Puerto Rico Hosp. v. Boston Scientific

• Citation: 426 F.3d 503
• Decision Date: 21 October 2005
• Docket Number: No. 05-1962.,05-1962.
• Parties: PUERTO RICO HOSPITAL SUPPLY, INC., Plaintiff, Appellee, v. BOSTON SCIENTIFIC CORP., Defendant, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 503

426 F.3d 503

PUERTO RICO HOSPITAL SUPPLY, INC., Plaintiff, Appellee, v. BOSTON SCIENTIFIC CORP., Defendant, Appellant.

No. 05-1962.

United States Court of Appeals, First Circuit.

Heard August 4, 2005.

October 21, 2005.

Humberto Guzman-Rodriguez, with whom Edward W. Hill-Tolinche and Jorge Soltero-Pales were on brief, for appellant.

Jesus E. Cuza, with whom John L. McManus and Linda M. Reck were on brief, for appellee.

Before BOUDIN, Chief Judge, SILER,^* Senior Circuit Judge, and SARIS,^** District Judge.

SILER, Senior Circuit Judge.

Plaintiff Puerto Rico Hospital Supply, Inc. ("PRHS") filed suit against Boston Scientific Corporation ("BSC") in the United States District Court in Puerto Rico for the purpose of obtaining a preliminary injunction pending arbitration before the International Chamber of Commerce ("ICC"). PRHS appeals the district court's denial of the injunction on the basis that the district court applied the wrong legal standard. We AFFIRM the district court.

I. BACKGROUND

PRHS is a Puerto Rico company in the business of distributing medical products. BSC is a manufacturer of medical products and is incorporated in Delaware with a principal place of business in Massachusetts. In 1989, the two businesses entered into a contract under which PRHS would become the exclusive distributor of BSC products in Puerto Rico. The contract specified that PRHS would use its "best efforts to develop and promote" BSC's products and that PRHS would "maintain, at [PRHS's] own expense, an adequate inventory" of BSC products. The term of the agreement was one year, but it could be extended for additional one-year periods provided that both parties agreed to the extension. The contract was extended for one-year periods through the normal course of business until 2005. Under the contract, either party could terminate or not renew the agreement for cause after giving the breaching party sixty days to remedy the problem. Otherwise, any party could terminate the agreement by giving the other twelve months notice. The choice-of-law provision states that the agreement "shall be governed by the laws of the Commonwealth of Massachusetts and, to the extent applicable, the Commonwealth of Puerto Rico and the United States of America." The agreement specifies that all disputes, including those relating to the construction of the contract, shall be arbitrated under the rules and the governance of the ICC.

In a letter dated April 29, 2005, BSC sent PRHS notice that it did not intend to renew the contract after it was set to expire on June 30, 2005. The letter cited three reasons for not wishing to renew: 1) that PRHS "failed to use its best efforts to develop and promote the use and sale" of BSC products such that "BSC's goodwill has been negatively affected" causing a loss of "millions of dollars in sales"; 2) that PRHS "failed to maintain an adequate inventory" of BSC products; and 3) that PRHS failed to "timely pay the amounts owed" to BSC. The letter stated that if PRHS began to meet its contractual obligations, BSC would reconsider terminating their relationship.

PRHS filed a complaint with the ICC to arbitrate the merits of this case. It also filed a complaint in district court for the sole purpose of obtaining a preliminary injunction pending arbitration. The ICC rules provide that either an arbitrator or a court can issue interim relief. The district court denied the motion for injunctive relief by analyzing this case under the traditional test. PRHS appeals. This court has jurisdiction under 28 U.S.C. § 1292(a)(1).

II. STANDARD OF REVIEW

This court reviews the denial of the preliminary injunction for an abuse of discretion. Charlesbank Equity Fund II v. Blinds To Go, Inc., 370 F.3d 151, 158 (1st Cir.2004). This court reviews abstract issues of law de novo, recognizing that an error of law is always an abuse of discretion. Id. Factual findings, however, are reviewed for clear error. New Comm Wireless Servs., Inc. v. SprintCom, Inc., 287 F.3d 1, 9 (1st Cir.2002).

III. DISCUSSION

A district court has jurisdiction to issue preliminary injunctions to preserve the status quo pending arbitration. Bercovitch v. Baldwin Sch., Inc., 133 F.3d 141, 151 (1st Cir.1998) (citing Teradyne, Inc. v. Mostek Corp., 797 F.2d 43, 51 (1st Cir.1986)). Additionally, the ICC rules, which were incorporated into the contract, allow either the arbitrator or "any competent judicial authority" to issue interim relief. Rules of Arbitration of the ICC, Article 23, available at http://www.iccwbo.org/court/english/arbitration/rules.asp. Thus, the court did not err in hearing the case and deciding the matter.

The essence of PRHS's argument is that the district court erred in not making a "provisional choice of law," and that such a choice would have resulted in the application of Puerto Rico's Law 75, 10 P.R. Laws Ann. § 278 ("Law 75").³ Because this argument was not made below, it was waived. See Carcieri v. Norton, 398 F.3d 22, 39 (1st Cir.2005) ("The general rule is that issues not raised in district court cannot be raised for the first time on appeal as a matter of right.").

Additionally, PRHS's actions below appear to have invited the very error it now claims. See Austin v. Unarco Indus., Inc., 705 F.2d 1, 15 (1st Cir.1983) (citing McPhail v. Mun. of Culebra, 598 F.2d 603, 607 (1st Cir.1979)). In general, "a party may not appeal from an error to which he contributed, either by failing to object or by affirmatively presenting to the court the wrong law." Id. The district court repeatedly stated that it would not make a choice-of-law determination, despite BSC's insistence that it must do so to properly rule on the motion. Not only did PRHS not object to the court's intentions, but it also stated that the determination would not turn on a choice-of-law interpretation. Rather, PRHS stated, in relevant part: "My point and my client's point is that this court should not go into either Puerto Rico law. . . or . . . Massachusetts law to decide whether my client . . . is entitled to the injunction" and "[m]y only request to this Court is [to] . . . retain the status quo, and let the arbitrator decide, whether it is Massachusetts [or] Puerto Rico" law. In its opinion, the district court followed federal law; and, as PRHS implored the court not to determine applicable law, PRHS cannot now assert error for the choice.

Even if there is no invited error or waiver, the district court was faced with an ambiguous choice-of-law provision. The parties' contract stated that "[t]his Agreement . . . shall be governed by the laws of the Commonwealth of Massachusetts and, to the extent applicable, the Commonwealth of Puerto Rico and the United States of America." This provision is ambiguous because the phrase "to the extent applicable" does not clearly dictate which law should apply under what circumstances. PRHS's witness said that he wanted Puerto Rico law to apply, and suggested that this was in order to gain the benefits of Law 75. BSC, "of course, may not have shared this understanding." Because neither the contract nor the evidence presented clarify the parties' intent, the provision is ambiguous.

Ambiguous choice-of-law provisions should be determined by the arbitrator, not the district court. Medika Int'l, Inc. v. Scanlan Int'l, Inc., 830 F.Supp. 81, 88 (D.P.R.1993). However, the fact that the choice-of-law determination is left to the arbitrator should not prevent a district court from making a preliminary judgment regarding which law to apply for the purposes of injunctive relief. In the face of an ambiguous choice-of-law provision, the district judge made a permissible choice to apply federal law as the default standard for preliminary injunction purposes. In Medika Int'l, Inc. v. Scanlan Int'l Inc., the court examined a contract involving a Minnesota choice-of-law provision which may have contravened Law 75. Id. The court held that the arbitrator should decide the applicability of Minnesota law, and it applied federal law when determining the merits of the plaintiff's request for a preliminary injunction. Id. Because preliminary relief is intended to deal with temporary conditions, the district's court decision to apply the federal law standard, given the ambiguous...