D.I.P.R. Mfg., Inc. v. Perry Ellis Intern., Inc.

• Decision Date: 23 January 2007
• Docket Number: Civil No. 06-2052(JAG).
• Parties: D.I.P.R. MFG., INC.; Diorvett International Zona Libre, S.A., Plaintiff(s) v. PERRY ELLIS INTERNATIONAL, INC., et al., Defendant(s).
• Court: U.S. District Court — District of Puerto Rico

472 F.Supp.2d 151

D.I.P.R. MFG., INC.; Diorvett International Zona Libre, S.A., Plaintiff(s) v. PERRY ELLIS INTERNATIONAL, INC., et al., Defendant(s).

Civil No. 06-2052(JAG).

United States District Court, D. Puerto Rico.

January 23, 2007.

Eric Perez-Ochoa, Adsuar Muníz Goyco Seda & Pérez Ochoa PSC, San Juan, PR, for Plaintiffs.

Richard M. Graffam-Rodriguez and Roberto Abesada-Aguet, McConnell Valdes, San Juan, PR, for Defendants.

OPINION AND ORDER

GARCIA-GREGORY, District Judge.

Pending before the Court is a Motion to Dismiss filed by defendants Perry Ellis International and Perry Ellis International Europe ("Perry Ellis" or "the defendants") pursuant to Fed.R.Civ.P. 12(b)(6). (Docket No. 2). For the reasons set forth below, the Court GRANTS the Motion.

FACTUAL AND PROCEDURAL BACKGROUND¹

Perry Ellis and plaintiff Diorvett International Zona Libre S.A. ("Diorvett") entered into a "Licence Agreement" ("the Agreement") on December 23rd, 2005, whereby Perry Ellis granted Diorvett the right to distribute the "Perry Ellis," "Perry Ellis Portfolio," and "Perry Ellis America" brands in the territory of Puerto Rico. On September 1st, 2006, Perry Ellis sent Diorvett a "Notice of Material Breach," because Diorvett had not paid royalties, had failed to submit its sales reports, and was unable to meet some sales quotas. Perry Ellis granted Diorvett a period of 15 days to address and cure the alleged violations. Diorvett, however, failed to comply with this deadline and, on September 18th, 2006, Perry Ellis sent a second letter immediately terminating the Agreement.

On September 29th, 2006, Diorvett and D.I.P.R. MFG., Inc. ("D.I.P.R.")(collectively, "plaintiffs"), filed suit against Perry Ellis in the Puerto Rico Court of First Instance, San Juan Part, seeking a declaratory judgment, a preliminary injunction and damages in the amount of $5,000,000.00, pursuant to Section 278b of the Puerto Rico Dealers' Act ("Act 75"), P.R. Laws Ann. Tit. 10 § 278b. Plaintiffs assert that the termination of the Agreement was premature, illegal, unjustified and in bad faith, because it allegedly received the notice of default on September 8th, 2006, and thus believed that the term of fifteen days granted by Perry Ellis to cure the violations expired on September 22nd, 2006. (Docket No. 1, Exhibit A at 3 ¶ 4).

On October 19th, 2006, Perry Ellis removed the case to this Court and, shortly thereafter, moved for the dismissal of the complaint based on a forum selection clause in which Diorvett agreed to the exclusive jurisdiction of the Federal and State courts of Florida for any dispute arising under the Agreement. (Dockets No. 1 & 2).²

On October 27th, 2006, the Court ordered plaintiffs to show cause why the case should not be dismissed or, alternatively, transferred to a federal venue in the State of Florida. (Docket No. 8). Plaintiffs responded on November 3rd, 2006, arguing that dismissal is not appropriate because: 1) plaintiff D.I.P.R. was not a party to the Agreement, and thus the forum selection clause is not enforceable against it; and 2) there has been an alleged "change in Puerto Rico's substantive treatment of forum selection clauses" which "annuls the precedential value of the several cases cited by the Defendants in support of their Motion to Dismiss." (Docket No. 9 at 2-3). No other argument is advanced against the enforcement of the forum selection clause.

On November 14th, 2006, Perry Ellis replied that D.I.P.R. is closely related to Diorvett and has economically benefitted from the Agreement. Likewise, that D.I.P.R. is estopped from setting forth a breach of contract claim while simultaneously claiming that it is not a party to it. As for the purported change in Puerto Rico law regarding forum selection clauses, Perry Ellis contends that the Court is bound by First Circuit case law that holds that Act 75 does not prevent the enforcement of forum selection clauses. (Docket No. 12 at 5-6).

The controversy is thus limited to determining whether the forum selection clause contained in Section 22 of the Agreement is enforceable in a case brought under Act 75 and, if that is the case, whether the clause in question is applicable against a party that is not a signatory to the Agreement. Considering that the defendants' request was for dismissal, and that neither party addressed the propriety of a transfer of venue under 28 U.S.C. § 1404(a), the Court will employ a Rule 12(b)(6) standard.³

STANDARD OF REVIEW

A. Motion to Dismiss Standard.

Pursuant to Fed. R.Civ.P. Rule 12(b)(6), a complaint may not be dismissed unless it appears beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief. See Brown v. Hot, Sexy, and Safer Prods., Inc., 68 F.3d 525, 530 (1st Cir.1995). The Court accepts all well-pleaded factual allegations as true, and draws all reasonable inferences in plaintiff's favor. See Correa-Martinez v. Arrillaga-Belendez, 903 F.2d 49, 51 (1st Cir.1990). The Court need not credit, however, "bald assertions, unsupportable conclusions, periphrastic circumlocutions, and the like" when evaluating the Complaint's allegations. Aulson v. Blanchard, 83 F.3d 1, 3 (1st Cir.1996). When opposing a Rule 12(b)(6) motion, "a plaintiff cannot expect a trial court to do his homework for him." McCoy v. Massa-chusetts Institute of Tech., 950 F.2d 13, 22 (1st Cir.1991). Plaintiffs are responsible for putting their best foot forward in an effort to present a legal theory that will support their claim. Id. at 23 (citing Correa-Martinez, 903 F.2d at 52). Plaintiffs must set forth "factual allegations, either direct or inferential, regarding each material element necessary to sustain recovery under some actionable theory." Gooley v. Mobil Oil Corp., 851 F.2d 513, 514 (1st Cir.1988).

B. Forum Selection Clause

Forum selection clauses are an increasingly important phenomenon in business contracting. Parties choose to select a forum in advance for different reasons, among them: convenience; a particular forum's expertise in a specific area of the law; or simply to minimize the risk of complicated and expensive litigation over the threshold question of jurisdiction.

The prevailing view towards contractual forum selection clauses is that they are prima facie valid and should be enforced unless doing so is shown by the resisting party to be unreasonable under the circumstances. See M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10-13, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). In Bremen, the Supreme Court held that enforcement of such clauses is consistent "with ancient concepts of freedom of contract," and that refusal to do so would be a "heavy hand indeed on the future development of international commercial dealings by Americans." Id., at 11-12.

The question of whether to enforce a forum selection clause is ordinarily one of federal law. Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29-31, 108 S.Ct. 2239 101 L.Ed.2d 22 (1988). Because of Erie,⁴ however, the situation is theoretically more complex when federal jurisdiction is premised on diversity of citizenship. Nevertheless, given the similarity between federal law and Puerto Rico law concerning enforcement of forum selection clauses, the First Circuit has applied federal common law when interpreting them in a diversity context. See Silva v. Encyclopedia Britannica Inc., 239 F.3d 385 (1st Cir.2001); Lambert v. Kysar, 983 F.2d 1110, 1116-17 (1st Cir.1993)("In cases where federal law and state law coincide on the issue in question, it is unnecessary for the court to make a full Erie analysis").

Under First Circuit standards, a party opposing the enforcement of a forum selection agreement must show that the particular clause: 1) was not freely negotiated or was the result of fraud; 2) contravenes a strong public policy of the forum where the suit is brought; or 3) the party challenging its enforceability shows that trial in the contractual forum will be so gravely difficult and inconvenient that it will, for all practical purposes, be deprived of its day in court. Miro Gonzalez v. Avatar Realty, Inc., 177 F.Supp.2d 101, 104 (D.P.R.2001) (quoting MIS Bremen, 407 U.S. at 18, 92 S.Ct. 1907).

DISCUSSION

1. Is D.LP.R. bound by the forum selection clause?

Plaintiffs claim that D.I.P.R. was not a signatory to the Agreement and, consequently, it is not bound by its terms, "including, without limitation, the forum selection clause invoked by Defendants in support of dismissal." (Docket No. 9 at 4). The Court disagrees.

It has been held that when the alleged conduct of non-parties to a contract "is closely related to the contractual relationship, all the participants, parties and non-parties, should benefit from and be subject to any forum selection clauses contained in the same." Hugel v. Corporation of Lloyd's, 999 F.2d 206, 209 (7th Cir.1993); Banco Popular de Puerto Rico v. Airborne Group PLC, 882 F.Supp. 1212, 1216 (D.P.R.1995)(citing Coastal Steel v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 202-203 (3rd Cir.1983)). In the case at bar, plaintiffs admit that Diorvett does business through D.I.P.R., and that Diorvett and D.I.P.R. "have been truly and effectively in charge of the distribution of the [Perry Ellis] Products in Puerto Rico." (Docket No. 1, Exhibit A at ¶¶ 18-19). Moreover, a review of the verified complaint shows that both Diorvett and D.I.P.R. seek relief under Act 75 based on Perry Ellis' purported breach of the Agreement, and support the claim by arguing that "the plaintiffs have substantially complied with all of their obligations under the Agreement." Id., at ¶ 56 (emphasis added). Plaintiffs' own averments thus show that D.I.P.R.'s is closely related to Diorvett, and that it has economically benefitted from the Agreement. Therefore, the Court finds that D.I.P.R. is subject to the forum selection clause contained in the Agreement.

2. Enforceability of the forum selection clause

The plaintiffs contend, based on the...