Plaza Carolina Mall, L.P. v. Municipality of Barceloneta

• Decision Date: 16 March 2015
• Docket Number: Civil No. 13–1264GAG.
• Parties: PLAZA CAROLINA MALL, L.P., Plaintiff v. MUNICIPALITY OF BARCELONETA, Defendant.
• Court: U.S. District Court — District of Puerto Rico

91 F.Supp.3d 267

PLAZA CAROLINA MALL, L.P., Plaintiff

v.MUNICIPALITY OF BARCELONETA, Defendant.

Civil No. 13–1264GAG.

United States District Court, D. Puerto Rico.

Signed March 16, 2015.

Salvador J. Antonetti–Stutts, Carla Garcia–Benitez, Attorneys for Plaintiff.

Hector J. Ferrer–Ríos, Juan J. Casillas–Ayala, Israel Fernandez–Rodriguez, Massiel Bermudez–Rios, Attorneys for Defendant.

OPINION AND ORDER

GUSTAVO A. GELPI, District Judge.

This case deals with the legality of a contract executed by the Municipality of Barceloneta (the “Municipality”) and a private entity who owned an outlet mall located within the Municipality, whereby the Municipality awarded it a multimillion dollar incentive grant for the expansion of the outlet mall. Plaza Carolina Mall, L.P. (“Plaintiff”) filed suit against the Municipality, alleging that it is in breach of its obligations under a Development Incentive Agreement (the “DIA”), which Plaintiff claims to be valid and binding. (See Docket No. 1.) The Municipality challenges the validity and legality of the DIA and argues it is and void pursuant to Puerto Rico law and its Constitution. (See Docket No. 12.) The Municipality moreover filed a counter claim against Plaintiff seeking to recover the full amount of the monies incorrectly paid under the DIA and accrued interests.Id. at 10.

Thereafter, and on the same date, Plaintiff and the Municipality each submitted motions for summary judgment and accompanying statements of fact. (Docket Nos. 33, 34 and 37.) Both parties submitted substantial oppositions and replies to the memoranda of law and statements of fact. (Docket Nos. 49, 50, 60, 64, 70, 71, and 81.) Currently before the court are Plaintiff and the Municipality's cross-motions for summary judgment at Docket Nos. 34 and 37. After carefully reviewing the parties' submissions and pertinent law, the court DENIES Plaintiff's motion for summary judgment at Docket No. 34, and DENIES in part and GRANTS in part the Municipality's motion for summary judgment at Docket No. 37.

In their motions, both parties assert that they are entitled to judgment as a matter of law. Plaintiff contends that the DIA is a valid and binding contract and requests the court to find that the Municipality breached it by failing to make any payments thereunder since May, 2010 and because it failed to recognize and approve the transfer of the DIA by the original signatory—PR Barceloneta, LLC (“PRB”)—to Plaintiff, who claims to be the proper successor in interest. (See Docket No. 34.) Plaintiff also moves the court to order the Municipality to pay all due amounts under the DIA. See id. at 4. The Municipality, in turn, first contends that the complaint must be dismissed because the court's subject matter jurisdiction is premised on diversity of citizenship and Plaintiff did not sufficiently establish that all its partners are diverse; thus, the court lacks diversity jurisdiction over this case. (See Docket No. 37 at 3–6.) The Municipality also contends that the complaint should be dismissed on various substantive grounds, in pertinent part, because the DIA is illegal, and void and Plaintiff failed to demonstrate it is the real party with interest in this case. See id. at 6–7.

I. Legal Standard of Review

Summary judgment is appropriate when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; see Fed.R.Civ.P. 56(a). “An issue is genuine if ‘it may reasonably be resolved in favor of either party’ at trial, ... and material if it ‘possess[es] the capacity to sway the outcome of the litigation under the applicable law.’ ” Iverson v. City of Boston, 452 F.3d 94, 98 (1st Cir.2006) (alteration in original) (internal citations omitted). The moving party bears the initial burden of demonstrating the lack of evidence to support the non-moving party's case. Celotex, 477 U.S. at 325, 106 S.Ct. 2548. “The movant must aver an absence of evidence to support the nonmoving party's case. The burden then shifts to the nonmovant to establish the existence of at least one fact issue which is both genuine and material.” Maldonado–Denis v. Castillo–Rodriguez, 23 F.3d 576, 581 (1st Cir.1994). The nonmovant may establish a fact is genuinely in dispute by citing particular evidence in the record or showing that either the materials cited by the movant “do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.” Fed. R.Civ. P. 56(c)(1)(B). If the court finds that some genuine factual issue remains, the resolution of which could affect the outcome of the case, then the court must deny summary judgment.See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

When considering a motion for summary judgment, the court must view the evidence in the light most favorable to the nonmoving party and give that party the benefit of any and all reasonable inferences. Id. at 255, 106 S.Ct. 2505. Moreover, at the summary judgment stage, the court does not make credibility determinations or weigh the evidence. Id. Summary judgment may be appropriate, however, if the nonmoving party's case rests merely upon “conclusory allegations, improbable inferences, and unsupported speculation.” Forestier Fradera v. Mun. of Mayaguez, 440 F.3d 17, 21 (1st Cir.2006) (quoting Benoit v. Technical Mfg. Corp., 331 F.3d 166, 173 (1st Cir.2003) ).

“Cross-motions for summary judgment do not alter the summary judgment standard, but instead simply require [the court] to determine whether either of the parties deserves judgment as a matter of law on the facts that are not disputed.” Wells Real Estate Inv. Trust II, Inc. v. Chardon/Hato Rey P'ship, S.E., 615 F.3d 45, 51 (1st Cir.2010) (citing Adria Int'l Group, Inc. v. Ferré Dev. Inc., 241 F.3d 103, 107 (1st Cir.2001) ) (internal quotation marks omitted). Although each motion for summary judgment must be decided on its own merits, each motion need not be considered in a vacuum. Wells Real Estate, 615 F.3d at 51 (quoting P.R. American Ins. Co. v. Rivera–Vázquez, 603 F.3d 125, 133 (1st Cir.2010) ) (internal quotation marks omitted); Mercado–Salinas v. Bart Enterprises Int'l, Ltd., 852 F.Supp.2d 208, 213 (D.P.R.) on reconsideration in part, 889 F.Supp.2d 265 (D.P.R.2012). “Where, as here, cross-motions for summary judgment are filed simultaneously, or nearly so, the district court ordinarily should consider the two motions at the same time, applying the same standards to each motion.” Wells Real Estate, 615 F.3d at 51 (quoting P.R. American Ins., 603 F.3d at 133 ) (internal quotation marks omitted).

II. Relevant Uncontested Material Facts

PRB was the owner of the Puerto Rico Premium Outlets, a shopping mall located in the Municipality. (Docket No. 33 at 1.) PRB projected to expand the mall, adding more space and more retail stores. (Docket No. 37–1 at 5.) The expansion, otherwise referred to as Phase II, was estimated at a cost of thirty eight million dollars. Id.

The Municipal Legislature passed Ordinance No. Twelve (12), Series 2007–2008 of August 8, 2007 (“Ordinance 12”) to authorize and empower then Mayor Sol Luis Fontanes¹ (“the Mayor”) to sigh two agreements with PRB, one of which was the DIA. (Docket No. 1–2 at 2.) Referring to the DIA, Ordinance 12 states that said agreement “develops an incentive plan so that the municipal sales and use tax generated from the profits on sales from the expansion of the ‘Prime Retail Outlets' shopping center will be shared at 50% to be able to attract investors....” (Docket No. 1–2 at 2.) (emphasis added) Ordinance 12 also notes that the Autonomous Municipalities Act, Act No. 81 of August 30, 1991, (“Act 81”) P.R. Laws. Ann. tit. 21, § 4455, in its Article 9.005 provides that “all exchanges, liens, leases, sales, or assignments of municipal property must be approved by the Municipal Legislature, through Ordinance or Resolution to that effect.” (Docket No. 1–2 at 1.)

On August 28, 2007, the Mayor executed the DIA with and benefitting PRB.² (Docket Nos. 33 at 1; 37–1 at 5; 49–1 at 4.) Through the DIA, the Municipality granted PRB a direct development incentive grant of three million dollars to help finance the expansion of the mall. (Docket No. 33–4.) The Municipality would pay the incentive grant from the general funds, which would be directly generated from a portion of the sales and use tax derived from the sales of the tenants of Phase II. (Docket No. 33–4.)

In exchange for the incentive grant, the parties agreed that PRB would complete the construction of Phase II, which the parties agreed would “benefit the economy and the residents of the Municipality through the creation of more jobs, while also increasing the amount of revenues received by the Municipality through municipal personal and property taxes.”³ (Docket No. 33–4.) The DIA did not, however, provide the mechanism to ensure that the above occurred. Id. A copy of the DIA was registered with the Office of the Puerto Rico Comptroller. (Docket No. 33 at 1.)

The proposed DIA was drafted by PRB and Plaintiff's legal counsel and then sent to the Municipality for its review and comments. (Docket No. 37–1 at 8; 49–1 at 8.) The recitals of the DIA state:

Whereas, the Municipality has enough funds to cover its finances and deems it in its best interest that funds from the general funds of the Municipality be generated from a portion of the municipal sales tax derived from the gross sales of tenants of Phase II, be granted to the Company for purposes of completing the development of Phase II.

(Docket No. 33–4 at 3.) (emphasis added.) Pursuant to Section 2.1 of the DIA, titled Development Incentive:

In order to promote the economic development and the creation and

...