Sunday, January 7, 2018
It may sound like a broken record, but yes, Law 75 claims are arbitrable
By now it’s firmly settled law that Law 75 claims are arbitrable. While the question whether the claim at issue in a case is or not within the scope of an arbitration provision in an agreement depends on the particular facts of each case, only in exceptional circumstances would a Law 75 claim not be arbitrable. First, there is a risk that claims may not be arbitrable where the written arbitration agreement is narrow in scope and does not provide for arbitration of claims arising out of or related to the agreement or its termination. Second, where a party has waived arbitration by actively litigating in court or consenting to litigation instead of arbitration. Third, where there is an allegation of fraud in the inducement of the arbitration agreement itself. Fourth, court intervention may be appropriate to issue preliminary remedies in aid of arbitration or determine whether a dispute or claim is arbitrable. For the first three situations I have described above, it is rare to find cases upholding objections to arbitration and more so if you weigh in the strong federal policy in favor of arbitration.
The latest case in the rather long line of cases granting motions to dismiss or compel in favor of arbitration is Crespo v. Matco Tools Corporation, ___F. Supp. 3d.___,2017 WL 3534998 (Aug. 15, 2017)(Gelpí, J.). This case is of the first variety described above. Plaintiff, a dealer of automobile products, alleged that the Law 75 termination claim was outside the scope of the arbitration agreement as were claims of fraud that fit an exception in the agreement from the obligation to arbitrate. The court found that the reason given for termination was lack of payment-not fraud-and the termination claim was, therefore, arbitrable.
Another case along the same lines is Johnson & Johnson International v. Puerto Rico Supply, Inc., 258 F. Supp. 3d 255 (D.P.R. 2017), where the court (Besosa, J.) held that claims by a supplier of medical products for collection of monies and declaratory judgment for termination of a non-exclusive distribution agreement under Law 75 were arbitrable; stayed claims for termination of other exclusive agreements that had no arbitration provisions; and denied a motion to compel arbitration by Defendant's affiliate and a non-signatory of the arbitration agreement. On reconsideration, the court denied the supplier's motion to lift the stay pending arbitration and the order denying provisional remedies in aid of arbitration. This author represents the Defendant Puerto Rico Hospital Supply, Inc. in that action.
Add another one to the list. In Air-Con, Inc. v. Daikin Applied Latin America, LLC, 2019 WL 2606881 (D.P.R. June 25, 2019), the distributor challenged the obligation to arbitrate arguing that the agreement was unsigned, and in any event, expired on its own terms. The supplier countered that the parties adopted the unsigned agreement in their course of dealings and the agreement continued indefinitely after its expiration date unless terminated without just cause. The court determined that there was an obligation to arbitrate and dismissed the case.