IRG Research Group Inc. v. Murad Skin Research Lab

• Decision Date: 03 March 1999
• Docket Number: No. 98-1595,98-1595
• Citation: 194 F.3d 313
• Parties: (1st Cir. 1999) ILEANA IRVINE, IRG RESEARCH GROUP, INC., PLAINTIFFS, APPELLEES, v. MURAD SKIN RESEARCH LABORATORIES, INC., DEFENDANT, APPELLANT. Heard
• Court: U.S. Court of Appeals — First Circuit

Page 313

194 F.3d 313 (1st Cir. 1999)

ILEANA IRVINE, IRG RESEARCH GROUP, INC., PLAINTIFFS, APPELLEES, v. MURAD SKIN RESEARCH LABORATORIES, INC., DEFENDANT, APPELLANT.

No. 98-1595

U.S. Court of Appeals, First Circuit

Heard March 3, 1999.

Decided Nov. 15, 1999.

[Copyrighted Material Omitted]

Vincent J. Syracuse, with whom Newman Tannenbaum Helpern Syracuse & Hirschtritt Llp, David A. Pellegrino and Luis N. Blanco-Matos were on brief, for appellant.

Jossie Yunque-Lopez and Raul Gonz lez-Toro, for appellees.

Before Torruella, Chief Judge, Selya, Circuit Judge, and Acosta, ^* Senior District Judge.

AMENDED OPINION

Acosta, Senior District Judge.

On appeal defendant-appellant Murad Skin Research Laboratories, Inc. ("Murad") challenges the verdict rendered in favor of both plaintiffs IRG RESEARCH GROUP, INC. ("IRG") and Ileana Irvine ("Irvine"). Specifically, Murad alleges that the district court erred by (1) not granting its motion for judgment as a matter of law; (2) declining to charge the jury in accordance with its proffered instruction on foreseeability; (3) denying its petition for a new trial; and (4) allowing the testimony of plaintiffs' expert witness.

On review we agree with Murad's reasoning that it is entitled to a new trial vis-...-vis IRG, and that Irvine's individual claim should have been dismissed as a matter of law.

BACKGROUND

Murad is a stateside manufacturer of skin care products. Irvine and her daughter, Catherine Irvine Sarnataro, both "aestheticians," i.e. skin care specialists, first came in contact with the Murad line of products at a trade show in Chicago in 1989. Irvine testified at trial that there was a "glycolic acid revolution" in the industry at the time and she found the glycolic acid manufactured by Murad to be the "most effective" of all the other products available in the market. Initially, she purchased Murad products for her own clients but since 1991 she also sold them to various salons.

Subsequently, Irvine and her daughter met periodically with Dr. Howard Murad, president of Murad, at various conferences and conveyed to him an interest in becoming the exclusive distributor of Murad products in Puerto Rico. The conversations culminated in a provisional exclusive distribution agreement dated September 2, 1993 with IRG, a corporation established and controlled by Irvine and her daughter. The contract would be extended after December 1994 conditioned upon IRG meeting certain sales quotas.

Both Irvine and her daughter testified regarding their efforts on behalf of IRG to develop a market for the Murad skin products in Puerto Rico which included promotions, advertisements, demonstrations, training and education of both aestheticians and dermatologists. IRG operated through its own clinics and also sold to aestheticians and medical offices.

In May 1994 Murad broadcast an infomercial on various stateside cable television stations as part of its advertising campaign. Dr. Murad testified that the purpose behind the infomercial was to expose their home products to customers and also to lure them into the salons for professional treatment. Unbeknown to Murad, a New York station relayed the infomercial to Puerto Rico and its products were thereby made available locally through telemarketing.

According to plaintiffs-appellees, the infomercial marked the beginning of the economic downfall of both IRG and Irvine. After IRG learned of the telemarketing incursion, it sought relief under the Puerto Rico Distributorship Act, Law 75 of June 24, 1964, P.R. Laws Ann. tit. 10 § 278 et seq. (1997) whereas Irvine sued under the local torts statute. The jury found for plaintiffs-appellees and awarded $390,000 to IRG and $100,000 to Irvine as damages.

RULE 50

Petitions for judgments as a matter of law under Rule 50(a)(1) Fed. R. Civ. P. will be granted only in those instances where, after having examined the evidence as well as all permissible inferences drawn therefrom in the light most favorable to non-movant, the court finds that a reasonable jury could not render a verdict in that party's favor. Wills v. Brown Univ., 184 F.3d 20, 28 (1st Cir. 1999); Mangla v. Brown Univ., 135 F.3d 80, 82 (1st Cir. 1998); Ed Peters Jewelry Co. v. C & J Jewelry Co., 124 F.3d 252, 261 (1st Cir. 1997); Bogosian v. Mercedes-Benz of N. Am., Inc., 104 F.3d 472, 475 (1st Cir. 1997); Speen v. Crown Clothing Corp., 102 F.3d 625, 628 (1st Cir. 1996), cert. denied, 520 U.S. 1276, 117 S. Ct. 2457, 138 L.Ed.2d 214 (1997). In carrying out this analysis the court may not take into account the credibility of witnesses, resolve evidentiary conflicts, nor ponder the weight of the evidence introduced at trial. Ramos v. Davis & Geck, Inc., 167 F.3d 727, 731 (1st Cir. 1999); Alvarez-Fonseca v. Pepsi Cola Bottling Co. of P.R., 152 F.3d 17, 23 (1st Cir. 1998), cert. denied, ___ U.S. ___, 119 S.Ct. 1778, 143 L.Ed.2d 806 (1999); Logue v. Dore, 103 F.3d 1040, 1043 (1st Cir. 1997); Speen, 102 F.3d at 637; Katz v. City Metal Co., Inc., 87 F.3d 26, 28 (1st Cir. 1996).

In order to overcome a Rule 50 petition the party carrying the burden of proof must have introduced at trial sufficiently adequate evidence for the jury to determine the plausibility of a particular fact. "Thus, in order to support a jury finding on such an issue, the evidence presented must make the existence of the fact to be inferred more probable than its nonexistence." Alvarez-Fonseca, 152 F.3d at 24; Katz, 87 F.3d at 28; Richmond Steel, Inc. v. Puerto Rican Am. Ins. Co., 954 F.2d 19, 22 (1st Cir. 1992); Malave-Felix v. Volvo Car Corp., 946 F.2d 967, 971 (1st Cir. 1991).

A mere scintilla of evidence will not rise to a triable issue of fact necessary to avoid dismissal under Rule 50. Crane v. Green & Freedman Baking Co., Inc., 134 F.3d 17, 21 (1st Cir. 1998); Ed Peters Jewelry, 124 F.3d at 261; Coyante v. P.R. Ports Auth., 105 F.3d 17, 21 (1st Cir. 1997); Speen, 102 F.3d at 637. Nor will "conjecture" or "speculation" over the evidence presented provide sufficient grounds to warrant a fact finding determination by the jury. Russo v. Baxter Healthcare Corp., 140 F.3d 6, 8 (1st Cir. 1998) (citing Katz v. City Metal Co., 87 F.3d at 28).

On appeal we will review the record de novo employing the same criteria applicable to the trial court, and decide whether, as defendant/appellant contends, the jury in this case "as a rational factfinder could have reached no Conclusion except that the plaintiff[s] take nothing." Logue v. Dore, 103 F.3d at 1043. See also Sheils Title Co., Inc. v. Commonwealth Land Title Ins. Co., 184 F.3d 10, 17 (1st Cir. 1999); Russo, 140 F.3d at 8; Speen, 102 F.3d at 628; Katz, 87 F.3d at 28.

NEW TRIAL

The nisi prius court's denial of a petition for new trial will be overturned only for abuse of discretion. A new trial is warranted only in those situations where the verdict is contrary to the clear weight of the evidence introduced at trial and its ratification would result in a miscarriage of Justice. Sheils Title Co., 184 F.3d at 17; Ramos, 167 F.3d at 731; Bogosian, 104 F.3d at 482.

LAW 75

Generally

Puerto Rico's Law 75 governs the business relationship between principals and the locally appointed distributors/dealers for marketing their products. The statute was initially enacted to avoid the inequity of arbitrary termination of distribution relationships once the designated dealer had successfully developed a local market for the principal's products and/or services. Sheils Title Co., 184 F.3d at 14; Euromotion, Inc. v. BMW of N. Am., Inc., 136 F.3d 866, 870 (1st Cir. 1998); Borschow Hosp. and Med. Supplies, Inc. v. Cesar Castillo, Inc., 96 F.3d 10, 14 (1st Cir. 1996); R.W. Intern. Corp. v. Welch Foods, Inc., 88 F.3d 49, 51 (1st Cir. 1996). In order to accomplish its goal Law 75 limited the principal's ability to end the relationship unilaterally except for "just cause," § 278a, while subjecting the principal to considerable economic liability for unjustifiable terminations. See § 278b of Law 75 (enumerating factors to consider in calculating award).

In 1966 the protection afforded to dealers under Law 75 was extended to include the conduct of a principal which even though it did not end the contract ¹ it was deemed detrimental ² to the distribution relationship. The amendment further provided that impairments without just cause would subject the infringing party to the same liability provided for terminations under § 278b.

Impairment

Law 75 enumerates some instances of impairment by way of illustration ³ and establishes a rebuttable presumption of impairment whenever a principal bypasses a dealer by distributing merchandise directly; appoints additional dealers in contravention of the agreement; fails to adequately fill orders; or arbitrarily changes the transportation and/or payment terms. § 278a-1(b)(1)-(4).

The protection afforded dealers by Law 75, however, is circumscribed by those rights acquired under the agreement regulating their business relationship. Therefore, whether or not an impairment has taken place will depend upon the specific terms of the distribution contract.

The question whether there has been a "detriment" to the existing relationship between supplier and dealer is just another way of asking whether the terms of the contract existing between the parties have been impaired.

Vulcan Tools of P.R. v. Makita USA, Inc., 23 F.3d 564, 569 (1st Cir. 1994).

The parties do not dispute the fact that, pursuant to the agreement dated September 2, 1993, IRG had the exclusive distribution rights of Murad products in Puerto Rico during a trial period lasting from August 25, 1993 through December 31, 1994. ⁴ Further, the document provided that should IRG meet a particular sales quota it would qualify to act as Murad's exclusive distributor for an additional two years.

It is also uncontested that through its infomercial, which commenced airing in Puerto Rico in May 1994, Murad sold its products directly to local...