In March 1978, Country Pride demanded higher prices for its products. In May 1978, Medina accepted an increase in prices. In June 1978, Country Pride started to demand additional increase in the prices for the sale of its products to Medina.
8. On October 24, 1978, Jerry R. Nelson, Country Pride's executive in charge of sales gave Medina a thirty-day notice to change the formula's rigid pricing structure then in effect to an open market pricing structure.
9. During the early part of November 1978, the parties met to discuss, among other things, the new open market policy proposal. Thereafter, on November 14, 1978, Country Pride changed its original proposal to a formula arrangement of higher prices than the ones existing, to begin on December 1, 1978 for a ninety-day try-out period.
10. On November 21, 1978, Medina analyzed and rejected the new formula and counterproposed a new one at lower prices than requested by Country Pride.
11. On November 22, 1978, Country Pride compromised and advised that Medina's November 21, 1978 formula was acceptable for a ninety-day period, but all deliveries were to be C.I.F. San Juan and payment by sight draft against ocean bills of lading.
12. Later, on that same date, Medina advised that four and one-half cents (4.5¢) could be added to the formula to make prices C.I.F. San Juan, but that the sight draft payment condition was unacceptable.
13. On November 27, 1978, Country Pride restated its position: (a) Medina's prices at Country Pride's payment terms or (b) open price formula. A reply was requested by the next day.
14. On November 28, 1978, Medina rejected the new payment terms alleging prior experience of shortages and overages in the shipment of products and prior experience of shipments of out-of-date products. Medina counterproposed to pay sight draft payable fifteen days after receipt of the product.
15. On November 28, 1978, Medina urged Country Pride to reconsider its offers.
16. On November 29, 1978, Medina again urged Country Pride to reconsider and asked for any other alternatives which Country Pride could choose to offer.
17. On November 29, 1978, Country Pride advised that it wanted to do business with Medina, but needed price relief immediately.
18. On November 30, 1978, Medina again explained why it rejected both offers of Country Pride.
19. On November 30, 1978, Country Pride insisted upon its previously stated position.
20. That same day, Medina restated its previous argument and an impasse was reached in the negotiations.
21. On December 4, 1978, Country Pride advised Medina that a shipment of goods was sent and payment was due by sight draft against ocean bills of lading.
22. On December 6, 1978, Medina advised that it was reexamining its previous position and studying the possibility of making a new proposal.
23. On December 7, 1978, Medina made a third proposal relative to payment terms, to wit: payment seven days after receipt of product, such terms to be in effect for a ninety-day trial period.
24. On December 7, 1978, Country Pride rejected Medina's third proposal and made its offers clear: "(1) our price, your credit terms, (2) your price, our credit terms". In view of the impasse, Country Pride announced withdrawal from Puerto Rican market.
25. On that same date, Medina accepted Country Pride's withdrawal from the Puerto Rican market.
26. On December 8, 1978, Country Pride requested payment for the last shipment due on December 3, 1978.
27. On December 11, 1978, Medina advised that payment for the goods was forthcoming later, following pre-November payment terms.
28. On December 11, 1978, Country Pride made an offer of delivery of last shipment and demanded a transfer of funds against commercial invoice to be telexed.
29. On December 12, 1978, Medina advised that under pre-December 1 delivery and payment terms, title to shipped goods passed upon tender to carrier at port of shipment to Medina and Country Pride and no right to condition delivery until payment of the goods.
30. On that same date, Country Pride rejected Medina's claim and also advised that the agency agreement was terminated.
31. Medina paid Country Pride for all products delivered and has no outstanding balance due to Country Pride.
1. Timeliness
Defendant contends the action filed on December 3, 1981 under Act 75 is time-barred. A review of the documents submitted, however, indicates otherwise.
It is not until December 12, 1978 that plaintiff was advised that the agency agreement was terminated. (App. 205.)2 The pertinent statute provides that suits must be filed within three years from the final termination of the distribution contract or from the detrimental acts to the relationship as the case may be.3 Prior to December 12, 1978, the parties were still attempting to reconcile their differences in pricing and an amicable solution was still a viable alternative. Accordingly, the complaint filed on December 3, 1981 was timely.
2. Price and/or Credit Terms and Right to Withdraw from the Puerto Rico Market
Because these two arguments are so intertwined, they will be discussed together.
The primary concern in enacting Act 75, also known as the Dealer's Act, was the protection of distributors in Puerto Rico when contracts were arbitrarily concluded after they had created a favorable market for the product within this jurisdiction. To this effect, the statement of motives for this piece of legislation reads:
The Commonwealth of Puerto Rico cannot remain indifferent to the growing number of cases in which domestic and foreign enterprises, without just cause, eliminate their dealers, concessionaires, or agents, as soon as these have created a favorable market and without taking into account their legitimate interests. The Legislative Assembly of Puerto Rico declares that the reasonable stability in the dealer's relationship in Puerto Rico is vital to the general economy of the country, to the public interest and to the general welfare, and in the exercise of its police power, it deems it necessary to regulate, insofar as pertinent, the field of said relationship, so as to avoid the abuse caused by certain practices.
Act 75 provides that no principal may terminate a distribution relationship except for "good cause". 10 L.P.R.A. § 278a. The term "just cause" is defined in the statute as: "Nonperformance of any of the essential obligations of the dealer's contract, on the part of the dealer, or any action or omission on his part that adversely and substantially affects the interests of the principal or grantor in promoting the marketing or distribution of the merchandise or service." 10 L.P.R.A. § 278(d).
It is evident from a reading of this provision that only the dealer's acts or omissions may constitute just cause under the statute. The Supreme Court of Puerto Rico held in Warner Lambert Co. v. Tribunal Superior, 101 D.P.R. 378, 400 (1979):
It should be noted that the just cause is limited to acts imputable to the dealer. Only when the dealer fails to comply with any of the essential conditions or adversely affects in a substantial manner the interest of the principal, may the latter terminate the contract without payment for damages. The Act does not admit the good faith of the principal in the termination of the contract, nor his right to establish his own distribution system or to make adjustments in the system which in good faith he considers necessary to improve his market.
(Official translation of the Supreme Court of Puerto Rico.)
In its definition of "just cause", section 278a makes reference to two situations, either the dealer's failure to comply with an essential obligation under the contract or any act or omission on its part that interferes with the interests of the principal in the distribution of the product.
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