Saturday, March 12, 2016

John Deere Construction and Forestry Company gets hit with federal jury verdict in dealer termination case


Last Friday, March 11, 2016, a federal jury in the U.S. District Court of Puerto Rico found defendant John Deere Construction & Forestry Company liable for termination of a 27 year-old dealer's contract without just cause under Law 75 and awarded plaintiff Casco, the Puerto Rico distributor, impairment and termination damages of $1,763,934.

This is the first Law 75 case to reach a federal jury verdict in recent memory.

The federal court's pretrial in limine rulings in Casco v. John Deere (published in Westlaw) provide a more developed background of the disputes and claims between the parties than I will attempt here. In summary, Casco, a Puerto Rican distributor of construction equipment, claimed that John Deere, one of the leading manufacturers of construction equipment in the United States, terminated unilaterally the dealer's contract in 2013 without just cause and impaired the contract by cancelling in 2012 a purchase order for the sale of a John Deere excavator worth $268,000.

Only the separate claims for impairment and termination under Law 75 reached the jury. At trial, the Court (Hon. Pedro Delgado Hernandez, J) dismissed the dolus (fraud) claim holding that the alleged predicate for fraud of constructive termination of the contract in 2009 was not actionable under Puerto Rico Law 75, a pure issue of law and one of first impression with the P.R. Supreme Court. Mid-trial, as noted, the Court granted John Deere's Rule 50 motion to dismiss the dolus claim for fraudulent inducement and fraudulent performance of contract and also entered judgment for John Deere on its counterclaim for collection of a debt of roughly $200,000.

About Casco's success on the Law 75 claims, the Jury must have found that John Deere's ostensible reasons stated in two letters for the impairment and subsequent termination were false or a pretext. The jury credited Casco's version of the events that John Deere retaliated or discriminated against its Puerto Rican dealer over many years as a vendetta for the dealer's owner's business affiliation with Volvo Construction, a competitor.

Substantial evidence was introduced at trial that John Deere treated its Puerto Rican distributor differently from other construction equipment dealers in Latin America or the United States. Those other dealers received grace periods to comply with John Deere's requirements and were invited to attend important dealer conferences. Casco received no breaks and was the only dealer excluded from the dealer conferences. John Deere's executives admitted to being upset at Casco for standing up for its rights for many commercial issues in their relationship, and more upsetting was to John Deere its business dealings with Volvo. The John Deere dealer agreement with Casco also did not have a non-compete obligation, as do many of John Deere's newer dealer contracts with other distributors.

After a two-week trial and over two hours of deliberations, the Jury awarded Casco impairment damages of $323,440 and termination damages of $1,440,494, fully compensating Casco for 100% of its Law 75 claims. Puerto Rico law does not permit punitive damages. Puerto Rico Law 75 has a cost-shifting provision requiring the Court to award reasonable attorney's and expert witness fees in the dealer's favor as the prevailing party, and those fees are expected to be substantial in this case.

This author Ricardo Casellas was lead trial counsel for the dealer Casco in this case and CAB's attorneys Heriberto Burgos and Sarika Angulo and paralegal Mercedes Rodriguez formed CAB's team. Plaintiff's damages expert was Reynaldo Quinones Marquez, CPA, and Gustavo Velez, an economist who testified about market conditions affecting the construction industry in Puerto Rico. For defendant, Dr. Freyre, an economist, testified as rebuttal expert on damages.