Preussag Intern. Steel Corp. v. Interacero, Inc.

• Citation: 951 F.Supp. 338
• Decision Date: 30 January 1997
• Docket Number: Civil No. 96-1391 (JP).
• Parties: PREUSSAG INTERNATIONAL STEEL CORPORATION, Plaintiff, v. INTERACERO, INC., et al., Defendants.
• Court: United States District Courts. 1st Circuit. District of Puerto Rico

951 F.Supp. 338

PREUSSAG INTERNATIONAL STEEL CORPORATION, Plaintiff, v. INTERACERO, INC., et al., Defendants.

Civil No. 96-1391 (JP).

United States District Court, D. Puerto Rico.

January 30, 1997.

José R. Gaztambide, Gaztambide & Plaza, San Juan, PR, for Plaintiff.

José A. Gallart, Hato Rey, PR, for Defendant.

OPINION AND ORDER

PIERAS, District Judge.

I. INTRODUCTION AND BACKGROUND

The Court has before it Plaintiff's Motion for Partial Summary Judgment (docket No. 24), defendants' Opposition to Motion for Summary Judgment (docket No. 28), and plaintiff's motion for Leave to Reply to Defendants [sic] Opposition to Partial Summary Judgment (docket No. 34). The Court will hear all sides to the Motion for Partial Summary Judgment, so the plaintiff's motion for leave to reply is hereby GRANTED.

The following facts are undisputed. Preussag International Steel Corporation ("Preussag") distributes steel products at the wholesale level throughout the world.¹ Its main offices are in Atlanta, Georgia. It conducted its business in Puerto Rico from May 1, 1991 to February 15, 1996 through an arrangement with codefendant Interacero, Inc. ("Interacero"), under which, Interacero acted as Preussag's exclusive sales representative in Puerto Rico.

Interacero is a corporation under the laws of the Commonwealth of Puerto Rico, with its principal place of business in Puerto Rico. Codefendant Kurt Legner ("Legner") is the president of Interacero, and codefendant Eva Lisa Santiago ("Santiago") is Legner's wife. Both Legner and Santiago reside in Puerto Rico. Codefendant Lourdes Cabrera is an employee of Interacero and also resident of Puerto Rico. Although these three individuals have been named by Preussag as defendants in this action, Preussag's motion for partial summary judgment is not directed against them. Plaintiff only moves the Court to enter summary judgment against codefendant Interacero.

At the heart of the plaintiff's Motion for Partial Summary Judgment, lie the dynamics by which money from Interacero's sales of Preussag's steel products in Puerto Rico were distributed to the two parties under their agreement. Interacero was responsible for making sales to and collecting corresponding debts from clients.² Preussag and Interacero split net receipts (profits) collected by Interacero. All of Interacero's revenue under the agreement derived from these commissions. In their Initial Scheduling Conference Memorandum, the defendants explained that Interacero's commission was "based on a formula contingent on sales, collections and `net profit' after the deduction of certain expenses, including costs of merchandise, shipping, etc., and `interest' on the cost of products warehoused by Preussag on the Island."

At the beginning of 1996, Preussag expressed concern regarding several accounts receivable held by Interacero. Preussag's concern stemmed from the old age of the supposedly unaccounted-for debts. Faced with the suspicious circumstances surrounding these aging accounts, Preussag sent two employees to Puerto Rico to investigate the matter. According to the investigators, those supposedly unpaid accounts had in fact been paid by debtor customers to Interacero. The plaintiff has alleged, and the defendants have not disputed, that Interacero had been issuing receipts to the customers for full payment, and maintained copies of these receipts in its deposit records. However, Interacero was reporting disparate payment amounts to Preussag, and had been remitting less to Preussag than the customers had paid. Therefore, Preussag's information regarding those accounts, which it obtained directly from Interacero, was inaccurate. To further explore the situation, Preussag sent the accounting firm of Price Waterhouse to examine Interacero's accounts.

Price Waterhouse twice investigated Preussag's account with Interacero. According to Price Waterhouse's report of its first investigation, Interacero had collected over Five Hundred Thousand Dollars, as of January 31, 1996, that it had not remitted to Preussag. According to Price Waterhouse's report of its second investigation, the amount had reached Six Hundred Twenty-One Thousand and Fifty-One Dollars and Twenty-One Cents ($621,051.21), by March 31, 1996.

On February 15, 1996 Preussag terminated its agreement with Interacero.³ Preussag filed this action on April 1, 1996. In its complaint, Preussag has asked for various forms of relief. In particular, Preussag seeks Six Hundred and Eighty-Eight Thousand Dollars ($688,000) plus interest as compensation for delinquent accounts; injunctive relief prohibiting Interacero and its officers from diverting any additional funds or assets or obtaining any other goods from the plaintiff; judgment against Legner under a veil-piercing theory; a declaratory judgment that 10 L.P.R.A. § 278 (the Puerto Rico Dealers Act) does not protect Interacero; an additional $500,000 in compensatory damages based on loss of business; two million dollars ($2,000,000) in punitive damages; attorney's fees and costs; and prejudgment interest. Preussag's motion for summary judgment and this order deal solely with compensatory damages stemming from the overdue accounts.

With respect to those compensatory damages, the defendants do not deny that Interacero has not paid the money to Preussag, nor that it would have to do so under the agreement. The defendants instead allege that Preussag also owes Interacero money. The defendants enumerate several reasons why Preussag is indebted to Interacero, each of which essentially constitutes a counter-claim. Before discussing these claims individually, the Court notes that none of these claims were raised by the defendants in their answer to the complaint. Each has been raised for the first time in the defendants' opposition to the plaintiff's motion for summary judgment. In their opposition to plaintiff's motion for summary judgment, the defendants first allege that Preussag has not paid Interacero all of the commissions Interacero is entitled to. Second, the defendants make a claim that Preussag incorrectly overcharged it for interest costs associated with inventory and accounts receivable. Third, the defendants allege that Preussag triple charged Interacero for the costs of bad debt by charging Interacero for "reserves" for bad debt, for credit insurance, and for offsetting actually uncollected debts against Interacero's future commissions. Fourth, the defendants claim that Interacero made outlays on Preussag's behalf for which Interacero should be compensated. Fifth, the defendants maintain that Preussag charged Interacero depreciation and equipment rental for equipment that "seems to have been property of Preussag." Finally, they assert that expenses such as meals, office supplies, and bank charges "were routinely charged against Interacero's commissions."

II. SUMMARY JUDGMENT STANDARD

Rule 56(c) of the Federal Rules of Civil Procedure provides:

"[Summary judgment] shall be rendered forthwith if 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."

The purpose of summary judgment is "to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for a trial." Garside v. Osco Drug, Inc., 895 F.2d 46, 50 (1st Cir.1990). Usually, this entails the following methodology. First, the court must identify genuine material factual disputes, drawing all reasonable inferences in favor of the party against whom summary judgment is sought. See Kennedy v. Josephthal & Co., 814 F.2d 798, 804 (1st Cir.1987). If there are genuine material factual disputes, summary judgment is inappropriate. "Material means that a contested fact has the potential to change the outcome of the suit under the governing law if the dispute over it is resolved favorable to the nonmovant." McCarthy v. Northwest Airlines, Inc., 56 F.3d 313, 315 (1st Cir.1995). "A dispute is genuine if the parties' positions on the issue are supported by conflicting evidence." The International Association of Machinists and Aerospace Workers v. Winship Green Nursing Center, 103 F.3d 196 (1st Cir.1996). However, "[w]hile an inquiring court is constrained to examine the record in the light most favorable to the summary judgment opponent and to resolve all reasonable inferences in that party's favor [citations omitted], defeating a properly documented motion for summary judgment requires more than the jingoistic brandishing of a cardboard sword." Id. In other words, a court need not credit "conclusory allegations, improbable inferences, and unsupported speculation". Medina-Muñoz v. R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st Cir.1990). Where there are no material facts in dispute, the court proceeds to search the undisputed facts in an effort to discern whether the moving party has shown that there is an absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 322-323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986).

Where, as in this case, the moving party would bear the burden of persuasion at trial, it must first show that there is no genuine dispute as to the material facts, and then it must satisfy the burden it would have at trial. To do the latter, it must show that it would be entitled to a directed verdict at trial (i.e. no reasonable jury could find any way but in favor of the moving party). Id. at 323, 106 S.Ct. at 2552-53. If the moving party has not met its respective summary judgment standard, the motion should of course be denied. However, where the moving party has met its initial burden of proof, the burden shifts to the nonmoving party to show that some triable issue, whether factual or legal, remains unresolved. Id. at 324, 106 S.Ct. at 2553. If the nonmoving party successfully meets...