Borschow Hosp. and Medical Supplies, Inc. v. Cesar Castillo Inc.

• Decision Date: 30 July 1996
• Docket Number: No. 96-1113,96-1113
• Citation: 96 F.3d 10
• Parties: 1996-2 Trade Cases P 71,587 BORSCHOW HOSPITAL AND MEDICAL SUPPLIES, INC., Plaintiff--Appellant, v. CESAR CASTILLO INC., et al., Defendants--Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 10

96 F.3d 10

1996-2 Trade Cases P 71,587

BORSCHOW HOSPITAL AND MEDICAL SUPPLIES, INC., Plaintiff--Appellant, v. CESAR CASTILLO INC., et al., Defendants--Appellees.

No. 96-1113.

United States Court of Appeals First Circuit.

Heard July 30, 1996.

Decided Sept. 23, 1996.

Fernando L. Gallardo, with whom Harry E. Woods, Geoffrey M. Woods, Woods & Woods, Hato Rey, PR, and Carlos R. Iguina-Charriz were on brief, Guaynabo, PR, for appellant.

Donald R. Ware, with whom Richard M. Brunell and Foley, Hoag & Eliot, were on brief, Boston, MA, for appellee Becton Dickinson and Company.

Edilberto Berros-Perez and Luis Fernandez-Ramrez, San Juan, for appellees Cesar Castillo, Inc., Umeco, Inc., Jose Luis Castillo, Ivonne Belaval de Castillo, Cesar Castillo, Jr., Aracelis Ortiz de Castillo and Mara Isabel Gonzalez.

Before SELYA, Circuit Judge, TORRES ^* and SARIS, ^** District Judges.

SARIS, District Judge.

Plaintiff-Appellant Borschow Hospital & Medical Supplies, Inc. is a distributor of a line of medical and surgical products supplied by Defendant-Appellee, Becton Dickinson and Company, in Puerto Rico. Borschow claims that Becton Dickinson violated the Puerto Rico Dealers Act, 10 L.P.R.A. § 278, also commonly known as "Law 75," by granting additional distributorships in violation of its allegedly exclusive Distributorship Agreement. ¹ Although the Distributorship Agreement contained a clear non-exclusivity provision and integration clause, Borschow contends that the district court erred under Puerto Rico's parol evidence rule when it excluded an unsigned written memorandum sent prior to the signing of the agreement as evidence that the parties actually intended the distributorship to be exclusive.

Borschow also claims that Becton Dickinson engaged in an unlawful tying arrangement in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, by threatening to discontinue a supply of a line of its products (the tying products) unless Borschow also carried its syringe line (the tied product) and dropped that of a competitor.

The district court granted summary judgment for Becton Dickinson on both claims. We affirm.

I. STATEMENT OF THE CASE

A. Facts

Reviewing the factual record in the light most favorable to the nonmoving party, as we must at summary judgment, see Mesnick v. General Elec. Co., 950 F.2d 816, 822 (1st Cir.1991), cert. denied, 504 U.S. 985, 112 S.Ct. 2965, 119 L.Ed.2d 586 (1992), we treat the following facts as controlling, noting, however, that Becton Dickinson disputes many aspects of this account.

A major supplier of medical products in Puerto Rico, Borschow contracted with Parke Davis & Company ("Parke Davis") on May 1, 1985 to distribute a line of medical and surgical products manufactured by its subsidiary, Deseret Medical, Inc. (the "Deseret Line"). In mid-1986, Becton Dickinson acquired Deseret and assumed Parke Davis' obligations under the distribution agreement as an assignee. This dispute turns in large part on the content of that agreement.

The distribution agreement executed by Borschow and Parke Davis ["Distribution Agreement"], includes two provisions of interest here. First, it provides that "Company [i.e., Parke Davis] hereby appoints Distributor [i.e., Borschow] and the Distributor hereby accepts appointment, as the Company's nonexclusive independent distributor of the Products for Regular Business in the Territory [i.e., Puerto Rico] during the term of this Agreement." Distribution Agreement, § 2.1.2 (emphasis added). Second, the contract included the following integration clause:

Integration: The terms and provisions contained in this Agreement, including all Schedules attached hereto and Company's Standard Terms and Conditions of Sale in effect, from time to time, constitute the entire agreement and is the final expression of intent between the Parties relating to the subject matter hereof and supersede, all previous communications, representations, agreements, and understandings, either oral or written, between the Parties with respect to the subject matter thereof. No agreement or understanding varying or extending this Agreement will be binding upon either Party hereto unless in writing, wherein this Agreement is specifically referred to, and signed by duly authorized officers or representatives of the respective Parties.

Id. § 9.10. Borschow's president, Jonathan Borschow, initially refused to sign any contract that included a non-exclusivity provision. However, in negotiations prior to execution of the Distribution Agreement, Robert Vallance, Deseret's Regional Director for Canada/Latin America, assured Mr. Borschow that his distributorship would be exclusive. Vallance promised him that he would receive a letter from Parke Davis promising exclusivity. When that letter was not forthcoming, Mr. Borschow telephoned Vallance and inquired about the delay. Vallance told Mr. Borschow that the people in "Morris Plains," the corporate headquarters of Warner Lambert, Parke Davis' parent company, were considering the matter.

After that conversation, Mr. Borschow received a draft of the Distribution Agreement, which included the non-exclusivity term. He again objected to Vallance but was told that the "contract cannot, it will not be changed. The people in Morris Plains will not countenance it." However, Vallance reassured Mr. Borschow that he would send a document that would outline the "true" basis for their business relationship, including a promise that Borschow's distributorship would be exclusive.

Within a matter of days, Mr. Borschow received a two-page undated and unsigned outline. The outline specifies that one of the supplier's obligations is to "sell exclusively to the DISTRIBUTOR and refrain from selling to other DISTRIBUTORS or clients in the territory while the AGREEMENT is in effect." The outline neither explicitly mentions Mr. Borschow or Parke Davis nor refers to the May 1 Distribution Agreement. Borschow testified that he executed the Distribution Agreement approximately two weeks after he received the outline. ²

From the execution of the agreement in 1985 to 1986, Borschow remained Parke Davis' exclusive distributor of the Deseret line. After Becton Dickinson's acquisition of Deseret in mid-1986, no changes were made in the relationship until November 1989, when Becton Dickinson granted distributorships to UMECO, Inc. and Cesar Castillo, Inc.

Moreover, according to Borschow and his salespeople, at approximately the same time that the additional distributors were established in November 1989, Becton Dickinson demanded that Borschow cease distributing the Monoject Syringe & Needle Line, made by a Becton Dickinson competitor, and begin carrying the Becton Dickinson syringe line. Becton Dickinson also threatened that if Borschow did not meet this demand, it would no longer be supplied with the Deseret line. However, Becton Dickinson did not carry through on this threat. Although Borschow refused to drop Monoject, Becton Dickinson continued to supply Deseret products to Borschow.

B. Proceedings Below

Borschow brought an action in federal district court for the District of Puerto Rico on February 6, 1990, alleging that Becton Dickinson's termination of Borschow's "exclusive" distributorship violated Law 75 and that Becton Dickinson's threat to tie the Deseret line to its syringe line violated the Sherman Act. Borschow also alleged a conspiracy with Castillo and UMECO in restraint of trade and attempted monopolization. Federal jurisdiction was invoked on the basis of a federal question and diversity of citizenship.

On September 24, 1990, the district court permitted discovery limited to the threshold issue as to whether Borschow's distributorship was exclusive. On January 15, 1991, Becton Dickinson moved for summary judgment, asserting that taking these facts in the light most favorable to Plaintiff, Borschow cannot evade the effect of its written contract providing for non-exclusivity. If Borschow's contract was non-exclusive, according to Becton Dickinson, the Law 75 claim fails as a matter of law. In addition, Becton Dickinson argued that the outline was extrinsic evidence of the contracting parties' intent that could not be considered on summary judgment because of Puerto Rico's parol evidence rule.

The motion was referred to a magistrate judge, who issued a report and recommendation denying summary judgment on the ground that the extrinsic evidence raised issues of fact regarding whether the agreement provided for exclusivity. The district court (Acosta, J.) initially adopted the magistrate judge's recommendation without comment, but on a motion for reconsideration, the court (Casellas, J.) granted partial summary judgment for Becton Dickinson. ³ The court held that Puerto Rico's parol evidence rule barred consideration of the outline and that the contract unambiguously provided for a non-exclusive distributorship. Borschow Hosp. & Medical Supplies, Inc. v. Cesar Castillo, Inc., 882 F.Supp. 236, 239-40 (D.P.R.1995). In a subsequent order, the court granted partial summary judgment for Becton Dickinson on the antitrust claims due to lack of evidence of tying, anticompetitive injury or conspiracy and dismissed the pendent state law claims. Borschow timely appealed the judgment.

II. DISCUSSION

A. Standard of Review

We review a district court's grant of summary judgment de novo. Werme v. Merrill, 84 F.3d 479, 482 (1st Cir.1996). The standard is well-rehearsed and familiar. "Summary judgment is appropriate when 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.' " Barbour v. Dynamics Research Corp., 63 F.3d 32, 36 (1st Cir.1995) (quoting Fed.R.Civ.P. 56(c)), cert. denied, --- U.S. ----, 116 S.Ct. 914, 133 L.Ed.2d 845 (1996). "In operation, summary judgment's...