United States Court of Appeals

For the First Circuit

No. 10-1677

LAMEX FOODS, INC.,

Plaintiff, Appellee,

v.

AUDELIZ LEBRÓN CORP.,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF PUERTO RICO

[Hon. José Antonio Fusté, U.S. District Judge]

Before

 Lynch, Chief Judge,

Torruella and Lipez, Circuit Judges.

Pedro Jiménez-Rodríguez, with whom Pedro J. Santa-Sánchez,

José L. Ramírez-Coll, and Adsuar Muñiz Goyco Seda & Pérez-Ochoa,

PSC were on brief, for appellant.

Laura Beléndez-Ferrero, with whom Ferraiuoli Torres Marchand

& Rovira, PSC was on brief, for appellee.

June 27, 2011
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LIPEZ, Circuit Judge. Defendant-appellant Audeliz Lebrón

Corp. ("ALC") appeals from a judgment in favor of plaintiffappellee Lamex Foods, Inc. ("Lamex"), which the district court

entered after consolidating a preliminary injunction hearing with

a bench trial on the merits under Federal Rule of Civil Procedure

65(a)(2). The appellant argues that the district court abrogated

its right to a jury trial by failing to provide indisputably clear

notice of its intent to consolidate. See U.S. Const. amend. VII;

see also Fed. R. Civ. P. 65(a)(2) (permitting the consolidation of

a preliminary injunction hearing with a trial on the merits, but

noting that "the court must preserve any party's right to a jury

trial").

Although we appreciate the district court's efforts to

resolve the parties' dispute in an efficient and timely manner, we

agree with ALC that the court's inadequate notice of its intent to

consolidate abrogated ALC's right to a jury trial. Rejecting

appellant's other arguments, we vacate the judgment in part and

remand for further proceedings.

I.

A. Factual Background

Lamex is a Minnesota corporation that facilitates the

sale of food from manufacturers to suppliers and vendors worldwide.

Around February 2007, Lamex entered into a business relationship in

which it purchased frozen chicken from George's Farms, Inc.
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("George's") and resold the product to ALC, a Puerto Rico

corporation that supplies frozen food products to supermarkets and

other retailers throughout the Commonwealth.

The parties' business relationship encountered an

obstacle around January 2009, when ALC's insurance underwriter

dropped the corporation from its coverage. Lamex sought from ALC

a replacement security, which ALC provided in the form of a standby

letter of credit for $500,000 drawn on First Bank, a Puerto Rico

financial institution. In turn, ALC requested from Lamex a

matching unsecured credit for $500,000. Lamex's corporate policy

prohibited such matching, but in an effort to preserve the parties'

relationship, Steve Anderson, the president of Lamex, encumbered

his personal funds to provide ALC with the matching credit.

In November 2009, however, the parties' cordial

relationship came to an end when ALC stopped paying Lamex money

owed. By that time, ALC, without remunerating appellee, had

received shipments of frozen poultry totaling over $1.2 million in

value. After myriad informal attempts to collect the delinquent

invoices from ALC failed, Lamex canceled ALC's account, halted

shipment on orders of poultry designated for ALC, and placed the

unpaid-for poultry into cold storage in various facilities in

Puerto Rico and on the mainland. Lamex also cashed in the $500,000

letter of credit from First Bank.
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ALC responded by filing suit in the Commonwealth's

Superior Court in San Juan, naming as defendants Lamex, George's,

and First Bank, among others, and alleging violations of Puerto

Rico's Dealers' Contract Act of 1964 ("Law 75"), P.R. Laws Ann.

tit. 10, §§ 278-278e, which prohibits a principal from terminating

a business relationship with a dealer without just cause,

Euromotion, Inc. v. BMW of N. Am., Inc., 136 F.3d 866, 870 (1st

Cir. 1998). After ALC's suit had been filed, but before serviceof-process had been completed, Lamex brought the instant action in

federal district court, naming as defendants ALC and its president,

Audeliz Lebrón. 

In its December 22, 2009 complaint, Lamex sought to

recover the remainder of the monies owed to it and asked that the

corporate veil be pierced to hold Lebrón personally liable for

ALC's debt should the corporation be unable to pay in full.

Furthermore, Lamex requested a declaratory judgment stating that it

was not a "principal" for Law 75 purposes or that even if it were

a principal, it had just cause to terminate its relationship with

ALC. Finally, Lamex sought a preliminary injunction barring ALC

from continuing a "smear campaign" against Lamex, in which ALC

purportedly interfered with Lamex's attempts to find other buyers

for the cold-stored poultry by telling potential buyers that Lamex

and George's poultry products were entangled in a lawsuit. Lamex's

complaint contained a jury demand for all of its legal claims. 
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B. District Court Proceedings

1. The First Hearing and Status Conference

On January 14, 2010, the district court convened an

initial hearing for the purpose of deciding Lamex's motion to

reconsider an order granting defendants extended time to answer the

complaint. After inquiring into the nature of the parties' dispute

and discovering that their conflict involved the collection of

outstanding debt, the court warned the litigants that "you cannot

drag a case like this for a year or two, because there's no point,"

and encouraged them to settle. In the interim, the court put the

case on an expedited schedule. It gave defendants one day to

respond to the complaint. Additionally, the court established what

it characterized as a "streamlined discovery process," ordering the

parties to exchange all pertinent documents by January 18 and to

depose two key witnesses -- Steve Anderson and Audeliz Lebrón -- by

January 20. 

 On January 18, Lamex filed a motion to convert its

request for a preliminary injunction, which it had submitted in its

complaint and in a separate motion dated January 13, into a demand

for a permanent injunction. The court, in an order issued on

January 20, "[g]ranted [the motion] in the sense that the

preliminary and permanent injunctive relief, if available, shall be

considered in a consolidated hearing as requested." 
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Soon after, the court received notice that the parties

did not finish the depositions on January 20, as ordered. Lebrón's

deposition was cut short after he refused to answer questions

relating to issues addressed in Lamex's prayers for declaratory

judgment and preliminary injunction. At a status conference six

days later, the court reviewed the transcript of Lebrón's

deposition, concluded that defendants were obstructing the

discovery process, and sanctioned them by ordering them to pay for

any expense Lamex incurred for the thwarted deposition. At the

conclusion of the status conference, the court advised the parties

that the preliminary injunction hearing, which was originally set

for February 1, would be advanced to January 27, the very next

morning.

2. The Injunction Hearing

Decrying behavior it characterized as parties "playing

hardball to avoid certain obligations," the court began the

preliminary injunction hearing by emphasizing that it was committed

"to help[ing] the parties . . . resolve this whole situation" in a

professional manner:

I am here to do the right thing, and that's the reason

why I got really upset with you people yesterday, and

that's the reason I said that if you had not taken my

advice to do discovery the right way, with the purpose of

trying to resolve the situation, I was going to then take

the law in my own hands and force it, shove it upon you,

a solution. . . . There is no way that I'm going to allow

a case like this to drag for months and months when you

have those amounts of money due and owing for chicken,

basically, okay? And I am not going to allow this kind
 Lamex also moved, in the alternative, for summary judgment, 1

see Fed. R. Civ. P. 56, arguing that Anderson's testimony, combined

with Lebrón's deposition, was sufficient to resolve the claims in

its favor. The motion was denied.

-7-

of argument to linger without some sort of arbiter,

[j]udge or whoever, telling you what the story is.

The court then informed the parties that "if I get at some point in

time during this hearing that I should convert this into a trial on

the merits, then I will do it." He advised them that "even though

we are proceeding under a preliminary injunction situation, if the

issues are as simple as I think they are, I'm going to take this

matter and resolve it altogether, one shot." When Lamex reminded

the court of its motion to convert the preliminary injunction

hearing into a permanent injunction hearing, the court replied,

"You already heard what I said. If I think as we progress that

that's what I should do, I'm going to do it. I'm just giving you

fair warning."

The court then proceeded to take the testimony of

Anderson. At the conclusion of its president's testimony, Lamex

again moved to have the hearing be treated as a permanent

injunction hearing. In response, the court stated, "I told you 1

that I was considering doing precisely that, the

consolidation. . . . But I will not make that decision until I have

heard all the evidence."

When the hearing reconvened after a lunch recess, Lamex

requested that the court "at least . . . enter an order for [a]
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preliminary injunction." The court admonished Lamex's counsel for

making this request, reminding her that it wanted to hear all the

evidence before proceeding: "Counsel, if you don't give me what I

need, I'm going to just deny your motion. Simple as that."

Defendants in turn moved for a judgment on partial findings under

Federal Rule of Civil Procedure 52(c), on the ground that because

they had already consigned money to the Superior Court, the amount

in controversy was insufficient to give the federal court subject

matter jurisdiction. As an alternative ground for their Rule 52(c)

motion, defendants argued that Lamex failed to meet the

requirements for a preliminary injunction. See Narragansett Indian

Tribe v. Guilbert, 934 F.2d 4, 5 (1st Cir. 1991) (reciting the

four-part preliminary injunction inquiry, which requires

consideration of the likelihood of success on the merits, the

potential for irreparable injury, the balance of equities for and

against an injunction, and the effect on the public interest). The

district court found both grounds unpersuasive and denied the

motion.

Audeliz Lebrón and two employees of George's then

testified, the latter two by phone. At the close of their

testimony, defendants renewed their Rule 52(c) motion, adding a new

argument that Lamex had failed to show irreparable harm "in as much

as ample evidence has been presented that the money that was

allegedly owed has already been consigned and given [to the Puerto
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Rico court]." The district court asked defendants whether they

would "object to a motion filed tomorrow . . . to disburse that

money immediately to Lamex," to which defendants initially

responded in the negative. But they subsequently equivocated,

telling the court, "If the amounts are the same, then [Lamex] can

retire the money."

The court then had the following colloquy with counsel:

THE COURT: This is what we're going to do. I find that

this is a very simple case. I thought it was a lot more

complicated. It's an extremely simple case.

The only issues here are, number one, what kind of

intervention this [f]ederal [c]ourt can have in the

context of the relations between these parties as it

pertains to Law 75, having plaintiff being the one who

initiated the case.

That's number one. And it could be as claimed by

way of injunctive relief or, more probable than not,

perhaps declarative judgment, if any, that could be the

alternative.

And then the other question is whether there is any

issue with the payment that is due and owing supposedly.

That's all.

Does everybody agree that those are the issues?

Plaintiff, are those the issues?

COUNSEL FOR LAMEX: Yes, Your Honor.

COUNSEL FOR ALC: Yes, Your Honor.

THE COURT: I think what I told you at the beginning, that

I could consolidate this into one thing, is going to

happen. I don't think I need anything else. All I need

to do is sit down with this evidence and figure out which

rights each party has to this. Any objection to this?

COUNSEL FOR LAMEX: Your Honor, I don't have any objection

to that.

THE COURT: Do you have any objection to that?

COUNSEL FOR ALC: No, Your Honor.
 According to the district court, ALC owed Lamex monetary 2

relief in the sum of $1,287,911.13 in poultry delivered; interest

on that amount, calculated at 1.5% for every month ALC's account is

in arrears; and storage fees totaling $56,692.12. The $500,000

Lamex already received by drawing on First Bank's letter of credit

would be credited toward the total amount owed, as would the

$785,097.14 held in consignment by the San Juan court.

Lebrón, in his personal capacity, is not a party to this 3

appeal.

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3. After the Injunction Hearing

A week later, the court conducted an evidentiary hearing

to determine the amount of cold-storage fees Lamex incurred as a

result of ALC's failure to pay its outstanding invoices. 

The next day, February 5, the court issued an opinion and

order disposing, on the merits, of all of the claims made in

Lamex's complaint. The court denied Lamex's requests to pierce the

corporate veil and for preliminary and permanent injunctive relief.

However, it granted Lamex's request for a declaratory judgment

absolving Lamex from liability under Law 75. Furthermore, it

ordered defendants to pay the total amount due to Lamex and ordered

the Superior Court of San Juan to release the money ALC consigned.2

After its motion for reconsideration was denied by the

district court, ALC timely appealed. Before us, it argues that 3

the district court failed to provide unambiguous notice of the Rule

65(a) consolidation and, in so doing, violated its right to trial
 Appellant raises two additional issues related to this 4

argument. It contends that the Rule 65(a) consolidation deprived

it of the opportunity to conduct meaningful discovery. It further

asserts that the court relied on inappropriate evidence, in

particular testimony obtained remotely via telephone, in adjudging

credibility and reaching a decision on the merits. Because we

vacate the judgment, we do not reach these subsidiary arguments.

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by jury. As an additional matter, ALC asks us to vacate the 4

court's order of sanctions for its discovery-related conduct.

II.

A. Right to a Trial by Jury

The Supreme Court has long counseled that "[m]aintenance

of the jury as a fact-finding body is of such importance and

occupies so firm a place in our history and jurisprudence that any

seeming curtailment of the right to a jury trial should be

scrutinized with the utmost care." Dimick v. Schiedt, 293 U.S.

474, 486 (1935). For this reason, once a party files a proper

demand for a jury trial on its legal claims, see Fed. R. Civ. P.

38, that demand must be honored unless the parties expressly

consent to withdraw the demand, see id., or subsequently waive

their jury trial right by either expressly or implicitly agreeing

to a bench trial, see Venture Tape Corp. v. McGills Glass

Warehouse, 540 F.3d 56, 62-63 (1st Cir. 2008); Coxcom, Inc. v.

Chaffee, 536 F.3d 101, 110-11 (1st Cir. 2008). 

In this instance, Lamex made a general demand for a jury

trial with respect to all the legal claims pled in its complaint,

and ALC was entitled to rely on that demand. In re N-500L Cases,
 Although Lamex's Law 75 claim was framed as a declaratory 5

judgment, appellant argues, and Lamex does not disagree, that Law

75 controversies are quintessentially legal, and not equitable, and

thus can be heard by a jury. This court has not held that Law 75

is an action to which the Seventh Amendment attaches; however,

because the parties here are in agreement on this issue, we accept

that position for the purposes of this case.

 As it turns out, during the injunction hearing, defendants 6

conceded the existence and amount of the debt owed to Lamex and

told the court that "[i]f the amounts [that Lamex claims is owed]

are the same [as that ALC consigned to the Puerto Rico court] then

they can retire the money." This admission left only two legal

claims: the declaratory judgment and the piercing of the corporate

veil.

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691 F.2d 15, 22 (1st Cir. 1982) ("Where one party has made a

demand, others are entitled to rely on the demand with respect to

issues covered by the demand and need not make an independent

demand of their own."). ALC says that it did so rely and, never

having received clear notice from the district court of its intent

to consolidate, its participation in the January 27 hearing was

limited to the issue of injunctive relief. It expected that

Lamex's legal claims, including the declaratory judgment related to

Law 75, would be resolved at a later point before a jury. Lamex 5 6

counters that the district court consolidated the preliminary

injunction hearing with a trial on the merits after providing

adequate notice, and that ALC implicitly waived the right to a jury

trial by actively participating, without objection, in that

consolidated proceeding.
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1. Inadequate Notice of Rule 65(a)(2) Consolidation

Rule 65(a)(2) states, in relevant part: "Before or after

beginning the hearing on a motion for a preliminary injunction, the

court may advance the trial on the merits and consolidate it with

the [preliminary injunction] hearing." Fed. R. Civ. P. 65(a)(2).

Although the rule facilitates "the generally admirable objective of

saving time and duplication of effort," there are "hazards inherent

in fully disposing of cases in such an expedited fashion -- among

them incomplete coverage of relevant issues and failure to present

all relevant evidence." Caribbean Produce Exch., Inc. v. Sec'y of

Health & Human Servs., 893 F.2d 3, 5 (1st Cir. 1989); see also

Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981) (noting that

"a preliminary injunction is customarily granted on the basis of

procedures that are less formal and evidence that is less complete

than in a trial on the merits," and concluding that "[i]n light of

these considerations, it is generally inappropriate for a federal

court at the preliminary injunction stage to give a final judgment

on the merits"). Such risks are especially acute in cases that

turn on credibility determinations, as a truncated hearing will

often limit the parties' opportunity to present and thoroughly

examine witnesses. For this reason, our law "demand[s that a trial

court provide] 'indisputably clear notice' to the parties before

approving . . . consolidation." Francisco Sánchez v. Esso Standard

Oil Co., 572 F.3d 1, 15 (1st Cir. 2009) (quoting Caribbean Produce,
 The issue of the adequacy of notice of consolidation under 7

Rule 65(a) can arise independently of a dispute over the waiver of

the jury trial right and has constitutional implications beyond the

Seventh Amendment. Cf. K-Mart Corp. v. Oriental Plaza, Inc., 875

F.2d 907, 913 (1st Cir. 1989) ("It is apodictic that the district

court's power in [ordering consolidation] 'must be tempered by the

due process principle that fair notice and an opportunity to be

heard must be given the litigants before the disposition of a case

on the merits.'" (quoting 11 Charles Alan Wright & Arthur R.

Miller, Federal Practice and Procedure § 2950 (1st ed. 1973))).

Here, however, ALC argues the adequacy of notice in relation to the

Seventh Amendment jury trial right. Under the circumstances of

this case, we think that is an appropriate way to analyze the

issue.

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893 F.2d at 5); see also Camenisch, 451 U.S. at 395 (noting that

"the parties should normally receive clear and unambiguous notice

[of consolidation] either before the hearing commences or at a time

which will still afford the parties a full opportunity to present

their respective cases" (quoting Pughsley v. 3750 Lake Shore Drive

Coop. Bldg., 463 F. 2d 1055, 1057 (7th Cir. 1972))). 

Failure to provide indisputably clear notice of

consolidation can constitute reversible error even if the right to

a jury trial is not at issue. See Caribbean Produce, 893 F.2d at 7

5-6; 11A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane,

Federal Practice and Procedure § 2950 (2d ed. 1995) ("[O]rdering

consolidation during the course of a preliminary injunction hearing

is reversible error when little or no notice is given of this

change and the effect is to deprive a party of the right to present

his case on the merits."). The stakes are even higher where, as

here, the surprise consolidation would result in the deprivation of
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a party's right to prosecute or defend the remaining legal claims

before a jury. In these situations, we "indulge every reasonable

presumption against [construing the parties' participation in the

consolidated hearing as] waiver." Aetna Ins. Co. v. Kennedy, 301

U.S. 389, 393 (1937); see also García-Ayala v. Lederle Parenterals,

Inc., 212 F.3d 638, 645 (1st Cir. 2000) (emphasizing that "the

right to a jury trial is constitutionally protected and casual

waivers are not to be presumed").

In this case, the court gave the parties contradictory

signals as to its intent. At the parties' first appearance before

the court, which took place on January 14, Lamex requested, and the

court scheduled, a hearing on Lamex's motion to enjoin defendants

from "interfer[ing] with [Lamex's] course of dealing with other

Puerto Rico businesses" and "performing other acts in detriment of

[Lamex's] goodwill, name, and reputation." On January 20, the

court granted Lamex's motion to consolidate and agreed to consider

"the preliminary and permanent injunctive relief, if available

. . . in a consolidated hearing." This order, which was the only

written order mentioning "consolidation," was plainly not a Rule

65(a)(2) order. On the eve of the January 27 hearing, the court,

despite its January 20 order, was still referring to the next

morning's proceedings as a preliminary injunction hearing, and the

hearing was captioned as such. Up to this point, the court and the
Indeed, the crux of ALC's defense against the imposition of 8

sanctions at the status conference was that Lebrón justifiably

refused to answer Lamex's counsel's questions because they

pertained to the Law 75 claim and not to the preliminary

injunction.

 It is not clear why Lamex insisted on renewing a motion that 9

had already been granted on January 20. Nor is it clear why the

court made no reference to its January 20th order. These oddities

confirm the confusion that permeated the proceedings.

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parties seemed to be in agreement that only the plea for injunctive

relief was before the court.8

The confusion began the next day. At the start of the

preliminary injunction hearing, the court warned the parties: "[I]f

I get at some point in time during this hearing that I should

convert this into a trial on the merits, then I will do it." It

advised them "that even though we are proceeding under a

preliminary injunction situation, if the issues are as simple as I

think they are, I'm going to take this matter and resolve it

altogether, one shot." This statement might provide the requisite

notice of Rule 65(a)(2) consolidation if not for the court's

subsequent comments. In the next breath, the court offered a

different view of its intentions when it responded in the following

way to Lamex's reminder that it had "requested that the preliminary

injunction hearing be converted to a permanent injunction hearing":

"You already heard what I said. If I think as we progress that

that’s what I should do, I’m going to do it." This succeeding 9

statement implied that the court's intention was only to
 In responding to Lamex, the court again did not acknowledge 10

the terms or existence of its January 20 order. Instead, it

stated: 

I told you that I was considering doing precisely that,

the consolidation. Consolidation doesn't mean that the

result is going to be favorable to you or to them.

Consolidation is a technical procedural matter.

But I will not make that decision until I have heard

all the evidence. I want to receive more evidence. I

need to hear you. I need to hear the other side, too.

Then I'll decide.

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consolidate the hearing for preliminary injunctive relief with the

hearing for permanent injunctive relief, as Lamex requested, and

not to reach the merits of the remaining claims. Later, the court

shored up this inference when, in response to Lamex's reminding the

court of its January 20 order, the court stated, "I told you that

I was considering doing precisely that, the consolidation." In 10

sum, during the hearing, the court made three references to

consolidation; of those three references, only the first mentioned

the merits of the other claims, and the later two implied that it

expected only to consolidate the proceedings for preliminary

injunctive relief with those for permanent injunctive relief.

At the very end of the preliminary injunction hearing,

the court compounded the confusion by stating that "I think what I

told you at the beginning, that I could consolidate this into one

thing, is going to happen," without clarifying what it meant by

consolidating "this into one thing." It then asked whether the

parties objected to "this," to which the parties answered in the
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negative. Not once during this colloquy did the court explicitly

state that it intended to dispose of all the issues on the merits

or that it was proceeding under Rule 65(a)(2). 

The court's contradictory and vague statements do not

satisfy "the overriding requirement [of] indisputably clear notice"

of the court's intention to consolidate the preliminary injunction

hearing with a trial on the merits. Caribbean Produce, 893 F.2d at

5. Indeed, statements less ambiguous than those voiced by the

district court have been held to be inadequate. See, e.g.,

AttorneyFirst, LLC v. Ascension Entm't, Inc., 144 F. App'x 283, 290

(4th Cir. 2005) (per curiam) (unpublished) (holding that the

comment that "the preliminary injunction stage, if I do it right,

will be the end of the fight," did not "constitute[] the kind of

clear and unambiguous notice required by Rule 65(a)(2)"); Woe v.

Cuomo, 801 F.2d 627, 629 (2d Cir. 1986) (concluding that the

court's "oblique references . . . to the dispositive nature of the

proceedings," including the statement that it wanted "to finally

close this case . . . [o]nce and for all, at least at this level,"

did not provide adequate notice); Pughsley, 463 F.2d at 1056-57

(holding that a court's instruction for counsel to put on "your

total case" did not provide adequate notice of consolidation, as

"[p]laintiffs' counsel could reasonably have understood the judge

as merely requiring a presentation . . . of the remainder of

plaintiffs' 'total case' in support of their pending motion [for a
 Notably, even Lamex behaved in ways consistent with this 11

understanding: Lamex reiterated its jury trial demand for its legal

claims, pressed the court at various points to convert the hearing

from one for preliminary injunctive relief to one for permanent

injunctive relief, and, at the hearing's conclusion, indicated that

it would refrain from presenting the rest of its evidence "[i]n the

interest of a speedy injunction." Lamex also called few witnesses

and petitioned for liberal rules of evidence and procedure. During

her questioning of Steve Anderson, for instance, Lamex's counsel

specifically referenced the fact that this was a preliminary

injunction hearing to argue for a more lenient standard of

admissibility:

THE COURT: We don't know what is the relationship between this

[person] and ALC. Therefore, it's [not admissible until] you

establish that relationship. That's it. 

COUNSEL FOR LAMEX: Your Honor, if this is a preliminary

injunction hearing, just for the record, inadmissible evidence

that may otherwise be admissible in a court of law at the

trial –

THE COURT: Counsel, no.

COUNSEL FOR LAMEX: Okay, Your Honor.

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preliminary injunction]"). From the court's statements, the

parties reasonably could have understood, as ALC claims that it

did, that only the issue of injunctive relief was before the court,

and that by "consolidation," the court meant that it would treat

the preliminary injunction hearing as a permanent injunction

hearing.11

Lamex suggests that we may infer the requisite notice

from the district court's summary of the issues before it as "one,

what kind of intervention this [court] can have in the context of

the relations between these parties as it pertains to Law 75," and

two, "whether there is any issue with the payment that is due and
 Lamex countered that it was suffering irreparable harm in 12

that ALC's delinquency and smear campaign were causing Lamex to

incur cold-storage costs that would continue to skyrocket "if

defendants continue their delinquent conduct." Relatedly, we note

that because the cold-storage fees were part of the court's

calculus on irreparable injury and because ALC conceded the amount

and existence of its debt to Lamex, the court's convening of an

evidentiary hearing to determine the cold-storage costs also cannot

be construed as providing unambiguous notice of consolidation. Nor

can ALC's participation therein imply its waiver of the jury trial

right. Lamex does not argue to the contrary.

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owing supposedly." These comments, however, do little to clarify

the scope of the issues actually at stake. By "what kind of

intervention this [court] can have in the context of the relations

between these parties as it pertains to Law 75," the court

reasonably could be understood as pondering whether it could

provide injunctive relief without addressing the Law 75 issues.

Nor could the reference to "the payment that is due and owing

supposedly" be construed unambiguously as notice of consolidation.

That comment came on the heels of defendants' renewal of its motion

for judgment on partial findings, see Fed. R. Civ. P. 52(c), in

which they argued that because they had already acknowledged their

debt and consigned money to the local court, Lamex could not meet

the irreparable harm prong of the four-part test for a preliminary

injunction. Alone or in context, these statements do not 12

constitute indisputably clear notice of the court's intent to

resolve all the issues on the merits. 

2. No Implicit Waiver of the Jury Trial Right
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Given the court's failure to provide indisputably clear

notice of consolidation, it becomes far more difficult for Lamex to

argue that ALC implicitly waived its right to a jury trial. We

have held that "active participation both leading up to and during

[a] bench trial," combined with a failure to "specifically object

to the lack of a jury," amounts to a waiver of the jury trial

right. Coxcom, 536 F.3d at 111. This rule of waiver-by-conduct

reflects our judgment that a losing party who has been accorded an

opportunity to present its full case before a court should not be

allowed to "reassert[] a right to trial by jury after a bench

trial." Id.; see also Royal Am. Managers, Inc. v. IRC Holding

Corp., 885 F.2d 1011, 1018 (2d Cir. 1989) (adopting the implicit

waiver rule because "[i]t would be 'patently unfair' and, 'in

effect, [an] ambush [of the] trial judge on appeal' if appellant

were allowed 'to lodge an early demand for a jury,' participate in

a bench trial without objection, and then assign as error the

failure to honor the jury demand" (second and third alterations in

original) (quoting United States v. 1966 Beechcraft Aircraft Model

King Air A90, 777 F.2d 947, 951 (4th Cir. 1985)) (internal

quotation marks omitted)).

ALC's behavior during the hearing simply was not

consistent with Lamex's assertion that ALC "fully and vigorously"

participated in what it understood to be a bench trial on all the

remaining legal issues. Venture Tape, 540 F.3d at 63 (quoting 1966
 The first exhibit, a letter from George's to ALC's counsel 13

demanding that ALC cease and desist from using George's protected

marks in its marketing and denying any "exclusivity in favor of

ALC," was presented for the purpose of justifying ALC's decision to

stop paying Lamex. The second exhibit was comprised of copies of

the checks consigned to the Superior Court.

 Rule 52(c) allows for a judgment on partial findings "[i]f 14

a party has been fully heard on an issue during a nonjury trial."

Fed. R. Civ. P. 52(c). Although Lamex is under the impression that

Rule 52(c) motions are only available in bench trials, appellant

points out, and the record confirms, that its Rule 52(c) motions

were directed toward Lamex's plea for injunctive relief, not toward

the Law 75 issues. Trial courts in this circuit routinely

entertain Rule 52(c) motions in preliminary injunction hearings,

and not just bench trials. See, e.g., Freightliner, L.L.C. v. P.R.

Truck Sales, Inc., 399 F. Supp. 2d 57, 73 (D.P.R. 2005).

-22-

Beechcraft Aircraft Model King Air A90, 777 F.2d at 951). To the

contrary, because it was not clearly notified of the court's intent

to adjudicate all of the issues on the merits, ALC conducted itself

as though it were participating in a preliminary injunction

hearing. During the January 27 proceeding, ALC acquiesced to

liberal rules of evidence and procedure. It only called one

witness and presented two exhibits, neither of which were in direct

support of its claim that Lamex could be held liable as a principal

under Law 75. Indeed, ALC conducted minimal discovery in the 13

barely one-month-long period between the commencement of the

federal suit and the injunction hearing; prior to the hearing, ALC

had not even deposed a single representative of Lamex or George's.

In arguing its initial Rule 52(c) motion, ALC framed its

argument in terms of the four-pronged test for preliminary

injunctions. Additionally, when arguing that Lamex lacked a 14
-23-

probability of succeeding on the merits, ALC specifically pointed

out that "there is a hearing on the state case that is scheduled

for February 7." Finally, in renewing its motion at the end of the

hearing, ALC argued that "injunction is a remedy for a person to

claim a right when there is no other alternative," and that this

equitable remedy was not necessary here because the parties would

soon be trying their Law 75 case in state court. From these

statements, it is evident that ALC understood that the Law 75 issue

was not being litigated fully during the injunction hearing but

instead would be resolved at a later point, either before a jury in

federal court or as part of its multi-million-dollar state lawsuit.

3. Summary

Neither the status of the jury trial right nor the

protections afforded it by the courts or the Federal Rules is

diminished when a district court employs the consolidation

mechanism provided by Rule 65(a)(2). In fact, the rule explicitly

requires that even when consolidation is ordered, "the court must

preserve any party's right to a jury trial," Fed. R. Civ. P.

65(a)(2), and appellate courts have held that a party's agreement

to a properly noticed "'consolidation of trial on the merits with

a hearing for a preliminary injunction by itself in no way amounts

to a waiver of the right to jury trial.'" New Windsor Volunteer

Ambulance Corps, Inc. v. Meyers, 442 F.3d 101, 120 (2d Cir. 2006)

(quoting Heyman v. Kline, 456 F.2d 123, 130 (2d Cir. 1972)); see
-24-

also Bowles v. Bennett, 629 F.2d 1092, 1095 (5th Cir. 1980) (noting

that "[e]ven assuming that plaintiffs' counsel had agreed to

consolidate . . . , that, alone, would not be an express waiver of

the right to jury trial"). Where, as here, the district court

fails to provide indisputably clear notice of its intent to

consolidate, with the effect that a party does not understand

itself to be participating in a trial on the merits and conducts

itself accordingly, we cannot infer a waiver of the jury trial

right. See Royal Am. Managers, 885 F.2d at 1018 ("Of course, a

party should not be held, by reason of its participation in the

nonjury proceedings, to have waived the jury trial right unless the

party was 'on notice that the trial court was planning to

adjudicate the dispositive issues of fact.'" (quoting 1966

Beechcraft Aircraft Model King Air A90, 777 F.2d at 951)); see also

White v. McGinnis, 903 F.2d 699, 703 (9th Cir. 1990). This is not

a situation in which a losing party is "attempting a second bite at

the apple." Coxcom, 536 F.3d at 111. Rather, ALC has not even had

its first full bite.

We conclude that the district court erred in failing to

provide indisputably clear notice of its intent to consolidate

under Rule 65(a)(2) and, in so doing, abrogated ALC's right to a

jury trial. Accordingly, we vacate the court's judgment with

respect to the claims for declaratory judgment and to pierce the

corporate veil and remand for further proceedings consistent with
 ALC also presses an abstention argument pursuant to the 15

doctrine enunciated in Colorado River Water Conservation District

v. United States, 424 U.S. 800 (1976). Although this court may

raise the issue of Colorado River abstention sua sponte, Jiménez v.

Rodríguez-Pagán, 597 F.3d 18, 27 n.4 (1st Cir. 2010), "abstention

is a waivable defense," Guillemard-Ginorio v. Contreras-Gómez, 585

F.3d 508, 517 (1st Cir. 2009). ALC failed to raise the issue

below, and we deem it waived. Even if the issue had been

preserved, however, abstention is not warranted here. The

circumstances permitting abstention on grounds of "wise judicial

administration," Colo. River, 424 U.S. at 818, "are quite 'limited'

and indeed 'exceptional.'" Rio Grande Cmty. Health Ctr., Inc. v.

Rullan, 397 F.3d 56, 71 (1st Cir. 2005) (quoting Colo. River, 424

U.S. at 819); see also Currie v. Group Ins. Comm'n, 290 F.3d 1, 10

(1st Cir. 2002) (reserving Colorado River abstention for only the

most "extraordinary circumstances"). The circumstances here would

not remotely justify the federal court taking the extraordinary

step of divesting itself of jurisdiction.

-25-

this opinion. Because ALC conceded the amount and existence of the

debt owed to Lamex, we affirm the district court's monetary

judgment in favor of Lamex.15

B. Discovery-Related Sanctions

Appellant challenges the district court's order imposing

sanctions upon it for its failure to comply with discovery

obligations. District courts have "first-line authority for casemanagement decisions." Torres v. Puerto Rico, 485 F.3d 5, 10 (1st

Cir. 2007). We therefore "step softly" when reviewing the

imposition of sanctions, intervening only when there has been an

abuse of discretion. Id. (quoting United States v. One 1987 BMW

325, 985 F.2d 655, 657 (1st Cir. 1993)). 

Pursuant to its authority under Federal Rules of Civil

Procedure 16(f) and 37(b)(2), the court ordered ALC to pay the
 ALC also ventures a fairness argument, contending that Lamex 16

too did not comply with its discovery obligations. It made this

argument in a motion for sanctions against Lamex, and the district

court, within its discretion, rejected the motion, concluding that

"[p]laintiff's behavior did not warrant sanction." 

This is a typical exchange between Lamex's counsel and 17

Lebrón:

Counsel: [W]hat was your position in [the first]

supermarket [you worked for]?

Lebrón: Groceries.

Counsel: Okay . . . . Could you explain to me what were

your duties and responsibilities . . . ?

. . . .

Lebrón: I repeat groceries, groceries.

Counsel: Okay. But my question goes a little further

than that, Mr. Lebrón . . . . What exactly did you do as

a grocery [at the supermarket]?

-26-

costs and attorney's fees Lamex incurred in the deposition of

Audeliz Lebrón. It did so upon finding that Lebrón was nonresponsive to the questions of Lamex's counsel during his

deposition, and that through his vexatious conduct he "placed

obstacles to the taking of the deposition in violation of the Rules

[of Civil Procedure]." Here, as below, appellant attempts to

justify Lebrón's behavior by asserting that he only refused to

answer questions that he thought were beyond the scope of the

deposition. This representation is belied by the deposition 16

transcript, which shows that Lebrón was obstructionist and hostile

to Lamex's counsel's most benign questions. Additionally, as the 17
Lebrón: Well, if you don't know what groceries is, check

and see what groceries is.

-27-

district court pointed out in its sanctions order, it did not order

limited discovery and thus Lebrón and ALC had no grounds to believe

that the deposition was limited in scope. Finally, even if ALC or

Lebrón had justifiable concerns regarding the scope of the

deposition, the Federal Rules provide a way for them to register

those objections without holding up the deposition. See Fed. R.

Civ. P. 30(c)(2). Given Lebrón's behavior, the district court was

well within its discretion in imposing sanctions.

III.

For the reasons set forth, we affirm the court's

imposition of sanctions against ALC; affirm the court's monetary

judgment in favor of Lamex; vacate the court's judgment with

respect to Lamex's claims for a declaratory judgment and to pierce

ALC's corporate veil; and remand for proceedings consistent with

this opinion. Each party shall bear its own costs on appeal.

So ordered.