United States Court of Appeals

For the First Circuit

No. 02-2114

DJ MANUFACTURING CORPORATION,

Plaintiff, Appellant,

v.

TEX-SHIELD, INC.,

Defendant, Appellee,

XYZ INSURANCE CO., CREATIVE APPAREL,

BLUCHER USA, BLUCHER GMBH.,

Defendants.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. Jay A. García-Gregory, U.S. District Judge]

Before

Torruella, Selya and Lipez,

Circuit Judges.

Marc Lamer, with whom Kostos & Lamer, PC, Eugene F. Hestres

and Bird, Bird and Hestres were on brief, for appellant.

Timothy K. Beeken, with whom Debevoise & Plimpton, Daniel M.

Abuhoff, Correa, Collazo, Herrero, Jiménez & Fortuño and Pedro

Jiménez were on brief, for appellee.

July 28, 2003
1 The plaintiffs also alleged violations of Sections 1 and 2 of

the Sherman Act, 15 U.S.C. §§ 1 and 2, Sections 2(a), (e), and (f)

of the Robinson-Patman Act, 15 U.S.C. §§ 13(a), (e), (f), the

Puerto Rican statute dealing with price discrimination, 10 L.P.R.A.

§ 263, and the Puerto Rican statute dealing with transactions in

restraint of trade, 10 L.P.R.A. § 258. The district court's

decision is unchallenged with respect to these other claims.

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TORRUELLA, Circuit Judge. Plaintiff-appellant DJ

Manufacturing ("DJM") alleges that Tex-Shield, Inc. ("Tex-Shield")

and Creative Apparel Associates ("Creative Apparel") violated,

inter alia, a Puerto Rican antitrust statute, 10 P.R. Laws Ann. §

264 (2002), by conspiring to destroy competition in the market for

chemical protective clothing in Puerto Rico.1 The district court

dismissed the complaint on a motion to dismiss. After careful

review, we reverse and remand for further proceedings.

I. Facts

Because this is an appeal from a dismissal under Fed. R.

Civ. P. Rule 12(b)(6), "[w]e glean the facts from the amended

complaint, stripped of any rhetorical gloss." Young v. Lepone, 305

F.3d 1, 4 (1st Cir. 2002).

DJM manufactures sewn clothing and equipage for the

United States military. It is a "small disadvantaged business"

under 48 C.F.R. § 19.001 (2003) (and a certified participant in the

Small Business Administration's program for contracts set aside to

small disadvantaged businesses under Section 8(a) of the Small

Business Act, 15 U.S.C. § 637(a) (2000).
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Defendant Tex-Shield manufactures, and its parent Blucher

GmbH holds a patent for, technology used to produce a chemical

protective material known as "Saratoga Filter Cloth" (the "Cloth").

The Cloth is a protective shield against biological and chemical

agents sewn into garments purchased by the United States military

and used for protection against attack by chemical warfare.

In July 1993, the United States Air Force ("USAF")

requested bids for the production of 40,000 Chemical Defense

Coveralls. The bidding was limited to businesses participating in

the SBA's § 8(a) program, such as DJM. The USAF specified that the

coveralls must be made using the Cloth and identified Tex-Shield as

the sole source. DJM won the contract.

DJM then subcontracted with Tex-Shield to buy the Cloth

for a price of $49.27 per yard. Subsequently, DJM and Tex-Shield

made a "technical services" contract, whereby, for a fee of $35,000

per month for twelve months, Tex-Shield agreed to provide DJM with

certain technical services.

On June 24, 1994, the Defense Personnel Support Center

("DPSC") solicited proposals for the production of at least 100,000

chemical and biological suits, with an option for more. As with

the USAF solicitation, the DPSC solicitation was limited to SBA's

§ 8(a) program participants. Also, the solicitation required the

suits be made with the Cloth; again, Tex-Shield was identified as

the Cloth's sole approved source.
2 Tex-Shield is wholly-owned by Blucher USA, which in turn is

wholly-owned by Blucher GmbH. Creative Apparel is, like DJM, a

clothing and equipage manufacturer. Tex-Shield, the Cloth's sole

supplier, also makes finished chemical and biological protective

clothing.

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In preparing its bid for DPSC, DJM inquired as to the

cost of procuring the Cloth. Tex-Shield quoted DJM a price of

$38.71 per yard for the first 100,000 suits, and $41.07 per yard

for any additional yardage. Tex-Shield quoted DJM a price of

$148.95 for the first 100,000 suits in pre-cut "kits" and $154.43

per kit for any extra kits. Based on these quotes, DJM offered

DPSC a price of $186.62 per unit for the first 100,000 suits and

$183.50 for any more suits. Creative Apparel bid $179.55 for the

first 100,000 suits and $186.02 for any extra. Creative won the

contract.

DJM filed a complaint against Tex-Shield, Blucher USA,

Blucher GmbH, and Creative Apparel,2 alleging several federal and

state antitrust violations. The complaint included allegations

that Tex-Shield violated § 264 of the Puerto Rico Anti-Monopoly Act

by selling goods in Puerto Rico at prices different from the

articles' price when sold elsewhere.

The district court dismissed all of the consolidated

actions, including the § 264 count, for failure to state a cause of

action. See Fed. R. Civ. P. 12(b)(6). In dismissing the § 264

count, the district court read the section only as an anti-dumping
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statute, forbidding the sale of goods at lower prices in Puerto

Rico.

DJM appeals only the lower court's dismissal of the § 264

count, as DJM waived all other appealable errors.

II. Standard of Review

We review the district court's resolution of Tex-Shield's

motion to dismiss de novo. Beddall v. State St. Bank & Trust Co.,

137 F.3d 12, 16 (1st Cir. 1998). When a litigant is facing a

summary dismissal, we first accept the complaint's well-pleaded

factual allegations as true, drawing all reasonable inferences in

the plaintiff's favor, and then determine whether this reading of

the complaint justifies recovery on any cognizable theory. Martin

v. Applied Cellular Tech., Inc., 284 F.3d 1, 6 (1st Cir. 2002).

Summary disposals "should be used sparingly in complex antitrust

litigation where motive and intent play leading roles, the proof is

largely in the hands of alleged conspirators, and hostile witnesses

thicken the plot." Poller v. Columbia Broad. Sys., Inc., 368 U.S.

464, 473 (1962).

III. Analysis

Two issues require discussion. First, we consider if the

district court erred when it limited the interpretation of the

phrase "at prices which are substantially different" to only those

situations where a supplier offers its product at a substantially

lower price to Puerto Rican customers as opposed to non-Puerto
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Rican customers, and ruled out those situations where a supplier

charged the Puerto Rican company substantially more than a

non-Puerto Rican company. Second, we decide if DJM's complaint

alleges sufficient facts to establish a § 264 claim, including

whether the complaint at least inferentially asserts that (1) TexShield's alleged conduct is aimed at "destroying competition or

eliminating a competitor located in Puerto Rico"; and (2) the goods

at issue are of the same grade or quality.

A. Statutory Interpretation

Neither this circuit nor the Puerto Rican commonwealth

courts have determined the pricing behaviors covered by § 264. DJM

contends that the statute prohibits charging either less or more

for goods in Puerto Rico. Thus, DJM argues that the district court

erred when it viewed the statute as an anti-dumping statute that

prohibits only the charging of lower prices in Puerto Rico.

Finally, DJM argues that § 264 is clear on its face and that we

should thus refrain from examining its legislative history. We

agree.

Where the statute's language is clear, and its terms do

not lead to "absurd or wholly impracticable consequences," the

words used are generally taken as the final expression of the

intended meaning. Caminetti v. United States, 242 U.S. 470, 490

(1917); see also United States v. Mo. Pac. R.R., 278 U.S. 269, 277-

78 (1929) ("where no ambiguity exists, there is no room for
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construction"). Although different canons of statutory

construction may apply when construing statutes in a civil code

system as opposed to statutes in a common law system, we need not

concern ourselves with these differences because the Puerto Rico

legislature provides a clear command as to the first step of civil

code interpretation: "When a law is clear and free from all

ambiguity, the letter of the same shall not be disregarded, under

the pretext of fulfilling the spirit thereof." 31 P.R. Laws Ann.

§ 14 (1967 & Supp. 1989); see also Pritzker v. Yari, 42 F.3d 53,

66-67 (1st Cir. 1994) (declining to "wander beyond the four

corners" of a Puerto Rican statute to discern "legislative

intent").

Here, the statute is clear regarding the pricing behavior

it targets. Section 264 states:

It shall be unlawful to sell, contract to

sell, offer to sell, or participate in any

step for the sale of articles in Puerto Rico,

after making due allowance for differences in

costs incident to the delivering of goods in

Puerto Rico and the costs of handling such

goods in Puerto Rico, at prices which are

substantially different from prices charged or

quoted by such sellers for goods of the same

grade or quality to buyers located outside of

Puerto Rico, when such difference in price is

granted with the purpose of destroying

competition or eliminating a competitor

located in Puerto Rico.

10 P.R. Laws Ann. § 264 (emphasis added). Unlike the Federal

Anti-Dumping Act of 1916, which the district court adopted as the

definitive model for this statute, there is no specific prohibition
3 The Federal Anti-Dumping Act reads in pertinent part:

It shall be unlawful for any person importing or

assisting in importing any articles from any foreign

country into the United States, commonly and

systematically to import, sell or cause to be imported or

sold such articles within the United States at a price

substantially less than the actual market value or

wholesale price of such articles, at the time of

exportation to the United States, in the principal

markets of the country of their production, or of other

foreign countries to which they are commonly exported

after adding to such market value or wholesale price,

freight, duty, and other charges and expenses necessarily

incident to the importation and sale thereof in the

United States: Provided, That such act or acts be done

with the intent of destroying or injuring an industry in

the United States, or of preventing the establishment of

an industry in the United States, or of restraining or

monopolizing any part of trade and commerce in such

articles in the United States.

15 U.S.C. § 72 (2003) (emphasis added). Clearly, the Puerto Rican

legislature did not merely adopt the provision wholesale, but

rather changed significant portions of it.

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against charging "a price substantially less" in Puerto Rico --

instead the legislature chose the broader term "substantially

different," which covers both higher and lower pricing.3

Because we hold the statutory language embraces both

higher and lower prices on its face, we need not enter the quagmire

of legislative history or use other tools of construction. The

district court judge erred in interpreting the provision too

narrowly, and that interpretation is reversed.

B. Sufficiency of Factual Allegations

Having decided the statute includes both higher and lower

price discrimination, we consider whether the complaint's
4 This is not a case in which the district court converted the

12(b)(6) motion into a motion for summary judgment.

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allegations and any logical inferences therefrom "justify recovery

on any cognizable theory." Martin, 284 F.3d at 6. Here, DJM

claims that the prices Tex-Shield charged to Creative Apparel were

lower than those quoted to DJM plainly suffice to survive

dismissal.

Even if the statute applies to the alleged charging of

higher prices in Puerto Rico, there are still two possible

obstacles to stating a claim under § 264. First, § 264 prohibits

a supplier from charging different prices for the purpose of

destroying the supplier's "competition or eliminating a competitor

located in Puerto Rico." Second, § 264 requires that the goods be

of "the same grade and quality." The district court did not

address either issue; taking all inferences in DJM's favor, we find

the district court erred in dismissing the complaint.4

1. Adverse Impact on Competition or Competitor

A well-pleaded § 264 claim must include allegations that

the price discrimination was for "the purpose of destroying

competition or eliminating a competitor located in Puerto Rico."

In its complaint, DJM contends that Tex-Shield and Creative Apparel

entered into "an agreement" involving, among other things,

investment by Tex-Shield in Creative Apparel as part of a

joint strategy to secure and maintain for the

Blucher defendants monopoly power in United
5 Both the allegation that Tex-Shield is building "additional

manufacturing operations" near Creative Apparel's plant and the

claim that Tex-Shield is investing in Creative Apparel to "enhance

its financial condition" could, if proven, support a finding of an

anti-competitive purpose to the price differential. Both of these

facts suggest a special relationship between Tex-Shield and

Creative Apparel that would make it logical for them to conspire to

destroy competition in the chemical protective clothing market.

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States trade and commerce in Chemical

Protective Cloth . . . and to attempt to

secure and maintain, and to secure and

maintain, monopoly power for Creative

[Apparel] in United States trade and commerce

in Chemical Protective Clothing, as well as in

such trade and commerce in the § 8(a) market.

It is not irrational for a monopoly-holder such as Tex-Shield to

act with the intent of sabotaging one of its two customers.5 Such

a concerted effort to establish and maintain monopoly power in the

relevant markets, if proven, would meet § 264's purpose requirement

because it would constitute an intent to harm competition in the

chemical protective clothing market or eliminate DJM as Creative

Apparel's competitor; thus, DJM's pleadings on this count suffice

to meet § 264's intent requirement. Compare In re Compact Disc

Minimum Advertised Price Antitrust Litig., 138 F. Supp. 2d 25, 28

n.4 (D. Me. 2001) (denying motion to dismiss where it was "not

irrational or implausible to infer agreement from the facts

alleged"), with DM Research, Inc. v. Coll. of Am. Pathologists, 170

F.3d 53, 55-56 (1st Cir. 1999) (affirming dismissal where complaint

"merely assert[ed] a conspiracy in conclusory terms" and stating

that allegation of some fact pertaining to an agreement would be
6 We find the defendant's reliance on Lubbock Glass & Mirror Co.

v. Pittsburgh Plate Glass Co., 313 F. Supp. 1184, 1187 (N.D. Tex.

1970), unfounded. In Lubbock Glass, the court found that glass,

doors, frames and windows could not be considered of like kind and

quality when conveyed in different contracting jobs, because

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necessary to overcome the improbability of a conspiracy against the

interests of one or more of the parties).

2. Goods of Same Grade and Quality

Finally, § 264 requires that DJM allege that Tex-Shield

was quoting different prices for "goods of the same grade or

quality." Defendants argue that "the goods for which DJM requested

a price -- pre-cut fabric kits -- were not the same grade or

quality as the goods on which Creative Apparel requested a price --

uncut cloth on the roll." Although this argument may ultimately

have merit, it does not preclude inferences from the complaint

sufficient to defeat a Rule 12(b)(6) motion.

It is possible to infer from the complaint that the goods

at issue were of the same grade and quality. According to the

complaint, a DPSC report indicates that "Defendant Tex-shield had,

in fact, offered the Blucher Chemical Protective Cloth to Creative

at a significantly lower price than it had offered the cloth to

DJM." Given that the final product, the chemical protective

clothing, had to be produced according to military specifications

that included use of the Cloth, it is a reasonable inference --

without considering any contrary proof -- that the goods at issue

(the Cloth) had to be of the same grade and quality.6 Cf. Arruda
"intangible items, such as installation, weather conditions, the

architect or contractor in charge of the job and other intangibles

make each job unique or different." Id. at 1185. Further the

court stated that

commercial installed contracts . . . are a combination of

many ingredients, none of which are subject to exact

calculation. A difference in one ingredient could and

probably would occasion a difference in the total price

or bid. Apparently, someone calculating a bid for a

commercial installed contract cannot even determine

exactly the material costs involved.

Id. at 1186-87. The Cloth needed by both DJM and Creative is the

same and the costs involved are easily estimated, as shown by DJM's

own calculation of cutting costs.

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v. Sears, Roebuck & Co., 310 F.3d 13, 18 (1st Cir. 2002)

(indicating that in evaluating propriety of 12(b)(6) motion, the

court must "assume the truth of all well-pleaded facts and indulge

all reasonable inferences therefrom that fit the plaintiff's stated

theory of liability").

IV. Conclusion

For the foregoing reasons, the district court's dismissal

of the complaint is reversed and the case is remanded for further

proceedings consistent with this opinion. We intimate no view as

to whether, after pretrial discovery, trialworthy issues will be

shown to exist.

Reversed and remanded.