Sudouest Import Sales Corp. v. Union Carbide Corp., 83-1725

• Decision Date: 12 April 1984
• Docket Number: No. 83-1725,83-1725
• Citation: 732 F.2d 14
• Parties: SUDOUEST IMPORT SALES CORPORATION, Plaintiff, Appellant, v. UNION CARBIDE CORPORATION, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

Page 14

732 F.2d 14

SUDOUEST IMPORT SALES CORPORATION, Plaintiff, Appellant, v. UNION CARBIDE CORPORATION, Defendant, Appellee.

No. 83-1725.

United States Court of Appeals First Circuit.

Argued Feb. 9, 1984.

Decided April 12, 1984.

Philip E. Roberts, Hato Rey, P.R., with whom Harry A. Ezratty, San Juan, P.R., was on brief, for plaintiff, appellant.

Samuel T. Cespedes, with whom Maggie Correa-Aviles, and McConnell Valdes Kelley Sifre Griggs & Ruiz-Suria, San Juan, P.R., were on brief, for defendant, appellee.

Before CAMPBELL, Chief Judge, WISDOM, ^* Senior Circuit Judge, and BREYER, Circuit Judge.

BREYER, Circuit Judge.

Union Carbide Corporation cancelled a contract that had made Sudouest Import Sales Corporation its "sales representative" in Puerto Rico. Sudouest sued Union Carbide, alleging that the cancellation violated the Puerto Rico Dealer's Act, 10 L.P.R.A. Sec. 278 et seq. (commonly known as Act 75). The federal district court, 569 F.Supp. 1547, found that Sudouest was not a dealer within the terms of that Act; it granted summary judgment for Union Carbide; and Sudouest appeals. Sudouest believes there are "genuine" and "material" issues of fact in dispute on the dealership question. Fed.R.Civ.P. 56. The factual disputes to which Sudouest points are "material" only if its version of the facts makes it a dealer under the Act. Astra Pharmaceutical Products, Inc. v. Beckman Instruments, Inc., 718 F.2d 1201, 1204 (1st Cir.1983). We have examined its factual account, mostly contained in an affidavit of its president; we conclude that Act 75 does not apply.

Our conclusion rests upon three salient features of Sudouest's account of its Union Carbide relationship. First, many of the ordinary trappings of a dealership are not to be found. Sudouest did not handle Union Carbide's product, Kemet (an electrical capacitor). It did not ship Kemet; it did not deliver Kemet; it did not store Kemet. Rather, Union Carbide shipped Kemet directly to the customer when it received an order. Moreover, Union Carbide, not Sudouest, handled billing and receipts. Sudouest did not bill the customer, take its money, or assume any credit risk.

Second, while Sudouest 'sold' Kemet to customers in Puerto Rico, its sales activities were limited. Union Carbide had previously signed a "national" sales contract with each of Sudouest's customers (or with a customer's parent corporation). The "national" sales contract determined virtually all conditions of any Kemet sale, including price. The contract left open the amount, if any, the customer would order. Sudouest's job was 1) to visit these customers in Puerto Rico, 2) to convince them to order Kemet from Union Carbide, rather than to use a competitor's product, and 3) to send any resulting purchase orders to Union Carbide.

Third, while Sudouest engaged in some promotional activities, their scope was also limited. It sent a newsletter to Kemet customers in which it referred to Kemet and to other products that Sudouest carried. It made certain that Sudouest's and Kemet's names were mentioned in a widely circulated publication of Puerto Rico's Economical Development Administration. It sent three employees to learn how Kemet was made. It visited customers each month and gave them literature. One salesman devoted most of his time to the needs of Sudouest's largest Kemet customer. It displayed a Kemet banner at a trade show. Sometimes it entertained potential buyers.

The legal question before us is whether the "relationship" just described between Sudouest and Union Carbide is a 'dealership' arrangement within the terms of the Act. The Act describes the relevant relationship as one in which the "dealer" "effectively ... [takes] charge of the distribution of a merchandise, or of the rendering of a service, by concession or franchise, on the market of Puerto Rico." 10 L.P.R.A. Sec. 278. The Supreme Court of the Commonwealth has emphasized that this statutory language must be "delimited in the light of the ends sought by the statute." San Juan Mercantile Co. v. Canadian Transport Co., Ltd., 108 D.P.R. 211, 215 (1978). And the statute is aimed at the "abusive practices of manufacturers who arbitrarily eliminated dealers as soon as they created a favorable market for their products and services." Id. at 216 (emphasis added); see also Statement of Motives of Act 75, 1964 P.R. Laws, 4th Reg.Sess. 231 (problem is one of enterprises eliminating dealers "as soon as they have created a favorable market"). In light of this purpose, the Commonwealth Supreme Court has said that a dealer protected by Act 75 is "one who endeavors to create a market or get new clients for a product or service by promoting or closing sales contracts." San Juan Mercantile Co. v. Canadian Transport Co., 108 D.P.R. at 217 (emphasis added). Thus, where a plaintiff has invested time, effort and expense in the development of a market, the Commonwealth courts have applied the Act, even where certain other...