In Alpha Biomedical v. Phillips Medical, 2011 WL 5837374 (D.P.R., Nov. 21, 2011)(Besosa, J.), Plaintiff, a distributor of medical equipment, filed an action in local court asserting claims under Law 75, tortious interference, and defamation against various Phillips corporations for breach and interference with an alleged verbal distribution contract. Defendants removed the case alleging that certain non-diverse defendants had been fraudulently joined to defeat diversity. Plaintiff moved to remand. A U.S. Magistrate recommended that the action should be remanded, which the Court adopted. The Magistrate (Silvia Carreno, J.) found that the standard of fraudulent joinder was unsettled in the First Circuit and adopted a prong of a Fifth Circuit test whether Plaintiff fails to state a claim upon which relief can be granted against the non-diverse defendants. She determined that the complaint properly pleaded a claim for defamation and there could not be a finding of fraudulent joinder.
Things then get tricky. While the Magistrate’s determination on the existence of a valid defamation claim sufficed to require granting the motion to remand for lack of jurisdiction, the Magistrate went further and concluded that Plaintiff failed to state a claim for tortious interference, which the Court agreed. Was there subject matter jurisdiction to make such a recommendation? The issue was not addressed in the opinion. Over Plaintiff’s objection, the Court held that Puerto Rico law would not recognize a valid claim for tortious interference with a verbal contract having an indefinite term and is terminable at will. Law 75 contracts without a fixed term could become indefinite in the sense there can be no lawful termination without just cause. However, Plaintiff’s allegations were defective in that it failed to allege the duration of the alleged verbal agreement or that it was in effect at the time of the alleged interference. The Court adopted both the recommendation to remand the case for lack of jurisdiction and the decision not to award attorney’s fees as the removal was objectively reasonable, citing Martin v. Franklin, 546 U.S. 132, 141 (2005).
Would the Court’s adoption of the Magistrate’s recommendation that no valid tortious interference claim exists be res judicata upon remand of the case to local court? It is questionable whether the court’s de facto dismissal of the tortious interference claim is reviewable on appeal when a remand order is not. The court’s determination that a valid defamation claim exists was enough to remand the case for lack of jurisdiction. It remains to be seen if the local court will pass judgment independently on the Court’s reasoning or conclude that the determination to dismiss the tort claim is res judicata. Did Plaintiff really win at all with remanding the case?