Marían Díaz, a reputable business reporter of El Nuevo Día, published on June 21st an interesting piece highlighting the results of a market study commissioned by Ferdysac Márquez, President of MIDA (la Cámara de Mercadeo, Industria, y Distribución de Alimentos) that was discussed during MIDA’s recent convention. The study relies on a survey conducted by Gaither International of the spending habits of consumers of groceries in Puerto Rico during April and May, 2013.
Market studies can become useful or probative to support or rebut allegations of just cause in distribution cases at least when evidence of market or economic conditions is an issue in the case. This evidence can also be relevant to corroborate the reasonableness of rules of conduct or sales quotas or goals or even to explore the “best efforts” that distributors can undertake to serve or promote the principal’s products or services. To paraphrase, just cause under Law 75 means a material breach of an essential contractual obligation on the dealer’s part or conduct that adversely and substantially affects the principal’s interests in the Puerto Rico market.
The study points out that consumers are spending less each month of this year in groceries when compared to the previous year and about the same dollar amount as four years ago. Díaz reports that the “study also measures factors that can affect the groceries industry in the future,” including the fact that the market could be shrinking from residents leaving or intending to leave Puerto Rico. The study highlights a number of factors that consumers take into account when buying groceries, such as:
New products. 31% of those surveyed are attracted to new products on the shelves but prefer to try the product first hand in the supermarket before making a purchase.
Out of stocks (OOS). This can be a recurrent issue in Law 75 cases and is a growing problem for retailers. 19% of those surveyed did not return to a particular supermarket with OOS in 2013 versus 12% in 2012. 60% blame the supermarket for the OOS.
Packaging. 32% of those surveyed prefer to purchase only products that have clearly identified expiration dates or are described as fresh.
Generic or Private Label Brands are becoming increasingly attractive for price and quality. 83% of those surveyed this year purchase private label products- an increase of 7% over the previous year.
The study also underscores trends of consumers in growing products in their homes and buying more frozen and locally manufactured products.
Tuesday, June 25, 2013
Tuesday, June 4, 2013
Law 75 case gets thrown out of federal court for failing to meet the jurisdictional amount requirement
I don’t recall a single case, but this one, dismissing a Law 75 action for not meeting the jurisdictional amount requirement for diversity jurisdiction. This one, Industria de Refrigeracion v. Gutierrez, 2013 WL 2378580 (D.P.R. June 3, 2013)(FAB) was skeletal from the start. But see General Motors v. Royal Motors Corp., 769 F. Supp. 2d 73 (D.P.R. Feb. 1, 2011)(Gelpí, J.)(reported on 12/5/2011); Ramirez de Arellano v. Budenheim USA, Inc. 2010 WL 3810078 (D.P.R. Sept. 22, 2010)(Perez-Gimenez,J)(reported on 11/23/2010).
There, plaintiff-supplier, a Colombian corporation, filed suit against a Puerto Rico distributor for breach of contract and collection of moneys of past due bills of lading totaling $45,653 and for declaratory judgment that termination of the non-exclusive distribution contract was with cause. Defendant’s sales of plaintiff’s products exceeded $300,000 over the past five years.
The court entered an order to show cause why the complaint should not be dismissed and the defendant followed with a motion to dismiss. Plaintiff opposed dismissal arguing that aggregation of the two claims exceeded the jurisdictional amount. See FRCP 18. The claim for declaratory judgment had to exceed $29,347 to establish jurisdiction, and it did not. The court framed the test as whether the “object giving value to plaintiff’s claim for declaratory judgment is the economic stake in the agreement.” To meet its burden, plaintiff filed an affidavit “on information and belief” attesting that the value of the agreement exceeded $40,000 based on sales of $300,000. Trouble loomed on the horizon. The Court disregarded the affidavit holding that it contained “bald statements based on round numbers as to the value of the contract.” Finally, it dismissed the action holding that “anyone familiar with the applicable law could [not] objectively view that the aggregate claims reach the jurisdictional minimum.”
There, plaintiff-supplier, a Colombian corporation, filed suit against a Puerto Rico distributor for breach of contract and collection of moneys of past due bills of lading totaling $45,653 and for declaratory judgment that termination of the non-exclusive distribution contract was with cause. Defendant’s sales of plaintiff’s products exceeded $300,000 over the past five years.
The court entered an order to show cause why the complaint should not be dismissed and the defendant followed with a motion to dismiss. Plaintiff opposed dismissal arguing that aggregation of the two claims exceeded the jurisdictional amount. See FRCP 18. The claim for declaratory judgment had to exceed $29,347 to establish jurisdiction, and it did not. The court framed the test as whether the “object giving value to plaintiff’s claim for declaratory judgment is the economic stake in the agreement.” To meet its burden, plaintiff filed an affidavit “on information and belief” attesting that the value of the agreement exceeded $40,000 based on sales of $300,000. Trouble loomed on the horizon. The Court disregarded the affidavit holding that it contained “bald statements based on round numbers as to the value of the contract.” Finally, it dismissed the action holding that “anyone familiar with the applicable law could [not] objectively view that the aggregate claims reach the jurisdictional minimum.”
First Circuit overturns jurisdictional dismissal in a Law 75 case
In Bacardi Intern. Ltd. v. V. Suarez & Co. Inc., 2013 WL 1919578 (1st Cir. May 8, 2013), the parties filed parallel proceedings in local and federal court to vacate and confirm a commercial arbitration award in a Law 75 dispute. An arbitration panel of the AAA had issued a partial final award in a bifurcated arbitration concluding that offset provisions in a sub-distributor agreement of the measure of damages were valid and enforceable under Law 75. The sub-distributor sought to vacate the award in the local court, a case that Bacardi removed and was remanded, and Bacardi filed a separate motion under Title 9 of the FAA to enforce it in federal court. It turned out that the federal court dismissed Bacardí’s proceeding for lack of jurisdiction and the local court confirmed the Award under the FAA. The sub-distributor appealed the local court’s judgment.
The First Circuit did not find it necessary to reach Bacardí’s “lively” argument that Titles 6 and 9 of the FAA preempt FRCP 19 by virtue of FRCP 81. Instead, the court concluded that the lower court had abused its discretion by dismissing the action for lack of jurisdiction because Bacardí Corporation, an affiliate, was not an indispensable party. Significantly, the First Circuit made a preliminary assessment of the merits of the motion to confirm to make a pragmatic determination that there was no risk of inconsistent obligations from Bacardi Corporation’s absence. After all, Bacardi International had been vigorously defending its identical interests to confirm the Award in their favor, the affiliate had not moved to intervene, and “review of arbitration awards is extremely narrow and exceedingly deferential” under the FAA. Touching but not deciding the broader preemption argument, the court rejected a blanket rule that would make indispensable all the parties to the arbitration in order to decide a motion to confirm. The court found that subject matter jurisdiction existed.
The First Circuit reversed the judgment and remanded to the federal court with instructions to stay pending the parallel certiorari proceeding in the local appellate court. Bacardi filed a petition for rehearing en banc of the decision to stay the motion to confirm and V. Suarez moved to reconsider the finding that Bacardi Corporation was neither required nor indispensable.
The author argued the appeal as lead counsel for Bacardí International.
The First Circuit did not find it necessary to reach Bacardí’s “lively” argument that Titles 6 and 9 of the FAA preempt FRCP 19 by virtue of FRCP 81. Instead, the court concluded that the lower court had abused its discretion by dismissing the action for lack of jurisdiction because Bacardí Corporation, an affiliate, was not an indispensable party. Significantly, the First Circuit made a preliminary assessment of the merits of the motion to confirm to make a pragmatic determination that there was no risk of inconsistent obligations from Bacardi Corporation’s absence. After all, Bacardi International had been vigorously defending its identical interests to confirm the Award in their favor, the affiliate had not moved to intervene, and “review of arbitration awards is extremely narrow and exceedingly deferential” under the FAA. Touching but not deciding the broader preemption argument, the court rejected a blanket rule that would make indispensable all the parties to the arbitration in order to decide a motion to confirm. The court found that subject matter jurisdiction existed.
The First Circuit reversed the judgment and remanded to the federal court with instructions to stay pending the parallel certiorari proceeding in the local appellate court. Bacardi filed a petition for rehearing en banc of the decision to stay the motion to confirm and V. Suarez moved to reconsider the finding that Bacardi Corporation was neither required nor indispensable.
The author argued the appeal as lead counsel for Bacardí International.
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