Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
__________________________
________________________
on brief for appellants.
Jaime E. Toro-Monserrate with whom Samuel T. Cespedes and
_________________________
___________________
Matilde Nin were on brief for Welch Food, Inc.
___________
Jorge I. Peirats with whom Jacabed Rodriguez Coss was on br
_________________
______________________
for Magna Trading Corp.
____________________
January 20, 1994
____________________
The parties in
this action
year of
haggling, defendant
(Welch)
la
Cruz,
marriage
Inc.,1
because
claimed that
of
that
it was
irreconcilable
the dissolution
of the
calling
off
the
differences.
corporate
Plaintiffs
relationship violated
Puerto Rico Dealers' Contracts Act, P.R. Laws Ann. tit. 10,
(Law 75), and federal and
alleged
claim
of
tortious
interference
the
278
Plaintiffs also
with
contractual
Magna Trading
Corp., supervisor
of
75,
and
it
the association
between
consequently
granted
summary
judgment
for
It dismissed the
us that only
the antitrust
I. Factual Background
__________________
The
facts
underlying
this
dispute
essentially
are
Our review
summary judgment is
plenary.
Napco,
______
1930s.
In 1987,
frozen concentrate
local
broker,
Welch needed
a new
line of products,
Magna Trading,
it
distributor for
identified R.W.
as
its
of its
the most
the beginning
of Welch's
interest
in R.W.,
company
products
international
under
the
marketing
"Donald
manager
Duck"
label.
Welch's
had
suggested
initially
owner, Thomas
measures
to
assure
Ward,
had
that the
agreed
Welch
to
frozen
reported that
undertake
several
concentrates would
products.
commitment by
App.
at
219,
These
included
Welch's for
and
a larger
financial
"[a]
trial
period of
contribution
period
with
no
representation,"
from
R.W.
for
Discussion
the early
international marketing
notified its
parties
plaintiffs regularly
immediately
submitting purchase
three months
submitted
began
later,
doing
business,
orders and
late
with
defendants
It was
June, that
not
Welch
Ward responded in
August
with a
Puerto
Rico
company
appeared to
subjects
were
Of particular
provisions
reflect an effort by
companies
dealership
document,
counterproposal.
to
in
other than
"just
if
to the
agreement
Welch to bypass
substantial damages
contracts for
the
concern
that
terminate
cause."
The Welch
-4-
as a
transfer of
between Welch
Act 75.
the contractual
the "transfer"
had existed
arrangement that
passage of
York law
would
apply.
In
mid-October, after
a series of
to R.W.
telephone conversations
During a visit
international
marketing
the
manager
negotiations "as
encouraged
Ward
soon as possible."
to
complete
On January 30,
contract
1989, Ward
future relationship."
In
response to
an inquiry
about R.W.'s
the
A follow-up
president
of
Magna
reiterated
concerns
8 to the
about
the
point
of
contractual
disagreement
between
the
-5-
parties.
They
had resolved
earlier conflicts
as to
which of
exclusive distributorship
Late in
to
be working
well; Magna
by-side
handling of
January
20, he
a special product
promotion.
wrote to
president, Roberto
Giro,
the goal on
Trading's
and
Welch's
This
in
Donald Duck
products.
marketing manager
juice products.
Early
by
On
indicating
of Donald Duck
Giro wrote
March 30,
1989, Welch's
international vice
president,
the existing
pre-trial
relationship
concentrate products."
The letter
continued:
As you know, the idea of working together on a one-year
trial basis was, as per your recommendations, to
determine if Welch's frozen concentrates could be
handled to our satisfaction in spite of your handling a
competitive product. The pre-trial relationship proved
to
us that the
conflicts of interest
of your
representing both competing lines are significant and
irreconcilable. . . . An increased level of conflict in
-6-
and,
personal
relations between
our broker
and R.W.
International has also been noted, tracing to conflicts
between the brands represented by the two firms. . . .
Instead of complementing one another, as was your
original premise, these brands represent conflicting
interests for you and us. . . .
Because
Welch
terminated
reached
an agreement
the relationship
in
writing,
the
before
one-year
the parties
trial
period
alleges
that
Welch
April 1989.
terminated
Their amended
their
dealership
Welch; and
threatening,
later
by seeking
through
defendants
and then
dealership if
and
that
to
improper
war.
procedural grounds,
dismissed
again
antitrust
actually terminating,
monopolize the
a price-cutting
violated
on
bottled
The case
see
___
laws
plaintiffs'
Duck products,
grape juice
was dismissed
market
once on
by
v.
and, following
motions
for
summary
judgment.
They argue
precedent on
the business
for a
year.
Law 75 establishes
relationship within
They assert
district court's
that the
which
that this
statute does
____
R.W. and
Welch
arrangement also
provides
a basis for
Magna.
In
addition,
plaintiffs
argue
that
claim against
their
antitrust
-7-
allegations
were
judgment motion
court
erred
sufficient
and that, if
in
to withstand
defendants'
dismissing the
claims
summary
deficient, the
without
first allowing
discovery.
II. Applicability of Law 75
_______________________
Law
75
provision
provides
to
the
that,
contrary,
notwithstanding
the
supplier
Rico
arbitrarily
created a
dealers
terminates
from
contractual
distribution
P.R.
harm
caused
a distributorship
favorable market
frustrating the
who
278a.2
in
any
for the
when
once
the
supplier
dealer has
supplier's products,
interests of
"thus
those
Medina v. Country Pride Foods, Ltd., 858 F.2d 817, 820 (1st Cir.
______
__________________________
1988) (reproducing
in full
translation of
Puerto Rico
Supreme
legislative reports)).
"very much
a `one-way street'
the unwarranted
acts of
The Act
has been
described as
designed to protect
dealers from
termination by
____________________
2 The provision states in full:
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.
-8-
Ltd. v.
____
Supp. 1235,
1237 (D.P.R.
1988).
For
dispute
functions of
R.W.
and
its
Ann. tit.
10,
affiliates
a distributor within
performing
the
75 during
that
would
govern
their
actual
relationship.
Because
the
75 was
not
negotiations preceding
supplier
and
operations in
"would
period
The
abeyance during
a good-faith
court
to sit and
preliminary
that
arms-length
keeping
negotiating process
the principal
noted
wait while
required
of
distributor.
market -- obtaining,
75 to dealings
autonomy
apply to
a completed
allow distributors
loses its
stronger
to
waits."
effort, a
Applying Law
the
Neither
____________________
approach
would serve
the statute's
purpose
of "improving
and
this judgment is
assert,
temporary or
be
they
described
tentative.
straightforward.
The
as
pre-trial,
preliminary,
inquiry is
statute; if so,
Law 75 governs.
R.W.
to terminate
test.
We
one.
the correct
75
plaintiffs' position is
and dealer
of
in
distributing
The
which
the dealer
the supplier's
is
merchandise
insists upon
between a
actually in
statute
the
in Puerto
sales to
establishment of
"supplier/dealer" relationship.
established,
But once
that relationship
irrespective of the
is
length of
-10-
Welch's concession
coverage through
inclusive
as its
language suggests,
and it
offers several
close scrutiny.
First,
Welch
provision indicates
claims
that the
that Law
word
75 applies
"established"
only once
The
in the
the parties
parties in this
their
failure to reach
their
Law 75.
In support of
agreement on essential
from
mutual trust,
coordination between
both
parties as independent
Dec. 117
(1988), Official
of Puerto Rico,
slip op. at
Translation of the
5 (June 30,
Supreme
the meaning
of Law
75
only after
_____
a supplier
and dealer
have
as "stable" or "continuous."
protect
from
abrupt
longstanding
benefit
to
and arbitrary
representation
the
had provided
manufacturer,
relationships from
termination
the
law
continuous.
858
at
levels
820
substantial
is drafted
whose
economic
to
govern
become and
F.2d
dealers
(Act
75
bargaining
power
between
manufacturer
dealership
precedent
cited
by
in
Puerto
Welch describes
Rico").
the
commercial
the
to
cases
coverage.
may have
exclude fledgling
type
Although
the
of longstanding
relationships
from
the act's
makes no distinction
between
them.
meaning
Indeed,
of
Law 75
Welch's counsel
only
if
it is
acknowledged at
committed
oral
to writing.
argument that
of dealing,
the parties
but argued
that this
continued to
disagree
was not
through a
such a
over the
case
essential
Welch contends
that this
relationship was
-12-
not
While it is
dimensions
of their future
year.
Plaintiffs
sent
purchase
companies were
special
time.
terms for a
orders
to
Welch
actively
on the
remains that
involved in
distributing Welch
As noted above,
Ward received a
promotion.
To
be
sure,
effort in a
the relationship
envisioned by
they began to do
business never
materialized;
second
of
argument,
preliminary
that applying
negotiations
Law
75
improperly
during a
burdens
the
convincing.
period
will
precede
establishment
of
the
long-term
the
Act
before
conclusion of
the
trial
asserts,
period
is
This is
relationship
supplier, Welch
be
forced
into
Thus,
an unsuccessful
accepting
the
loss of its
-13-
In the first
place, as we have noted, the parties in this case were not simply
negotiating
future.
a relationship
R.W.
to
be
activated
sometime
While we
in accepting
actual
dealership
relationship
plan.
the
twelve months.
terminate
in
statute,
that
existed
however,
Welch can
plainly
a longer-
states that
the
status under
Law 75.
If the
sense.
suppliers could
substantial periods
Otherwise,
potential conflict of
of
time.
Although
delaying Law
75's
example, could
regard
for any
business,
if
forsake R.W.
efforts taken
another
be
no
principled
by R.W.
dealer
without
available.
distinction
recourse and
to
willing
gear up
to
without
for Welch's
accept
Moreover, there
between
Welch,
smaller
seems to
Welch's one-year
trial
-14-
period
and a
supplier's effort
to designate
five-year "preliminary"
distributorship
long-term relationship.
To rule that a
is
loophole in
of Law 75
a three-
before
deciding
or even
on
contingent relationship
is thus to
allow a significant
provide.
In the
in a manner to which it
has serious
requires a
justify
objections.
its decision
to
Law 75 simply
terminate a
dealership.
supplier to
If
Welch's
we have
no doubt
Law 75.
as it presumes that
stumbles insofar
suffer if, to
avoid
____________________
4
application of
they have
Law 75,
the parties
long-term relationship.
refrain from
dealing until
on all terms to
govern their
market to slip
negotiations.
We therefore
no
manufacturer's for a
engaged in protracted
district court's
incentive to
time.
To
the
reach agreement
extent
supplier's
at the
Both sides
earliest possible
future
flexibility
is
is a result intended by
dealer
is
effect of activating
the Dealers'
to
ensure
that,
right
from
the
start,
the
relationship is marked by a
supplier.
entirely
This does
opportunity to
not
evaluate the
through a "test
period."
suitability of
It simply means
dealer fails
a meaningful
suppliers engaged in
deprive suppliers
a particular
test.
This should
not trouble
goal is
disintegrates
-16-
match
preliminary "understanding"
the
of
into impasse
over
essential terms,
is
Law 75
823-24.
Of course,
whether or not
are sound
the
for
tenure
academic
arrangements
world.
window, as we
But the
Law 75 do not
in government
legislature
has not
and
in the
enacted such
not for us to
case
involving
a novel
(D.P.R. 1988),
is unavailing.
reach an agreement
Law
75
689 F. Supp.
the
have bargained in
reliance on
as to price, credit, or
75 if "the
the district court's ruling, allowing the company to call off the
protracted, unsuccessful
faithful to
that decision.
In Medina & Medina, however, the Puerto Rico
________________
did not rule that a
Supreme Court
negotiations is outside the scope of Law 75, but it held that the
failed negotiations
cause
_____
for
the
over price
supplier's
distributorship a year
unclear
and credit
decision
after it began.5
whether a supplier
terms provided
to
terminate
just
____
the
could terminate
without consequence
Medina &
________
but it does
dealer
who failed
to give
the
contractually required
written
Supp.
at 1239.
principle
that
agreements
company
their
According to
dealers
may
not
Welch,
Nike stands
____
avoid the
express
689
for the
terms
of
Consequently, the
appellants to
own characterization of
the arrangement as
a preliminary
test period.
This
boundaries.
from
an
argument
Nike
____
far
beyond
its legitimate
distributorship
to
stretches
renewal
contract.
procedure
contained
in
the
____________________
relationship.
In
may agree
the power
to a
contractual procedure
either to
F. Supp. at 1239.
gives
See 689
___
end or
of time.
to
that
continue the
Law
follow
that procedure.
This
case is
simply not
equivalent
to Nike.
____
Welch,
in
essence, claims that the parties agreed that Welch would have the
power
to terminate their
period,
without
precisely the
regard
relationship after a
to
imbalance of power
may
just
not
cause.
preliminary test
This,
to which Law 75
such an agreement.
wield unilateral
however,
was directed,
Under Law
authority
is
to
75, a
terminate a
ongoing
embrace of
must be reversed so that the court may consider whether Welch had
"just
judgment
on
the
claim
for
tortious
Because summary
interference
with
____________________
contractual relation
decision
also
consideration.
must
The
without prejudice
regardless of
75,
there
was premised
be
on the
vacated
and
Law 75
holding, that
remanded
for
further
any argument
the existence of
was
no
contract
Welch
may be
making
a relationship protected
protected
against
that,
by Law
tortious
interference.
III. Antitrust Claims
________________
In January
grape
juice
campaign.
into
the
market
with
an
intensive
promotional
law, P.R.
principal
were
Laws
(1) discussions in
(`molestia'),
handling
of
discomfort
the
Ann.
1, 2, as well as Commonwealth
tit.
10,
`Donald Duck'
258,
The
preoccupation
bottled
260.
grape
with
Plaintiffs'
juice," Amended
Complaint
at
Welch's own
order to
78;
(2) a
bottled grape
"massive
promotional campaign"
juice, and a
price cutting
decision of
Welch to
terminate
for
war, "in
Duck' bottled
82,
91; and
its relationship
with
81.
-20-
issue
material
of
constituted
either
fact
a
as
to monopolize
Of
from
one
of
whether
in
defendants'
restraint
greatest significance
Donald Duck
of time,
to
conspiracy
violation of
2.8
failed to demonstrate
trade
to the
court was
Francisco
the stores
in
unlawful conspiracy
Gil,
actions
Magna's principals,
at least
of
a genuine
of
a declaration
stating that
a short period
typically carrying
such products.
because
The court
"plaintiffs never
competition
has
not
responded to
been
Welch's
injured, and
that
claim that
the
[]
Donald Duck
the Puerto
Rico market."
Plaintiffs claim
prematurely
brief
on
argument
in
on appeal
dismissed their
this issue,
that the
court improperly
antitrust claims.
however,
is devoted
to
Much of
and
their
an off-the-mark
their complaint
liberally.
The court
did not
dismiss the
____________________
8 Section 2 makes it
an offense for any person to
"monopolize, or attempt to monopolize, or combine or conspire
with any other person or persons, to monopolize any part of the
trade or commerce among the several States, or with foreign
nations . . . ." 15 U.S.C.
2.
-21-
antitrust
claims
based
on
the
pleadings,
but
ruled
that
response to
defendants' summary
judgment motion
on the
appropriateness of
summary judgment.
Section 1 of the Sherman Act.
_____________________________
their
appellate
brief,
underlying their
part
of
the
1 claim
conspiracy
dealership
and
relationship.
the
argued by plaintiffs
unreasonable
restraint
was an alleged
with
Magna)
_____
subsequent
These
As
to
of
trade
threat by Welch
terminate
actual
in
(as
plaintiffs'
termination
of
the
to violate
drop the
Donald Duck
line of products,
thereby suppressing
violation, however.
judgment,
dispute as
competition,
___________
as distinguished from
law
to
defendants' actions
plaintiffs needed
to whether
do not constitute an
demonstrate
a genuine
caused an
injury to
impact on themselves.
v. McQuillan, 113
_________
directs itself
not against
S. Ct.
See,
___
884, 892
conduct which
is
to
destroy
competition itself.");
Copperweld Corp.
_________________
antitrust
were enacted
laws
for
"the
v.
(1984) ("`[T]he
protection
of
-22-
competition, not
___________
competitors."'") (citations
___________
omitted) (emphasis
not to
actions that
rather
to actions
defendants
products
1988) ("`Anticompetitive' . .
merely injure
that harm
. refers
individual competitors,
successfully
entered the
market
during the
relevant
Once
the
but
allegations
contained
in
their
complaint.
--
than
See
___
584-87 (1986).
Plaintiffs
products.
4. This intensive promotion of the Welch's Grape
bottled products caused [] the introduction of the
Donald Duck bottled grape juice be severely suppressed.
5. Upon information and believe [sic], this intensive
promotion was carried out in conjunction with Magna
Trading Corporation to eliminate
the Donald Duck
bottled grape juice from [the] Puerto Rico market.
The
district
insufficient to
court
concluded
generate a
left unchallenged
that
this
genuine factual
defendants'
assertion that
statement
dispute because
the
Donald
was
it
Duck
-23-
bottled juice had deeply penetrated the Puerto Rico market during
the period
of defendants'
allegedly unlawful
conspiracy.
The
court observed:
[A]s the Puerto Rico Supreme Court has recognized,
distributors are in
contact with the
retailers,
consumers, and the different components of the trade.
Medina, 817 F.2d at 823 n.6. Plaintiffs were in the
______
position to show, based on their knowledge of the
Puerto Rico market, the effects of Welch's conduct on
the market . . . . However, other than the conclusory
allegation
that
their line
had
been "severely
suppressed," plaintiffs never responded to Welch's
claim that the competition has not been injured, and
that
the Donald
Duck bottled
grape juice
was
successfully introduced into the Puerto Rico market.
The
district
court's
decision
and
explanation
are
unimpeachable.
Plaintiffs may
in order to preserve
to drop the
antitrust violation
rebut
is concerned.
insofar as
Plaintiffs' failure
to
was not
___
affected --
fully
justifies the
district
figure, arguing
that each
of
of defendants'
the stores
carrying
Donald Duck juice may have had only a single bottle of that brand
while displaying shelves
the
district court,
however, that
such
We agree with
information, if
true,
-24-
thus not a
from defendants.9
Plaintiffs'
defendants' promotional
reduced prices
on its bottled
campaign, in
grape juice, as
claim
which Welch
an impermissible
In light of R.W.'s
success in introducing
the
Court repeatedly
has recognized
that "cutting
594.
(".
differences
Congress
that
competition.");
result
dominant
from
intend
or
further
to
outlaw
the
firms
to
engage
not
forces
price
of
did
2578, 2586
in
competition to
vigorous
(citations omitted).
competition,
There
was
engaged in below-cost
____________________
consciousness" necessary to be
principal).
their
-25-
pricing
is
not automatically
competition is not
2588.
Where,
threatened.
in addition,
See
___
an
antitrust
new product
is
evident
that
competition
violation if
is
is
Ct. at
able to
deeply
price-cutting period,
unharmed
and
"summary
Plaintiffs
suggest
that
their
to lift
stay
antitrust claims.
of
discovery that
had
been
(1st
discovery
1991), and
.
. .
on
the
imposed
must
"the
show
party seeking
that the
additional
facts
sought
1259, 1263
time for
`will, if
obtained,
suffice
to
engender
an
issue
both
genuine
and
were
well
the
district
court
observed,
plaintiffs
juice market,
and they
had
an obligation
the bottled
to use
their
further
inquiry.10
Plaintiffs,
however,
"never
____________________
of
Welch's
Opinion, at 23-24.
conduct
on
the
Their failure
market."
District
to do so negates
Court
their claim
we conclude that
plaintiffs'
claims
the district
under sections
court properly
and
2 of
the
IV. Conclusion
__________
For
for defendants
and remand those
this opinion.
on the Law
we vacate the
75 and tortious
summary judgment
interference claims,
consistent with
have not
considered in any
district
court that
claims.
dismissal of
all
We
to the
claims alternatively
is
before it.
before
us.
Affirmed in part, and vacated and remanded in part.
_____________________________________________________
Each
____
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