Medina & Medina v. Country Pride Foods, Ltd., s. 86-2033

• Decision Date: 07 October 1988
• Docket Number: Nos. 86-2033,86-2060,s. 86-2033
• Citation: 858 F.2d 817
• Parties: MEDINA & MEDINA, Plaintiff, Appellee, v. COUNTRY PRIDE FOODS, LTD., Defendant, Appellant. MEDINA & MEDINA, Plaintiff, Appellant, v. COUNTRY PRIDE FOODS, LTD., Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

Page 817

858 F.2d 817

MEDINA & MEDINA, Plaintiff, Appellee, v. COUNTRY PRIDE FOODS, LTD., Defendant, Appellant.

MEDINA & MEDINA, Plaintiff, Appellant, v. COUNTRY PRIDE FOODS, LTD., Defendant, Appellee.

Nos. 86-2033, 86-2060.

United States Court of Appeals First Circuit.

Oct. 7, 1988.

Appeals from the United States District Court for the District of Puerto Rico; Raymond L. Acosta, U.S. District Judge.

Salvador Antonetti with whom Fiddler, Gonzalez & Rodriguez, Hato Rey, P.R., was on brief, for Country Pride Foods, Ltd.

Luis E. Dubon, Jr. with whom Dubon & Dubon, Hato Rey, P.R., was on brief, for Medina & Medina.

Before BREYER and TORRUELLA, Circuit Judges, and RE, ^* Judge.

PER CURIAM.

We certified this case to the Puerto Rico Supreme Court 825 F.2d 1 (1st Cir.1987). We have received a response. Medina & Medina v. Country Pride Foods, Ltd., No. CE-87-447 (P.R. Supreme Court, June 30, 1988). In view of the Court's opinion (official translation attached as Appendix A), this case is remanded to the district court to determine whether adequate pre-withdrawal notice was given to plaintiff-appellant.

APPENDIX A

(Translation)

IN THE SUPREME COURT OF PUERTO RICO

No. CE-87-447

Certification

Medina & Medina, Plaintiff

v.

Country Pride Foods, Ltd., Defendant

MR. JUSTICE HERNANDEZ DENTON delivered the opinion of the Court.

San Juan, Puerto Rico, June 30, 1988

The United States Court of Appeals for the First Circuit has certified to this Court an important issue regarding Act No. 75 of June 24, 1964, as amended, 10 L.P.R.A. Sec. 278 et seq., or Dealer's Contracts Act. Since this case is particularly suited for dealing with the issue certified, we state below the facts of the case:

I

Plaintiff Medina & Medina (Medina) is a collective mercantile partnership organized under the laws of Puerto Rico in 1969. It distributes meat and poultry products. The defendant, Country Pride Foods, Ltd. (Country Pride) sells poultry products as a corporation organized under the laws of the United Kingdom, with offices in Arkansas. In 1977, Country Pride appointed Medina as its exclusive agent and distributor for all its products in Puerto Rico. The contract effectively contained no time limit. Product prices were periodically set by mutual agreement and fluctuated according to changes in the Georgia market, a recognized industry guideline.

According to the findings of fact of the U.S. District Court for the District of Puerto Rico, in March 1978, Country Pride demanded higher prices for its products. In May 1978, Medina accepted an increase in the prices. One month later, Country Pride demanded an additional increase in prices. In October, with the increase still under negotiation, Country Pride proposed to change its rigid pricing structure to an open market pricing structure. In November, Country Pride changed its original proposal to a formula arrangement of higher prices than the existing ones, to begin on December 1, for a 90-day period. Medina rejected this formula and counterproposed one with lower prices. Country Pride agreed to Medina's formula for a 90-day period, but all deliveries would be "C.I.F. San Juan" ("cost, insurance, and freight"), with payment by "sight draft against ocean bills of lading." Medina advised that the sight draft payment condition was unacceptable.

On November 27, Country Pride restated its position: a) Medina's prices at Country Pride's payment terms, or b) open price formula. Medina again rejected the payment terms alleging prior problems with shortages and surpluses in shipments and also shipments of expired products. Medina counterproposed a sight draft payable fifteen days after receipt of the product. Negotiations continued but by November 30, it was evident that an impasse had been reached. On December 4, Country Pride advised Medina that a shipment of goods had been sent and that payment was due by sight draft against ocean bills of lading. Later on, Medina made another proposal as to the payment terms, to wit, payment seven days after receipt of the product. Country Unable to reach an agreement, on December 7, Country Pride announced its withdrawal from the Puerto Rican market; Medina accepted the withdrawal. Country Pride then requested payment for the last shipment, but Medina stated that payment would be made according to pre-November terms. Country Pride demanded a transfer of funds against a commercial invoice to be telexed. Medina retorted that title to shipped goods passed upon tender to carrier at port of shipment, and that Country Pride had no right to condition delivery upon payment of the goods. Country Pride rejected Medina's claim on December 12, and also advised that the agency agreement was terminated.

Pride rejected this proposal and reiterated its position: "1) our price, your credit terms, 2) your price, our credit terms."

Medina subsequently resorted to the United States District Court for the District of Puerto Rico and filed a suit under the Puerto Rico Dealer's Act, Act No. 75 (10 L.P.R.A. Sec. 278 et seq.), claiming that Country Pride had unilaterally terminated their distribution agreement without just cause. Defendant filed a motion for summary judgment raising, inter alia, that Act No. 75 should not be construed as if saying that the principal had to pay large damages when completely withdrawing from the Puerto Rican market, without taking advantage of the clientele developed by the distributor. The District Court, adopting a narrow construction of the term "just cause" denied the motion for summary judgment. After the trial, the Court found for plaintiff. Country Pride appealed and the Court of Appeals certified to us the following question, under Rule 53.1 of the Rules of Civil Procedure, 32 L.P.R.A., App. II, R. 53.1, and Rule 27 of the Rules of this Court, 4 L.P.R.A., App. I-A, R. 27; Pan Ame. Comp. Corp. v. Data Gen. Corp., 112 D.P.R. 780 (1982):

Where there is a contract of indefinite time period, with price and credit terms left open to negotiation, and the parties negotiate in good faith but cannot reach an agreement as to price and credit, does Law 75 prohibit the supplier from unilaterally and completely withdrawing from the market, when the supplier makes no attempt to appropriate the dealer's good will or established clientele?

After the pertinent procedures, the case was taken under advisement on September 3, 1987.

II

We are construing an item of Puerto Rican Law that could determine the outcome of the case and we have the benefit of an excellent statement of all the relevant facts, as adjudicated and distilled by the original federal forum, prepared for us by the Court of Appeals for the First Circuit.

In Pan Ame. Comp. Corp. v. Data Gen. Corp., supra at 784-785, we stated the essential aspects of the historical and regulatory roots of the interjurisdictional certification procedure in Puerto Rico. We recognized that "[c]ertification is the most direct, speedy, and inexpensive way for a federal court to obtain an authoritative interpretation of state law." We reaffirm those statements today.

The procedure established in Rule 53.1 of the Rules of Civil Procedure, and Rule 27 of our Regulations have paved the way for a useful collaboration between the local and federal jurisdictions. Several factors have triggered off these developments. On the one hand, they are the result of changes in the adjudicative approach of our Supreme Court. We have recognized the prevalence of civil law rules in the solution of private law disputes. This was not always the case. Valle v. American International Insurance Co., 108 D.P.R. 692 (1979). Consequently, federal courts--specially appellate forums--have become more sensible, respectful and prudent in the construction and adjudication of Puerto Rican law. See, Breyer, Stephen, The Relationship Between the Federal Courts and the Puerto Rico Legal System, LIII Rev. Jur.U.P.R. 307 (1984); Reyes-Cardona v. J.C. Penney Co., Inc., 694 F.2d 894, 896-897 (1982); Arroyo Davila, Mario, Federal Court Certification Revisited, 45 Rev.Col.Abo.P.R. 58 (1984).

The certification process is a valuable tool used by the federal forum to seek a direct interpretation of Puerto Rican law when we have no clear-cut precedents to settle the controversy pending in that jurisdiction. Since both forums are aware of the historical and legal peculiarities that distinguish us, as well as of the historical and legal ties that bring us together, this procedure becomes, specially in our case, an adequate mechanism for easing and smoothing any differences that may arise between federal and Puerto Rican courts. Pan Ame. Corp. v. Data Gen. Corp., supra 785; Lehman Brothers v. Schein, 416 U.S. 386, 391 (1974); Note, Interjurisdictional Certification: Beyond Abstention Toward Cooperative Judicial Federation, 111 U.Pa.L.Rev. 344 (1963).

The adjudicative framework having been clarified, we proceed to answer the certified question.

III

We have dealt in the past with several controversies involving Act No. 75 where we have extensively examined its background and development and pinpointed its underlying purpose. We have almost invariably cited the following excerpt taken from its statement of motives:

The Commonwealth of Puerto Rico cannot remain indifferent to the growing number of cases in which domestic and foreign enterprises, without just cause, eliminate their dealers, concessionaries, or agents, as soon as these have created a favorable market and without taking into account their legitimate interests.

The Legislative Assembly of Puerto Rico declares that the reasonable stability in the dealer's relationship in Puerto Rico is vital to the general economy of the country, to the public interest and to the general welfare, and in the exercise of its police power, it deems it necessary to regulate, insofar as pertinent, the field of said relationship, so as to avoid the abuse caused by certain practices. 18 Diario de Sesiones 1531 (1964)....