Triangle Trading Co. v. Robroy Industries, Inc., Civil No. 96-1882(SEC).
| Decision Date | 23 January 1997 |
| Docket Number | Civil No. 96-1882(SEC). |
| Citation | 952 F.Supp. 75 |
| Parties | TRIANGLE TRADING CO., INC., Plaintiff, v. ROBROY INDUSTRIES, INC., Defendant. |
| Court | U.S. District Court — District of Puerto Rico |
Sigfredo A. Irizarry, San Juan, PR, for Plaintiff.
Carlos A. Rodríguez-Vidal, Goldman, Antonetti & Cordova Law Offices, San Juan, PR, for Defendant.
This case is before the Court on defendant Robroy Industries Inc.'s motion to dismiss (Docket # 8), which was duly opposed (Docket # 10).1 Defendant asserts that plaintiff's complaint should be dismissed on the grounds that (a) Triangle is not a "dealer" for purposes of the Puerto Rico Dealers' Act, 10 L.P.R.A. §§ 278-278d ("Act 75"); (b) that it is not a "sales representative" under the Puerto Rico Sales Representatives' Act, 10 L.P.R.A. §§ 279-279h ("Act 21"); and (c) that Triangle specifically agreed that any dispute arising from the sales agency agreement which is the object of this controversy would be governed by the laws of the state of Pennsylvania, and litigated therein.2
Plaintiff, on the other hand, argues that there is a genuine issue of material fact as to whether or not Triangle was a distributor or a sales representative under Puerto Rico law; and that the public policy embodied in these statutes is of such importance that its provisions should overrule any "choice of law" or "choice of forum" provisions to the contrary. Upon careful analysis of the relevant facts, the applicable law and the legal theories advanced by both parties, defendant's motion is hereby DENIED.
The parties to this action entered into a sales agency agreement in 1985, whereby they agreed, inter alia, that plaintiff would serve as defendant's sales agent within the territory of Puerto Rico; and that any dispute arising out of this contract would be litigated in Pittsburgh, Pennsylvania and would be governed by the laws of that state. In February of 1996, defendant notified plaintiff of the cancellation of the agreement, effective March 31, 1996. Three months later, plaintiff filed suit in the Superior Court of Puerto Rico, San Juan part, alleging breach of contract under Acts 75 and 21. Defendant promptly requested that the case be removed to the United States District Court for the District of Puerto Rico, and removal was finally noted on August 22, 1996.
In its motion to dismiss, defendant argues that the complaint fails to state a claim upon which relief may be granted because it is based on inapplicable Puerto Rican statutes (Motion to dismiss, at 4). According to Robroy, plaintiff had none of the responsibilities commonly associated with a distributor under Act 75. It could not, for example, purchase products for resale; it was not required to maintain an inventory in Puerto Rico; it was devoid of authority to grant credits or rebates, fix prices, split commissions, or give secret refunds, concessions or inducements of any sort; and it could not deliver or ship merchandise. Neither did it assume any of the risks or responsibilities normally associated with a dealer under Act 75 (Motion to dismiss, at 7-8). Defendant further contends that since Act 21 did not become effective until December 5, 1990, it cannot be applied to the instant contract because the statute clearly expresses that its provisions "sh[ould] not be understood as an impairment to the contractual obligations that may have arisen prior to [December 5, 1990]" (Motion to dismiss, at 9).
In the alternative, defendant maintains that regardless of whether the contract is covered by the forgoing acts, its forum selection clause requires that the parties litigate this dispute in Pittsburgh, Pennsylvania (Motion to dismiss, at 10). According to Robroy, forum selection clauses must be enforced unless they contravene a strong public policy of the forum where the suit is brought, and "judges in this District and the Court of Appeals for the First Circuit have dismissed claims based on [Act] 75 on grounds of forum-selection clauses, as well as forum non conveniens, with full knowledge of the local public policy implications" (Motion to dismiss, at 12). Thus, defendant concludes, no strong public policies are contravened by the enforcement of the forum selection clause, and dismissal is warranted.
Plaintiff asserts that to determine whether Acts 75 and 21 are applicable to the instant action "will require consideration of many facts relevant to the development of the relationship between the parties over the years, not merely the documents submitted by defendant in support of its contentions" (Motion Opposing Defendant's Request for Dismissal, at 2). Plaintiff further argues that once discovery is conducted, it will be able to demonstrate that the original written agreement was modified through novation — as witnessed through the parties' actions — to the point where a "truly exclusive distributorship was established" (Opposition, at 4). Given that the exact nature of the relationship between the parties is actually the crux of this controversy, that the relevant statutes have a strong public policy content and that at least one of them clearly maintains that choice of law and choice of forum clauses shall be automatically deemed null and void, plaintiff contends that the motion to dismiss should be denied.
Rule 12(b)(6) motions must be examined in conjunction with Rule 8(a) of the Federal Rules of Civil Procedure, which requires a plaintiff to assert "a short and plain statement of the claim showing that [it] is entitled to relief." 5A Wright & Miller, supra, at § 1356. It has been argued that "only when the pleading fails to meet this liberal standard is it subject to dismissal under Rule 12(b)(6)." Id. Given the forgoing standard, in examining a Rule 12(b)(6) motion, courts must construe the complaint in the light most favorable to the plaintiff and assume that its allegations are true, drawing all reasonable inferences in plaintiff's favor. Correa-Martinez v. Arrillaga-Beléndez, 903 F.2d 49, 51 (1st Cir.1990).
Courts have considerable discretion, under the liberal pleading standard of the Federal Rules of Civil Procedure, to decide when a complaint is formally insufficient and thus, subject to dismissal. Although the Court will not credit bald assertions or mere specious allegations, it will not dismiss a complaint for failure to state a claim "unless it appears beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957); Miranda v. Ponce Fed. Bank, 948 F.2d 41, 44 (1st Cir.1991).
Act 75 defines a "dealer" as a "person actually interested in a dealer's contract because of his having effectively in his charge in Puerto Rico the distribution, agency, concession or representation of a given merchandise or service." 10 L.P.R.A. § 278(a). The Puerto Rico Supreme Court has held that the fundamental criterion to be used in identifying a dealer under this section is the dealer's role in creating a favorable market and gaining consumers for the product or service through the promotion and execution of sales contracts. San Juan Merc. v. Canadian Transport Co., 108 D.P.R. 211 (1978); Cobos Liccia v. De Jean Packing Co., 124 D.P.R. 896, 906-07 (1989). Publicity, market coordination, merchandise delivery, collections, maintenance of inventory and the promotion and execution of sales contracts are some of the duties which are commonly associated with a dealer under the Act. Id. Exclusivity in the distribution of a product or provision is not, however, an absolute requirement to qualify as distributor under this section. Roberco, Inc. v. Oxford Inds., Inc., 122 D.P.R. 115 (1988).
Notwithstanding the forgoing, the definition of a dealer does not extend to a sales agent not contractually bound to purchase inventories or to keep warehouse facilities. Neither does it include employing a salesperson or assuming any of the other responsibilities that typify a dealer, if the company which the agent represents grants lines of credit and charge accounts directly to customers, or services some of the merchandise sold and contracts all commercial and institutional advertising. Cruz Ramos v. Brother Intern. Corp., 445 F.Supp. 983 (D.Puerto Rico 1978); aff'd. 588 F.2d 817 (1st Cir.1978).
Precisely because the forgoing definition of a dealer is somewhat limited, the Puerto Rico Legislature enacted the Sales Representative Act of 1990 (Act 21). See Statement of Motives, Laws of Puerto Rico (December 5, 1990). This statute was meant to protect sales representatives — who "assume all the operational costs which such representation entails, such as the cost of maintaining an office, exhibition rooms, cars, office personnel, phones, electricity, water, insurance, travel costs, representation costs, office supplies and municipal patents" — from termination without just cause. Id. As stated previously, however, the Legislature noted that even though the Act was to take effect immediately after its approval on December 5, 1990, its provisions were not to be understood to impair those contractual obligations which might have arisen prior to its enactment. 10 L.P.R.A. 279, Article 10.
Act 21 defines a sales representative as "an independent entrepreneur who establishes a sales representation contract of an exclusive nature, with a principal or grantor, and who is assigned a specific territory or market, within the Commonwealth of Puerto Rico." 10 L.P.R.A. § 279(a). It does not, however, define when a sales representative relationship is deemed exclusive, and local courts have yet to decipher its meaning. In interpreting contracts under Act 75, courts have nevertheless noted that exclusivity is generally apparent either from the contract or...
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