Saturday, May 19, 2018
Federal district court denies Rule 12(b)(6) motion to dismiss a Law 21 complaint
In Vilá del Corral v. D’Accord, Inc., 2017 WL 1184002 (D.P.R. March 28, 2017) (“D’Accord”) (Domínguez, J.), plaintiff filed suit for collection of unpaid commissions and injunctive relief, invoking Puerto Rico’s Sales Representative Act No. 21 (a special law modeled after Law 75). Plaintiff alleged that Defendant breached an exclusive agreement existing, for over “twenty-nine years”, that authorized him to represent D’Accord branded menswear clothing in Puerto Rico. Defendant attacked the sufficiency of the allegations under Rule 12(b)(6), Fed. R. Civ. P., arguing that “there are no contract documents” to support Plaintiff’s argument that he was an exclusive sales agent for D’Accord in Puerto Rico. Id. at *2.
The court noted that it was “unclear [from the Complaint’s allegations] whether the agreement was written or oral and whether it was later novated.” Id. at *4 n. 2. What is more, the court was “skeptical” on whether Law 21, enacted in 1990, applied retroactively to the alleged business relationship predating the enactment of Law 21, but lacked the “requisite clarity to reach a properly-founded conclusion” at the pleadings stage without the contract documents. Id. at *4 n. 3. Considering the well-established plausibility standard governing a Rule 12(b)(6) motion, the court denied the motion to dismiss holding that “Plaintiff has made a satisfactory showing of a plausible Act 21 claim, which the Court deems sufficient to level up and proceed to discovery.” Id. at *4 (quoting) Triangle Trading Co. v. Robroy Indus., 952 F. Supp. 75 (D.P.R. 1997) (Providing that determinations of whether a person is a dealer or exclusive sales representative is fact-intensive and should not be made on the pleadings).
The takeaway of the D’Accord decision is that, no matter how dubious a claim might seem on the pleadings without the benefit of full discovery, a plaintiff is not required to plead the particulars of a binding contract or establish an extinctive novation to state a plausible claim under Law 21 (or for that matter, Law 75) and survive a Rule 12(b)(6) motion to dismiss. This holding is aligned with recent First Circuit authority. APB Realty, Inc. v. Georgia-Pacific LLC, No. 17-1906 slip op. at 9 (May 7, 2018) (vacating Rule 12(b)(6) dismissal of breach of contract claim because “the complaint alleges facts from which the court can plausibly infer the making and breaking of a contract”). D’Accord applies correctly the plausibility standard governing a Rule 12(b)(6) motion to dismiss an action brought under any one of Puerto Rico’s representation statutes (Law 75 or Law 21).