Plaintiff v. Suarez & Co.

• Decision Date: 05 December 2011
• Docket Number: 11–1871(GAG).,Civil Nos. 11–1858
• Citation: 826 F.Supp.2d 433,81 Fed.R.Serv.3d 289
• Parties: V. SUAREZ & CO., INC., Petitioner, v. BACARDI INTERNATIONAL LIMITED, et al., Respondents.
• Court: U.S. District Court — District of Puerto Rico

81 Fed.R.Serv.3d 289

826 F.Supp.2d 433

V. SUAREZ & CO., INC., Petitioner,

v.BACARDI INTERNATIONAL LIMITED, et al., Respondents.

Civil Nos. 11–1858

11–1871(GAG).

United States District Court, D. Puerto Rico.

Dec. 5, 2011.

Francisco G. Bruno–Rovira, Manuel A. Moreda–Toledo, Omar Oquendo–Claudio, McConnell Valdes, Kevin M. Acevedo–Carlson, San Juan, PR, Horacio R. Subira, Guaynabo, PR, for Petitioner.

Ricardo F. Casellas, Natalia Del Mar Morales–Echeverria, Rosalie Irizarry–Silvestrini, Casellas, Alcover & Burgos PSC, San Juan, PR, for Respondents.

OPINION AND ORDER

GUSTAVO A. GELPÍ, District Judge.

On August 5, 2011, petitioner V. Suarez & Co., Inc. (“VSI” or “Plaintiff”) filed an action against Bacardi International Limited (“BIL”), Bacardi Corporation (“BC”) and Bacardi Caribbean Corporation (“BCC”) (collectively “Defendants”) pursuant to P.R. Laws Ann. tit. 32, §§ 3222 and 3224 in the Puerto Rico Court of First Instance seeking to set aside a final, partial arbitration award. ( See Docket No. 1–1 at 1–2.) On September 1, 2011, filed a notice of removal with this court (Docket No. 1). On September 2, 2011, BIL filed an action in federal court seeking to confirm and enforce that arbitration award in its favor pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 9. ( See Civil No. 11–1871, Docket No. 1.) On September 20, 2011, Civil No. 11–1871 was consolidated with the present case because both involved the same disputed arbitration award. ( See Civil No. 11–1871, Docket No. 15.) After consolidation, VSI filed two motions on September 29, 2011. The first was a motion to remand Civil No. 11–1158 (Docket No. 25). The second was a motion to dismiss Civil No. 11–1871 for lack of subject matter jurisdiction (Docket No. 26). After reviewing the parties submissions and applicable laws regarding the two motions, the court GRANTS Petitioner's motions.

I. Factual and Procedural Background

At this juncture, the court is only concerned in deciding whether the court has subject matter jurisdiction over the cases.¹ The citizenship of the parties is not in dispute. Plaintiff is a citizen of Puerto Rico as it is incorporated and has its principal place of business in Puerto Rico. ( See Docket No. 35 at ¶ 1.) BIL is a foreign corporation that is both incorporated and has its principal place of business in Bermuda. ( See Docket Nos. 35 at ¶ 4; 1 at ¶ 6.) BC and BCC are both incorporated in Puerto Rico and have their principal places of business in Puerto Rico. ( See Docket Nos. 1 at ¶ 5; 35 at ¶¶ 2–3.)

In 2004, BCC and VSI began negotiations for VSI to become the exclusive local subdistributor for BCC's alcoholic products in Puerto Rico. ( See Docket No. 31–1.) Angel Torres, President of BCC, and Diego Suarez, Jr., President and CEO of VSI, signed a subdistribution agreement on August 2, 2004, allowing VSI to become the exclusive subdistributor of specific brands and sizes of alcoholic beverages in Puerto Rico. ( See Docket No. 2–3.) There were no other signatories to the agreement, but BIL is listed and described as an entity, “engaged in the business of selling, promoting, and distributing certain beverage alcohol products worldwide.” Id. The agreement states BC, “is engaged in the business of producing and selling certain beverage alcohol products within Puerto Rico and the U.S. Virgin Islands.” Id. The agreement also states BIL and BC duly consented to the agreement between BCC and VSI, however neither company was a party or signatory to the agreement. Id. On April 1, 2006, BCC merged with Castleton Holdings, which, minutes later merged with BC. ( See Docket No. 1–6.) The result being that BC became responsible for all of BCC's responsibilities and obligations. ( See Docket No. 1 at ¶ 20.) BC and BIL are both subsidiaries of Bacardi Limited. ( See Docket Nos. 13–14.)

On May 29, 2009, BC informed VSI it would not renew the subdistribution contract and would seek arbitration in order to resolve any disputes regarding the termination of the agreement. ( See Docket No. 27–28.) Defendants sought arbitration on October 10, 2009, and VSI responded by claiming that certain provisions were null and void pursuant to the local laws of Puerto Rico. ( See Docket No. 27–29; 1–1 at ¶ 4.) At the request of Defendants, the arbitration proceedings were bifurcated with the initial stage resolving the validity of sections 9.4(d) and 9.5 of the subdistribution agreement and the second stage, if necessary, to resolve any damages. ( See Docket No. 27–33; Civil No. 11–1871, Docket No. 1.) On July 19, 2011, the arbitration tribunal agreed with Defendants regarding bifurcation and decided the subdistribution agreement was valid under Puerto Rico law. ( See Docket No. 1–9.) VSI filed a special proceeding in the local court seeking to vacate the arbitration tribunal's findings and this removal followed shortly thereafter. On September 2, 2011, BIL filed a separate suit seeking to confirm the arbitration tribunal's decision.

II. Discussion

Federal courts are courts of limited jurisdiction and cannot hear cases for which they do not have subject matter jurisdiction. See Am. Fiber & Finishing v. Tyco Healthcare Grp., LP., 362 F.3d 136, 138–39 (1st Cir.2004). Both cases, although consolidated for judicial convenience, must be analyzed separately in order determine whether the court has subject matter jurisdiction to adjudicate the case. See Narragansett Indian Tribe of R.I. v. Rhode Island, 296 F.Supp.2d 153, 159 (D.R.I.2003) (reversed on other grounds). As there is no federal question in the case at bar and because the FAA confers standing, not subject matter jurisdiction, the only manner in which this court could have subject matter jurisdiction over these cases is by diversity of citizenship. See Templeton Bd. of Sewer Com'rs v. Am. Tissue Mills of Mass., Inc., 352 F.3d 33, 38 (1st Cir.2003) (citing Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 n. 32, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). Federal courts have subject matter jurisdiction over diversity cases when there is both complete diversity between the plaintiffs and the defendants, and the amount in controversy is met. 28 U.S.C. § 1332(a); See Am. Fiber & Finishing, 362 F.3d at 139.

A. Amount in Controversy

In addition to diversity of citizenship, the damages claim must be in excess of $75,000 exclusive of interest and costs. See 28 U.S.C. § 1332(a); Exxon Mobil Corp. v. Allapattah Serv's, Inc., 545 U.S. 546, 551, 125 S.Ct. 2611, 162 L.Ed.2d 502 (2005). The party asserting federal jurisdiction has the burden of demonstrating federal jurisdiction. See Bull HN Info. Sys., Inc. v. Hutson, 229 F.3d 321, 328 (1st Cir.2000). Typically, the amount sought in the complaint controls the amount in controversy analysis, unless it is shown to a legal certainty that the amount of recovery will be $75,000 or less. See St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288–89, 58 S.Ct. 586, 82 L.Ed. 845 (1938); Esquilin–Mendoza v. Don King Prods., Inc., 638 F.3d 1, 4 (1st Cir.2011) (“[L]egal certainty that the claim is really for less than the jurisdictional amount trumps the plaintiff's good faith in claiming for a larger amount.”) (internal quotations omitted). The court notes a lack of controlling precedent to determine what the amount in controversy is in a bifurcated arbitration, when damages will be decided in the latter stage of the arbitration. However, the First Circuit has stated in dicta that the total amount sought through the entire arbitration should be controlling for jurisdictional purposes. See id. at 329 (noting issue of appeal to partial damage award in bifurcated arbitration brought under FAA, but not resolving the issue). In Bull HN Info. Sys., the First Circuit stated the purpose for arbitration was to allow for simple and expedited proceedings between the parties. Id. If the court only considers the amount of the partial judgment, then the court would not have jurisdiction over the case because the amount in controversy would not be met. Id. However, if the parties did not submit to a bifurcated arbitration and the entire claim was arbitrated at the same time, the court would have jurisdiction because all damages would be included within the arbitration award. In effect, this would, “impose a penalty—loss of federal jurisdiction—on the use of procedural devices such as bifurcation, devices meant only to simplify and expedite the process.” See Bull HN Info. Sys., 229 F.3d at 329. To protect the rights of those who choose arbitration, the court finds the better rule is to consider the damages for the entire arbitration process in order to determine subject matter jurisdiction.

Applying this rule to the two cases at hand, the court finds the amount in controversy has been met. The current removed case and enforcement request only deal with the enforceability and the validity of the subdistribution agreement. ( See Docket No. 1 at ¶ 29.) In the complaint filed in the local court, Plaintiff claims damages in excess of $30,000,000. ( See Docket No. 1–1 at ¶ 4.) Defendant does not dispute the damages sought are in excess of $75,000. However, upon removal of the case by Defendants, Plaintiff argues the court lacks subject matter jurisdiction due to an insufficient amount in controversy. ( See Docket No. 35 at 21.) The issue of damages has not reached the arbitration panel because the parties chose to bifurcate the arbitration. However, the amount in damages sought at the end of arbitration exceeds $75,000. Pursuant to the previous discussion, this court holds the better rule is to use the amount in controversy for the entire arbitration for jurisdictional purposes. In this case, the amount sought by Plaintiff is $30,000,000. Therefore, as the amount sought in the complaint controls unless shown to a legal certainty to be less, the amount in controversy has been met.

B. Diversity of Citizenship

Generally, the court analyzes all parties to an...