Monday, July 11, 2016

Waiver of just cause defense neither moots nor makes issuance of Law 75 preliminary injunction automatic

In Next Step v. Bromedicon, 190 D.P.R. 474 (P.R. 2014)(“Next Step I”), the court held that the issuance of a Law 75 preliminary injunction to a dealer, that qualified for protection, required weighing the policies served by the statute and balancing all the relevant interests. The traditional standards for preliminary injunctions are relevant but do not necessarily apply in this context, although traditional defenses to equitable relief, such as laches and estoppel, still apply.

Another Next Step case, Next Step v. Biomet Inc., 2016 TSPR 120 (2016), involved Biomet’s termination of a Law 75 contract after the dealer’s distribution rights had been expressly assumed by the principal’s successor. After the trial court scheduled a preliminary injunction hearing, the principal admitted lack of just cause and argued that the request for a preliminary injunction had become moot for all that remained was a prompt hearing on damages. The trial court agreed with the principal. The intermediate appellate court not only reversed but, concluding that the principal had admitted lack of just cause, entered a preliminary injunction on appeal without a hearing.

This procedural imbroglio came before the P.R. Supreme Court on two issues, first, whether the principal’s admission of liability mooted the preliminary injunction remedy (it did not), and two, did the appellate court err by granting a preliminary injunction on appeal (it did). The preliminary injunction, held the court, was not moot. The purpose of the Law 75 provisional remedy was to lessen the impact to the dealer from its loss of the dealer’s contract until a final judgment on the merits. Because the case was not over only with an admission of lack of just cause, the provisional remedy was not moot. The intermediate appellate court, however, erred in granting the preliminary injunction without a hearing because the dealer still had the burden to prove the reality of its damages and that the balancing of the relevant factors justified injunctive relief under Next Step I. The case was remanded for further proceedings.