Alpha Biomedical & Diagnostic Corp. v. Philips Med. Sys. Netherland BV

• Decision Date: 21 November 2011
• Docket Number: Civil No. 11–1379 (FAB).
• Citation: 828 F.Supp.2d 425
• Parties: ALPHA BIOMEDICAL AND DIAGNOSTIC CORP., Cruz A. Ruiz, Plaintiffs, v. PHILIPS MEDICAL SYSTEMS NETHERLAND BV, Philips Medical Systems Puerto Rico, Inc. and Ismael Jaras, Defendants.
• Court: U.S. District Court — District of Puerto Rico

828 F.Supp.2d 425

ALPHA BIOMEDICAL AND DIAGNOSTIC CORP., Cruz A. Ruiz, Plaintiffs,

v.PHILIPS MEDICAL SYSTEMS NETHERLAND BV, Philips Medical Systems Puerto Rico, Inc. and Ismael Jaras, Defendants.

Civil No. 11–1379 (FAB).

United States District Court, D. Puerto Rico.

Nov. 21, 2011.

Rafael Escalera–Rodriguez, Amelia Caicedo–Santiago, Reichard & Escalera, San Juan, PR, for Plaintiffs.

Jaime A. Torrens–Davila, Pedro J. Santa–Sanchez, Eric Perez–Ochoa, Adsuar Muniz Goyco Seda & Perez Ochoa PSC, San Juan, PR, for Defendants.

OPINION AND ORDER

BESOSA, District Judge.

Before the Court is the Report and Recommendation (“R & R”), (Docket No. 65), regarding plaintiffs Alpha Biomedical and Diagnostic Corp. and Cruz A. Ruiz's (collectively, “plaintiffs”) motion to remand to state court, (Docket No. 14.) Having considered the magistrate judge's recommendations, plaintiffs' objections and defendants' opposition to plaintiff's objections, (Docket Nos. 67 & 71), the Court ADOPTS the R & R, (Docket No. 65.)

DISCUSSION

I. BackgroundA. Procedural Background

On April 11, 2011, plaintiffs filed a civil action in the Puerto Rico Court of First Instance pursuant to the Puerto Rico Dealer's Act, also known as Puerto Rico Law 75, P.R. Laws Ann. tit. 10, § 278. In their complaint, plaintiffs request injunctive relief, damages, costs, and attorneys' fees against defendants Philips Medical Systems Nederland B.V.¹ (“Philips Nederland”), Philips Medical Systems Puerto Rico (“Philips PR”) and Ismael Jaras (“Jaras”), the Regional Director of Philips PR. Specifically, plaintiffs asked for relief against defendants Philips PR and Jaras for tortious interference with contract and defamation. On that same date, plaintiffs also filed a motion seeking provisional and preliminary injunctive relief pursuant to article 3–A of Puerto Rico Law 75, P.R. Laws Ann. tit. 10, § 278b–1, and Rule 57 of the Puerto Rico Rules of Civil Procedure.

On April 20, 2011, defendants Philips Nederland, Philips PR and Jaras removed the case to federal court, alleging that the non-diverse defendants—Philips PR and Jaras-had been fraudulently joined for the purpose of defeating diversity and that the only real defendant was the diverse Philips Nederland. (Docket No. 1.) On April 21, 2011, plaintiffs filed an emergency motion to extend the operation of a state court temporary restraining order (“TRO”). (Docket No. 6.) The Court denied the emergency motion without prejudice on April 25, 2011. (Docket No. 10.) The state court TRO expired by its own terms. ( See Docket No. 12.)

On April 25, 2011, plaintiffs filed a motion to remand the case to state court, arguing that defendants have failed to carry the extremely heavy burden of showing fraudulent joinder. (Docket No. 14.) On May 4, 2011, defendants Philips Nederland, Philips PR and Jaras opposed plaintiffs' motion to remand. (Docket No. 22.) On that same date, defendants Philips Nederland, Philips PR and Jaras also moved to dismiss for insufficient service of process and pursuant to the arbitration clause. (Docket No. 24.) On May 10, 2011, plaintiffs moved again for a TRO, (Docket No. 28), and moved the court to hold in abeyance defendants Philips Nederland, Philips PR and Jaras's motion to dismiss pending a decision on the issue of remand. (Docket No. 30.)

On September 30, 2011, pursuant to a referral order issued by the Court, Magistrate Judge Silvia Carreño–Coll filed a R & R, recommending that plaintiffs' motion to remand to state court be GRANTED. ( See Docket Nos. 61 & 65.) The magistrate judge also recommends that no attorneys' fees should be awarded to the plaintiffs because defendants Philips Nederland, Philips PR and Jaras did not lack an objectively reasonable basis for removal. (Docket No. 65.) Additionally, the magistrate judge finds that the remaining motions pending before the court, Docket Nos. 17, 24 and 28, would be mooted by the remand and should accordingly be terminated. Id.

The magistrate judge finds that the First Circuit Court of Appeals has not articulated a precise standard for deciding fraudulent joinder cases and that most other courts in this district considering fraudulent joinder allegations have followed the Fifth Circuit Court of Appeals. (Docket No. 65 at pp. 2–3.) The magistrate judge also finds that only the second prong of the Fifth Circuit's test—whether plaintiffs failed to state a cause of action against the non-diverse parties—is applicable to show fraudulent joinder in this case. Id. at 3. Applying the Fifth Circuit's test, the magistrate judge finds (1) that plaintiffs fail to state a claim for tortious interference against the non-diverse defendants, and therefore, that defendants were correct in one of their primary arguments for removal; (2) that plaintiffs validly state a claim for defamation against the non-diverse defendants, and that the case should therefore be remanded to state court.

On October 12, 2011, plaintiffs filed a partial objection to the R & R, arguing that the magistrate judge erroneously concluded that plaintiffs fail to state a claim of tortious interference against Philips PR. (Docket No. 67 at p. 4.) Thus, plaintiffs argue that they should receive attorneys' fees for defendants Philips Nederland, Philips PR and Jaras's alleged frivolous removal. Id. at pp. 4–5. On October 31, 2011, defendants Philips Nederland, Philips PR and Jaras filed an opposition to plaintiffs' partial objection to the R & R. (Docket No. 71.)

II. Legal AnalysisA. Standard under 28 U.S.C. § 636(b)(1)

A district court may refer a case to a magistrate judge for a report and recommendation. See 28 U.S.C. § 636(b)(1)(B); Fed.R.Civ.P. 72(b); Loc. Rule 72(b). Any party adversely affected by the report and recommendation may file written objections within fourteen days of being served with the magistrate judge's report. See 28 U.S.C. § 636(b)(1). A party that files a timely objection is entitled to a de novo determination of “those portions of the report or specified proposed findings or recommendations to which specific objection is made.” Sylva v. Culebra Dive Shop, 389 F.Supp.2d 189, 191–92 (D.P.R.2005) (citing United States v. Raddatz, 447 U.S. 667, 673, 100 S.Ct. 2406, 65 L.Ed.2d 424 (1980)). Failure to comply with this rule precludes further review. See Davet v. Maccarone, 973 F.2d 22, 30–31 (1st Cir.1992). In conducting its review, the court is free to “accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge.” 28 U.S.C. § 636(a), (b)(1). Templeman v. Chris Craft Corp., 770 F.2d 245, 247 (1st Cir.1985); Alamo Rodriguez v. Pfizer Pharmaceuticals, Inc., 286 F.Supp.2d 144, 146 (D.P.R.2003). Furthermore, the Court may accept those parts of the report and recommendation to which the parties do not object. See Hernandez–Mejias v. General Elec., 428 F.Supp.2d 4, 6 (D.P.R.2005) (citing Lacedra v. Donald W. Wyatt Detention Facility, 334 F.Supp.2d 114, 125–126 (D.R.I.2004)).

B. Plaintiffs' Objections Regarding The Tortious Interference Claim

Plaintiffs specifically object to the magistrate judge's conclusion that plaintiffs fail to state a claim for tortious interference under Puerto Rico law. (Docket No. 67 at p. 4.) They argue that in their complaint, ( see Docket No. 1), they have properly pled that there was a contract—a verbal distribution agreement—in effect and that Philips PR tortiously interfered with that contract. (Docket No. 67 at pp. 4–6.) Furthermore, they argue that there is no need for a written contract between the parties in order to trigger the application of the Puerto Rico Dealer's Act under Puerto Rico Law 75, P.R. Laws Ann. tit. 10, § 278(b). Id. at p. 5.

Having examined the factual allegations in the complaint, the Court finds plaintiffs' argument unpersuasive. ( See Docket No. 1.) To establish a tortious interference claim, plaintiffs need to show: 1) the existence of a contract; 2) that the interfering party acted with intent and knowledge of the existence of a contract; 3) that plaintiff suffered damages; and 4) that there exists a causal link between the injury and the interfering party's actions. New Commc'n Wireless Servs. v. SprintCom, Inc., 287 F.3d 1, 9 (1st Cir.2002) (citing Gen. Office Prods. Corp. v. A.M. Capen's Sons, Inc., 15 P.R. Off. Trans. 727, 734, 115 D.P.R. 553 (1984)). Regarding the first element requiring the existence of a contract, the Supreme Court of Puerto Rico has stated that a fixed time period in the contract is essential to a tortious interference claim. A.M. Capen's Co., Inc. v. Am. Trading & Prod. Corp., 200 F.Supp.2d 34, 43 (D.P.R.2002) (discussing how the Supreme Court of Puerto Rico in Dolphin Int'l of P.R. v. Ryder Truck Lines, 127 P.R. Dec. 869, 882–83, 1991 WL 735928 (P.R. Jan. 31, 1991), explains that there can be no tortious interference when the contract at issue has no expiration date and is terminable at will); see also Leopoldo Fontanillas, Inc. v. Luis Ayala Colón Sucrs., Inc., 283 F.Supp.2d 579, 588 (D.P.R.2003) (where there was no alleged term of duration and the alleged agreements were terminable at will, no contract right to continue a business relationship existed, and no action for damages for tortious interference existed). Furthermore, the Supreme Court of Puerto Rico has specified that if what is affected is a “mere expectancy or a profitable financial relationship,” an action for tortious interference cannot lie. Dolphin Int'l., 127 P.R. Dec. at 882–83 (internal citation omitted).

Plaintiffs allege that Philips PR interfered with a contract between defendant Philips Nederland and plaintiff Alpha. Even if plaintiffs' pleading were to be interpreted as alleging that there was an oral contract in effect at the time of the alleged interference, they do not show a fixed time period for the agreement or that the alleged agreement was not terminable at will. Plaintiffs has pled the following: for nine years, plaintiff Alpha acted as a distributor for defen...