Vaquería Tres Monjitas, Inc. v. Comas

• Decision Date: 23 September 2013
• Docket Number: Civil Nos. 04–1840 (DRD), 08–2191(DRD), 08–2380(DRD).
• Citation: 980 F.Supp.2d 65
• Parties: VAQUERÍA TRES MONJITAS, INC. and Suiza Dairy, Inc., Plaintiffs, v. Myrna COMAS, in her official capacity, as the Secretary of the Department of Agriculture for the Commonwealth of Puerto Rico, and Jose Pantojas, in his official capacity, as Administrator of the Office of the Milk Industry Regulatory Administration for the Commonwealth of Puerto Rico, Defendants.
• Court: U.S. District Court — District of Puerto Rico

980 F.Supp.2d 65

VAQUERÍA TRES MONJITAS, INC. and Suiza Dairy, Inc., Plaintiffs,

v.Myrna COMAS, in her official capacity, as the Secretary of the Department of Agriculture for the Commonwealth of Puerto Rico, and Jose Pantojas, in his official capacity, as Administrator of the Office of the Milk Industry Regulatory Administration for the Commonwealth of Puerto Rico, Defendants.

Civil Nos. 04–1840 (DRD), 08–2191(DRD), 08–2380(DRD).

United States District Court, D. Puerto Rico.

Sept. 23, 2013.

Enrique Nassar–Rizek, Enrique Nassar Rizek & Associates, Jose R. Lazaro–Paoli, Jose R. Lazaro Paoli, Rafael Escalera–Rodriguez, Amelia Caicedo–Santiago, Carlos M. Hernandez–Burgos, Reichard & Escalera, Maxine M. Brown–Vazquez, Enrique Nassar–Rizek, Enrique Nassar Rizek & Associates, San Juan, PR, for Plaintiffs.

Edward W. Hill–Tollinche, Hill & Gonzalez, PSC, Marta Elisa Gonzalez–Yglesias, Department of Justice of Puerto Rico, Wandymar Burgos–Vargas, P.R. Department of Justice–Federal Litigation, Luis Sanchez–Betances, Department of Justice, Yassmin Gonzalez–Velez, Gonzales Velez Law Offices, San Juan, PR, for Defendants.

AMENDED OPINION AND ORDER NUNC PRO TUNC

DANIEL R. DOMÍNGUEZ, District Judge.

Pending before the Court are: (a) Post–Hearing Memorandum In Support Of The Imposition Of A Specific Remedy As A Result Of Non–Compliance And In Support Of Petition For Contempt filed by Suiza Dairy, Inc. (hereinafter “Suiza's Post–Hearing Memorandum”), Docket No. 2225; (b) Vaquería Tres Monjitas, Inc.'s Memorandum On Compliance Of Amended Preliminary Injunction Order (hereinafter “VTM's Memorandum”), Docket No. 2228; (c) Defendants' Opening Compliance Hearing Brief (hereinafter “Defendants' Brief”), Docket No. 2227; (d) Memorandum In Response To Docket No. 2227 filed by Suiza (hereinafter “Suiza's Opposition to Defendants' Brief”), Docket No. 2229; (e) Reply Memorandum To Defendants' Compliance Hearing Brief (Dkt. 2227) filed by VTM (hereinafter “VTM's reply to Defendants' Brief”), Docket No. 2234; (f) Defendants' Reply Brief, Docket No. 2232; (g) Motion for Leave to File Amendment to Dkt. No. 2225 and Include Appendix 1 filed by Suiza on March 5, 2013, Docket No. 2248.

Introduction

On August 13, 2004, the fresh milk processors, Suiza Dairy, Inc. (“Suiza”) and Vaquería Tres Monjitas, Inc. (“VTM”), filed the instant action to challenge the constitutionality of the existing regulation issued by the Office of the Milk Industry Regulatory Administration for the Commonwealth of Puerto Rico (“ORIL”) to determine the milk price. The challenge is based on constitutional grounds, as well as timely scientific, rationale grounds, and non-discriminatory parameters within the formula used in the year 2004 and, henceforth, completely obsolete. See Vaquería Tres Monjitas, Inc., Suiza Dairy, Inc. v. Irizarry, et al., 587 F.3d 464, 482–484 (1st Cir.2009), citing Duquesne Light & Co. v. Barasch, 488 U.S. 299, 307, 109 S.Ct. 609, 102 L.Ed.2d 646 (1989), and Tenoco Oil Co. v. Department of Consumer Affairs, 876 F.2d 1013, 1026–1029 (1st Cir.1989).

On July 13, 2007, 2007 WL 7733665, the Court entered an Amended Opinion And Order Granting Preliminary Injunction (hereinafter the “Injunction Order ”), Docket No. 480. After several appeals to the United States Court of Appeals for the First Circuit (hereinafter the “First Circuit”), and a certiorari request denied by the United States Supreme Court (“Supreme Court”), this Court was forced to return to the compliance hearings stage, as to examining the new parameters and the unexpected eliminations as to former parameters and authorized expenses accounts relating to potential constitutional violations of due process, equal protection and takings. Vaquería Tres Monjitas, Inc., 587 F.3d at 482–484. The compliance hearings finalized on December 1, 2012, now the Court must determine whether the defendants have indeed failed to comply with the Court's Injunction Order of July 13, 2007, Docket No. 480, based on the evidence submitted by the parties, as well as the prior orders entered by the Court, which are critical to this matter.

Significant events have transpired since the Injunction Order was entered on July 13, 2007, which are worth mentioning, to wit: (a) after the general elections of November 8, 2008, Puerto Rico underwent another change of administration effective January 2009; (b) Puerto Rico, since at least 2006, until today is still severely affected by the worldwide economic crisis, which has had an adverse impact both in the United States' and Puerto Rico's economy; (c) the inflation and the staggering costs of doing business in Puerto Rico are also determinative, as it results in a higher price of fresh milk; and (d) the consumers' declining demand for fresh milk, amongst others.

When considering the parties' legal memorandums, the Court has decided to address the issues under the following topics: (a) the Experts' Agreement, Docket No. 1003, and the proposed formula agreed as to critical parameters to be included in the formula as to the price of the fresh milk, the ROE, return on equity, the regulatory accrual, the existence of an unsystematic risk applicable to Puerto Rico, amortization of regulatory accrual, and regulatory accounts based on a document prepared on February 25, 2008, the agreement of the experiment had a wide scope, the Court reiterates its related opinions as to the Experts' Agreement, amongst others; (b) the Court also reiterates opinions excluding certain parameters which the Court has ordered to be stricken; (c) the proposed Regulation No. 12, which is intertwined with the milk price formula, and the procedure on how the formula will be implemented amongst the farmers, the milk processors, Indulac, the advertisers, the vendors, intermediaries, agents, and the consumers, amongst others; (d) whether the defendants should be found in contempt for failure to comply with the Injunction Order of July 13, 2007; ¹ and (e) whether the Court has the inherent power to enforce the Injunction Order, by establishing a formula and the implementation procedure through the adoption of a regulation, which is a task traditionally delegated to the states, and used as a last resource remedial solution by this Court, if necessary, based on the defendants consistent lack of compliance with the terms and conditions of the Injunction Order of July 13, 2007.

At the outset, the Court finds that, at this time, the Court will not establish the price fixing formula nor the corresponding regulation to implement the formula, see discussion infra. Except that matters that are directly contrary to law as to a potential discretionary matter or because the parties have stipulated a matter and one party, ORIL, is attempting to extricate itself from the Experts' Agreement signed by their experts as to the parameters to establish the factors to determine the return on equity (ROE), and other matters relating to the equity formula, and to the establishment of the price of the milk, which is determined by ORIL. See Docket entries No. 1697 and 1804, for a more detailed analysis.

The parties shall bear in mind that a reported non-compliance at this critical stage of the proceedings may result in a finding of contempt, fines, and if continued potential findings of criminal contempt. See discussion infra.

The Court, however, refuses to continue with the “games” staged by the defendant ORIL and its expert. ORIL, as explained infra is simply not in compliance and consequently, “cannot expect a trial court to do his homework for him.” McCoy v. Massachusetts Institute of Technology, 950 F.2d 13, 22 (1st Cir.1991); Cruz–Báez, et als. v. Negrón–Irizarry, 220 F.Supp.2d 77, 79 n. 3 (D.P.R.2002), citing McCoy v. Massachusetts Institute of Technology, 950 F.2d at 22. Rather, the parties have an affirmative responsibility to put their best foot forward in an effort to present a legal theory that will support their claim, which is in compliance with the Court's injunctive relief, as affirmed by the First Circuit. Cruz–Báez, 220 F.Supp.2d at 79, citing McCoy, 950 F.2d at 23. Likewise, the Court will not tolerate the “games” being played by the defendants to evade compliance with the Injunction Order and/or to try to extricate without showing manifest injustice from the Experts' Agreement, a matter that will be discussed below. See Docket entries No. 1907, 1965. The Court has also determined that ORIL is barred from alleging economic facts as to the economic crisis that Puerto Rico is undergoing as the Government has prevailed in the First Circuit, in the Supreme Court of Puerto Rico, as well as the United States Supreme Court, alleging exactly the contrary as alleged by ORIL and its expert, in the instant case. See Patriot Cinemas, Inc. v. General Cinemas Corp., et al., 834 F.2d 208, 212 (1st Cir.1987) (“playing fast and loose with the courts”).

Factual and Procedural Background

As stated above, the instant case was filed on August 13, 2004 by the fresh milk processors, Suiza and VTM on the grounds of violations of their civil rights, 42 U.S.C. § 1983, as the milk price formula used by ORIL at the time of the filing of the Complaint was discriminatory, and was predicated on factors no longer applicable to the Puerto Rico economy. Suiza and VTM also challenged the constitutionality of the milk regulation existing at the time based on due process, equal protection and the takings clause. Vaquería Tres Monjitas, Inc., 587 F.3d at 482–483.

On July 13, 2007, the Court issued an Injunction Order, Docket No. 480, granting a preliminary injunction to the fresh milk processors, and directing the defendants to comply with the terms and conditions set forth in the Injunction Order to remedy the challenges presented by the plaintiffs. In a nutshell, on July 13, 2007, the Court granted the preliminary injunction to the milk processors and ordered the following remedies:

(1) “Effective immediately, both the fresh milk...