Court Opinion

ID: 201275
Source: CourtListenerOpinion
Date Created: 2011-02-07 05:11:23+00
Date Added: 2024-06-11T17:27:15.980647
License: Public Domain

Not for Publication in West's Federal Reporter
                  Citation Limited Pursuant to 1st Cir. Loc. R. 32.3

             United States Court of Appeals
                           For the First Circuit

No. 03-2122

                              SUN BLINDS, INC.,

                            Plaintiff, Appellee,

                                         v.

                                 S.A. RECASENS,

                            Defendant, Appellant.

             APPEAL FROM THE UNITED STATES DISTRICT COURT

                     FOR THE DISTRICT OF PUERTO RICO

          [Hon. Carmen Consuelo Cerezo, U.S. District Judge]

                                      Before

                 Torruella and Howard, Circuit Judges,

                       DiClerico,* District Judge.

     Roberto Boneta, with whom María Teresa Figueroa Colón and
Muñoz Boneta Benítez Peral & Brugueras were on brief for appellant.
     Juan A. López Conway with whom Luis F. Zayas Marxuach and
García & Fernández Law Offices were on brief for appellees.

                                October 7, 2004

     *
         Of the District of New Hampshire, sitting by designation.
               DICLERICO,        District     Judge.        S.A.    Recasens,   a

manufacturer    of    fabric     located     in    Barcelona,   Spain,    appeals

following a jury verdict in favor of Sun Blinds, Inc., on a claim

brought under the Puerto Rico Dealership Act, Law 75 of June 24,

1964, Puerto Rico Laws Annotated, title 10 § 278, et seq.                Recasens

seeks judgment in its favor or a new trial.                  We agree that Sun

Blinds’s claim should have been dismissed as a matter of law.

            Sun Blinds was the exclusive distributor in Puerto Rico

and the Caribbean Basin of awning fabric manufactured by Recasens.

After Recasens terminated their distributorship agreement, Sun

Blinds brought suit under Law 75, alleging that Recasens engaged in

conduct that impaired their relationship and terminated their

agreement   without       just   cause.      Sun   Blinds   also    alleged   that

Recasens    sold     it   defective       merchandise.   Recasens     brought   a

counterclaim, alleging that Sun Blinds breached their agreement by

failing to pay outstanding balances.

            The case was tried to a jury over the course of five

days.     At the close of Sun Blinds’s case, Recasens moved for

judgment as a matter of law under Federal Rule of Civil Procedure

50.     The court granted the motion as to Sun Blinds’s defective

merchandise claim, ruling that Sun Blinds “did not establish a

reasonable basis for the valuation of said damages and any jury

award would have to be based on mere speculation.”                 The motion was

otherwise denied.         After the court denied Recasens’s request that

                                       -2-
its sole witness, Kay Ludwig, be permitted to testify on the

following Monday, when closing arguments and jury instructions were

scheduled      to    be    given,    Recasens     rested      without      presenting

witnesses.          The   jury   found    that   Recasens     had   just    cause   to

terminate the distributorship relationship but found in favor of

Sun Blinds on the impairment claim, awarding $71,577.50 in damages.

On the counterclaim, the jury found that Sun Blinds owed Recasens

$14,297.18 for unpaid balances.

            Recasens renewed its motion under Rule 50, arguing that

the evidence was insufficient to prove that any impairment caused

damages or to prove the amount of the damages awarded.                       Recasens

also argued that Law 75 does not apply to sales outside of Puerto

Rico.    At the same time, Recasens moved for a new trial, asserting

that the district court erred in permitting the testimony of Sun

Blinds’s co-owner on damages and in giving a missing witness

instruction with regard to Ludwig. Recasens did not prevail in the

district court on these issues and raises them on appeal.

            The denial of a Rule 50 motion is reviewed de novo.

Tapalian v. Tusino, 377 F.3d 1, 5 (1st Cir. 2004).                    We review the

evidence and draw reasonable inferences in favor of the nonmoving

party,   without      considering        the   credibility    of    the    witnesses,

resolving conflicting testimony, or weighing the evidence.                     Santos

v.   Sunrise    Med.,      Inc.,    351   F.3d   587,   590    (1st     Cir.   2003).

Nevertheless, “the plaintiff is not entitled to inferences based on

                                          -3-
speculation and conjecture.”       Vázquez-Valentín v. Santiago-Díaz,

2004 WL 2106344, at *4 (1st Cir. Sept. 22, 2004).             The district

court’s   decision   will   be   reversed   only   when    the   facts   and

inferences show that there is a total failure of evidence to prove

an element of the plaintiff’s case so that a reasonable jury could

not have reached a verdict for the plaintiff.             Id.; Santos, 351

F.3d at 590.

           Law 75 protects dealers and distributors in Puerto Rico

from arbitrary or inequitable practices by their principal after

their business relationship is established.         Caribe Indus. Sys.,

Inc. v. Nat’l Starch & Chem. Co., 212 F.3d 26, 29 (1st Cir. 2000).

Specifically, Law 75 provides:

           Notwithstanding the existence in a dealer’s
           contract of a clause reserving to the parties
           the unilateral right to terminate the existing
           relationship, no principal or grantor may
           directly or indirectly perform any act
           detrimental to the established relationship or
           refuse to renew said contract on its normal
           expiration, except for just cause.1

10 P.R. Laws Ann. § 278a.        Some actions by the principal, when

proven, establish a rebuttable presumption of impairment: “whenever

a principal bypasses a dealer by distributing merchandise directly;

appoints additional dealers in contravention of the agreement;

     1
      The phrase “act detrimental to,” used in the English
translation of § 278a, also means “impairment,” and the terms are
used interchangeably in cases involving Law 75. See Caribe, 212
F.3d at 29; Irvine v. Murad Skin Res. Labs., Inc., 194 F.3d 313,
318 n.2 (1st Cir. 1999); Goya de P.R., Inc. v. Rowland Coffee, 206
F. Supp. 2d 211, 217 (D.P.R. 2002).

                                   -4-
fails       to   adequately    fill   orders;    or   arbitrarily   changes   the

transportation and/or payment terms.” Irvine, 194 F.3d at 318. If

a plaintiff proves termination or impairment of the business

relationship by the defendant, Law 75 provides a formula for

indemnification but only “to the extent of the damages caused.” 10

P.R. Laws Ann. § 278b.            Sun Blinds bore the burden at trial of

proving that Recasens’s actions were detrimental to their business

relationship and caused damages.                See Irvine, 194 F.3d at 320.

                 Sun Blinds claimed that its distributorship was impaired

when Recasens changed its credit terms in 1999, sold fabric in the

Dominican Republic in violation of the exclusivity provision in

their       agreement,   and   provided   defective      fabric.    Sun   Blinds

acknowledges that no evidence was presented during trial that any

actions by Recasens caused specific losses or damages.2                Instead,

Sun Blinds argues that those actions breached Recasens’s good faith

obligation, which led to the termination of the agreement.

                 Sun Blinds contends that “[t]his is not strictly an

impairment claim” because Recasens also terminated the agreement.

The jury found, however, that just cause existed for Recasen’s

decision to terminate the agreement and denied Sun Blinds recovery

under the termination claim. Sun Blinds cannot recover damages for

        2
      The district court ruled that Sun Blinds was unable to prove
damages caused by the allegedly defective fabric.      The record
includes no evidence of damages caused by the change in credit
terms or by sales in the Dominican Republic.

                                         -5-
termination under its impairment claim.3          Instead, Law 75 requires

proof of specific damages caused by the alleged impairment, which,

if proven, may be calculated using the formula provided in § 278b.

              Sun Blinds argues, nevertheless, that Law 75 permits

“indirect” proof of damages and should be read broadly to allow the

damages claimed here.      The “indirect” language in Law 75 describes

conduct by the principal that may cause impairment and does not

pertain to proof of damages.        Further, “Law 75 specifically limits

payment ‘to the extent of the damages caused [the dealer/dis-

tributor].’” Irvine, 194 F.3d at 319 (quoting § 278b). “Therefore,

in order to prevail, a Law 75 plaintiff must submit evidence of

damages as part of its action.”           Id. at 320.

              To avoid judgment as a matter of law, Sun Blinds had the

burden of introducing sufficient evidence at trial to make the

existence of damages more likely than not.              Id. at 317.   A “mere

scintilla” of evidence is not enough, nor may a plaintiff rely on

conjecture or speculation to sustain its burden.              Id.   Sun Blinds

failed   to    provide   evidence    of    damages   caused    by   Recasens’s

detrimental actions.        Therefore, the district court erred in

denying Recasens’s motion for judgment as a matter of law. Because

     3
      Sun Blinds provided evidence of damages caused by the
termination of the agreement through the testimony of Liz Ann
Isgut, who owns Sun Blinds with her husband. Mrs. Isgut calculated
the loss under § 278b by averaging the amount of the company’s net
profits attributable to sales of Recasens’s fabric during past
years and multiplying that amount by five. The total amount she
calculated was $71,575.50. The jury awarded $71,577.50.

                                     -6-
this issue is dispositive, we need not consider the other grounds

Recasens raises on appeal.

          For the foregoing reasons, the judgment in favor of Sun

Blinds is vacated and the matter remanded. On remand, the district

court is directed to enter judgment as a matter of law in favor of

Recasens on the impairment claim brought by Sun Blinds.       The

parties shall bear their own costs.

                               -7-