Intermediaries in the distribution chain are not principals or grantors and Law 75 liability cannot attach to them

In Meta Med, LLC v. Insulet Corporation, 2024 WL 1763610 (D.P.R. Apr. 23, 2024) (Vélez-Rivë,J.), following a termination and the appointment of another distributor, a Puerto Rico reseller Meta Med and an individual sued a medical device company and two stateside wholesalers asserting claims under Laws 75 and 21. Plaintiffs alleged to have signed separate written agreements with defendants to provide training and resell diabetes products and services. Plaintiffs’ flawed theory of the case was that there were multiple principals and defendants were jointly liable. In short order, the court granted the defendants-wholesalers’ motion to dismiss. Citing Romero v. ITE, 332 F. Supp. 523 (D.P.R. 1971), the court held that Law 75 limits liability to the principal and grantor and not third parties. Based on the allegations, the court found that the wholesalers stopped selling products to plaintiffs at the principal Insulet’s request and control. As intermediaries and not principals, the wholesalers were not liable under Law 75. Because plaintiffs had no actionable Law 75 claim against these defendants, the claim for breach of a duty of good faith and fair dealing failed as well. As to Insulet, the court enforced a mandatory forum selection clause of Massachusetts in the agreement with plaintiff Mercado and dismissed certain claims. Notably, the court held that Law 75’s public policy considerations cannot override the benefit of the bargain in the valid choice of forum provision. The Law 21 claim did not survive as the statute requires exclusivity and Plaintiffs conceded the relationship was nonexclusive.The only claim that survived, and remained pending for a preliminary injunction hearing, was plaintiff Meta Med’s termination claim against Insulet, whose agreement apparently did not have a choice of forum provision.

Federal court rejects multiple tolling theories to resurrect a previously dismissed and stale Law 75 impairment lawsuit

Air-Con v. Daikin, 2024 WL 1016184 (D.P.R. March 8, 2024)(Raul Arias, J.), is instructive for its rejection of multiple tolling theories of Law 75’s caducity period. The case illustrates the risk of suing, voluntarily dismissing, and then refiling the same claims dressed as a new action years after the caducity period expired. A Puerto Rico dealer of air conditioners sued in 2018 asserting impairment claims under Law 75 that arose in 2013, except for one claim concerning the elimination of a mini split air conditioning line. Based on the three-year caducity period, the court granted the defendant’s motion for summary judgment and dismissed the complaint as time barred. The court considered plaintiff’s prior complaint which specifically alleged the same impairment acts and all arose in 2013 or 2014. The new lawsuit was a continuation of the identical prior lawsuit for claims that were time barred in 2018 and not tolled. The court rejected plaintiff’s arguments of equitable estoppel on the facts for plaintiff was not lulled by not suing during the entire limitations period. In any event, no state court case supported applying that defense in the context of Law 75. The court also rejected an argument that Daikin acknowledged a legal obligation to the distributor sufficient to toll the limitations period or the purported acknowledgements were irrelevant or untimely. Finally, the court held that plaintiff’s voluntary dismissal of the prior lawsuit did not legally toll. And, the continuing violations doctrine did not apply because a contract breach is a single and readily ascertainable event. As to the remaining Law 75 claim, it held that the principal’s elimination of the mini-splits did not breach any contract and could not be actionable as an impairment claim. Finally, the court dismissed in part Daikin’s counterclaim seeking a declaration of just cause for termination holding that the claim was not ripe as it was premised on events that have not come to pass. The court set the counterclaim for collection of monies for trial as there was a dispute as to whether monies were due and owing. Author's Note: The court’s dismissal of the declaratory judgment count may clash with General Motors v. Royal Motors Corp., 769 F. Supp. 2d 73 (D.P.R. Feb. 1, 2011)(Gelpí, J.). There, GM filed a preemptive suit against one of its dealers seeking a declaration under 28 U.S.C. §2201 that it had just cause for termination of the motor vehicle dealer agreement with one of its dealers. As to the justiciability of the claim, the court found that the federal Declaratory Judgment Act “is designed to enable litigants to clarify legal rights and obligations before acting on them.” “GM’s right to terminate its contractual relationship is the exact type of dispute considered ripe for declaratory judgment”, held the court. The court also found that GM showed the hardship it would suffer absent a judicial determination of its rights and denied the motion to dismiss.