A.M. Capen's v. American Trading and Production, CIVIL NO. 94-1367(DRD).

• Citation: 200 F.Supp.2d 34
• Decision Date: 28 March 2002
• Docket Number: CIVIL NO. 94-1367(DRD).
• Parties: A.M. CAPEN'S CO., INC., Plaintiff, v. AMERICAN TRADING AND PRODUCTION CORPORATION, et als., Defendants.
• Court: United States District Courts. 1st Circuit. District of Puerto Rico

200 F.Supp.2d 34

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

CIVIL NO. 94-1367(DRD).

United States District Court, D. Puerto Rico.

March 28, 2002.

COPYRIGHT MATERIAL OMITTED

Fernando L. Gallardo, Antonio Borres-Otero, Woods and Woods, San Juan, PR, for plaintiff.

Joes E. Colon-Santana, San Juan, PR, for defendants.

OPINION AND ORDER

DOMINGUEZ, District Judge.

From the very beginning, in 1994, it has been clear that this case presents issues of great difficulty, both factually and legally. On repeated occasions the Court has expressed that the issues being adjudicated here are extremely close. Now the duel has reached its climax.

Pending before the Court at this stage are several motions.¹ After closely and carefully examining the record, the Court has reached a conclusion. For the reasons set forth below, this case is DISMISSED.

I

The factual and procedural background of this case has been restated and reported extensively on previous occasions. See in chronological order, A.M. Capens Co. v. American Trading and Prod. Corp., 892 F.Supp. 36, 38 (D.Puerto Rico 1995); A.M. Capen's Co. v. American Trad. & Prod Corp., 74 F.3d 317 (1st Cir.1996)(Bownes, J.); A.M. Capen's Co. v. American Trading and Production, 12 F.Supp.2d 222 (D.Puerto Rico 1998); A.M. Capen's Co., Inc. v. American Trading, 202 F.3d 469 (1st Cir.2000)(Torruella, J.). The Court will, however, highlight the key factual and procedural factors that justify dismissal.

Since 1978, Plaintiff, A.M. Capen's Co., Inc. ("Capen's") allegedly served as Defendant's, American Trading and Production Corp. ("ATAPCO" or "the Defendants"), "exclusive distributor"² for Puerto Rico of ATAPCO's products. "However, the parties never signed a formal contract because they could not agree on choice-of-law and forum-selection clauses." A.M. Capen's Co., Inc., 202 F.3d at 471. Their agreement was confirmed through a letter. The agreement letter did not contain a fixed term, that is, it lacked an expiration date in the agreement.³ In 1993, however, ATAPCO wrote a letter to Capen's in which it terminated the exclusive aspect of their dealership.⁴ Therefore, in 1994, Capen's filed this action alleging, inter alia, that ATAPCO violated Puerto Rico's Dealer's Act ("Law 75"), 10 P.R. LAWS. ANN., § 278 et seq.⁵

Law 75 governs the business relationship between "principals" and the locally appointed "distributors" who market their products in Puerto Rico. See Caribe Industrial Systems, Inc. v. National Starch and Chemical Co., 212 F.3d 26, 29 (1st Cir. 2000). Law 75 was enacted with the specific purpose of avoiding the inequity of arbitrary termination of distribution relationships once the distributor has developed a local market for the principal's products or services. As such, Law 75 limits the principal's ability to unilaterally end the relationship except for "just cause." 10 P.R. LAWS. ANN., § 278a. The aspect of Law 75 which is critical here, however, is its definition of "dealer," which is defined as: "as a person actually interested in a dealer's contract because of his having effectively in his charge in Puerto Rico the distribution, agency, concession or representation of a given merchandise or service." Id.

The jurisdictional basis supporting Capen's suit in this Court is diversity jurisdiction. 28 U.S.C. § 1332. It is well known that in civil diversity jurisdiction, federal courts are to apply substantive state law, as if it were a state court.⁶ From the outset, both parties began contesting what state law was applicable (choice-of-forum-law). Capen's, a New Jersey corporation with its principal place of business in that state, at all times alleged that Puerto Rico law is applicable. On the other hand, ATAPCO, with its principal place of business in Missouri, claimed that Missouri law was applicable. In fact, as stated before, the controversy regarding which state law controls their contractual and business relationship is the reason why they never signed a formal contract. A.M. Capen's Co., Inc., 202 F.3d at 471.

As part of its complaint, Capen's sought provisional injunctive relief. Noting that the choice-of-law issues raised were a "close matter," this Court granted the provisional remedy requested by Capen's. A provisional injunction was issued, and judgment entered. See A.M. Capens Co., 892 F.Supp. at 38. ATAPCO appealed.

A. Round One.

On appeal, ATAPCO raised two issues: 1) "that Puerto Rico law does not apply;" and 2) "that [Capen's] is not a dealer under the Puerto Rico Dealer's statute." See A.M. Capen's Co., 74 F.3d at 319 (emphasis added). Obviously, the second issue raised by ATAPCO on appeal—i.e., that Capen's is not a "dealer" under Law 75—necessarily depended on his the first-i.e., whether Puerto Rico law applied. Indeed, the Court adjudicated the first issue, made a determination and rendered an opinion. See A.M. Capen's Co., 74 F.3d at 323.

The First Circuit Court focused its inquiry on whether the preliminary injunction issued by this Court met, prima facie, all federal requisites, and specifically whether this Court was correct in finding that Capen's action had a probability of success on the merits. See id., 74 F.3d at 319. Then, immediately, the Court addressed the issue of whether Puerto Rican law was applicable. Id. Relying on principles governing contract and tort law, Circuit Judge Bownes determined that Puerto Rico's law was applicable. In short, that Court found that the subject matter of the parties contract—i.e., a distribution agreement—pointed to Puerto Rico, because it was executed in Puerto Rico (contract principle); and moreover, because Capen's tortious injury—i.e., the termination of agreement—occurred in Puerto Rico (tort principle), this factor also pointed to the conclusion that Puerto Rican law was applicable. Id., at 320-321.

The First Circuit Court, however, cautioned that it was only making a prima facie determination "as to the merits of the issues presented on preliminary injunction" and that its holding was "to be understood as statements of probable outcomes, rather than as comprising the ultimate law of the case." Id. (citing, Narragansett Indian Tribe v. Guilbert, 934 F.2d 4, 6 (1st Cir.1991)(quotation marks omitted)). Nevertheless, the Circuit Court affirmed this Court's determination and concluded its inquiry in the following manner:

bringing all the factors into consideration, the law of Puerto Rico most probably applies to this hybrid contract/tort action and, perforce, the district court properly made reference to the Puerto Rico Dealer's Act for the purpose of the motion to impose a provisional remedy.

Id., at 323(emphasis added).

It was clear then, that the First Circuit Court did not directly entertain the issue of whether Capen's was "dealer" under Law 75,⁷ but only incidentally. Instead that Court focused its attention on the more crucial determination—on which, of course, the first necessarily depended on—of whether Puerto Rico law was applicable altogether. See A.M. Capen's Co., 74 F.3d at 323. And at that the Circuit Court unmistakably held that "the law of Puerto Rico most probably applies." Id. (emphasis added). Thus, the appellate Court affirmed the applicability of local law to the facts of this case, notwithstanding it was a "close matter."⁸ As such, this Court's determination was affirmed.

Eventually, the case returned to this Court for final disposition. Soon thereafter, this Court entertained and granted Capen's summary judgment on the issue of liability, awarding damages in its favor.⁹ This Court first observed that ATAPCO had failed to provide additional evidence on Capen's dealership status, albeit the Court, prior thereto, granted ATAPCO further opportunity to provide additional facts. Thus, this Court found that there was no reason justifying a reconsideration of the initial, albeit preliminary, finding, and therefore gave closure to the matter based on the initial record. See A.M. Capen's Co., 12 F.Supp.2d at 223. On March 31, 1998, judgment was entered, declaring in part that:

Having the court rendered its Opinion and Order on this same date, judgment is entered accordingly. Defendants ATAPCO and Blas Rossy are to pay jointly and severally to Plaintiff, A.M. Capen's Co. Inc. $135,352.00 resulting from an impairment of an exclusive dealership representation (ATAPCO) and a tortious interference with a contractual relationship (Blas Rossy).

See Docket Nos. 133 (Opinion and Order) & 134 (Judgment)(emphasis added).

The Court later issued an amended judgment which provided as follows:

At the request of Plaintiff's motion to amend, judgment is entered jointly and severally against [ATAPCO], Blas Rossy, Rafaela Gonzalez and the conjugal partnership established amongst them, in the amount of $135,352.00 resulting from an impairment of an exclusive dealership representation (ATAPCO) and a tortious interference with a contractual relationship (Blas Rossy, Rafaela Gonzalez and the conjugal partnership).

See Docket No. 142 (emphasis added).

After final (amended) judgment was entered, both parties, once again, appealed.

B. Round Two.

On appeal the second time, ATAPCO raised five issues, most of which were directed to objecting the application of Law 75 in this case; to wit, ATAPCO claimed on appeal that:

1) The District Court erred in deciding in favor of the application of Act 75 to the facts of the case.

2) The District Court erred by finding that the Puerto Rico Legislature intended the application of the law to non residents and whose dealings with the Principal are not executed in Puerto Rico.

3) The District Court erred by refusing to refer the application of Act 75 to the certification procedure, as a matter of substantive law, to Puerto Rico's Supreme Court.

4) The District Court erred by holding plaintiff's appellee's President and sole shareholders as qualified to testify as an expert.

5) The...