American Home Assur. Co. v. Insular Underwriters Corp., No. 71-1111

• Decision Date: 18 March 1974
• Docket Number: 71-1120.,No. 71-1111,71-1029
• Parties: AMERICAN HOME ASSURANCE COMPANY et al., Plaintiffs, Appellants, v. INSULAR UNDERWRITERS CORP. et al., Defendants, Appellees. MANUEL SAN JUAN COMPANY, INC., et al., Plaintiffs, Appellees, v. AMERICAN INTERNATIONAL UNDERWRITERS CORP. et al., Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

494 F.2d 317 (1974)

AMERICAN HOME ASSURANCE COMPANY et al., Plaintiffs, Appellants, v. INSULAR UNDERWRITERS CORP. et al., Defendants, Appellees.

MANUEL SAN JUAN COMPANY, INC., et al., Plaintiffs, Appellees, v. AMERICAN INTERNATIONAL UNDERWRITERS CORP. et al., Defendants, Appellants.

Nos. 71-1111, 71-1029, 71-1120.

United States Court of Appeals, First Circuit.

Argued February 5, 1974.

Decided March 18, 1974.

Peter J. Malloy, Jr., New York City, with whom R. H. Francis and Juan F. Doval, San Juan, P. R., were on motion for plaintiffs, appellants to review order of the District Court and memorandum in support thereof.

Wallace Gonzalez-Oliver, San Juan, P. R., for defendants, appellees in opposition to the motion.

Before COFFIN, Chief Judge, McENTEE and CAMPBELL, Circuit Judges.

COFFIN, Chief Judge.

These are appeals from orders remanding to the Superior Court of the Commonwealth of Puerto Rico actions which had been commenced there by appellees and removed to the federal district court, and dismissing an action for declaratory relief, growing out of the same controversy, which had been commenced in the federal district court by appellants.

The tangled procedural history of this case begins on September 22, 1970, when appellants, insurance underwriters whose headquarters are in New York, notified appellees, their general agents in Puerto Rico, that the agency contracts first entered into in 1962 were to be cancelled as of December 31, 1970. At the same time, appellants sought a declaratory judgment from the district court that the Puerto Rican Dealer's Contract Law, Law 75 of 1964 (10 L.P.R.A. § 278 et seq.), which restricts the cancellation of dealer contracts, was inapplicable to general agency contracts. Later that same day, appellees commenced a separate action in the Superior Court of the Commonwealth, and obtained a protective order enjoining appellants from cancelling the agency contracts. Appellees' action was then removed to the district court, on appellants' motion, and another protective order granted them. Appellees moved to remand their action to the Superior Court of the Commonwealth, contending that the federal district court lacked jurisdiction, but their motion was denied. Appellants appealed the reinstatement of the protective order, and appellees contested the denial of their motion to remand. We stayed the appeals pursuant to the mandate of Fornaris v. Ridge Tool Co., 400 U.S. 41, 91 S.Ct. 156, 27 L.Ed.2d 174 (1970), until the courts of the Commonwealth had had an opportunity to interpret Law 75.

This status quo was preserved for the next two years, while appellants continued to seek a federal forum, and Law 75 continued in effect without authoritative interpretation by the courts of the Commonwealth. Finally, in Warner Lambert Co. (American Chicle Co. Division) v. Superior Court of Puerto Rico, San Juan Part, ___ P.R.R. ___ (May 9, 1973), the Superior Court of the Commonwealth held that Law 75 did not apply retroactively to contracts entered into before its enactment in 1964. We therefore granted appellants' motion to vacate the stay, and remanded the various actions to the district court. The district court then decided that it had no jurisdiction over appellees' cause of action, which had been improvidently removed from the Commonwealth courts three years before, and therefore granted appellees' motion to remand. Concluding that a disposition of appellees' actions would necessarily dispose of appellants' claim, and wishing to avoid multifarious suits, the district court dismissed appellants' action for declaratory relief. It is from this posture that appellants now appeal, both from the order of remand of appellees' actions and from the order dismissing appellants' declaratory judgment action without prejudice.

Appellants contend that the district court abused its discretion in remanding the appellees' action to the Commonwealth courts, because the original removal had been proper. Appellants also argue that the district court abused its discretion in dismissing appellants' action for declaratory relief, since appellants' action was commenced before that of appellees, and a resolution of that action would resolve all of the issues between the parties. What is understandably galling to appellants is that, three and one half years after their suit was filed, and almost one year after the Puerto Rico Supreme Court in Warner Lambert decreed that Law 75 does not apply to dealer contracts entered into prior to its passage, they are in the Sisyphean predicament of being forced to labor under their contractual arrangement — of ever diminishing value — with appellees, while appellees have been free to develop their own lucrative business. But much of the delay was occasioned by the Fornaris-mandated restraint awaiting interpretation of Law 75 by the Supreme Court of Puerto Rico. And, now that the district court has at last made its decision, we conclude that the twin barriers of lack of appellate jurisdiction over the order to remand and somewhat limited scope of review over the order of dismissal of the declaratory action outweigh the demonstrated tenacity of appellants in trying to stay in a federal forum. We therefore affirm.

Appellants base their challenge to the remand on an alleged fraudulent joinder of several Commonwealth party defendants in appellees' action who, say appellants, are nominal parties joined for the sole purpose of defeating diversity jurisdiction in the federal courts. Appellants argue that appellees' basic cause of action is breach of contract, which lies solely against appellants, and that the joined Commonwealth defendants are mere agents or "middlemen" through which the actions of appellants were carried out and communicated to appellees. Appellees, on the other hand, maintain that the joined defendants played an active part in the scheme to cancel the general agency contracts, and that in all likelihood the named defendants would become appellants' new general agents if cancellation of the old contracts were effective. Their cause of action, they say, is founded in tort and, therefore, the joined defendants, who acted far beyond an agency capacity, are joint tortfeasors. Appellees also allege causes of action which arise under the Puerto Rican law relating to nuisance, "Perturbacion" and "Menoscabo", 32 L.P.R. § 2761, under the law against conspiracy and restraint of trade, 10 L.P.R.A. §§ 258, 259, and the statute protecting freedom of speech, 1 L.P.R.A. § 11.

However meritorious we find argument on either side, we are unable to jump into the foray. Review of the district court's decision to remand is simply outside our province. 28 U.S.C. § 1447(d). See Chandler v. O'Bryan, 445 F.2d 1045 (10th Cir. 1971); Louisiana State Board of Medical Examiners v. Howze, 445 F.2d 586 (5th Cir. 1971). As we said in In re La Providencia Development Corp., 406 F.2d 251 (1 Cir. 1969), "Removal in diversity cases, to the prejudice of state court jurisdiction, is a privilege to be strictly construed . . . and the state court proceedings are to be interfered with once, at most." We based our decision then, as we do now, not only upon judicial economy, but also in recognition of principles...