Sun Blinds, Inc. v. S.A. Recasens , 111 F. App'x 617 ( 2004 )

Not for Publication in West's Federal Reporter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
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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
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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).
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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.
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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.
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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.
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