Casco Sales Co. v. Maruyama U.S., Inc.

• Decision Date: 02 November 2012
• Docket Number: Civil No. 10–1145 (SEC).
• Citation: 901 F.Supp.2d 311
• Parties: CASCO SALES COMPANY, INC., Plaintiff, v. MARUYAMA U.S., INC., Defendant.
• Court: U.S. District Court — District of Puerto Rico

901 F.Supp.2d 311

CASCO SALES COMPANY, INC., Plaintiff,

v.MARUYAMA U.S., INC., Defendant.

Civil No. 10–1145 (SEC).

United States District Court,

D. Puerto Rico.

Nov. 2, 2012.

Jason R. Aguilo–Suro, Jorge I. Peirats, Pietrantoni Mendez & Alvarez, LLP, San Juan, PR, for Plaintiff.

James W. McCartney, Cancio, Nadal, Rivera & Diaz, San Juan, PR, for Defendant.

OPINION AND ORDER

SALVADOR E. CASELLAS, Senior District Judge.

Before the Court are the defendant's motion for summary judgment (Docket # 45), and the plaintiff's opposition thereto (Docket # 53). After reviewing the filings and the applicable law, the defendant's motion is GRANTED.

Factual and Procedural Background

Casco Sales Company, Inc. (“Casco”) brings this diversity suit against Maruyama U.S., Inc. (“Maruyama”), seeking damages resulting from the termination of an exclusive Distribution Agreement. The material facts, which are largely uncontested, follow.

On October 19, 2005, Casco, a Puerto Rican corporation, and Maruyama, a corporation organized under the laws of the state of Washington, subscribed a Distributor Policies & Agreement (the “Agreement”) for distribution by Casco of Maruyama's landscape-related equipment and products in Puerto Rico. Docket # 45–1 (“SUF”), ¶¶ 1–3. The Agreement, which granted Casco the exclusive distribution of Maruyama's products, provided in pertinent part that Maruyama could terminate Casco if the latter failed to:

(a) “[R]emit payments in a timely manner (not to exceed 90 days from due date)....” Docket # 45–2, Exh. 1, p. 6.

(b) Participate in the “annual production planning program.” Id.

(c) Furnish Maruyama with a “Monthly Inventory & Sales Report.” Id. at 7.

(d) Maintain an inadequate sales force. Id. at 6.

The parties got off to a good start. But, at some point in 2007, Casco started struggling to make payments on time. The record shows that, from April 9, 2007 to May 6, 2007, Casco had 4 past due invoices over 60 days. See SUF ¶¶ 5–16. Things got worse, and from June 6, 2008 to June 25, 2009, Casco had 6 outstanding invoices over 90 days. See id.

Apart from e-mailing Casco's outstanding invoices on a monthly basis, Maruyama regularly made it clear to Casco that it was in arrears. SUF ¶ 18. For instance, the record shows that, on July 10, 2008, a Casco agent acknowledged a debt of at least $50,420.11, but stated that payment would be delayed because Casco had obligations related to its tax payments. Id. ¶ 18(e). On August 19, 2008, a Maruyama agent e-mailed Casco advising regarding a past due balance of $32,420.28, and that a pending order could not be filled until the past due payment was made. Id. ¶ 18(f). Maruyama similarly advised Casco of its past due balances on November 25 and December 9, 2008, on June 4, 2009, and on June 21, 2009. Id. ¶ 18(h-k).¹ Casco's debt ran as high as $111, 383.38 in December 2008. Docket # 55–1, p. 20:4–22.

When Maruyama complained about such outstanding balances, Casco did not remain silent. On February 2, 2009, Enrique Irizarry, Casco's President, sent a letter to Maruyama, acknowledging Casco's need to bring its “debt down.” Docket # 45–4, p. 2. Because the “economic situation worldwide is extremely difficult,” Irizarry wrote, “the Construction Industry in the island has been hit hard, with sales the lowest they have been in Casco's history.” Id. And, asking for Maruyama's “help” in establishing “a payment plan,” Irizarry underscored that he wished to continue their business together. In the same time frame, Manuel A. Galvan, Maruyama's International Sales Manager, replied, saying that Maruyama had been “flexible” in “recognizing currents events and payments efforts are very much appreciated and well noted.” Docket # 55–3, p. 1.

But on February 24, Albert Guibert, Maruyama's Regional Manager, sent another email to Casco, stating that “portions of [Casco's] past due ha[d] reached 120 days due.” Docket # 45–3, p. 41. Guibert further wrote:

It is important [that] we collect both the 90 day and 120 day amounts, and avoid being reviewed for referral to collections. By maintaining your account within manageable levels we can avoid affecting our ability to ship Casco Sales needed [sic], and sold [sic] Maruyama Equipment. Please review this urgent matter, and send a payment on account today, or very soon. Please review the attached updated statement of account. As always, we appreciate your business, and look forward to continuing our support of Casco Sales in the future. Id.

The next day, Casco's “VP–Operations,” Johanna M. Rive, wrote back to Guibert and said that Guibert's “offer to collect immediately the balance over 90 days [was] extremely reasonable and greatly appreciated.” Docket # 55–5, p. 4. “We will monitor the account and send payments on a monthly basis to try and keep the account below that 90 day mark and become current as soon as possible,” Rive concluded. Id. That same day, Casco managed to send a check for $13,000. Id., p. 2. Guibert then wrote back to Rive, saying that “[Maruyama] appreciate [s] ... [Casco's] continued business, and will cooperate as best [as] possible to provide our support, and service to both you, and your clientele.” Id., p. 3.

About a month later, on March 31, 2009, Guibert wrote back to Rive, expressing his dissatisfaction with the “payment plan” proposed by Casco. Docket # 55–6, pp. 3–4. “[I]t is necessary [that] I make this request to pay the amount in the 90 day column, and the ... planned pay amount falls way short of the amount needed ($27, 945.09),” Guibert concluded. Id.

The record reflects that, on April 3, 2009, Casco sent another check to Maruyama for $10,211.42, which brought the “past due amount” to $36,814.10. Docket # 55–7, p. 2. Maruyama's Guibert responded by saying that they are “grateful for the effort [Casco] [is] making to maintain [the] account in good order.” Docket # 55, ¶ 12. Similarly, five days later, Alejandra Sargent, Maruyama's International Support Coordinator, replied to Casco's latest proposed payment plan, noting how much they “appreciate the effort that Casco is doing to bring the account current, as we strongly want to keep making business with you guys.” Docket # 55–7, p. 1.

Casco then made several other payments in that time frame, effectively reducing its outstanding invoices due over 90 days to $0 by the beginning of June 2009. But by the end of June, Casco again owed $4,360 on debt due over 90 days. In fact, according to the last invoice sent by Maruyama at the end of June, Casco owed a total of $57, 019.42. Docket # 45–3, p. 27.

Apart from consistently breaching the Agreement's clause that required Casco's payments not to exceed 90 days from due date, the undisputed facts show that Casco ran afoul of other provisions that provided Maruyama grounds to terminate the Agreement. First, Casco did not provide Maruyama with the Monthly Inventory & Sales Reports, as required by the Agreement. SUF ¶ 20. Second, Casco refused to participate in Maruyama's 2008–2009 booking program (described in the Agreement as the annual production planning program), or as Casco (concededly) describes it a “program for buying by container load.” Id. ¶ 21; Docket # 54, ¶ 20. Finally, Casco also failed to hire and train outside sales personnel to assist in the marketing of Maruyama's products (or as stated in the Agreement, Casco failed to maintain an adequate sales force). SUF ¶ 21. ²

On July 20, 2009, Maruyama's patience ran its toll. Thomas R. Glaze, then Vice President & General Manager of Maruyama, sent a letter to Casco's Rive, saying that “Maruyama ha[d] elected to take a different approach concerning the market areas currently covered by Casco. Under the terms of the Agreement, Maruyama is giving Casco a 30 day notice of termination of said Agreement.” Docket # 45–5, p. 1. Glaze testified on his deposition that a “different approach” meant “a very nice way of telling somebody that we're going to go with another distributor in your area.” Docket # 55, ¶ 6. In fact, at the time of the Agreement's termination, Maruyama had been looking at “fall back positions” for other companies that could sell Maruyama's products in Puerto Rico. Id. ¶ 19.

Casco still owed around $50,000 to Maruyama when the Agreement was terminated, Docket # 55–1, p. 31:18–20, and, while Casco never exceeded its credit limit of $250,000 with Maruyama, Docket # 55, ¶ 4, Maruyama had to place several holds on Casco's orders until late payments were addressed. SUF ¶ 18(f). It is unclear when, but at some point after the Agreement's termination, a different company began selling Maruyama's products in Puerto Rico. Docket # 55, ¶ 20.

Shortly thereafter, Casco's counsel wrote back to Glaze, arguing that Maruyama's “decision to terminate the agreement without just cause constitutes not only an express breach of the Agreement,” but also violated Puerto Rico's Dealers' Contract Act of 1964 (“Law 75”), P.R. Laws Ann. tit. 10, §§ 278–278e. Docket # 45–6, p. 1. Contending that, because Casco “was in breach of the Agreement in multiple respects and had been for some time,” Maruyama had “just cause” to terminate the Agreement, Maruyama's counsel replied. Docket # 45–7, p. 1.

With the parties unable to resolve their disagreement outside of court, this suit soon followed. Docket # 1. In it, Casco alleges violations of Law 75, as well as breach of contract and breach of duty of good faith, and seeks $500,000 in damages.

After an unsuccessful mediation attempt, see Docket # 21, and upon completion of discovery, Maruyama filed the instant motion for summary judgment, arguing that it had “just cause” to the terminate the Agreement. Docket # 45. There was “just cause,” Maruyama says, because “Casco repeatedly failed to pay invoices on time, that it did not provide [it] with reports that were required by the Agreement, ... that Casco did not participate in marketing or promotional programs generated by Maruyama, ... and that Casco failed to employ an adequate...