Tuesday, August 7, 2012

Should an exclusive distributorship be implied from the supplier’s silence? Not according to a panel of the local appellate court.

In Next Step Medical Co. Inc. v. Bromedicon, Inc., 2012 WL 2399503 (TCA San Juan, May 23, 2012)(Dominguez-Irizarry, J.), the plaintiff-distributor filed suit for preliminary injunctive relief and damages under Law 75 in the Court of First Instance, San Juan Part, alleging an impairment with an alleged exclusive relationship for the distribution and servicing of medical products in Puerto Rico. The facts are somewhat unusual, but crucial for the court’s conclusion that there was no meeting of the minds over exclusivity. The parties exchanged and amended two drafts of an exclusive distribution agreement. The distributor signed and delivered the last draft to the supplier’s principal who never signed it. Subsequently, the parties met to discuss contractual expectations and differences of opinion arose as to whether the supplier would be bound by a purported obligation not to offer competing products for the services required by the distributor. At no time during those meetings did the distributor allege the existence of an exclusive relationship. Nor was an exclusive agreement ever signed. The distributor filed suit when the supplier began to offer the same medical services through other entities. The standards for preliminary injunctions in Law 75 cases are straightforward and addressed at length in the appellate court’s opinion. The appellate court affirmed the trial court’s denial of preliminary injunctive relief reasoning that the distributor had failed to establish irreparable harm as there was no evidence of actual damages and the sales of the line at issue were small when compared to total company sales; the distributor had failed to show convincingly the existence of an exclusive dealership necessary to prove likelihood of success on the merits; the allegation of harm to reputation was not substantiated and it incurred in laches. The court in effect affirmed the judgment by denying the petition for certiorari.