P.R. Appellate Court affirms trial court’s judgment for agent in Law 21 case

In Ram-Rel, Inc. v. NCR International, Inc., 2018 WL 1941655 (TA Mar. 27, 2018), a panel of Puerto Rico’s appellate court affirmed the judgment of the Court of First Instance, San Juan Part, in favor of a sales representative after holding a bench trial and finding liability and awarding damages under Law 21, the special statute protecting sales representatives (who do not qualify for protection as Law 75 dealers).

For over 37 years, Plaintiff had served as an agent in Puerto Rico for NCR’s hardware and software computer products. In 1993, Plaintiff signed a new distribution agreement under which NCR agreed not to appoint other distributors or resellers to market the product to certain customers under specified circumstances. A claim arose after NCR sold directly the products that Plaintiff had a right to sell exclusively. And, in 2008, NCR terminated the distribution agreement.

Plaintiff’s complaint in the local court pleaded only a claim of damages and breach of contract under Law 75. The Pretrial Conference Report did not raise a Law 21 claim. During trial, the court determined that Plaintiff did not qualify as a Law 75 dealer. Based on the evidence admitted at trial, however, the court held that Plaintiff qualified for protection as a Law 21 agent and awarded the alternative compensation under Article 5 consisting of 5% of the total sales generated by the agent during 8 years prior to termination, for a total compensation of $243,319 plus taxable costs.

NCR did not contest the liability determination of lack of just cause on appeal but only the award of damages. The appellate court affirmed the judgment and the court’s rationale is significant in various respects. First, the appellate court held that Rules 42.4 and 71 of the P.R. Rules of Civil Procedure permitted the trial court to award any remedy at law permitted by the admissible evidence, including Law 21 damages that were not pleaded or requested in the Complaint and the Pretrial Conference Report.

Second, the court held that expert testimony was not required to prove the amount of damages permitted by the alternative compensation formula in Article 5 because there was admissible evidence of the total sales generated by the sales representative prior to termination.

Third, the court held that the alternative compensation formula does not require discounting any costs incurred in generating the sales, so that the calculation is based on gross sales as established by the statute. The court explained that this alternative compensation is meant to simplify the process and facilitate the agent, who lacks the resources, to be able to prove its claim.

Fourth, the court affirmed the trial court’s dismissal of the claims made by Plaintiff’s shareholders in their individual capacities and against officers or employees of the Defendant. The court reasoned that Law 21, as a special law, did not codify a right of action by or against anyone other than a sales representative against its principal.

Finally, the court affirmed the trial court’s decision to partially award taxable costs to Plaintiff as the prevailing party. Unlike Law 75 that has a special provision allowing attorney’s and expert witness fees to the dealer as prevailing party without a showing of temerity, Law 21 has no such provision, and there was no finding of temerity to award attorney’s fees against the principal in this case.