Wednesday, October 2, 2019

Federal Court confirms arbitration award as a judgment for the dealer under Law 75

On May 9, 2019, this blog reported that a three-member panel of the AAA issued an award finding that Johnson & Johnson International terminated a non-exclusive distribution agreement without just cause in violation of Law 75 and awarded damages, fees, and interest to the dealer. Subsequently, the dealer moved in federal court to confirm the award under the FAA. The supplier moved to vacate the award under the Puerto Rico Arbitration Act (PRAA).

In Johnson & Johnson International v. Puerto Rico Hospital Supply, 2019 WL 4723892 (D.P.R. Sept. 25, 2019)(Besosa, J.), the court denied the motion to vacate and confirmed the award in its entirety. The court decided that the standards of review of arbitration awards under the FAA and the PRAA are different. Puerto Rico law permits review of arbitration awards under standards comparable to judicial review of determinations by administrative agencies and the FAA does not. The court held that the FAA governed here because the transactions at issue satisfied the "in commerce" requirement and a general Puerto Rico choice of law provision in the distribution agreement did not manifestly reflect an intent to have the PRAA govern judicial review of the award to the exclusion of the FAA. Applying the highly deferential standard in the FAA and the First Circuit's authoritative jurisprudence, the court held that "[t]he arbitration award sets forth a well-reasoned and methodical approach to the Law 75 dispute, citing the relevant statutes, case law, and evidence." The dealer stands to recover as a judgment almost $1.2 million in damages plus interest that continues to accrue until repayment.