Gemco Latinoamerica, Inc. v. Seiko Time Corp.
| Decision Date | 06 May 1988 |
| Docket Number | No. 86 Civ. 6329 (WK).,86 Civ. 6329 (WK). |
| Citation | 685 F. Supp. 400 |
| Parties | GEMCO LATINOAMERICA, INC., Plaintiff, v. SEIKO TIME CORPORATION, Hattori Seiko Co., Ltd., and Hattori Corporation of America, Defendants. |
| Court | U.S. District Court — Southern District of New York |
James D. Fornari, Jarblum, Solomon & Fornari, P.C., New York City, for plaintiff.
John M. Newell, Whitman & Ransom, New York City, for defendants.
MEMORANDUM AND ORDER & ORDER OF REFERENCE
Defendants Hattori Seiko Co., Ltd. ("Hattori-Japan") and Hattori Corporation of America ("Hattori-U.S."), hereinafter sometimes collectively referred to as the Hattori defendants, move for partial reconsideration of our order dated October 14, 1987, reported at 671 F.Supp. 972. By that order, we dismissed all claims against defendant Seiko Time Corporation ("Seiko Time"). We also dismissed the breach of contract claims against the Hattori defendants, but let stand the Law 75, duty of good faith and antitrust claims. The Hattori defendants again seek dismissal of the remaining claims on various grounds. We agree that the arguments defendants now bring to our attention "became submerged in the sea of paper that washed in upon the Court with the various motions and cross-motions," (Def. Brief at 1) and therefore grant the motion for reconsideration. Upon reconsideration, we conclude that the antitrust claims may proceed against the Hattori defendants, but that the remaining claims should be dismissed.
In our prior order, we ruled that the Law 75 claims were not barred by the doctrines of res judicata and collateral estoppel because the arbitrators had no concern with, and did not address, the liability of Hattori-U.S. and Hattori-Japan, who were not parties to the arbitration. Although we adhere to that ruling, we hold that the Law 75 claims must be dismissed for a wholly independent reason: the statute and case law establish that a claim for damages under Law 75 may be brought only against the party who executed the dealer's contract, i.e., Seiko Time.
Law 75, 10 L.P.R.A. § 278 contains the following definitions:
Section 278b establishes a cause of action for damages solely against a principal.
Confronted with this unambiguous language, courts in Puerto Rico have consistently held that Law 75 claims may proceed only against the principal. Poultry & Beef of Puerto Rico, Inc. v. Smithfield Packing Co. (D.P.R.1986) 635 F.Supp. 1070, 1071 (); Romero v. ITE Imperial Corp. (D.P.R.1971) 332 F.Supp. 523, 525 (); Panamerican Pharmaceutical v. Sherman Laboratories (D.P.R.1968) 293 F.Supp. 713, 716 ().1
Applying these definitions and standards to the distribution contract before us, the "dealer" can only be plaintiff Gemco Latinoamerica ("Gemco"), and the "principal or grantor" can only be defendant Seiko Time. The distribution agreement was solely between Gemco and Seiko Time; the other defendants did not sign the written contract. Hence, a cause of action for violation of Law 75 lies, if at all, only against Seiko Time.
Gemco, however, focusing on the definition of "dealer's contract," contends that Hattori-U.S. or Hattori-Japan may also be "principals," depending upon the nature of the "relationship established" between Gemco and the Hattori defendants, "irrespective of the manner in which the parties may call, characterize or execute such relationship." Viewed in context, the language upon which Gemco relies serves merely to include within the reach of the statute those arrangements which function as distributor-supplier relationships but which are never formalized as such through a written contract. It is not intended to extend liability beyond the party who executes the contract to multiple unnamed principals. Our conclusion is fortified by the fact that the Puerto Rico legislature considered and rejected a proposed draft of the law which would have extended liability to "any person helping to make possible the illegal acts." Romero, supra, 332 F.Supp. at 525.
For the foregoing reasons, the Law 75 claim is dismissed against Hattori-U.S. and Hattori-Japan.
We previously held that "to the extent that there may be merit in the assertion that Hattori-U.S. and/or Hattori-Japan had — without necessarily involving Seiko Time — engaged in a course of conduct which gave rise to duties of good faith to Gemco, the breach of good faith claim against them is not barred by the arbitration award." 671 F.Supp. at 977. The Hattori defendants again urge that in the absence of a a contractual relationship between the plaintiff and the party charged, no duty of good faith exists. The only exception to this rule of which we are aware arises when the defendant is alleged to have made misrepresentations during pre-contractual negotiations. Tommy Muniz v. Copan (Puerto Rico Sup.Ct.1982) 113 D.P.R. 664. No facts are alleged in support of such a claim in the instant case.
Despite having been afforded a second opportunity to do so, Gemco has failed to cite a single case in support of its theory that the Hattori defendants owed Gemco a duty of good faith. Indeed, plaintiff's memorandum in opposition to the motion for reconsideration (at 7-8) devotes all of two sentences to this claim.
For the same reason as the Law 75 claims, this Court properly sustained Gemco's "good faith" claims against Hattori-U.S. and Hattori-Japan. Although there was no written distributorship agreement between Gemco and the two Hattoris, the Amended Complaint ... sufficiently alleges that there was, in fact, a distributorship relationship, the breach of which gave rise to a claim.
Gemco's inability to produce any relevant authority is consistent with our own failure to find any. We therefore conclude that none exists, and that the good faith claims merely duplicate the faulty logic of the Law 75 claims. Accordingly, the duty of good faith claims against Hattori-U.S. and Hattori-Japan must be dismissed.
In our prior order, we dismissed the antitrust claims against Seiko Time under the doctrine of res judicata because we determined that they constituted the same causes of action as were previously asserted by Gemco in the arbitration. Since neither of the Hattori defendants were parties to the arbitration, we noted that the award could not have any res judicata effect as to them. They argued, however, that since the Amended Complaint alleges that all defendants operated as one entity in their dealings with Gemco, the arbitrators' determination as to Seiko Time's culpability, or lack thereof, must extend to them as well. In response to this argument, we observed:
If the Amended Complaint is construed as defendants suggest, the requirements for the application of collateral estoppel would be met, and Gemco would be precluded from relitigating the issue of defendants' conduct. At oral argument, however, Gemco's counsel explained that Hattori-U.S. and Hattori-Japan acted in concert with Seiko Time, but also allegedly acted independently to affect the market for Seiko watches. If the Amended Complaint is read as charging Hattori-U.S. and Hattori-Japan with separate conduct, such independent conduct was not before the arbitrators and could not have been determined by them. Accordingly, to the extent that the Amended Complaint can be read to allege independent conduct on the part of Hattori-U.S. and Hattori-Japan, the antitrust claims against those two defendants may be litigated in the instant lawsuit.
The Hattori defendants contend that the...
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