Starlight Sugar Inc. v. Soto

• Decision Date: 14 February 2000
• Docket Number: No. 95-2078 (PG).,95-2078 (PG).
• Citation: 86 F.Supp.2d 23
• Parties: STARLIGHT SUGAR INC., Pan American Grain Manufacturing, Inc., Plaintiffs, v. Neftali SOTO, Individually and as Secretary of the Department of Agriculture for the Commonwealth of Puerto Rico, Defendant.
• Court: U.S. District Court — District of Puerto Rico

86 F.Supp.2d 23

STARLIGHT SUGAR INC., Pan American Grain Manufacturing, Inc., Plaintiffs, v. Neftali SOTO, Individually and as Secretary of the Department of Agriculture for the Commonwealth of Puerto Rico, Defendant.

No. 95-2078 (PG).

United States District Court, D. Puerto Rico.

February 14, 2000.

Antonio Moreda-Toledo, Moreda & Moreda, San Juan, PR, Marcos A. Ramirez-Lavandero, San Juan, PR, for Starlight Sugar, Inc., Pan American Grain Co., Inc., plaintiffs.

Eric A. Tulla, Rivera, Tulla & Ferrer, Hato Rey, PR, for Sugar Corporation of Puerto Rico ("La Corporacion Azucarera De Puerto Rico"), defendant.

John F. Nevares, Smith & Nevares, San Juan, PR, for Manuel Diaz-Saldana, defendant.

OPINION & ORDER

PEREZ-GIMENEZ, District Judge.

Pending before this Court are Plaintiffs', Starlight Sugar, Inc. and Pan American Grain Manufacturing, Inc., Motion for Summary Judgment (Dkt.121) and Defendant Neftalí Soto's Opposition to Plaintiffs' Motion for Summary and Defendant Soto's Motion for Summary Judgment (Dkt.128). Plaintiffs have alleged Market Regulation No. 13 is unconstitutional under the Interstate Commerce Clause and the Equal Protection Clause of the United States Constitution, and that Defendant Soto is liable to Plaintiffs for his deliberate and willful violation of Plaintiffs' federal constitutional rights as provided for in 42 U.S.C. § 1983. Plaintiffs request injunctive relief and damages.

The Court has previously intimated strongly twice before that Market Regulation No. 13 is unconstitutional, a conclusion affirmed by the First Circuit Court of Appeals. See Garcia v. Bauza Salas, 686 F.Supp. 965 (D.P.R.1988) (Pérez-Giménez, J.), vacated and rev'd on other grounds, 862 F.2d 905 (1st Cir.1988); Starlight Sugar, Inc. v. Soto, 909 F.Supp. 853 (D.P.R. 1995) (Pérez-Giménez, J.), aff'd, 114 F.3d 330 (1st Cir.1997) ("Soto I" & "Soto II").

SUMMARY JUDGMENT STANDARD

Summary judgment is "a means of avoiding full-dress trials in unwinnable cases, thereby freeing courts to utilize scarce judicial resources in more beneficial ways." Mesnick v. General Elec. Co., 950 F.2d 816, 822 (1st Cir.1991), cert. denied, 504 U.S. 985, 112 S.Ct. 2965, 119 L.Ed.2d 586 (1992). In essence, summary judgment should be granted only 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 judgment as a matter of law." FEDR. CIV.P. 56(c). See also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Therefore, the trial court must go beyond the facade of the pleadings, and "assay the parties' proof in order to determine whether trial is actually required." Wynne v. Tufts Univ. Sch. of Med., 976 F.2d 791, 794 (1st Cir.1992), cert. denied, 507 U.S. 1030, 113 S.Ct. 1845, 123 L.Ed.2d 470 (1993). Throughout the court's analysis, "the entire record [must be seen] in the light most hospitable to the party opposing summary judgment, indulging all reasonable inferences in that party's favor." Griggs-Ryan v. Smith, 904 F.2d 112, 115 (1st Cir.1990). See also Mullin v. Raytheon Co., 164 F.3d 696, 698 (1st Cir.1999), reh'g denied by 171 F.3d 710 (1st Cir.1999), cert. denied ___ U.S. ___, 120 S.Ct. 44, 145 L.Ed.2d 40 (1999); Maldonado-Denis v. Castillo-Rodríguez, 23 F.3d 576, 581 (1st Cir.1994).

In order to prevail on a motion for summary judgment, the moving party first must make a preliminary showing that there is no genuine issue of material fact which requires resolution at trial. See Cadle Co. v. Hayes, 116 F.3d 957, 960 (1st Cir.1997). Once the moving party has properly supported it's motion, "the burden shifts to the nonmovant to demonstrate, through specific facts, that a trial worthy issue remains." Id. See also Borschow Hosp. & Med. Supplies, Inc. v. Cesar Castillo, Inc., 96 F.3d 10, 14 (1st Cir. 1996). "The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "There must be `sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the evidence is merely colorable or is not significantly probative, summary judgment may be granted.'" Rogers v. Fair, 902 F.2d 140, 143 (1st Cir.1990) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. at 249-50, 106 S.Ct. 2505).

A NOT SO SACCHARINE HISTORY

Plaintiffs are in the business of importing, packing, distributing and selling refined sugar for consumer use or consumption in the Commonwealth of Puerto Rico. At all times relevant to this case, Defendant Neftalí Soto was the Secretary of Agriculture and Chairman of the Board of the Sugar Corporation.¹ In 1994, Soto acknowledged that there would be a shortage of refined sugar in Puerto Rico, caused by the shrinkage of the Puerto Rico sugar industry. The announcement was less than surprising; the shrinkage of the sugar industry has been continuous since the late 1950s. In response to the continuing decline, the Board of Directors of the Sugar Corporation authorized the corporation to hold biddings for the importation of packed sugar to satisfy the needs of the local consumers.

Plaintiffs wished to enter the consumer sugar market in Puerto Rico and commenced preparations to import and pack refined sugar in Puerto Rico, including the purchasing of equipment for packing facilities. Subsequently, Plaintiffs brought refined sugar in bulk to Puerto Rico, where they packed it in small bags for direct sale to consumers. The Department of Agriculture never authorized Plaintiffs to import consumer-type sugar into Puerto Rico.

The Department of Agriculture of Puerto Rico served Plaintiffs with a Detention Order on August 11, 1995. The Detention Order called for the detainment of 3,490 bales of refined sugar bagged for direct sale to consumers on the grounds that the sugar was designated for industrial use only and thus in violation of Market Regulation No. 13. The applicable section of Market Regulation No. 13 reads:

"Section No. VI-Containers

A. Refined sugar to be imported in Puerto Rico shall come in consumer size packages inside the corresponding shipping containers. For the purpose of this Regulation a consumer size package is that one whose net content does not exceed five (5) pounds.

B. Raw sugar, refined sugar for industrial use or sweepings to be imported for marketing and for processing in Puerto Rico, shall come in containers with a capacity up to two hundred (200) pounds only. Imported refined sugar for industrial use shall not be repacked in consumer size packages.

Following the detainment of the bales of sugar, Plaintiffs initiated an action in federal court seeking declaratory judgment, as well as injunctive and damage relief alleging that Market Regulation No. 13 is unconstitutional under the Commerce Clause of the United States Constitution,² and that the illegal enforcement of the Regulation caused Plaintiffs substantial economic damages.

Market Regulation No. 13 is not an absolute prohibition on the importation of consumer sugar since it can still be imported in pre-packed two (2) and five (5) pound bags. Also, raw sugar may be imported for refinement. However, the Sugar Corporation owned and operated the only sugar refinery in Puerto Rico. Economic reality precludes the construction of another refinery and also prevents the importation of pre-packed consumer sugar. The Sugar Corporation seemingly maintains a monopoly in sugar refining and consumer sugar sales in Puerto Rico. "As the Acting Executive Director of the Sugar Corporation admitted, Regulation 13 effectively prohibits the importation of table sugar to the island. Tr. at 142 (Vélez Ramos Testimony)." Soto I, 909 F.Supp. at 856. Soto readily admits in his memorandum that "Article VI of Market Regulation No. 13 protects the market for locally grown and refined sugar in the Commonwealth of Puerto Rico. See Tr. at 274-75. The Sugar Corporation cannot compete with other countries that have less expensive manual labor, more fertile lands to be cultivated, better weather conditions, and no laws requiring minimum wages and other benefits for the employees." (Dkt.128) (Memorandum at 29) Soto goes on to allege that heightened protection is necessary in the sugar industry as opposed to other sectors, such as commerce and manufacturing. Soto concludes that without Market Regulation No. 13 the sugar industry in Puerto Rico will disappear. Id.

Despite the Department of Agriculture's best efforts, not to mention a great deal of money, Market Regulation No. 13 has not stopped the deterioration of the sugar industry in Puerto Rico; the number of persons employed in the industry and the amount of land devoted to sugar production has declined significantly. See U.S. v. Smith,, 686 F.Supp. at 855 n. 2; Tr. at 162-66 (Vélez Ramos Testimony).

MORE SWEET TALK

I. PUERTO RICO SUGAR AND THE UNITED STATES CONSTITUTION

A. COMMERCE CLAUSE DISCUSSION

The Department of Agriculture is no stranger to constitutional challenges to their regulations. This Court has previously concluded that this precise section of Market Regulation No. 13 is unconstitutional, a finding upheld on appeal. See Garcia v. Bauza Salas, 686 F.Supp. at 973-74; Soto I, 909 F.Supp. at 861; Starlight Sugar, Inc. v. Soto, 114 F.3d at 331-32 ("Soto II"). Department of Agriculture regulations concerning both pigeon peas and eggs have also been determined to violate the dormant Commerce Clause. See Goya De Puerto Rico Inc. v. Santiago, 59 F.Supp.2d 274, 276-78 (D.P.R.1999) (Cerezo, J.) (holding several Department of Agriculture sections within a regulation regulating, among other things, pigeon peas, unconstitutional under the Dormant Commerce Clause); United Egg Producers...