A.M. Capen's Co. v. American Trading and Production

• Decision Date: 31 March 1998
• Docket Number: No. Civ. 94-1367 DRD.,No. Civ. 94-1483 DRD.,Civ. 94-1367 DRD.,Civ. 94-1483 DRD.
• Citation: 12 F.Supp.2d 222
• Parties: A.M. CAPEN'S CO., INC., Plaintiff, v. AMERICAN TRADING AND PRODUCTION CORPORATION, Defendant. A.M. CAPEN'S CO., INC., Plaintiff, v. Blas Rossy ASENCIO, et al.
• Court: U.S. District Court — District of Puerto Rico

12 F.Supp.2d 222

A.M. CAPEN'S CO., INC., Plaintiff, v. AMERICAN TRADING AND PRODUCTION CORPORATION, Defendant.

A.M. CAPEN'S CO., INC., Plaintiff, v. Blas Rossy ASENCIO, et al.

No. Civ. 94-1367 DRD.

No. Civ. 94-1483 DRD.

United States District Court, D. Puerto Rico.

March 31, 1998.

Jose E. Colon-Santana, Hato Rey, PR, for co-defendant, defendant.

Philip E. Roberts, San Juan, PR, for plaintiff.

OPINION AND ORDER

DOMINGUEZ, District Judge.

Plaintiff requested a statutory provisional remedy under Article 3A of the Dealers Contract Law (the "Act"), Law No. 75 of June 24, 1964, as amended, P.R.Laws Ann. tit. 10, § 278b-1. Plaintiff alleged an impairment to the dealership contract based on Defendant's violation to the exclusivity provisions of the dealership contractual letter. A separate complaint, latter consolidated, alleged a tortious interference with contractual relations against Blas Rossy Asencio, the additional dealer appointed by Defendant. The court following the standard of Narragansett Indian Tribe v. Guilbert, 934 F.2d 4, 5 (1st Cir.1991), determined ultimate likelihood of success on the merits, potential irreparable injury to Plaintiff outweighed by harm to the Defendant and determined that the public interest would not be adversely affected by the relief. A.M. Capens Co., Inc. v. American Trading and Production Corporation, 892 F.Supp. 36, 37-38 (D.P.R.1995). The court further concluded that Plaintiff was a "dealer" under the law, that under conflict of law standards and dominant contacts Puerto Rico law applied and determined that Puerto Rico was a proper forum. The Court of Appeals for the First Circuit affirmed, agreeing with the trial court that the dealership status was "a close matter." A.M. Capen's Co., Inc. v. American Trading and Production Corporation, 74 F.3d 317, 319 (1st Cir. 1996). The appellate court also affirmed the applicability of local law and made no expression as to venue since the issue was not properly elevated.

The trial court granted Defendant a further opportunity to provide additional facts on dealership status since our initial determination was preliminary. When Defendant did not raise additional facts, the court closed the "dealership" coverage matter based on the initial record and scheduled a hearing on damages. A.M. Capen's Co. Inc. v. American Trading and Production Corporation, 973 F.Supp. 247, 259 (D.P.R.1997).¹ The trial court further provided guidelines as to damages under the Act in the above captioned cases of "impairment" of a contractual relationship as distinguished from a "termination case of dealership." A.M. Capen's, 973 F.Supp. at 263-69.

Defendant alleged that the formula of the law contained at Article 3 of the law, P.R.Laws Ann. tit. 10, § 278b² is applicable only to termination and, hence, inapplicable to the instant case wherein Plaintiff remains as the dealer. Plaintiff, on the other hand, alleged that the formula of the law is mandatory. The court determined that "both parties are partly correct and partly incorrect: There is no legal support for the Defendant's contention that the factors enumerated in Section 278b are never applicable to impairment cases, but there is no legal support for the Plaintiff's insistence that damages must always be awarded pursuant to each and every one of the factors enumerated in Section 278, regardless of whether the distribution relationship was merely terminated or impaired." A.M. Capen's, 973 F.Supp. at 263.

The court suggested the following guidelines:

(a) The list of factors contained at Section 3A applies (not mechanically nor automatically) at the discretion of the court to impairment cases. Said listing is not mandatory.

"[T]he factors listed [in Article 3A of the Act] were only guidelines for the fixing of damages and do not bind the court to automatically award indemnity applying each and every factor. The court has discretion to apply the factors listed in the light of the specific circumstances of each case ..." Marina Industrial, Inc. v. Brown Boveri Corp., 114 Official Translations of the Opinion of the Supreme Court of Puerto Rico 86, 118, 114 P.R. Dec. 64, 90 (1983).

(b) The Civil Code of Puerto Rico provides the principal rules for the calculation of damages. A.M. Capen's, 973 F.Supp. at 264.

(c) Plaintiff must prove the existence of damages. Marina Industrial, 114 P.R.Dec. at 90.

(d) Claimants are obligated to mitigate damages. Computec Sys. Corp. v. General Automation, Inc., 599 F.Supp. 819, 828 (D.P.R.1984).

(e) There is no conflict between Law 75 and the Civil Code, they complement each other. A.M. Capen's, 973 F.Supp. at 266.

(f) The court shall entertain potential loss of goodwill damages notwithstanding the potential problem of duplication stated at Pan American Computer Corp. v. Data Gen. Corp., 562 F.Supp. 693, 700 (D.P.R.1983) and Ballester Hermanos Inc. v. Campbell Soup Co., Civ. No. 92-1096(JP) 1993 WL 269656 (D.P.R.1993).

(g) The court shall authorize as relevant evidence post impairment profits under Article 3 of the Act. Casas Office Machines, Inc. v. Mita Copystar America, Inc., 961 F.Supp. 353, 361 (D.P.R.1997) (h) The damages are to be ultimately granted under loss of profit not loss of income.

(i) The parties were encouraged to illustrate the court on pretax damages or, in the alternative, after tax damages.

A bench hearing as to damages was held on October 29 and 30 of 1997, (Dockets Nos. 128, 129). Plaintiff filed a sealed memorandum, (Docket No. 127), when Defendant requested an extension after simultaneous briefs were ordered. Defendant was granted, the extension and filed its memorandum shortly after Plaintiff's Memorandum was filed (Docket No. 130).

Camilo Fernández testified for Plaintiff as President, sole stockholder and as an accountant (expert). Ronald J. Kevane testified as an expert accountant with experience in determining dealership damages under the Act.

DAMAGES

Mr. Camilo Fernández, the President, Chief Executive Officer and sole stockholder of Plaintiff, A.M. Capen's, testified as to damages. He was a public accountant in Cuba educated in Havana University with a degree in economics and Ph.D. also from said university. Mr. Fernández also received two years of law education from Havana University. Mr. Fernández worked as an auditor for Montecristo Cigars in Cuba, comptroller for the National Medical School and advisor for the National Merchants of Paper in Cuba. In the United States has been an accountant for the Elizabeth Lions Club. In Havana he was a member of the College of CPA's and a member of the Latin America Chamber of Commerce. In the United States he is a member of the School/Office Products Association and Garden State Office Products and a member of the Board of Directors of the College State Bank in New Jersey. He has never testified in court as an expert. Mr. Fernández has not been certified as an accountant in any state of the Union. In the last thirty years, since he entered the United States from Cuba in 1961, he has not practiced his profession as an accountant and has not provided any opinion to any client as to his profession. As a businessman, Mr. Fernández has been a representative for various american office supplies manufacturers. He has been the owner of a paper clip manufacturing company and the owner of a medical laboratory.

Although the matter was close, the court accepted Mr. Fernández as a CPA expert, and authorized him to testify as to the profit and losses of A.M. Capen's and to provide lay mans opinion as to the economic damages of his company. See Shane v. Shane, 891 F.2d 976 (1st Cir.1989) (under Fed.R.Ev. 701, opinion testimony by lay witness of an owner of a company was authorized to testify about the value of the company); Robinson v. Watts Detective Agency, 685 F.2d 729 (1st Cir.1982), cert. denied Consolidated Service Corp. v. Robinson, 459 U.S. 1105, 103 S.Ct. 728, 74 L.Ed.2d 953 (1983). The court exercised its discretion and authorized Mr. Fernández' testimony because of his education in public accounting and Ph.D. in economics. As to the value of the company and/or loss for the impairment, he not only may provide expert lay opinions, but also worked closely with the economic summaries prepared by the original expert scheduled to testify in court.

Mr. Donald J. Kevane testified as a CPA expert for Defendant American Trading and Production Corp., hereinafter referred to as "ATAPCO." Mr. Kevane has been in the private practice of the profession for forty-three years including twenty-four years with Arthur Andersen & Co., where he was an auditor partner for twelve years. He graduated from San Diego State University of California and enjoys CPA certificates in California and Puerto Rico. While at Arthur Andersen he was assigned to Los Angeles, San Francisco, Milan, Rome, Athens and, since 1968 in San Juan, P.R. In 1975 Mr. Kevane established the accounting and tax firm of Kevane Peterson and Pasarell. He provides tax and/or audit litigation support services and has had extensive experience (over twenty-five cases) in calculating damages under Law 75. He has been accepted (three times) as an expert to testify as to Law 75 damages in other cases in federal and state court.

The court revisits briefly the uncontroverted factual background of the case:

Capens entered into an agreement with ATAPCO's predecessor, Sheller-Globe to be exclusive distributor of Globe-Weiss and Steelmaster office products in Puerto Rico, the Caribbean, the Dominican Republic, and Central and South America. The agreement did not contain an expiration date. Although confirmed in a written letter, the parties did not sign a formal contract because they could not agree on the law that would apply to the contract. When ATAPCO took over, the arrangement with Capen's continued, as did the disagreement as to choice-of-law and forum selection clauses.

ATAPCO, with its principal place of business in Missouri, wanted Missouri law...