Virgin Island Mar. Serv., Inc. v. Puerto Rico Mar. Shipping Auth.
| Decision Date | 24 June 1997 |
| Docket Number | Civil No. 1992-226. |
| Citation | 37 V.I. 193 |
| Parties | VIRGIN ISLAND MARITIME SERVICE, INC., Plaintiff, v. PUERTO RICO MARITIME SHIPPING AUTHORITY, Defendant. |
| Court | U.S. District Court — Virgin Islands |
OPINION TEXT STARTS HERE
Following entry of jury verdict in favor of agency of shipping line on its claims against Puerto Rico Maritime Shipping Authority (PRMSA), PRMSA submitted post–trial motions to dismiss, for judgment as matter of law, or alternatively for new trial. The District Court, Moore, Chief Judge, held that: (1) PRMSA was an entity separate from the Commonwealth of Puerto Rico, and thus, was not entitled to sovereign immunity; (2) PRMSA was entitled to judgment as a matter of law on breach of contract claim; and (3) jury verdict of $2,911,297 on breach of contract claim by shipping agency against PRMSA was utterly without support from evidence adduced at trial, and thus new trial was warranted.
Verdict vacated; complaint dismissed with prejudice. Fernando L. Gallardo, Woods & Woods, San Juan, PR, Alan R. Feuerstein, Buffalo, NY, Ashley R. Andrews, New York City, for Plaintiff.
Richard H. Hunter, Christiansted, St. Croix, VI, J. Ramon Rivera Morales, Jimenez, Graffam & Lausell, San Juan, PR, for Defendant.
A Jury trial took place on February 20 and 21, 1997 relating to a contract dispute between the parties. At the conclusion of that trial the jury returned a verdict in plaintiff's favor in the amount of $2,911,297.00. Defendant has submitted a post-trial motion to dismiss, for judgment as a matter of law, or alternatively for new trial. The respective grounds for these motions are sovereign immunity, an allegedly unambiguous contract, and a jury verdict which is not rationally related to the evidence. Before addressing these claims, a thorough discussion of the procedural history is required.
Plaintiff Virgin Islands Maritime Services, Inc. [“VIMS”] brought three causes of action against defendant Puerto Rico Maritime Shipping Authority [“PRMSA”] in its January 19, 1993 Amended Complaint. VIMS alleged in Count I that PRMSA had breached the parties' August 1, 1979 Agency Agreement [“Agency Agreement”] by delivering to VIMS on June 26, 1992 a written notice of termination, effective in ninety days, which termination was not based on any “good cause” as that term was defined in the Agency Agreement. Count II of the Amended Complaint alleged that the relationship between VIMS and PRMSA was that of a franchisee and franchisor within the meaning of the Virgin Islands Franchised Businesses Act, V.I.Code Ann. tit. 12A, § 130, and that PRMSA was liable to VIMS under that act. Count III alleged that PRMSA had tortiously interfered with prospective contractual relations between VIMS and a Florida shipper, Seaboard Marine, by advising VIMS that if it became an agent of another shipping line, VIMS would suffer from a conflict of interest and be in violation of the agency agreement. Count IV of the Amended Complaint, and the entirety of PRMSA's February 10, 1993 counterclaim, excepting the first claim for relief, were settled between the parties shortly before trial. PRMSA's first claim for relief surviving the settlement was that PRMSA had validly terminated VIMS by giving them ninety days notice, which was all that was required after the initial three-year term of the contract had expired.
In the Joint Final Pretrial Order submitted by the parties to the Court on January 31, 1997, PRMSA alleged that the claims of VIMS were not justiciable in federal court because PRMSA was an instrumentality and arm of the Government of the Commonwealth of Puerto Rico under Title 23, P.R.Laws Ann. § 3051 et seq. and thus is immune from suit in federal court under the Eleventh Amendment of the Constitution. The parties submitted briefs addressing the question of the District Court's jurisdiction before trial. The Court made a pre-trial ruling that it had jurisdiction and denied PRMSA's motion, although no written opinion was issued at that time.
In opening statement plaintiff's counsel told the jury that VIMS would be seeking $871,000.00 in damages for breach of contract and an additional $1.9 million in damages for tortious interference with prospective contractual relations.1 At the conclusion of the plaintiff's case-in-chief, the franchise claim (Count II) and the tortious interference claim (Count III) were dismissed upon defendant's Rule 50 motion for a directed verdict.
PRMSA also moved for a directed verdict on the remaining breach of contract claim (Count I) on the basis that the contract was unambiguous and that, as a matter of law, the Agency Agreement gave each party the right to terminate the contract after the initial three year term of the agreement by giving a ninety-day written notice. The Court withheld ruling on the breach of contract claim, but denied PRMSA's other assertions that VIMS had failed to establish any damages to a reasonable degree of certainty, that VIMS' own corporate records showed continuous financial losses, that the absence of economic expert testimony was fatal, that a projected ten-year period for claimed lost profits was speculative, that no evidentiary bases had been established for allowing judicial notice of Virgin Islands Department of Labor industry growth increases, and that no damage claims should be permitted beyond March 3, 1995 when PRMSA went out of business and ceased all operations. 2
At the close of all evidence, PRMSA renewed its directed verdict motions. The Court again withheld ruling on the question of whether the contract was unambiguous and whether good cause was required for termination, and denied the balance of the Rule 50 motion.
In summation, VIMS asked the jury to conclude that its agency contract had been improperly terminated and that VIMS would have received average net operating profits of $70,918.00 annually had the agency agreement continued. VIMS asked the jury to award it the sum of $709,180.00, representing theorized net lost profits over a ten year period. In its argument to the jury, PRMSA pointed out that the June 26, 1992 termination letter complied with the provisions of Article 12(A) of the Agency Agreement, that Mr. Francis, the sole owner of VIMS, had acknowledged in writing shortly thereafter that the contract could be terminated with a ninety-day written notice, and that VIMS' financial records (Exs. G1, G2, G3, G4 and G5; Ex. 48) revealed an average annual operating loss of $17,500.00, were reviewed by the jury. In rebuttal, VIMS made arguments based on matters not in evidence, including assertions that plaintiff had lost millions of dollars and that VIMS employees had lost jobs as a result of PRMSA's wrongful termination. PRMSA's motion for a mistrial and PRMSA's request for admonishment were denied.
The jury began deliberating at approximately 5:00 p.m. on Friday, February 21 and reached a verdict about two hours later, awarding VIMS $2,911,297.00 for breach of contract on Count I.
The issues relevant to trial and raised by the post-trial motion regarding Count I are whether the Agency Agreement (1) is unambiguous, and (2) only allowed PRMSA to terminate VIMS with ninety days notice for good cause. The relevant provision of the Agency Agreement is Article 12, which states:
(A) This agreement shall for all purposes be effective as of the date herein above upon execution by both parties, and shall remain in effect for three (3) years thereafter. Unless notice of a party's intention to terminate this Agreement at the end of such three (3) year period be given by such party to the other at least ninety (90) days in advance of the end of such year, this Agreement shall continue in full force and effect thereafter until terminated by notice given by the party desiring to terminate this Agreement to the other at least ninety (90) days in advance of the specified termination date.
(B) PRMSA may terminate this agreement upon 90 days advance notice in the event of,
(a) Gross negligence on the part of the Agent in the performance of his duties.
(b) Unlawful or wrongful acts by the Agent to the detriment of PRMSA's interests.
(c) The failure of PRMSA to achieve a reasonable share of the market as a result of lack of activity on the part of the Agent.
(Plaintiff's Ex. 3). The undisputed evidence at trial showed that on June 26, 1992 PRMSA had provided VIMS with written notice of termination effective on September 26, 1992, pursuant to Article 12 of the Agency Agreement. (Ex. 16.) The issue presented to this Court both during trial and in PRMSA's post-trial motion for judgment as a matter of law on Count I is whether the specified grounds for termination delineated in 12(B) limited PRMSA's ability to terminate the agreement only during the initial three-year term, as argued by PRMSA, or continued to limit PRMSA if the parties allowed the Agency Agreement to remain in effect after its initial three-year term, as asserted by VIMS.
III. THE JURISDICTION OF THE DISTRICT COURTA. Claims of Sovereign Immunity
Before trial, PRMSA moved to dismiss the entire case on the ground that it was an arm of the government of the Commonwealth of Puerto Rico [“the Commonwealth”] and therefore entitled to share in the Commonwealth's sovereign immunity. The Court here recites the basis for denying its renewed contention.
Whether PRMSA is entitled to participate in the Commonwealth's sovereign immunity has been confronted by several courts. The most recent case, which is also most apposite, is Trans America Recovery Services, Inc. v. Puerto Rico Maritime Shipping Authority [“ Trans America I”], 820 F.Supp. 38 (D.P.R.1993), reversed upon reconsideration [“ Trans American II”], 850 F.Supp. 103 (1994). In that case, a contractor brought an action seeking to recover damages suffered as a result of PRMSA's alleged unjustified cancellation of a demurrage billing and collection contract....
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