Federal court awards Puerto Rico dealer over $855,000 in fees and costs as prevailing party in a Law 75 case

Litigating and losing Law 75 cases come at a high price. In Casco, Inc. v. John Deere Construction, ---F. 3d---, 2022 WL 1090559 (D.P.R. Mar. 31, 2022) (P. Delgado, J.), the court applied Puerto Rico Law 75’s fee-shifting statute and awarded the prevailing party Puerto Rico dealer over $855,000 in attorney's fees, expert witness fees, and statutory costs. After a nine-day trial in 2016, a jury found for the dealer and awarded $1.7 million in damages for termination and impairment of a dealer’s contract. The First Circuit affirmed the district court’s judgment and rulings. See 990 F. 3d 1 (1st Cir. 2021). This is the first reported decision that dives into the purpose of the fee-shifting provision in Law 75 and its legislative history. The P.R. Supreme Court and the local appellate courts have not addressed a claim for fee recovery under Law 75, but rather, under Rule 44.1 which requires a showing of temerity.The federal district court observes that the fee-shifting provision of Article 7 in Law 75 is modeled after fee-shifting provisions in federal civil rights statutes. This is significant because under federal law a prevailing party plaintiff ordinarily, absent exceptional circumstances, is entitled to recovery of reasonable fees incurred in the litigation. Further, the lodestar is the accepted methodology to determine the reasonableness of the fee amount. While Article 7’s permissive language is like Section 1988 of Title VII by allowing the court discretion to award fees, an award of fees is virtually mandatory in these cases for public policy reasons. Recovery of Law 75 fees does not require a showing of temerity or bad faith. On the other hand, for a prevailing party defendant to recover its fees, the case must have been frivolous or litigated in bad faith. From this rationale, the standards for prevailing party dealers and principals are different for fee recovery in Law 75 cases as they are in civil rights cases. The court also rejected Deere’s constitutional attack to Casco’s fee recovery. Deere argued that a provision in the 1986 agreement would allow Deere not only to recover its own fees in an action to enforce a breach of contract but also its fees if it lost the case brought by the dealer. The court found the argument contractually and legally untenable. The contract only allowed fee recovery by Deere in an enforcement action by it, not if it illegally terminated the contract and lost the case filed by the dealer. Because the contract could not reasonably be read as precluding the dealer’s remedy under the fee-shifting provision enacted in 2000, there was no retroactive application of the statute because applying it would not impair any of Deere’s contractually established rights. Casco could not waive rights that did not exist when the contract was executed in 1986, said the court, in declining having to decide whether such a waiver would have been unenforceable. As most of the opinions dealing with fee awards go to great length to evaluate line by line challenges to items of fees and costs, this opinion is no exception. Highlighting only some significant rulings, the court applied First Circuit precedent in 2022 to allow fee recovery for time invested in settlement negotiations. The court also held that Casco could recover fees for time spent on claims or motions it lost because those claims were factually interrelated to the claims it won. As a final straw that broke the proverbial camel’s back, the court dismissed Deere’s attempt to recover its fees under the contract for the counterclaim for collection of monies it won mid-trial. The court held that this claim for contractual fees was an element of the collection of monies counterclaim for damages that should have been briefed in the pretrial conference report and tried before the jury, so it was waived. It was doubly waived too because Deere did not claim contractual fees as a prevailing party in its own Rule 54 motion that the court had previously denied. What may turn out to be significant in fee litigation in other cases, the court cited federal cases holding that where the opponent puts its own fees at issue the moving party can allow discovery of the opponent’s fees to prove the reasonableness of its fee application. Deere claimed that it was entitled to recover $1.3 million in fees it spent to litigate the case it lost. It argued that it was entitled to offset those fees from Casco’s fee recovery. The court would have none of it because any such claim was waived and a set off would not have been proper under Puerto Rico law. What is more, the court held that Deere having spent almost twice as much as Casco did to win the case proves that Casco’s attorneys litigated the case more efficiently and effectively. Finally, the court awarded post judgment federal interest on the total fee award accruing from the date in the order determining the amount of the award. While not addressed in the opinion, federal circuit courts, however, are split on the question whether post-judgment interest on a fee award accrues from the date of the original merits judgment or from the subsequent order awarding fees, which in this case, was six years later.