Thursday, July 11, 2019
Reputation damage with clients after a termination suggests a possible loss of goodwill
I came across an old case decided by Judge Jaime Pieras, Antilles Carpet, Inc. v. Milliken Design Center, 26 F. Supp. 2d 345, 348-349 (D.P.R. 1998), that discusses what evidence is relevant to goodwill damages in the context of a summary judgment motion, and there’s not much case law on this subject. This case involved a Law 75 dispute between a brand-name supplier of carpets and its Puerto Rico distributor. The parties disputed who terminated or impaired the relationship (the supplier denied a termination but the court found an issue of fact). The dispute also turned contentious on damages. The supplier urged that the distributor suffered no damages because it did not lose any revenues and clients from the termination. The court disagreed with the premise of the argument (though granted the MSJ on that ground because plaintiff failed to refute those allegations) since those are not the only two factors, citing a prior decision, to the effect that damages for lost profits are measured by Section 278(b).
On goodwill, the court found that the distributor’s deposition testimony (presumably not hearsay and otherwise admissible) created an issue of fact on whether reputational damage with clients suggests a possible loss of goodwill, which is an element of damages under Law 75. The witness said: “when you go to one of your major clients and say you no longer handle Milliken [the brand name], which is a major name in the carpet industry, it affects you image wise, and that's why I thought…”. The best evidence might have been testimony by the clients themselves but in this case was absent. The court granted and denied in part the MSJ but allowed the Law 75 claim to proceed on elements of damages other than lost revenues and clientele.