AM Capens Co. v. American Trading & Production

• Decision Date: 16 June 1995
• Docket Number: 94-1483(DRD).,Civ. No. 94-1367(DRD)
• Parties: A.M. CAPENS CO., INC., Plaintiff, v. AMERICAN TRADING AND PRODUCTION CORPORATION, Defendant. A.M. CAPENS CO., INC., Plaintiff, v. Blas Rossy ASENCIO, et al., Defendant.
• Court: U.S. District Court — District of Puerto Rico

892 F. Supp. 36

A.M. CAPENS CO., INC., Plaintiff, v. AMERICAN TRADING AND PRODUCTION CORPORATION, Defendant.

A.M. CAPENS CO., INC., Plaintiff, v. Blas Rossy ASENCIO, et al., Defendant.

Civ. Nos. 94-1367(DRD), 94-1483(DRD).

United States District Court, D. Puerto Rico.

June 16, 1995.

Philip E. Roberts, San Juan, PR, for plaintiff.

Jose E. Colon-Santana, Hato Rey, PR and Jose E. Colon-Santana, Rio Piedras, PR, for defendants.

OPINION AND ORDER

DOMINGUEZ, District Judge.

Before the Court are A.M. Capens Co., Inc. (Capens) request for provisional remedy (Docket # 4)¹ and defendant, American Trading and Production Corporation's (ATAPCO) request for change of venue (Docket # 11).

The "Motion for Provisional Remedy" was filed by Capens on April 25, 1994. A hearing on the Motion was celebrated before Hon. Magistrate Judge Jesus Antonio Castellanos on June 6, 1994 as per order of the Court (Docket # 6). The Magistrate's Report and Recommendation followed on August 18, 1994 (Docket # 26) and objections thereto were filed by the parties on August 29, 1994 and September 1, 1994 (Docket #'s 27 and 30). The case was assigned to the subscribing judge on November 1, 1994 (Docket # 34).

A hearing was held before the undersigned in May 15, 1995. At that date the Court requested the parties' memorandums on the criteria required under Puerto Rico's Act 75, P.R. Laws Ann., tit. 10 § 278 et seq. for qualifying distributor/dealer status under the Act. Memorandums were filed by the parties on May 19, 1995 (Docket # 42 and # 43).

Having reviewed the Magistrate's Report and Recommendation and objections thereto, having heard the parties arguments and examined the parties memorandums, the Court hereby adopts the Magistrate's recommendation and grants the provisional remedy requested by Capens. The change of venue requested by ATAPCO is denied.

DISCUSSION

Provisional Remedy Request

Capens seeks a provisional remedy pursuant to Article 3A of the Dealer's Contracts Act, Law No. 75 of June 24, 1964, as amended, P.R. Laws Ann. tit 10 § 278b-1.

Capens alleges the exclusive representation in Puerto Rico of certain products of ATAPCO; that such representation was impaired and/or diminished without just cause and that therefore Capens is entitled to the provisional remedy.

Article 3A of the Dealer's Act provides in pertinent part:

In any litigation in which there is directly or indirectly involved the termination of a dealer's contract or any act in prejudice of the relation established between the principal or grantor and the dealer, the Court may grant, during the time the litigation is pending solution, any provisional remedy or measure of an interdictory nature to do or to desist from doing, ordering any of the parties, or both, to continue, in all its terms, the relation established by the dealer's contract, and/or to abstain from performing any act or any omission in prejudice, thereof.

In the First Circuit Jurisdiction, trial courts in considering preliminary injunction requests must use a quadripartite test. Narragansett Indian Tribe v. Guilbert, 934 F.2d 4, 5 (1st Cir.1991). Under those standards the relief requested is appropriate if: (1) petitioner has exhibited a likelihood of success on the merits; (2) the petitioner will suffer irreparable injury if the injunction is not granted; (3) such injury outweighs any harm which granting injunctive relief would inflict on the respondent; and (4) the public interest will not be adversely affected by granting the injunction. Planned Parenthood League of Mass. v. Bellotti, 641 F.2d 1006, 1009 (1st Cir.1981).

Upon solving a request for provisional remedy under Article 3A (§ 278b-1) of the Puerto Rico Dealer's Act the district court need not rely on the criteria of "probability of success," DeMoss v. Kelly Services, Inc., 493 F.2d 1012, 1015 (1st Cir.1974); notwithstanding, nothing in article 3A prevents a district court from using this criteria. Luis Rosario v. Amana Refrigeration, 733 F.2d 172 (1984).²

Petitioner herein, Capens, has shown the existence of the dealer's agreement by Exhibit # 5 presented at the hearing held before the Magistrate Judge.³ Said document is a letter dated June 6, 1978 subscribed by Mr. John F. Cornforth, General Sales and Marketing Manager of Globe Weis which confirms Capens' immediate appointment as Globe Weis exclusive representative for Puerto Rico, Caribbean Area, Dominican Republic and Central and South America. Plaintiff's Exhibit # 6 and Joint Exhibits I and II also support this finding.

Furthermore, Capens has also demonstrated that ATAPCO assumed as successor of Globe Weis the obligations under the dealership agreement. (See Plaintiff's Exhibits # 7-9, Joint Exhibits VI and VII and Hrg. Tr. at p. 83). For example at Joint Exhibit # I, A.M. Capens is referred to as ATAPCO's exclusive representative/distributor for Puerto Rico.

Prima facie ATAPCO has violated the dealership relationship without "just cause" when defendant informed Capens that effective January 1, 1994 "the Caribbean and Central American Territories will become non-exclusive territories for A.M. Capens." (Plaintiff's Exhibit # 12, see also Hrg.Tr. at p. 87).

Moreover, at the hearing before the Hon. Magistrate Castellanos, Mr. Blas Rossy Asencio⁴ admitted that he is a sales representative of ATAPCO in Puerto Rico for various products including those for which Capens has been the exclusive representative under the contract with ATAPCO, namely, Globe-Weis and Steelmaster.

Under the above stated circumstances Capens is entitled to the provisional remedy requested since Capens has exhibited a "likelihood of success" on the merits: Capens had the exclusivity and ATAPCO impaired and/or diminished the exclusivity without "just cause"⁵. Capens has also shown that his business will suffer irreparable injury if the injunction is not granted because Mr. Rossy Asencio will continue to sell the products in the areas wherein Capens had the exclusivity with the added competitive advantage for Asencio of freight charges assumed by ATAPCO. The above will obviously mean that Capens' business market will be significantly irreparably diminished.

The harm that Capens will suffer most certainly outweighs ATAPCO's possible harm: the business area will remain unchanged (the Caribbean and Central and South America) and ATAPCO will continue receiving benefits, either through Mr. Rossy Asencio or through A.M. Capens; however, the harm is for Capens who will lose business market should Mr. Rossy Asencio continue to interfere with the customers.

Last, the public interest will not be adversely affected by granting the remedy. On the contrary at this stage of the proceedings the public interest and the public policy that Act 75 seeked to protect will be adequately safeguarded by the issuance of the provisional remedy. DeMoss v. Kelly, supra. ATAPCO has not shown otherwise.

We must also stress that the injunctive relief herein granted is statutory in nature wherein the principal criteria is "likelihood of success," Pan American Computer Corp. v. Data General Corp., supra.

Dealer Status

Arguments and memorandums were requested and received by the Court on the issue of Capens' "dealership" status and the consequential applicability of Act 75. The question of dealership status is a core and a close matter.

ATAPCO sustains that plaintiff is not dealer under Act 75.

Act 75 states that a dealer is a "person actually interested in a dealer's contract because of his having effectively in his charge in Puerto Rico the distribution, agency, concession or representation of a given merchandise or service." See P.R. Laws Anno. tit. 10 § 278(b). The Act defines "dealer" in terms of the person's activities in relation to the merchandise or service. That is: does the person distribute, act as an agent, act as a concessionaire or as a representative of a given merchandise or service. Section 278(b) defines a dealer's contract as a relationship in which a dealer effectively has the responsibility of distributing certain merchandise, or of the rendering of a service, by concession or franchise. Pursuant to section 278(b), the person should be responsible of the distribution either in the form of a concession or of a franchise.

In EBI, Inc. v. Gator Industries, Inc., 807 F.2d 1, 2 (1st Cir.1986) the First Circuit Court assessed a dealer's lack of status as a dealer under Act No. 75. The Court expressed that under the facts presented therein plaintiff "maintained no inventories, had no investment in warehouse or other facilities, had no responsibility for shipment or delivery, engaged in no advertising or formal promotion, and assumed no credit risk". Furthermore the Court stated in that plaintiffs' effort therein included "only one out of eight activities" which had been previously considered by the Supreme Court of Puerto Rico upon deciding other Act 75 cases.⁶ The eight activities relied upon to ascertain dealership status under the law are "in general terms"⁷ the following: (1) activities necessary to the transportation of the products or services from the manufacturer to the consumer or to some point in between; (2) publicity; (3) market coordination; (4) merchandise deliveries; (5) collections; (6) the keeping of an inventory; (7) promotion, and (8) closing of sales contracts.

Therefore, under EBI, Inc. and the Puerto Rican cases cited therein, facts would have to be evaluated on the eight activities of the agent to determine dealership status.

The grounds upon which ATAPCO objects the Magistrate's Report and Recommendation are essentially that the parties are not residents of Puerto Rico nor have representatives in Puerto Rico⁸, that defendant ignores the final destination of the sold merchandise to Capens and that there is no written contract. In the Memorandum (Docket 42) ATAPCO reiterates these arguments and adds that Capens does not have a warehouse, that Capens is exclusively a sales office,...