# Opposition Brief — Kagan v. El San Hotel & Casino, 114 S. Ct. 1372 (1994) (No. 93-1274)

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1994

## Text

Buprome Gout, U.S,
; FILER D
MAL 34
Le oF a a
In the a

Supreme Court of the United States

Ocroser TERM, 1993

MARSHALL J. KAGAN,
PETITIONER,

v.

EL SAN JUAN HOTEL CORP.,
HANS LOPEZ STUBBE AND
RODRIGO OTERO BIGLES,

RESPONDENTS.

ON A PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

BRIEF IN OPPOSITION FOR RESPONDENTS
EL SAN JUAN HOTEL CORP. and
HANS LOPEZ STUBBE

DANIEL R. DomINGUEz*
Marie Exsit Lopez ADAMES
Domincuez & Tort!

PO Box 191732

San Juan, PR 00919-1732

Tel: (809) 753-7910

“Attorney of Record

Blanchard Press, Inc., Boston, Mass — Law Printers (617) 426-6690

ee gael M '
Noe bitte Rinse

I. QUESTIONS PRESENTED FOR REVIEW —
MISSTATEMENTS CONTAINED THEREIN

In compliance with this Honorable Court’s Rule #15 the
appearing party addresses misstatements in the Questions
Presented For Review by Mr. Marshall J. Kagan, petitioner
herein, acting pro se. These statements have a repercussion
on the question of the issues properly presented before the
court.

Petitioner states that in this case an employee of a company
operating under bankruptcy law, himself, discovers that the
trustees and their attornies [sic] are corrupt criminals, stealing
from the estate, and protecting each other. Mr. Kagan further
states that he had them removed from office, charged, con-
victed, and in one case imprisoned for their wrongdoing and
that in retaliation they fired him and blackballed him,
preventing him from working for several years.

The appearing party specifically states that there has never
been any criminal actions instituted against the successor
trustee Hans Lopez Stubbe nor against his former attorney
Rodrigo Otero Bigles who are the parties in this cause of
action. At no time has there been an ailegation, evidence or
finding of fact relating to any criminal activity by these two
co-defendants; therefore Mr. Kagan’s statement that Hans
Lopez Stubbe and Rodrigo Otero Bigles have been charged
and convicted for criminal acts constitutes a gross misstate-
ment of fact.

Also Petitioner wrongfully expresses that he had them,
referring to, once again, the successor trustee (Hans Lopez
Stubbe) and Rodrigo Otero Bigles (former trustee’s attorney),
removed from office. The appearing party specifically indi-
cates that said statement constitutes a misstatement of fact
since Hans Lopez Stubbe is still the trustee of the bankrupt
estate, he was never removed or convicted or even charged
with any criminal acts, and neither was his attorney, Rodrigo
Otero Bigles. However, the former trustee, Hector Rodriguez
Estrada, who is not a party in this appeal, the original trustee,

EE EEE

was convicted and removed from office and is now serving
an eighteen (18) year sentence. Petitioner obtained also a
default judgment in the instant case against said original
trustee.

Furthermore, petitioner Kagan states that in retaliation
they, referring also to former trustee, successor trustee and his
former attorney, fired him preventing him from working for
several years. The appearing party specifically indicates that
this is a misstatement of fact referring to Hans Lopez Stubbe
and to his former attorney Rodrigo Otero Bigles since Mr.
Kagan was dismissed from his position before Mr. Hans Lopez
Stubbe was appointed trustee of the estate and before Mr.
Bigles was the lawyer for the estate. Thus, Mr. Hans Lopez
Stubbe and Mr. Bigles could not possibly have dismissed Peti-
tioner from employment.

The appearing party very respectfully prays this Court to
refer to the factual background of this case as found by the
Bankruptcy Court, the District Court, and as later summa-
rized by the Circuit Court. (See Petitioner's Appendix and
Supplemental Addendum wherein the District Court and Cir-
cuit Court judgments are included and Respondents’
Appendix pp. 15-26 for the Bankruptcy Court Opinion and
Order). We further emphasize that the bankruptcy trial judge
specifically made a finding exonerating the successor trustee,
Mr. Hans Lopez Stubbe of ever participating in any “cover
up’ activities. (Resp. Appendix p. 24).

A. Questions that would properly be before the court.

Although the appearing party emphatically sustains that
certiorari in the instant case should not be granted, we state
the questions that would properly be before this Honorable
Court.

1. If petitioner's claim for damages against the successor
trustee Hans Lopez Stubbe and the lawyer for the estate, in
1eir personal capacity, is not barred since under Puerto Rican

employment law, law applicable to this employment matter,

the exclusive remedy for a claim as made by appellant is the
one provided by State Law Act No. 80 of May 30 of 1976,
29 LPRA §185a-1851, as found by the Bankruptcy Judge, the
District Judge and the Circuit Court.

2. If a successor bankruptcy trustee and his attorney had
any legal duty to provide references regarding Petitioner, ex-
employee of the bankruptcy estate, notwithstanding that the
successor trustee and the lawyer did not have any personal
knowledge of Petitioner’s work habits and notwithstanding
that there is no state law requiring the provision of references.

3. If a successor trustee and his attorney’s fiduciary
duties to the bankrupt estate extend to an ex-employee seeking
damages for acts of a former trustee.

4. If this Court should formulate a federal common law

remedy to redress plaintiff where Congress has not acted.

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TABLE OF CONTENTS

Page
I. QUESTIONS PRESENTED FOR REVIEW
MISSTATEMENTS CONTAINED THEREIN

A. Questions that would properly be before the

court ii
Il. STATEMENT OF THE CASE ]
A. Re-statement of Facts ]
B. Course of the Proceedings 3
II]. DECISIONS BELOW 6
A. Disposition in District Court 6
B. Disposition in Circuit Court 7
IV. ARGUMENT )
V. REASONS FOR DENYING THE WRIT 10
A. Factual Misstatements 10
B. The Alleged conflict of circuits 1]

C. Bankruptcy is Federal Interest as to the Adminis-
tration of the Estate 14

CONCLUSION 15

vi

TABLE OF AUTHORITIES

CASE Law

United States Page
Alvardo Morales v. Digital, 843 F.2d 613 (st Cir. 1988) 1]
Amato v. Western Union Intern, Inc., 773 F.2d 1402

(2nd Cir. 1985) 12, 14
Ana Bonelli de Pujol y. Shearson American Express,

90 D.C.O. 127 (D.C.P.R. 1990) 12
Bahamundi v. American Airlines, Inc., 7070 F Supp.

79 (D.C.P.R. 1989) 1]
Banco Nacional de Cuba vy. Sabbatino. 84 S.Ct. 923

(1964) 13
Barany v. Buller, 670 F.2d 726 (7th Cir. 1982) 13
Board of Regents v. Roth, 408 U.S. 564 (1972) 12, 14
Garcia v. American Airlines, Inc., 673 F. Supp. 63

(D.C.P.R. 1987) 1]
Gonyea v. Motor Parts Fed. Credit Union. 7 IER Cases

539 (Mich. Court of Appeals 1991) 10
In re Gibbons, 52 B.R. 861, 863 12, 14
In re Goerg, 844 F.2d 1562 cert. den 109 S.Ct. 850

(llth Cir. 1988) 14
In re Grieves, 81 BR 912 (1987) 12, 14
In re Martin, 817 F.2d 175 (1st Cir. 1987) 6
In re TCI Ltd., 769 F.2d 441 (7th Cir. 1985) 14
Johnson vy. First Nat. Bank of Montevideo, 719 F.2d

270 cert. den. 465 U.S. 1012, 1045 S.Ct. 1015. 79

L.Ed. 2d 245 (1983) . | 12, 14
Lugo v. Matthew Bender & Co., 579 F. Supp. 638

(trem. $1964)... ee Fe 1]
Matter of Roach, 824 F.2d 1370 (3rd Cir. 1987) 14
Nasuti v. Scondell, 792 F.2d 264 (lst Cir. 1986) 12, 14
Ridenour v. Andrews Federal Credit Union, 897 F.2d

PE 5556s hy ae ene ae Magers 13
Rodriguez v. Eastern Airlines, 816 F.2d 24 (1st Cir.

Ye a-ak 5 Ee oe are ee eae 1]

vii

Page
Valle v. J.C. Penney, Inc., 704 F. Supp. 329 (D.C.P.R.
1988) 1]
Vargas v. Royal Bank of Canada, 604 F. Supp. 1036
(D.P.R. 1985) 11, 12
Warren Brothers Company v. Cardi Corporation, 47]
F.2d 1304, 1307 (Ist Cir. 1973) 12, 14
Weatherly v. International Paper, 648 F. Supp. 872
(D.C.P.R. 1986) 11, 12
White v. General Motors, 908 F.2d 669 (10th Cir
1990) 7)
Puerto Rico
Diaz v. Secretario de Hacienda, 14 T.P.R. 1115 (1983) 10
Garcia Pagan v. Shiley Caribbean, 88 JTS 101 (1988) 11
Guardiola v. Perez Moran, 14 T.P.R. 613 (1988) 10
Industria Lechera v. Secretario de Hacienda, 95 PRR
819 (1968) 10
Ocasio v. Diaz, 88 P.R.R. 658 (1963) 10
Porto v. Bentley, 92 JTS 175 (1992) 9, I]
Rivera v. Security National Life Ins. Co., 6 TPR 727
(1977) 1]
Rodriguez v. Comision Industrial, 91 D.P.R. 434 (1969) — 10
Santiago v. Kodak, 92 JTS 11 )
Puerto Rico Statutes
Act No. 65 of July 3, 1986, 29 LPRA §185(b) 10, 11
Act No. 80 of May 30, 1976, 29 LPRA §185a-1851 3, 4,
6, 7, 9, Il
Civil Code of Puerto Rico, Article 3, 31 LPRA §3 10

Vili

Miscellaneous

60 ALR 3rd 1080

Bankruptcy Code §327

Bankruptcy Code §107, 704 and 1106(a)

California Labor Code §1055

Defamation In The Workplace: The Impact of In-
creasing Employer Liability, 72 Marg. L. Rev. 264
(1989)

Duffy, Defamation and Employer Prit ilege, 9 Employee
; ploy pio}

REL. L.J. 444 (1983)

Indiana Stat. §22-6-3-]

Lewis, Ottley & Mersol, Defamation and the Workplace:
A Survey of the Law and Proposals for Reform, 54
MO. L. Rev. 797 (1989)

Martin & Bartol, Potential Libel and Slander Issues
Involving Discharged Employees, 13 Employee REL
L.J. 43 (1987)

Missouri Rev. Stat. §290.140

10

In the
Supreme Court of the United States

No. 93-1274

OcToBer TERM, 1993

MARSHALL J. KAGAN,
PETITIONER,

v.

EL SAN JUAN HOTEL CORP..,
HANS LOPEZ STUBBE AND
RODRIGO OTERO BIGLES,

RESPONDENTS.

ON A PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

BRIEF IN OPPOSITION FOR RESPONDENTS
EL SAN JUAN HOTEL CORP. and
HANS LOPEZ STUBBE

Il. STATEMENT OF THE CASE
A. Re-Statement of Facts

As described below, the factual situation in the case at bar
is different than indicated by petitioner. Petitioner herein,
Marshall J. Kagan, was the comptroller of the bankrupt estate
of El San Juan Hotel Corporation at the time Hector
Rodriguez Estrada was appointed as Trustee of said estate.
Kagan, having worked for the bankrupt estate for less than

a year was dismissed by Rodriguez Estrada on December 30,

2

1982 for alleged unsatisfactory performance. Several months
after he was terminated, Mr. Kagan testified before the House
of Representatives of Puerto Rico.! On March 24, 1983 the
Bankruptcy proceedings were converted to Chapter VII; the
Hotel thus was permanently closed. Mr. Rodriguez Estrada
was finally removed from his office on September 1983. Ten
months after petitioner's termination, on October 31, 1983
Mr. Hans Lopez Stubbe was appointed Successor Trustee.
Shortly thereafter Kagan urged Lopez and Otero, Successor
Trustee's attorney, to file suit against Rodriguez. A request
they refused based on the information available to them at
that time. Otero Bigles’ opinion was that at the time there
was insufficient evidence to sustain an action on their part
against Rodriguez Estrada. It was not that they were exoner-
ating Rodriguez Estrada from any misconduct.

Contrary to petitioner's statements, Rodrigo Otero Bigles
resigned as counsel at Mr. Lopez’s request and not because
they were both summoned to court and ordered to do so.
(Resp. Appendix at p. 89-90). All lower courts have correctly
and accurately determined that Otero had no conflict of
interest in violation of section 327 of the Bankruptcy Code on
which responsibility could be imposed in favor of Kagan.

Kagan requested from Hans Lopez reinstatement, sever-
‘ance pay and damages and further demanded that Lopez rec-
tify his termination letter and instead prepare letters of recom-
mendation, notwithstanding that the successor trustee was not
his employer, all this pursuant to an alleged agreement which
Kagan had reached with the original trustee Rodriguez
Estrada. Kagan claimed that he was dismissed in retaliation
for his attempts tc have the trusteeship of Rodriguez Estrada
investigated and that he should be compensated by the estate

' Petitioner implies that he was terminated after testimony at the House
of Representatives. The fact is that he testified after termination. Mr. Kagan
was terminated on December 29, 1982 (Resp. Appendix p.16) and the tes-
timony in the State Legislature was provided in February 1983 (Resp.
Appendix pp. 7-8 deposition of Mr. Kagan).

3

for the alleged harm he suffered because of the dismissal
ordered by the original trustee, Rodriguez Estrada.

Mr. Lopez, as Successor Trustee, agreed to settle the sever-
ance pay ordered by law but refused to recommend the estate
to proceed to make any payment beyond what is established
by the Puerto Rican severance statute, 29 LPRA 180 et. sec.
Furthermore, the reinstatement remedy could not proceed
due to the fact that the hotel had filed Chapter VII
proceedings prior to the appointment of Mr. Lopez as trustee.

B. Course of the Proceedings
&

This case was initially filed in the Bankruptcy Court as an
adversary proceeding on March 10, 1983. The original defen-
dants were the estate of the San Juan Hotel Corporation and
former Trustee Hector Rodriguez Estrada. The allegations
made therein were of wrongful dismissal and slander.

Various causes of action filed against Rodriguez Estrada in
his personal capacity were dismissed by the Bankruptcy Court
nine months after the filing of the complaint in an order which
stated that the actions were directed at Rodriguez Estrada in
his official capacity. (See Resp. Appendix p. 1). The Judge
also directed plaintiff to file an amended complaint as to his
cause of action for slander. The Complaint was also amended
to include defendants Hans Lopez Stubbe and Rodrigo Otero
Bigles as well as their wives and conjugal partnerships in their
personal capacities. Rodriguez Estrada moved the Court to
dismiss the action against him in his personal capacity. The
issue was considered by the District Court which finally ren-
dered a Memorandum Opinion and Judgment on August 27,
1986 dismissing the libel and slander complaints against Lopez
Stubbe and Rodriguez Estrada, signed by Hon. Judge Jose A.
Fuste. Said Judgment was not appealed. (See Resp. Appendix
p. 4).

In the Memorandum Opinion and Judgment the District
Court held that the cause of action for slander was dismissed

for lack of jurisdiction and that the remaining proceedings
against former trustee Rodriguez Estrada and successor trustee
Lopez in their official capacities as well as against the Hotel
San Juan-€orporation were to be remanded to the Bankruptcy
Court. That judgment was never appealed and is hence final.

The trial of the case commenced on May 24, 1988. The
proceedings were halted because of petitioner's lack of
counsel.?

Much later the trial was started once again, Petitioner con-
tinuing pro se, before Bankruptcy Judge Sara De Jesus on Sep-
tember 11, 1990. At the beginning of the trial, the Court
issued a ruling dated September 11, 1990 excluding the defen-
dants therein, trustee Hans Lopez Stubbe and his attorney
Otero Bigles, their wives and conjugal partnerships from any
personal liability, since the court was precluded from holding
contrary to Hon. Judge Fuste’s order dated August 27, 1986
(See Resp. Appendix pp. 4-6). On September 17, 1990, a par-
tial final judgment was entered, wherein the Court granted
severance payment to Petitioner pursuant to Local State Law,
Act 80 of 1976, 29 LPRA 185a et sec., and dismissed the claim
for libel and slander based principally on the reasons set forth
by Hon. Judge Jose A. Fuste in his Memorandum Opinion and
Judgment of August 27, 1986. Judge De Jesus further denied
Kagan’s request for punitive damages for the reasons stated
by Hon. Judge Beckerleg in his order of November 16, 1984,
see Appendix pp. 1-3 and pp. 11-12. The trial was continued
until its conclusion on September 12, 1990. No appeal was
made from the partial final judgment entered by Hon. Judge
De Jesus dated September 17, 1990.

On March 22, 1992 the Bankruptcy Court issued its opinion
and order dismissing the causes of action against Hans Lopez
Stubbe and Rodrigo Otero Bigles. Mr. Kagan has alleged in

? During the Hearing on May 25, 1988, the Court concluded that the
case could not continue with Kagan representing himself pro se because the
Court could find itself compromising its impartiality.

Petitioner herein Kagan had, at that time, already terminated attorney-
client relationships with at least three legal representatives.

ur

his petition that there are still two motions (Motion to Dis-
gorge Legal Fees and Motion to Remove Trustee) pending
resolution by Hon. Judge De Jesus. However, those motions
were addressed by the Judgment of the Bankruptcy Court
dated March 22, 1992 and confirmed by Hon. Judge Fuste’s
opinion dated December 29, 1992; hence both motions are
now moot. This constitutes a further misstatement of
procedural matters.

In its Opinion the Bankruptcy Court made the following
findings:

1. Successor Trustee Hans Lopez Stubbe had no obliga-
tion to rectify the letter of dismissal which was sent to Appel-
lant by former trustee Rodriguez Estrada nor was he obligated
to provide appellant with any letters of recommendation or
references.

2. There was no record of the purported agreement
wherein Kagan’s letter of termination was to be expunged and
Petitioner was to be provided with letters of recommendation.

3. Lopez Stubbe could not provide references for Kagan
since he did not have personal knowledge of his performance
and there was no legal duty to provide such references. See
Appendix at pp. 24-25.

4. The Court found no evidence on which to sustain the
allegations of a “cover-up” by Trustee Lopez Stubbe and
Otero Bigles of the former Trustee Rodriguez Estrada’s illegal
actions. Appendix at pp. 24, 25.

5. There was no jurisdiction of the Bankruptcy Court on
which it could “entertain questions concerning an attorney’s
violation of the rules of professional conduct” .*

‘Mr. Kagan has claimed that attorney Rodrigo Otero Bigles did not
comply with said rules for he was allegedly performing legal services for
an estate handled by trustee Lopez in the instant case and at the same time
that he served as attorney for an estate handled by trustee Rodriguez Estrada
in a different Bankruptcy case, therefore, having an alleged conflict of
interest.

6

6. Plaintiff's exclusive remedy for alleged consequential
damages due to termination was the severance payment under
local State law Act No. 80 of 1976, 29 LPRA 185a et seq

The Court then proceeded to dismiss the remaining causes
of action against all codefendants except Mr. Hector
Rodriguez Estrada in his professional capacity as former
trustee.

Mr. Kayan filed an appeal from the Bankruptcy Court's dis
position in the District Court. The District Court entered its
Judgment and Opinion and Order on December 29, 1992,
confirming the Bankruptcy Court's Opinion. An appeal to the
Circuit Court followed, which then confirmed the District
Court opinion. The present Petition for Certiorari before the
Supreme Court followed, which is now the object of this oppo
sition.

HI. DECISIONS BELOW
A. Disposition in District Court

In the Opinion of the District Court, the Judge dismissed
Petitioner's cause of action under section 327 of the
Bankruptcy Code, that counsel Otero Bigles falsely claimed
to be a disinterested party, for lack of standing.* He expressed
that the injury could only be to the estate and petitioner herein
is claiming injury to himself as an employee and not as a
creditor. -

The Court further expressed that there was lack of causal
relationship relating to the alleged claim of conflict of interest
against Otero Bigles and petitioner's alleged damages: “Our

‘ Hon. Judge Fuste disagreed with the Bankruptcy Court that the Court
lacked jurisdiction over the question of whether Otero-Bigles violated the
requirement that counsel be a “disinterested party” for in In Re Martin,
817 F.2d 175. 181 (Ist Cir. 1987) it was expressed that “bankruptcy courts
have been accorded wide discretion in regard to the terms and condi-
tions of the engagement of professionals.”

problem is with both the traceability and redressability prongs
of the doctrine. ... Tracing plaintiff's injury, i.e. his inability
to get work after his termination, to Otero Bigles’ alleged mis-
representation is difficult.” See Hon. Judge Fuste’s Opinion
and Order See Petitioner's Appendix at pp. 34-35.

On plaintiff's lack of standing the District Court stated that
it had jurisdiction over a claim concerning the fiduciary duties
of the officers of the estate. The court correctly stated that
the trustee and his attorney do have a fiduciary duty to the
shareholders and creditors but however the Court found no
application of that principle to Marshall J. Kagan’s claim since
the case at bar was not that of a creditor nor shareholder but
of an ex-employee. As the Court pointed out, the nexus with
which it was concerned in this case was not that between the
fiduciary and the interests in the estate, but rather that
between employer and employee which is a_ relationship
governed by state law.

Relating to plaintiff's labor claim of consequential damages
due to termination, the court, knowledgeable in Puerto Rican
employment law, which is the law applicable to the case at
bar, rejected plaintiff's public policy exceptions to the
employment-at-will doctrine and stated, once again that
plaintiff's exclusive remedy was recovery under Act No. 80 of
1976, 29 LPRA 185a et sec.

B. Disposition in Circuit Court

The Circuit Court entered its opinion on September 9,
1993, affirming the District Court Opinion. The opinion
determined that Kagan had shown no basis for even inferring
that either Lopez Stubbe or Otero Bigles had a legal duty to
correct his references which had not been given by them, but
by the former trustee ten months before Lopez Stubbe and
Otero Bigles arrived on the scene. The Court also found that

even assuming Lopez Stubbe and Otero Bigles were employers

8

of Kagan, codefendants were under no obligation to provide
any references under State Law to him and that, therefore,
it could not see why they should be required to provide cor-
rected ones. The Court further expressed that Lopez Stubbe’s
and Otero Bigles’ fiduciary duties to the bankrupt estate and
to its creditors do not extend to Kagan, who is seeking
damages as a former employee of the estate.

In relation to Kagan’s claim that Lopez Stubbe and Otero
Bigles harmed him by providing false references the Court
stated that said claim was not raised below and, therefore,
was not properly before the Court and that in any event
Kagan admitted that he never sought any references from
them for a prospective employer, a fact which made his claim
devoid of merit.

The Circuit Court also found without merit Kagan’s reli-
ance on §§ 107, 704 and 1106(a) of the Bankruptcy Code to
sustain that the trustee had a duty to provide proper references
and/or to correct them. The Court accurately concluded with
respect to said matter that: “(1) any duty under the
Bankruptcy Code to prevent the dissemination of defamatory
material is imposed on the court not the trustee; (2) the
allegedly defamatory letter is not a ‘paper filed’ in a
bankruptcy case; and (3) as noted above, Kagan concedes that
the letter was never disseminated.”

In relation to Kagan’s assertion that he is entitled'to relief
under federal common law the Court expressed, among other
reasons, that the instances in which a federal court has the
authority to formulate a federal common law remedy are “few
and restricted”, that absent some statutory authorization to
formulate substantive rules of decisions the court could not
create a federal common law remedy, and that in this case

it was not “necessary to protect unique federal interests”.

9

IV. ARGUMENT

The appearing party’s position regarding petitioner’s claim
has consistently been that Mr. Kagan’s dismissal by Mr.
Rodriguez Estrada, former trustee, was not justified pursuant
to State Law and that, therefore, the existing remedy for
unjust dismissals under Puerto Rican law applies. On Mr.
Kagan’s clairn that Mr. Lopez Stubbe and his former attorney
Otero Bigles refused to correct the record of the dismissal and
give Kagan proper references, the appearing party has sus-
tained and the courts have correctly determined that there is
no legal obligation to provide references. Therefore, the exclu-
sive rernedy available to Mr. Kagan is the one provided by
State Law Act. No. 80 of May 30, 1976, 29 LPRA § 185a-185]
and its case law.°

Mr. Kagan intends to portray that he has an independent
cause of action for defamation in employment without com-
plying with the required standard of proof and regardless of
the fact that the type of information provided which is
claimed as the cause of action is privileged under labor/libel

6

law.® Furthermore said cause of action was adjudged,

decreed, dismissed and was not appealed.

* Also on this issue it is important to state that there is no obligation for
an employer to provide an employee with references regarding his job per-
formance. See Santiago v. Kodak, 92 JTS 11 Resp. Appendix pp. 27-46.
Also different from other states, there is no obligation for the employer to
provide the employee a letter of dismissal. See for example California Lab.
Code § 1055, Indiana Stat. § 22-6-3-1 and Missouri Rev. Stat § 290.140.

® One of the elements of the cause of action for defamation in employment
is publication. Porto v. Bentley, 92 JTS 175 p. 10249, Resp. Appendix pp.
47-79. See also White v. General Motors, 908 F.2d 669 (10th Cir. 1990)
where a discharged employee failed to state a claim for slander based on
alleged negative job reference since he failed to introduce specific evidence
of what was said, by whom and to whom. Furthermore, it has been stated
that there is a need to promote the free flow of communication which
requires the existence of the privilege. Among the communications which
are considered privileged are the ones made to prospective employers
informing the reasons for the dismissal. See Annot., 60 A.L. R.3d 1080

10

On the other hand, petitioner herein has failed to demon-
strate that he is a “whistle-blower” under the applicable
Puerto Rican statute since, in the first place, Act No. 65, the
local Whistle-Blower Act (29 L.P.R.A. §185(B)), was enacted
on July 3, 1986, three years after the fact, and is therefore
not applicable to petitioner since substantive statutes under
Puerto Rican law have no retroactive effect unless specifically
indicated by the statute.? Second, even if Act No. 65 was
retroactive Mr. Kagan does not qualify for its application
since the act applies to an employee’s collaboration with or
to the expressions made by him regarding his employer’s busi-
ness prior to the employee's dismissal and Mr. Kagan’s tes-
timony before the legislature occurred after his dismissal.

A detailed examination of the Circuit Court’s opinion and
of the lower courts opinions (Bankruptcy and District) based
upon issues of state law, leads to the conclusion that those
courts gave full consideration to the issues presented and
decided them correctly: they followed an unbroken line of
authority.

V. REASONS FOR DENYING THE WRIT
A. Factual Misstatements

If this most Honorable Court were to grant the petition
requested by Mr. Kagan it would be on action based upon

(1974); Duffy, Defamation and Employer Privilege, 9 Employee REL. L.J.
444 (1983); Martin & Bartol, Potential Libel and Slander Issues Involving
Discharged Employees, 13 Employee REL. L.J. 43 (1987); Defamation In
The Workplace: The Impact of Increasing Employer Liability, 72 Marq.
L. Rev. 264 (1989); Lewis, Ottley & Mersol, Defamation and The Work-
place: A Survey of the Law and Proposals for Reform, 54 MO. L. Rev.
797 (1989); and Gonyea v. Motor Parts Fed. Credit Union. 7 IER Cases
539 (Mich. Court of Appeals 1991).

" See Article 3 of the Civil Code of Puerto Rico, 31 LPRA 3; Guardiola
v. Perez Moran, 14 TPR 613 (1983); Diaz v. Secretario de Hacienda, 14
TPR 1115 (1983); Ocasio v. Diaz, 888 PRR 658 (1963); Industria Lechera
v. Secretario de Hacienda, 95 PRR 819 (1968): Rodriguez v. Comision
Industrial, 97 DPR 437 (1969).

1]

the presentation of an erroneous factual situation. The facts
of the case are different from the facts expressed in the
petition.

First of all, Mr. Kagan was dismissed from his employment
at the El San Juan Hotel Corp. by the former trustee Hector
Rodriguez Estrada before Mr. Kagan appeared to testify at
the House of Representatives of Puerto Rico. Hector
Rodriguez Estrada could not retaliate for testimony not
having been provided by Mr. Kagan. The state ‘whistle-
blowers’ statute, Act No. 65 of July 3, 1986, 29 LPRA §
185(b), is not applicable to this situation because Petitioner
blew the whistle after he was terminated. Even if the facts
had occurred as wrongfully narrated by Mr. Kagan, the
whistle-blowers statute would not apply because it was
enacted on July 3, 1986, three years after the fact, the law
having no retroactive effect.

B. The Alleged Conflict of Circuits

The Court of Appeals for the First Circuit Opinion is fully
in accord with the pertinent state law and state public policy.
In its per curiam opinion the Circuit Court arrived at the cor-
rect result based on the overwhelming unanimity existing in
Puerto Rico on the issue that State Law 80 of 1976, 29 LPRA
185 et. seq. is the exclusive remedy under the facts of the case
and that this case did not present issues nor facts to depart
from the exclusive remedy doctrine. See Porto v. Bentley, 92
JTS 175 pp. 10246-7, Resp. Appendix pp. 47-79; Garcia Pagan
v. Shiley Caribbean, 88 JTS 101, 1988: Resp. Appendix p.
82-98; Rivera v. Security National Life Ins. Co., 6 TPR 727
(1977); Rodriguez v. Eastern Airlines, 816 F.2d 24 (1st Cir.
1987); Alvarado Morales v. Digital, 843 F.2d 613, 615 n.1 (1st
Cir. 1988); Lugo v. Matthew Bender ¢> Co.. 579 F.Supp. 638
(DCPR 1984); Vargas v. Royal Bank, infra: Weatherly v.
International Paper, infra; Garcia v. American Airlines Inc.,
673 F.Supp. 63 (DCPR 1987); Valle v. J.C. Penney, Inc., 704
F. Supp. 329 (D.C.P.R. 1989); Bahamundi v. American

12

Airlines, Inc., 707 F.Supp. 79 (D.C.P.R. 1989); and Ana
Bonelli de Pujol v. Shearson American Express, 90 D.C.O. 127
(D.C.P.R. 1990).

The alleged intercircuit conflict is also distinguishable on
the facts and on the applicable law. In relation to the
applicable law it is clear that Mr. Kagan’s alleged claim arises
from a situation which is absolutely governed by state not fed-
eral law: an employment relationship. When Mr. Kagan
claims that the estate is liable what he is asserting is the
employer-employee relationship existing between the
bankrupt estate of El San Juan Hotel Corp. and himself.

It is a principle of law that when federal courts face issues
of state law they are forced to apply the legal and public
policy principles embodied in the pertinent local statute -
See Vargas v. Royal Bank of Canada, 604 F.Supp. 1036
(D.P.R. 1985) and Weatherly v. International Paper, 648
F.Supp. 872 (D.C.P.R. 1986). Warren Brothers Company v.
Cardi Corporation, 471 F.2d 1304, 1307 (Ist Cir. 1973) and
see also In re Gibbons, 52 B.R. 861, 863. See In re Grieves,
81 BR 912 (1987); Johnson v. First Nat. Bank of Montevideo,
719 F.2d 270 cert. den. 465 U.S. 1012, 1045 Ct. 1015, 79
L..Ed.2d 245 (1983). Board of Regents v. Roth, 408 U.S. 564,
577 (1972): Amato v. Western Union Intern Inc., 773 F.2d
1402, 1405 (2nd Cir. 1985); Nasuti v. Sconell, 792 F.2d 264
(Ist Cir. 1986). It is logical then that there had to be differ-
ences among the circuits with respect to this matter since in
the majority of the cases they are applying different state law
embodying different public policies. The states have different
legislative bodies which enact different labor statutes with
different public policies in mind. This fact definitely has an
effect upon the decisions of the federal courts applying state
law.

In other words, the existing differences among the Circuits
are perfectly and logically accounted for and do not in reality
constitute basis for the granting of the petition.

13

Mr. Kagan intends to characterize his clairm as one which
needs redress under unique federal interests. Petitioner cites
the case of Banco Nacional de Cuba v. Sabbatino, 84 S.Ct.
923, 939 (1964) alleging that the case at bar started in the
Bankruptcy Court and the Bankruptcy Court is exclusively a
federal creation. However, in Banco Nacional de Cuba there
were questions of international law which are definitely of
federal interest.

The fact that the bankruptcy system controls “finances of
thousands of large businesses, and of hundreds of thousands
of individuals, and its staffing by federal personnel” definitely
does not make the case at bar worthy of designation as a
“unique federal interest” as the alleged federal credit union
regulatory system. Even if the instant case was worthy of the
designation it does not mean that when dealing with matters
of state employment law the bankruptcy court will create fed-
eral public policy especially if there is no federal statute

The intercircuit conflict claimed by Petitioner is also distin-
guishable from the case at bar in terms of the facts of the case
because Mr. Kagan testified before the House of Representa-
tives of Puerto Rico after he was discharged. The cases cited
by Petitioner are cases wherein the employees were active in
employment when they committed the acts which gave place
to their dismissals. See Barany v. Buller, 670 F.2d 726 (7th
Cir. 1982), further, also contrary to the facts of the case. there
was no remedy by applicable statute, Ridenour v. Andrews
Federal Credit Union, 897 F.2d 715 (1990).

Thus, regardless of what other circuits might have man-
dated regarding other distinguishable cases under other fac
tual situations it is clear that the First Circuit properly decided

the instant case based on the applicable state law

14

C. Bankruptcy is Federal Interest as to the Administra-
tion of the Estate

Although the federal bankruptcy law preempts state law (In
re Goerg, 844 F.2d 1562 cert. den. 109 S.Ct. 850 (C.A. 1]
1988)) on bankruptcy matters this does not mean that all fed-
eral public policy will apply even to underlying non-
bankruptcy matters. The Bankruptcy Court, for instance, is
not authorized to change the applicable state law on certain
matters. See In re TCI Ltd., 769 F.2d 441 (7th Cir. 1985).
Furthermore, “the Bankruptcy Code was written with the
expectation that it would be applied in context of state law
and federal courts are not licensed to disregard interests
created by state law when that course is not clearly required
to effectuate federal interests.” See Matter of Roach, 824 F.2d
1370 (3rd Cir. 1987).

Thus, in strict bankruptcy matters, the bankrutpcy code
and its federal interest take precedence over state bankruptcy
statutes but state law controls over underlying aspects like
employment, contracts, property, damages, attachments etc.

Warren Brothers Company v. Cardi Corporation, supra
and see also In re Gibbons, supra. See In re Grieves, supra;
Johnson v. First Nat. Bank of Montevideo, supra. Board of
Regents v. Roth, supra; Amato v. Western Union Intern Inc..,

supra; Nasuti v. Sconell, supra.

15
CONCLUSION

For the foregoing reasons this most Honorable Court should

deny the petition for writ of certiorari requested by petitioner
Respectfully submitted

DanieL R. Domincuez*
Marie Evsie Lopez ApAmes
Domincuez & Torti

P O Box 191732

San Juan, PR 00919-1732
Tel. (809) 753-7910
Counsel for El San Juan
Hotel Corp. and
Hans Lopez Stubbe

A-1]

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO

B-80-00259 (A)

Chap. 7

Apversary No. 83-0183

IN RE:
SAN JUAN HOTEL CORPORATION.
DEBTOR,
MARSHAL J. KAGAN,

PLAINTIFF,

v.
EL SAN JUAN HOTEL CORPORATION.
HECTOR RODRIGUEZ ESTRADA, Trustee.
DEFENDANTS.

ORDER

This adversary proceeding was transferred to our considera-
tion by order of the Hon. Antonio I. Hernandez Rodriguez of
Nov. 17, 1983.

Our first intervention in this proceeding has been to hear the
parties, after notice, on the motion to dismiss filed by co-
defendant Hector M. Rodriguez Estrada.

On March 10, 1983, plaintiff filed his complaint against E]
San Juan Hotel Corp., a Chapter 7 debtor (hereinafter referred
to as “defendant debtor” and Hector Rodriguez Estrada,
Trustee, the trustee in the Chapter 7 case of the defendant deb-
tor (hereinafter referred to as defendant Rodriguez). The com-
plaint alleges jurisdiction under 28 USC 1471 and 1473 as an
action against the debtor and the representative of the estate
arising after the commencement of the case.

Three claims for relief are set forth. The first claims the defen-
dant Rodriguez arbitrarily, negligently, and wrongfully dis-

A-2

missed plaintiff from his position as controller of defendant
debt. The second claim is a claim for unjustified dismissal
under 29 LPRA 185(a) - 185(j). The third claim is a claim
for damages based upon allegedly slanderous and libelous
statements concerning plaintiff allegedly made by defendant
Rodriguez.

The answer of co-defendant Rodriguez denies most of the
allegations, the jurisdiction, and the right to relief; the defen-
dant debtor did not file, but as co-defendant Rodriguez was
~at that time the trustee of the case, and thus the representative
of the debtor estate (4323), no separate answer was required.

After certain discovery, co-defendant Rodriguez moved to
dismiss the complaint for lack of jurisdiction based on
Northern Pipeline v. Marathon, 102 S.Ct. 2858 (1982). This
is the motion we heard, and which we now consider; before
doing so, however, we should note that co-defendant
Rodriguez is no longer the trustee in this case having been
replaced by Hans Lopez Stubbe; a motion by the new trustee
to be substituted as the party in interest was granted Oct. 31,
1983.

Bankruptcy Rule 7025 makes applicable to adversary
proceedings Rule 25 of F.R. Civ. P., which deals with substi-
tution of parties, subject to the provisions of Rule 2012; Rule
2012 provides that when a trustee is removed during the pen-
dency of a case, the successor is automatically substituted as
a party in any pending proceeding. As trustee, co-defendant
Rodriguez is no longer a party to this proceeding by virtue
of the foregoing rules and by virtue of the aforementioned
order of Oct. 31, 1983.

Is co-defendant Rodriguez yet a party in his individual or
personal capacity? To answer this question, we must first
determine whether he was sued in his official capacity, or in
his personal capacity, or in both capacities.

As to the first two causes of action or claims, it is clear to
us that co-defendant Rodriguez was sued in his official
capacity. The nature of the alleged wrong, (dismissal from
the position of controller of a trustee administered debtor),

dew > die ee Sree.

Anat 4 Nig iste a

A-3

and the nature of the relief requested (reinstatement, bonus,
severance pay, reimbursement of expenses incurred as an
employee, and dismissal pay) are typical of the wrongs
attributed to and the relief claimed from the employer and
not from the officer who carried out the dismissal, in cases
of this type.

As to the third cause of action, plaintiff suggests that either
or both the debtor defendant and co-defendant Rodriguez
could be responsible for the allegedly slanderous and libelous
statements. If there is slander and/or libel, it is to be deter-
mined under the laws of the Commonwealth of Puerto Rico,
which we assume as neither of the parties has elected to sug-
gest any source, would have to be found in $1802 of the Civil
Code, 31 LPRA 5141, or, more likely, the special action of
the Code of Civil Procedure, 32 LPRA 3141-3149. This.
however, begs the issue, which is whether co-defendant
Rodriguez was personally sued under such a cause of action.

The complaint on a motion to dismiss must be liberally
interpreted. While a liberal interpretation perhaps could sup-
port plaintiff's position, in view of the changed circumstances
arising from the substitution of the new trustee, an amend-
ment of the pleadings would assist the trial of this case greatly.

The plaintiff is granted 10 days to amend its complaint;
absent such an amendment within the 10 days, the motion
to dismiss will be granted.

San Juan, Puerto Rico, this 14th day of December, 1983.

s/_W. H. BeckERLec
W. H. BecKERLEG
cc/ JoHN M. Garcia
CHARLES CupRILL HERNANDEZ
R. Otero BIGLeEs
12-15-83
r.

A-4

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

Misc. No. 84-0035 (JAF) ;
MARSHALL J. KAGAN,

PLAINTIFF,

v.

SAN JUAN HOTEL CORPORATION,
HECTOR M. RODRIGUEZ-ESTRADA, anp
HANS LOPEZ STUBBE, as TrustE oF SAN JUAN
Hore, CorporaTION,

DEFENDANTS.

MEMORANDUM OPINION AND JUDGMENT

After a thorough examination of the pleadings and docu-
ments on file, we conclude that this court lacks jurisdiction
to entertain a suit by a private citizen against an ex-trustee
of a bankruptcy estate where diversity-of-citizenship jurisdic-
tion, 28 U.S.C. Sec. 1332, is absent and the parties are not
subject to a bankruptcy proceeding. We further find that the
suit initiated by plaintiff Marshall J. Kagan as an adversary
proceeding against the bankrupt, San Juan Hotel Corpora-
tion, should be remanded to the bankruptcy court, since with-
drawal of reference as mandated by 28 U.S.C. Sec. 157(d)
is not warranted here.

On March 10, 1983, Marshall J. Kagan filed an adversary
proceeding before the bankruptcy court against the estate of
debtor San Juan Hotel Corporation and trustee Hector M.
Rodriguez-Estrada, for wrongful dismissal from employment.
Plaintiff also made allegations of slander against the trustee.
The complaint was subsequently amended to include Hans

Cre ee tren ee Ty

A-5

Lopez-Stubbe, who succeeded Mr. Rodriguez-Estrada as
trustee upon the latter’s removal from his position. Defendant
Rodriguez-Estrada moved for dismissal. The bankruptcy
court elevated defendant’s motion to dismiss to the district
court,

On July 16, 1984, Rodriguez-Estrada filed a second motion
to dismiss, alleging that the action is a claim for damages
against him in his personal capacity and that the bankruptcy
court lacked jurisdiction to entertain such suit. 28 U.S.C. Sec.
157(b)(5). This motion was also referred by the bankruptcy
court to this court. The Hon. Raymond L. Acosta, U.S. Dis-
trict Judge, held that the bankruptcy court could entertain
personal injury claims with the consent of all the parties.’
Judge Acosta retained the case. His order was entered on April
3, 1985.

Codefendant Hector M. Rodriguez-Estrada moved for
reconsideration alleging that the pleaded cause of action was
not one “arising under or related to title 11.” Plaintiff Kagan
opposed stating that the allegation of actions and/or omissions
pertaining to Rodriguez-Estrada occurred during his tenure
as trustee. Rodriguez-Estrada’s motion for reconsideration
and/or dismissal was denied by Judge Acosta on December 6,
1985.

Subsequently, defendant Rodriguez-Estrada filed a motion
to strike and for sanctions. The same was received by the
Clerk as tendered for filing. This matter remained undecided
when Judge Acosta transferred this case to our docket. The
tendered motion is dated October 18, 1985. The motion to
strike requests that we sanction Mr. Kagan for signing motions
pro se. Codefendant Rodriguez-Estrada understood that all
pleadings were to be signed by counsel. Counsel for plaintiff,

; The bankruptcy judge had stated as to this matter that “a proceeding
based on improper acts of a Trustee while engaged in the administration
of an estate under this court's jurisdiction would seem to be a matter exclu-
sively for our consideration. While the personal properties and assets
of an ex-Trustee are also at risk in this case, they were placed at risk by
him when he accepted the appointment.”

CO

A-6

John M. Garcia, had filed a motion withdrawing legal
representation as of January 19, 1985.

Rodriguez-Estrada’s motion to strike and for sanctions
requests that we “eliminate” the Kagan motions. In so doing,
he cited Local Rule 204.3, requiring that pleadings and
motions be signed by the attorney of record. We do not pass
upon the mentioned motion exchange. Mr. Kagan now has
retained counsel. We do reexamine the jurisdictional allega-
tion in the case against ex-Trustee Rodriguez-Estrada.

Even though this Court had found jurisdiction on the
slander cause of action against the ex-Trustee, we now
VACATE said order. Jurisdiction is not present. Federal
bankruptcy jurisdiction does not extend to cover actions that
have no effect on the estate of the debtor. See In re Turner.
724 F.2d 338 (____ Cir. __); First State Bank v. Sand Spring
State Bank, 528 F.2d 350 (10th Cir. 1976) (court in
bankruptcy cannot entertain jurisdiction of private matters

which do not relate to matters pertaining to the estate).
JUDGMENT

The slander cause of action is DISMISSED WITHOUT
PREJUDICE. The adversary proceeding against debtor Hotel
San Juan Corporation, ex-trustee Hector M. Rodriguez-
Estrada, and Mr. Lopez-Stubbe as succeeding trustee,
brought against him in his official capacity, is REMANDED
to the bankruptcy court for further proceedings. The
bankruptcy court will pass upon the allegation of wrongful
dismissal from employment.

IT IS SO ORDERED.

San Juan, Puerto Rico, this 27th day of August, 1986.

s/ Jose ANTONIO FusTE

Jose ANTONIO FusTE
U.S. District Court

A-7

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO

Chapter # 7B-8000259(SE K)
Apv. # 8301A3

MARSHAL J. KAGAN,
PLAINTIFF,
v.
THE SAN JUAN HOTEL CORPORATION,
DEFENDANT.

DEPOSITION OF

MARSHAL J. KAGAN

Taken at the offices of LLoveras & Quituicuini, Recinto Sur
Street, Old San Juan, Puerto Rico. On October 26th, 1989.
at 10:00 o'clock in the morning.

were held before the Citizens Committee of the house of
Representatives, do you recall that?

A. Yes.

Q. When were they held?

A. I think February of nineteen-eighty-three (1983).

Q. So, that would have been still when Mr. Rodriguez
Estrada was a trustee?

A. Yes, he was trying in the last ditch attempt to keep him-
self in the El] San Juan. He was trying to get the government
to provide additional financing.

Did you appear before that committee.

Yes.

When did you appear before the committee?
Well, in February nineteen-eighty-one (1981).
Nineteen-eighty-three you mean (1983)?
Eight-three (83), sorry.

POPO PO

iii

A-8

Q. Do you claim, from what I read, I gather that basically
what you're saying is that, you were defamed or slandered
or libeled in those hearings. Is that right?

A. Yes. that’s correct. Since there has been a ruling in the
District Court that the slander claim can’t be heard. The
reason for including it here is the fact that Rodriguez finally
gave the reason for dismissing me. He had never given me a

reason. and he claimed that he was

A-9

IN THE UNITED STATES BANKRUPTCY COURT FOR
THE DISTRICT OF PUERTO RICO

Case No. 80-00259 SEK
Chapter 7
ApversARY No. 83-0183

IN THE MATTER OF:
KL SAN JUAN HOTEL CORPORATION,
DEBTOR,
MARSHALL J. KAGAN,

PLAINTIFF,
wD.

KL SAN JUAN HOTEL CORP., HECTOR RODRIGUEZ
ESTRADA, HIS WIFE JANE DOE AND THE LECAL
SOCIETY CONSTITUTED BY BOTH OF THEM; HANS
LOPEZ STUBBE, AS TRUSTEE OF EL SAN JUAN HOTEL
CORP., IN HIS PERSONAL CAPACITY, HIS WIFE
JANE DOE AND THE LEGAL SOCIETY CONSTITUTED
BY BOTH OF THEM; RODRIGO OTERO BIGLES, HIS
WIFE JANE DOE AND THE LEGAL SOCIETY
CONSTITUTED BY BOTH OF THEM,

DEFENDANTS.

PARTIAL FINAL JUDGMENT

Upon the Order entered by the Honorable Sara De Jesus
in open Court at hearing held on September 11, 1990 and
Order entered on September 17, 1990, it is now

ADJUDGED AND DECREED that judgment be and is
hereby entered in favor of Plaintiff in the second claim for
relief in the amended complaint filed on July 29, 1988 for the
amount of $7,051.28. Decision of whether said payment will
be considered-as a Chapter 11 claim has been reserved. It is
further

|

A-10

ADJUDGED AND DECREED that the third claim for
relief as it pertains to claim for libel and slander be and is
hereby dismissed for the reasons stated by the Hon. Jose
Antonio Fuste in his Opinion and Order entered August 27,
1986 and Judgment entered August 28, 1986, and it is further

ADJUDGED AND DECREED that the request for punitive
damages be and is hereby denied for the reasons stated by the
Hon. William H. Beckerleg in Order entered November 8,
1984 and Partial Judgment entered November 16, 1984.

IT IS SO ORDERED.

San Juan, Puerto Rico, this 17th day of September, 1990.

s/__Frances Rios pe Moran
FRANCES Rios DE MORAN
Clerk of Court
cc: MARSHAL. KAGAN
UST
PETER J. PORRATA
JOHN GARCIA
Hans Lopez
Roprico OTERO
C. CupriLyi
CABASSA
POREATA
DomincuEz V. Torti
9/18/90
iF

A-1]1

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO

Case No. 80-00259 (SEK)
Chapter 7
Apv. No. 83-0183

IN THE MATTER OF:
EL SAN JUAN HOTEL CORP..,
DEBTOR,
MARSHAL J. KAGAN,
PLAINTIFF,

v.

EL SAN JUAN HOTEL CORP., et at.,
DEFENDANTS.

ORDER

The Order issued in open Court on September 11, 1990 is
hereby amended Nunc Pro Tunc to provide that the Clerk will
enter a Partial Final Judgment in accordance with the adjudi-
cations made in open Court, as there is no just reason for any
delay in so doing. Bankruptcy Rule 7054(a) and F.R.C.P.
54(b).

Clerk will give notice of this Order.

oe

A-12

GIVEN in San Juan, Puerto Rico, this 17th day of Sep-
tember, 1990.

S SARA DE Jesus

SARA DE JESUS
U.S. Bankruptcy Judge
cc: MARSHAL KAGAN
UST
Perer J. Porrata
JouNn GARCIA
LEPOLDO CABASSA
C. Cupriti
Domincuez V. Tort

HANS Lopez
9/18/90

A-13

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO

Case No. 80-00259 (SEK)
Chapter 7
A pv No B3_O1R3

IN THE MATTER OF
EL SAN JUAN HOTEL CORP
DEBTOR,
MARSHALL J. KAGAN
PLAINTIFF

1

EL SAN JUAN HOTEL CORP., HANS LOPEZ STUBBE.
AS TRUSTEE OF EL SAN JUAN HOTEL CORP.. HIS
WIFE JANE DOE AND THEIR CONJUGAL SOCIETY
RODRIGO OTERO BIGLES, HIS WIFE JANE DOE
AND THEIR CONJUGAL SOCIETY
DEFENDANTS -

ORDER

Mr. Hector Rodriguez Estrada will show cause in w riting.
within 60 days, why a default judgment should not be entered
against him in the causes of action yet to be adjudicated in
this adversary proceeding, as per Amended Complaint filed
on July 28, 1988 (docket entry 147) and Opinion and Order
entered by the undersigned today
Failure to comply with this Order may cause the Court to
enter appropriate sanctions, including a judgment by default
as stated above
The Clerk will notify this Order and follow up on the s

matter

A-14

GIVEN in San Juan, Puerto Rico, this 20th day of March,
1992.

s/ Sara de Jesus

Sara de Jesus
U.S. Bankruptcy Judge

A-15

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO

Case No. 80-00259(SEK)
Chapter 7
Apv. No. 83-0183

IN THE MATTER OF:
EL SAN JUAN HOTEL CORP.,
DEBTOR,
MARSHAL J. KAGAN,
PLAINTIFF,
v.
EL SAN JUAN HOTEL CORP., HANS LOPEZ STUBBE,
AS TRUSTEE OF EL SAN JUAN HOTEL CORP., HIS
WIFE JANE DOE, AND THEIR CONJUGAL SOCIETY,
RODRIGO OTERO BIGLES, HIS WIFE JANE DOE,

AND THEIR CONJUGAL SOCIETY,
DEFENDANTS.

OPINION AND ORDER
I. BACKGROUND

The Amended Complaint filed after this proceeding was
remanded is predicated on the following factual allegations. !

Mr. Marshall Kagan is a certified public accountant. He
was employed as comptroller by El San Juan Hotel Cerpora-
tion (the Hotel). When the Corporation filed for the protec-
tion afforded by Chapter 11 of the U.S. Bankruptcy Code,
Mr. Kagan was employed by both the Debtor in possession
and the former trustee, Mr. Hector Rodriguez Estrada (the
Trustee). All told, his employment as comptroller for the
Hotel lasted from approximately September of 1979 until

' This is actually a third amended complaint. The Second Amended com-
plaint was withdrawn by the Plaintiff on May 5, 1988, docket entry 135.

A-16

December 29, 1982, when he received a letter signed by the
Trustee summarily dismissing him.

Following several phone calls, Mr. Rodriguez Estrada
agreed to meet with Mr. Kagan. According to Mr. Kagan,
the Trustee agreed to destroy the December 29th letter of dis-
missal, substituting it for one which stated Mr. Kagan’s
employment was terminated because the case was converted
to Chapter 7 and the Hotel would be closed.? The Trustee also
agreed to pay the amount of severance requested by Mr.
Kagan. The Trustee did not honor this agreement.

Mr. Kagan testified at a public hearing before the P.R.
House of Representatives’ Committee on Tourism. He stated
the Hotel El San Juan would be closed because of the Trustee’s
poor management and failure to follow the Bankruptcy
Court's instructions to operate the Hotel as economically as
possible. When ‘the Trustee testified he did not deny Mr.
Kagan’s charges of his poor management. He accused Mr.
Kagan of participating in a conspiracy with others to close
the Hotel. These statements were televised and reported in the
newspapers. Mr. Kagan claims he was dismissed because of
this testimony.’

When Mr. Hans Lopez Stubbe (the Successor Trustee) was
appointed to succeed Mr. Rodriguez Estrada as Trustee in the
case, he hired Mr. Otero Bigles as his counsel. Mr. Kagan
approached both of them to have them rectify the record of
his dismissal. They failed to do this. This failure to rectify the
reasons for Mr. Kagan’s dismissal prevented Mr. Kagan from
obtaining future employment.

Mr. Otero Bigles, as Attorney for the Successor Trustee,
urged U.S. District Judge Jose A. Fuste not to permit an action
against the former Trustee, while at the same time receiving

* The Second Order converting the case to Chapter 7 was entered on April

20, 1983.

* The parties refer to this alleged cause of dismissal as “whistle blowing”.

RE Re ae nS

A-17

fees from Mr. Rodriguez Estrada in the case of “Northeastern
Promotions” (sic). According to Mr. Kagan, this is a violation
of rules of professional conduct. It was not until this conduct
was disclosed to U.S. District Judge Fuste, did Mr. Lopez
Stubbe “fire” Mr. Otero Bigles. Hence, they both participated
in a “cover up” which harmed Mr. Kagan.

Pursuant to these alleged facts, Mr. Kagan claims remuner-
ation based on the following causes of action:

1. the summary dismissal which violated his rights of due
process, public policy and the U.S. Bankruptcy Code;

2. the summary dismissal which violated Law #80, 29
Laws of P.R. Ann. Sections 185 (a)-(i);

2. the summary dismissal which violated Law #80, 29
Laws of P.R. Ann. Sections 185 (a)-(i);

3. the statements made by Mr. Rodriguez Estrada, broad-
casted on television and published in the newspapers which
were slanderous and libelous;

4. the cover-up engineered by the Successor Trustee and his
Counsel and their failure to rectify Mr. Kagan’s retaliatory
summary dismissal which were willful negligent acts;

5. Mr. Otero Bigles’ conduct violated the attorneys’ rules
of professional conduct.

The specific remedies requested were:

1. reinstatement and back pay to be assessed as an adminis-
trative expense due as Comptroller for El San Juan Hotel;5

2. payment as an administrative expense of $7,051.28 of
severance pay; of a $961.54 bonus; of $728.00 for expenses;
of $3,000.00 relocation or moving expenses;

* See In Re San Juan Hotel, 841 F.2d 6 (lst Cir. 1988): and, In Re San
Juan Hotel, 847 F.2d 931 (Ist Cir. 1988).

* Mr. Kagan claims he is owed these sums both as a Chapter |1 and
Chapter 7 administrative expense because of the continuing nature of the
tortious conduct.

en

A-18

3. award $500,000.00 and $1 million in punitive damages;
$100,000.00 for pain and suffering; $100,000.00 for damages
to his professional reputation; $500,000.00 for compensatory
damages due to his retaliatory discharges.°

The following causes of action and requests for damages
have been adjudicated:

1. Partial summary judgment was entered in open Court
on September 12, 1990, granting the cause of action for
wrongful dismissal based upon Law 80, 29 Laws of P.R. Ann.
Section 185 (a)-(i). The award was limited to the severance
pay requested in the amoung of $7,051.98.” Compensatory
damages requested pursuant to Law #80 in the form of
$728.000 of expenses incurred by Mr. Kagan during his
employment as the Comptroller for El] San Juan Hotel, a
bonus of $961.54, and $3,000.00 for his moving or relocation
expenses, were denied. A Partial Final Judgment was entered
accordingly on September 18, 1990.

2. U.S. District Court Judge Jose A. Fuste entered a
Memorandum Opinion and Order on August 28, 1986, dis-
missing without prejudice “the slander cause of action

* Mr. Kagan claims he is owed these sums both as a Chapter 1] and
Chapter 7 administrative expense because of the continuing nature of the
tortious conduct.

* The Estate, Mr. Rodriguez Estrada, his wife and their conjugal partner-
ship, Mr. Hans Lopez Stubbe, his wife and their conjugal partnership, and
Mr. Otero Bigles, his wife, and their conjugal partnership should apparently
all be jointly and severally liable for these damages.

” We cannot determine whether this severance payment for discharge
awarded to Mr. Kagan on Sept. 12, 1990, for his dismissal without cause
under 29 Laws of P.R. Ann. Section 185 (a), should be afforded the Code

Section 503 (b)(1)(A) administrative priority, in view of In Re Mammoth
Mart, Inc., 536 F.2d 950 (Ist Cir. 1976) and 3 Collier On Bankruptcy,
503.04 (15th ed). 29 Laws of P.R. Ann., Sec. 185 (a) calls for an award
of one month of salary, plus an additional progressive indemnity equivalent
for one week for each year of service as defined by the law. We have no
evidence of Mr. Kagan’s salary during the periods in question, nor can we
determine whether he was employed while the Debtor was under Chapter
11 or 7 of the Code. This information is available to the Successor Trustee
and we will enter a separate Order accordingly.

ELEN ADE EREL RAT RO CN ee te

A-19

. [because] federal jurisdiction was not present.”*® The Clerk
of the U.S. District Court entered a partial judgment accord-
ingly. As per our Order, the Clerk of the Bankruptcy Court
entered a partial final judgment on September 18, 1990, dis-
missing this cause of action.®

3. Judge Fuste’s August 28th Memorandum Opinion and
Order also dismissed the cause of action against the “ex-trustee
of a bankruptcy estate [in his personal capacity] where diver-
sity of citizenship jurisdiction, 28 U.S.C. Section 1332, is
absent and the parties are not subject to a bankruptcy
proceeding”.

4. The requests for $1 million and $500,000.000 in punitive
damages were denied as per opinion entered by Judge Beck-
erleg in open Court on August 10, 1984, his Order Dismissing
the 35th Allegation entered on November 8, 1984, the Partial
Judgment entered on November 16, 1984, and the Partial
Final Judgment entered on September 18, 1990.

Judge Fuste remanded “ the adversary proceeding
against debtor Hotel San Juan Corporation, ex-trustee Hector
M. Rodriguez-Estrada, and Mr. Hans Lopez Stubbe as suc-
ceeding trustee, brought against him in his official capacity,
to the bankruptcy court for further proceedings.”

Trial before the undersigned on the remanded causes of
action began on May 24, 1988. For reasons stated in open
court, the trial was stopped. Mr. Kagan was given ample
opportunity to obtain counsel. He chose to appear pro se at
new trial which began on September 11, 1990.

* This adversary proceeding was originally assigned to Bankruptcy Judge
Antonio |. Hernandez. By Order entered on November 17, 1983. he reas-
signed the proceeding to Bankruptcy Judge William H Beckerleg. Judge
Beckerleg entered a Transmittal of Moticn to Dismiss to the U.S. District
Court on August 29, 1984. It was apparently assigned to U.S. District Court
Judge Raymond Acosta Judge Acosta transferred the case to the docket of
Judge Fuste. Judge Fuste vacated Judge Acosta’s Order of December 5.
1985, dismissed the slander cause of action and remanded the case to the
Bankruptcy Court on August 28, 1986

* See transcript of the September 11, 1990 hearing entered on September
19, 1990, and order entered on September 17, 1990

A-20

On that date the Court ordered the severance of the trial
against former Trustee, Mr. Hector M. Rodriguez Estrada.

II. ORDER REMANDING THE CASE

Before the second trial began, Defendants requested a
ruling on whether the Memorandum Opinion and Order
entered by Judge Fuste of August 26, 1986, excludes litigation
against Messrs. Hans Lopez Stubbe and Otero Bigles, their
wives and their conjugal societies for any personal liability on
account of the allegations of cover up contained in the
amended complaint. Defendants claim the transmittal from
the Bankruptcy Court to the U.S. District Court with refer-
ence to the former trustee, Mr. Rodriguez Estrada and the
adjudication thereof disposed of this question when Judge
Fuste stated:

“After a thorough examination of the pleadings and
documents on file, we conclude that this court lacks juris-
diction to entertain a suit by a private citizen against and
ex-trustee of a bankruptcy estate where diversity-of-
citizenship jurisdiction, 28 U.S.C Sec. 28 U.S.C. Sec.
1332, is absent and the parties are not subject to a
bankruptcy proceeding.”

The Judge ordered the bankruptcy court to adjudicate, “The
adversary proceeding against the debtor Hotel San Juan Cor.
poration, the ex-trustee Hector M. Rodriguez-Estrada, and
Mr. Hans Lopez-Stubbe as succeeding trustee, brought
against him in his official capacity ...”. The Opinion also
vacated an April 3, 1985 order entered by a colleague which
had provided “... the banktuptcy court could entertain per-
sonal injury claims with the consent of all the parties.” Lastly,
Judge Fuste’s Order stated, “federal bankruptcy jurisdiction
does not extend to cover actions that have no effect of the
estate of the debtor. See In re Turner, 724 F.2d 338 (

Cir. ___); First State Bank v. Sand Spring State Bank,

a ee ee

a
4

A-21

528 F.2d 350 (10th Cir. 1976) (court in bankruptcy cannot
entertain jurisdiction of private matters which do not relate
to matters pertaining to the estate)

We believe Judge Fuste meant for the bankruptcy court to
limit its inquiry on remand to considering whether the former
and successor Trustees are liable for actions or omission while
acting in their official capacities even though their personal
properties and assets may be at risk. This means the issues
tried were narrowed down to:

>
.

1. Whether the Successor Trustee or his former Counsel
may be liable for the alleged cover-up and failure to rectify
the former Trustee’s summary dismissal of Mr. Kagan?

2. Whether Mr. Rodrigo Otero Bigles has violated the rules
of professional conduct by acting as counsel for the Successor
Trustee, while at the same time receiving remuneration from
the Former Trustee in the case of Northwestern Promotions,
Inc., and by advising the Successor Trustee to settle adversary

¢
‘

proceeding no. 84-0359 filed in this case?
II. FINDINGS OF FACT

1. Mr. Hector Rodriguez Estrada was appointed a Chapter
11 operating trustee in this case.

2. He hired or assumed Mr. Kagan’s employment as comp-
troller for the E] San Juan Hotel around August 27, 1979.

3. On December 29, 1982, Mr. Rodriguez Estrada as
Trustee, executed and delivered a letter terminating Mr.
Kagan’s employment. This letter stated:

“We deeply regret that after making extensive evalua-
tions of your performance as Comptroller of El San Juan
Hotel, you are hereby dismissed from your position and

A-22

work at El San Juan Hotel, effective tomorrow

Thursday, December 30, 1982.”

4. Both Messrs. Kagan and Rodriguez Estrada testified
before the Puerto Rico House of Representative’s Committee
on Tourism as per Joint Exhibits 6 & 7.

5. As per newspaper reports, Mr. Kagan accused the
Trustee of mismanagement at the El San Juan Hotel thereby
causing the Debtor to incur in substantial losses, and of per-
sonally benefitting from his position as operating trustee in
bankruptcy.

6. As per letter dated December 29, 1983, Mr. Kagan urges
the Successor Trustee to take action in accordance with wishes
of several creditors and the information he provided to
recuperate some of the losses caused by the former trustee’s
mismanagement of the Hotel.

7. Mr. Otero Bigles responded on January 3, 1984, that as
attorney for the Successor Trustee and after reviewing the
available evidence, Mr. Hans Lopez Stubbe had no evidence
available on which he could rely to pursue the cause of action
suggested.

8. The exchange between Messrs. Kagan, Lopez Stubbe
and Otero Bigles continued along above mentioned course
becoming increasingly strident as per Joint Exhibits 12-17

9. As per Exhibit 19, Mr. Otero Bigles represented Mr.
Hector Rodriguez Estrada, in a reply to a motion filed by the
Internal Revenue Service on August 11, 1985, filed in the
Bankruptcy case of Northwestern Promotions, Inc.

10. The Successor “Trustee’s Report to the Court” filed on
May 16, 1985 (apparently in response to previous report filed
by Mr. Kagan), brought to the attention of the Court the
different positions assumed by Mr. Kagan and the Successor
Trustee concerning ability to recuperate mismanaged funds
for the estate and alleged problems with conflict of interest
of Mr. Otero Bigles.

A-23

11. Judge Fuste’s Findings of Fact as per pp. 7-9, 12-13,
and 26 of Joint Exhibit 21, speaks to the role of Mr. Kagan
in establishing the evidence used to find the Former Trustee,
Mr. Hector M. Rodriguez Estrada, liable to this Estate in the
civil suit instituted on behalf of the Estate. Judge Fuste
entered a judgment finding Mr. Rodriguez liable to the Estate
and ordered him to pay $3,434,081.82.'°

12. On February 6, 1987, as per Joint Exhibit 23, Mr. Hans
Lopez Stubbe asked Mr. Otero Bigles to withdraw as his
counsel in this case.

13. Mr. Kagan testified Mr. Lopez Stubbe refused to honor
the agreement he had with Mr. Rodriguez Estrada to remove
the December 29th letter dismissing him from his position as
Comptroller and substituting it with a new letter of termina-
tion of employment on account of the conversion to Chapter
7 and closing of the Hotel. He also testified Mr. Lopez Stubbe
refused to give him letters of recommendation which he might
use to secure future employment and refused to settle the
severance pay and other charges he claimed under Law #80.

14. Mr. Lopez Stubbe testified he was not privy to the pur-
ported agreement between Mr. Kagan and the former Trustee
and could not find any evidence of such an agreement on
record. He also testified he could not give Mr. Kagan letter
of recommendation for future employment, as he had never
employed Mr. Kagan. The Trustee stated he had agreed to
the severance pay, but not to the other charges claimed by
the Trustee under Law #80.

CONCLUSIONS OF LAW
1. Whether the Successor Trustee or his former Counsel
may be liable for the alleged cover up and failure to rectify
'° This was later reduced on appeal to $2, 137,639.60, along with an addi-
tional potential liability up to $1,000,000.00 for the casino’s worker's back

pay award, as per holding in the case of In Re San Juan Hotel Corp., 847
F.2d 931 (1st Cir. 1988)

A-24

the former Trustee’s summary dismissal of Mr. Kagan?!!

The Memorandum Opinion and Order entered by Judge
Fuste on August 26, 1986, precludes our considering whether
Mr. Otero Bigles, his wife and their conjugal partnership may
be liable to Mr. Kagan for these causes of action.

The record shows Mr. Lopez Stubbe’s testimony as to the
purported agreement with Mr. Rodriguez Estrada to expunge
the letter of Mr. Kagan’s summary dismissal is correct. There
is no evidence of such an agreement, other than Mr. Kagan’s
testimony. We do not believe the Successor Trustee was
obliged to remove the letter of dismissal from Mr. Kagan’s per-
sonnel file under these circumstances.

We do not find the Successor Trustee liable for his failure
to provide Mr. Kagan with references which he could present
when applying for jobs. The Successor Trustee never
employed Mr. Kagan. It is reasonable to assume he could not
attest to Mr. Kagan’s capabilities as an employee nor evaluate
his professional services. !2

We have been provided no evidence which shows the Suc-
cessor Trustee participated in a “cover up” designed to harm
Mr. Kagan. Mr. Kagan seeks to substantiate this charge by
producing a legal opinion rendered by Counsel to the Suc-
cessor Trustee as to the probability of prevailing in an action

'' The Defendants have argued this cause of action is foreclosed by Law
#80. According to their theory, Law #80 is the exclusive remedy available
to an employee who has been wrongfully dismissed. Hence, the Mr. Kazan’s
only and exclusive cause action against these Defendants is Law #80. In
our view, Mr. Kagan is not claiming redress for his wrongful dismissal
against these Defendants. He asks for redress of harm caused by these Defen-
dants cover-up of the wrongful dismissal and their failure to provide refer-
ences which prevented him from obtaining employment following the sum-
mary dismissal.

‘* 11 U.S.C. Section 704 enumerates the duties of a Chapter 7 Trustee.
These do not include providing references to former employees of a debtor.

ae Se aR

A-25

against the former Trustee given the information available at
that point in time. Mr. Kagan has also produced documents
showing this legal opinion was reiterated in Motions and
Reports submitted to the Bankruptcy Court. While Counsel’s
position adopted by the Successor Trustee may have been
incorrect, it certainly was not in the nature of a “cover-up”!

2. Whether Mr. Rodrigo Otero Bigles has violated the rules
of professional conduct by acting as Counsel for the Successor
Trustee while at the same time receiving remuneration from
the former Trustee in the case of Northwestern Promotions.
Inc., and by advising the Successor Trustee to settle adversary
proceeding no. 84-0359 filed in this case?

11 U.S.C. Section 327 provides the Trustee, with the
Court’s approval, may employ an attorney provided this
attorney is a disinterested person and does not hold an interest
adverse to the estate. The Code does not grant the Bankruptcy
Court jurisdiction to entertain questions concerning an
attorney's violation of the rules of professional conduct.

We realize we have a pro se Litigant and should therefore
afford him certain leeway in the prosecution of his case.
However, even if we were to consider Mr. Kagan’s claim as
a violation of the mentioned section of the Bankruptcy Code,
the remedy is disgorgement of fees for the benefit of the
Estate.'* Mr. Kagan would therefore, have no remedy under
this Section of the Code. We therefore, decline to enter an
opinion as to this issue.

WHEREFORE, for the reasons stated above we dismiss the
remaining causes of action in this adversary complaint
~ 19 See Opinion and Order entered in the case of San Juan Hotel Corp.,
Bankruptcy number 80-00259-A, on April 18, 1985, by Bankruptcy Judge
Antonio I. Hernandez Rodriguez.

'* Am. Bankr. Inst., American Bankruptcy Institute National Report on
Professional Compensation in Bankruptcy Cases 153-154 (G.R. Warner rep.
1991).

a

A-26

filed against all Co-Defendants, except Mr. Hector Rodriguez
Estrada in his capacity as a former Trustee in the captioned
case.

The Clerk will enter a partial final judgment accordingly
as there is no just reason for any delay in so doing as per
Bankruptcy Rule 7054 (a) and Federal Rule of Civil Procedure
54 (b).

GIVEN in San Juan, Puerto Rico, this 20th day of March,
1992.

S/ SARA DE JEsus

SARA DE JESUS
U.S. Bankruptcy Judge

} . ne , .
: Certified Translation by
. THOMAS H. Kaveutin, USDCC

[page 9159:]

92 JTS 11
LILLIAN SANTIAGO

PLAINTIFF-APPELLANT
Dv.
KODAK CARIBBEAN, LTD.
DEFENDANT-APPELLEE.

Nos. RE-89-319/RE-89-278

JUDGMENT OF THE SUPERIOR COURT, CAROLINA PART

HON. ANGEL GONZALEZ ROMAN, J.

REVIEW
San Juan, Puerto Rico, on 30 January 1992
CITE 92 JTS 11

OPINION OF THE COURT ISSUED BY
ASSOCIATE JUSTICE NAVEIRA DE RODON

Counsel for appellant: Jose Luis Verdiales Morales & Jose J.
Santiago (Fiddler, Gonzalez & Rodriguez). Counsel for
appellee: Reinaldo Ramos Collazo.

Work-related Accidents: Retention of Employment Following
Work-Related Accident
Labor Law: Unjustified Dismissal.

A-28

Plaintiff-appellant, an employee of Kodak, brought an action
against the latter, alleging dismissal without just cause —
claiming the benefits under Act 80 of May 30, 1976 — and
violation of Article 5a of the Workmen’s Accident Compensa-
tion Act, demanding reinstatement on the job. The Superior
Court entered partial summary judgment dismissing the
action under

[page 9160:]

Article 5a of the Workmen’s Accident Compensation Act and,
following the appropriate hearing, granted the complaint
under Act 80 by finding that there was an unjustified dis-
missal. Both parties appealed to the Supreme Court. The
Supreme Court, in an Opinion issued by Associate Justice
Naveira de Rodon, confirmed the appealed judgments by
ruling that: (i) Article 5a of the Workmen’s Accident Compen-
sation Act does not benefit the employee who has been dis-
missed and later reports an accident to the State Insurance
Fund which had occurred prior to the dismissal, and (ii) the
dismissal of plaintiff was without just cause. Associate Justice
Negron Garcia disqualified himself. Associate Justice Negron
Garcia issued a Dissident Opinion.

NORMATIVE SUMMARY*

1. Work-Related Accidents, Interpretation of Statutes,
Liberal Construction of the Workmen’s Accident Compensa-
tion Act, Spirit and Letter of the Law.

Although the Workmen’s Accident Compensation Act, being
a remedial statute, should be interpreted in favor of the
laborer, if the law is clear and free of ambiguity, its letter
should not be undervalued under the pretext of complying
with its spirit.

} NORMATIVE SUMMARY © 1992 by Publicaciones JTS®

ed bibier ee

F Ja Pe ee ee ae eee ae mA eA ow J
ph POE RN Ae ei AB ett sadiciat ees

A-29

2. Work-Related Accidents, Employment Reserve for
Employee Who Suffers a Work-Related Accident (Article 5a
of the Workmen’s Accident Compensation Act).

Article 5a of the Workmen’s Accident Compensation Act
establishes two types of protection for the laborer who suffers
a work-related accident and reports [to the State Insurance
Fund] and avails himself of the benefits offered by the
Workmen’s Accident Compensation Act. First, it imposes on
the employer the duty to reserve for the laborer for twelve
(12) months, the job he was performing at the time the acci-
dent occurred. In the second place, the laborer is entitled to
be reinstated in that same job once he is discharged from treat-
ment by the Fund, applies to the employer to reinstate him,
subject to the three (3) conditions established in said Article:
(1) that the laborer or employee demand reinstatement from
the employer in his job within the period of fifteen days from
the date the laborer or employee was discharged from treat-
ment, and as long as said demand is not made after the lapse
of twelve months from the date of the accident; (2) that the
laborer or employee is mentally and physically fit to fill said
job at the time he demands reinstatement from the employer;
and (3) that said job still exists at the time the laborer or
employee demands reinstatement. (The job shall be under-
stood to exist wher the same is vacant or is being filled by
another laborer or employee).

3. Id.

The protection offered to the laborer by Article 5a of the
Workmen’s Accident Compensation Act is absolute: if the
laborer engages in conduct which constitutes just cause for dis-
missal before the work-related accident, the employer is not
under obligation to reinstate him in his job, but rather may
dismiss him. What the employer may not do is dismiss the
laborer after he has suffered the work-related accident, or
refuse to reinstate him, without just cause therefor.

A-30

4. Id.

Article 5a of the Workmen’s Accident Compensation Act does
not apply (does not benefit) an employee who has been dis-
missed and then reports an accident to the State Insurance
Fund which occurred prior to said dismissal.

5. Labor_Law, Dismissal of Employees, Just Cause for Dis-
missal.

Under the laws of Puerto Rico, there is no absolute prohibition
against the dismissal of an employee; if there is just cause,
the employee may be dismissed without any remedies.

6. Id., Unjustified Dismissal (Act 80).

Act 80 of May 30, 1976, provides a financial remedy —
indemnity — for the employee dismissed without just cause
(29 LPRA sec. 185a). The law establishes a series of circum-
stances or actions which can give rise to justified dismissal,
some imputable to the employee, others to the employer or
the financial state of the company (29 LPRA sec. 185b).

7. Labor Law, Dismissal of Employees, Manner of the Dis-
missal.

There is no law which obliges the employer to dismiss an
employee or to do so in a set fashion, either in writing or with
prior notice. Nor does the law place the employer under obli-
gation to inform the laborer, at the time of the dismissal, or
thereafter, of the reasons it had for dismissing him, except in
order to defend itself in a court action.

8. Labor Law, Dismissal of Employees, Unjustified Dismissal
(Act 80).

An employer who dismisses an employee because the latter has
availed himself of a plan of benefits which are provided by
the company’s Employee Manual — which forms a part of

ED ak BD Om De Magn F

A-31

the job contract — has no just cause for the dismissal, for pur-
poses of Act 80 of June 30, 1976.

9. Id., Job Contract, Employee Manual.
A company’s manual containing the rules and regulations of
the-job and establishes the standards, benefits and privileges

_ which the employee shall enjoy, forms a part of the job con-

tract. As a general rule, a pattern of non-compliance with
these standards or rules could give rise to a justified dismissal.

[page 9161:]

Nevertheless, the absence of reasonableness of these standards
could turn the dismissal into a capricious or arbitrary, and
therefore, unjustified, dismissal. On the other hand, the
benefits and privileges established therein constitute rights oi
employment, and a dismissal in violation thereof would also
result in an unjustified dismissal.

10. Contracts, Interpretation of Contracts.

The clauses of a contract should be interpreted in relation to
one another, giving to those that are doubtful the meaning
which may appear from the consideration of all of them
together.

COMPLETE TEXT OF THE OPINION -

Mr. Lillian Santiago filed a complaint against Kodak Carib-
bean, Ltd. (hereinafter Kodak), alleging that she was dis-
missed without just cause and in violation of Article 5a of the
Workmen’s Accident Compensation Act, Act No. 45 of April
18, 1935, as amended, 11 L.P.R.A. sec. 7. She demanded the
compensation provided by Act No. 80 of May 30, 1976, as
amended, 29 L.P.R.A. sec. 186, “reemployment to her prior
position, back pay and emotional and mental damages .. .
for being unlawfully dismissed and for defendant’s refusal to
rehire plaintiff”.

A-32

Kodak answered by asserting as affirmative defenses,
among others, that the dismissal was justified given the
“plaintiff's chronic absenteeism and her poor attitude toward
her responsibilities on the job”: that plaintiff did not suffer
any job-related accident; and that she did not fulfill the
requirements of Article 5a of the Workmen’s Accident Com-
pensation Act.

Hence, Kodak filed a motion for entry of summary judg-
ment, which plaintiff opposed. On March 27, 1989, the trial
court entered partial summary judgment dismissing the action
filed on the basis of Article 5a of the Workmen’s Accident
Compensation Act. With regard to the claim under Act No.
80, supra, it ruled that there was a controversy of fact and
therefore entry of summary judgment was not in order.

Following a full hearing, on April 24, 1989, the trial court
entered judgment finding that the dismissal had been unjusti-
fied. It awarded plaintiff “an amount equal to one month’s
salary ($1,780.00) plus one week for every year of employment
(9 weeks) $4,005.00, altogether the sum of $5,785.00, plus the
amount of $1,500.00 in attorneys’ fees”.

Plaintiff Santiago appealed the partial summary judgment
of March 27, 1989, before us, alleging that the trial court
erred in entering partial summary judgment when there were
relevant and material facts to the controversy that were
clearly in dispute. Defendant Kodak in turn petitioned for
review of the judgment entered on April 24, 1989. It ques-
tioned the appreciation of the evidence and the trial court’s
conclusion “that plaintiff's chronic absenteeism and/or disa-
bility to perform her job is not just cause for her dismissal”.

We granted the petitions for review and consolidated the

-~ Cases.

RR SS Ee IS ORME De,

A-33

I
FACTS RELEVANT TO CASE RE-89-278 -

The trial court, in its partial summary judgment of March
27, 1989, made the following findings of fact:

“Plaintiff Lillian Santiago began working for defendant
Kodak on an indeterminate time basis on October 27, 1975,
as Secretary of Publicity. She subsequently assumed several
positions within the company until she ultimately occupied
the position of saleswoman, after receiving an eleven- (11-)
week training in the city of Rochester, New York, during the
months of June to September, 1984.

In April, plaintiff began absenting herself from work due
to emotional problems. The case file contains a medical cer-
tificate from Dr. Juan R. Diaz Troche, of April 28, 1984,
vouching for her condition.

Her emotional condition at that time did not affect her in
the performance of her functions in said training and she was
awarded the “Billy T. Files Award” for her performance and
the skills she displayed.

On February 19, 1985, plaintiff was absent from work.

Plaintiff would call her work site periodically to indicate
her state of health.

On May 30, 1985, she was dismissed from her job.

In the letter of dismissal, she was not told why she was
being fired.

On June 4, 1985, after her-dismissal, plaintiff reported to
the facilities of the State Insurance Fund.? She was given a
psychiatric evaluation by Dr. Sampayo, who, on October 2,
referred her to the Vocational Rehabilitation Program. On
November 12, 1986, plaintiff was discharged by the State
Insurance Fund. On that same date she applied for reinstate-
ment to her job at Kodak.

A-34

[page 9162:]

Before the letter of dismissal plaintiff was never told nor
was she admonished for her absences.”

I] :
THE RIGHT OF RESERVE AND REINSTATEMENT ON
THE JOB OF ARTICLE 5a OF THE WORKMEN’S
ACCIDENT COMPENSATION ACT

The instant case allows us to rule on whether Article 5a of
the Workmen’s Accident Compensation Act, Act No. 45 of
April 18, 1935, as amended, 11 L.P.R.A. Sec. 7, applies to
an employee who has been dismissed and then reports an acci-
dent which had occurred prior te said dismissal, to the State
Insurance Fund (hereinafter F und).

Article 5a of the Workmen’s Accident Compendation Act
provides the following:

“In the cases of working disability according to the provi-
sion of this chapter, the employer shall be under obligation to
reserve the job filled by the laborer or employee at the time the
accident occurred, and to reinstate him therein, subject to the
following conditions: (1) that the laborer or employee demand
reinstatement from his employer in his job within the period
of fifteen (15) days counted from the date the laborer or
employee is discharged from treatment, provided such
demand is not made after the lapse of twelve months from
the date of the accident; (2) that the laborer or employee be
mentally and physically fit to fill said job at the time he
demands reinstatement from his employer;-and (3) that said
job still exists at the time the laborer or employee demands
reinstatement. (The job shall be understood to exist when the
same is vacant or is being filled by another laborer or
employee. The job shall be presumed to be vacant when the
same was filled by another laborer or employee within thirty
(30) days following the date on which the demand for rein-
statement was made.)

ee Rpt ae SG EE SEs VP OSRP RATS Oa) Are Sete
¥ - SPRY ESR aa =a
Pte Sree ees bak on ais

A-35

If the employer does not comply with the provisions of this
section, he shall be under obligation to pay the laborer or
employee or his beneficiaries the wages said laborer or
employee would have received if reinstated, also the employer
shall be responsible for all damage he has caused him. The
laborer or employee or his beneficiaries may prosecute and
file the corresponding claim for reinstatement and/or damages
in court through ordinary proceedings or through the proce-
dure for claiming wages set up by sections 3118-3132 of Title
32.” Emphasis supplied.

We have repeatedly ruled that since the Workmen’s Acci-
dent Compensation Act is a remedial statute, it must be inter-
preted liberally in favor of the laborer. Bruno Colon v. Comi-
sion Industrial, 109 D.P.R. 785 (1980); Alonso Garcia v.
Comision Industrial, 84 D.P.R. 196 (1974); Gallart, Admor
v. Comision Industrial, 87 D.P.R. 17 (1961). Now then, this
does not mean that if “the law is clear[ly] free of ambiguity,
the letter thereof [must] be undervalued on the pretext of ful-
filling its spirit”. Article 14 of the Civil Code, 31 L.P.R.A.
sec. 201; Rojas v. Mendez & Co., 115 D.P.R. 50, 53 (1984);
Caban Mendez v. F.S.E., 115 D.P.R. 1, 3 (1983).

Article 5a establishes two types of protection for the laborer
who suffers a work-related accident and reports [to the F und]
and avails himself of the benefits offered by the Workmen’s
Accident Compensation Act. First, it imposes upon the
employer the duty to reserve for the laborer for twelve (12)
months, the job in which he was engaged at the time the acci-
dent occurred. In the second place, the laborer is entitled to
be reinstated at that same job once he is discharged from treat-
ment by the Fund and applies to the employer to be rein-
stated, subject to the three conditions established in said
Article.*

Now then, the protection offered by this Article to the
laborer is not absolute. “The case may arise wherein an
employer discovers that a laborer who has suffered a work-

A-36

related accident engaged in behavior prior to suffering said
accident which is a justified cause for dismissal and in this
case the employer obviously would not be under obligation
to reinstate said laborer to his post, and could dismiss him for
those prior acts without being prohibited therefrom by the
prohibition of law. What may not be done is to dismiss him
after he suffers an accident or to refuse to reinstate him at
his job without the existence of just cause to dismiss him.” Del-
gado Zayas, Ruy, Apuntes para el Estudio de la Legislacion
Protectora del Trabajo en el Derecho Laboral Puertorriqueno,
San Juan, Ramallo Bros. Printing, Inc., (1989), Chap. XI, p.
189.

A conscientious reading of Article 5a and case law which
interprets the Workmen’s Accident Compensation Act, con-
vinces us that the purpose of said provision is to protect the
injured laborer so that he “does not, in addition, have to be
faced with the undesirable uncertainty of his employer dis-
missing him from his job without just cause because of his
having suffered said accident, or being without a job when
he returns after being discharged from treatment”. Delgado
Zayas, supra, p. 189. By imposing on the employer the duty
of reserving for a period of twelve (12) months from the date
of the accident, “the job which he was performing at the time
the accident occurred”, the legislature established a balance
between the interests of the laborer, that is, the economic
security that returning to work at his old job represents, and
those of the employer, by avoiding the onerousness of having
to reserve the job indefinitely.

In an opinion issued on September 22, the Labor Solicitor
correctly pointed out that “the protection foreseen in Article

[page 9163:]

5a of the Workmen’s Accident Compensation Act supposes,
in our judgement, that the employee avails himself of the

A-37

benefits of the Act while the labor-management tie is in effect.
It implicitly involves the duty to report the accident prior to
the rupture or termination of said tie. It should be noted that
the duty to reserve the job supposes the continuity and exis-
tence of the labor-management relationship, for at least
twelve (12) consecutive months (360 days) from the date of
the accident”. Legal Opinion No. 13310.

Wherefore, we rule that Article 5a of the Workmen’s Acci-
dent Compensation Act does not apply to an employee who
has been dismissed and then reports a work-related accideat
to the Fund which occurred before said dismissal.

The trial court acted correctly in dismissing the action
brought under Article 5a of the Workmen’s Accident Compen-
sation Act.

Il
FACTS RELEVANT TO CASE RE-89-319

The documents in the case file show the facts which we set
forth below.

Plaintiff Santiago began working on an indeterminate time
basis with defendant Kodak, on October 13, 1975. Ina deposi-
tion taken on October 11, 1985, she stated that while working
for Kodak, she became ill with an emotional problem of
“stress”, depression, anxiety and insomnia and that on
February 19, 1984 said “illness reached the point where I
simply couldn't function.” On May 30, 1984 she was dis-
missed.

The attendance reports submitted with the motion for sum-
mary judgment of February 17, 1989, by defendant Kodak,
show that from January | to May 30, 1985, the date on which
plaintiff was dismissed, she had been absent from her job for
fifty-two and a half (52%) days; of these, forty-seven and a
half (47%) were consecutively. The reports also reflect that
in the last thirteen (13) months that plaintiff worked for
Kodak, she was absent for a total of eighty-three (83) days.

a a et

A-38

In the Employee Manual of Kodak Caribbean, Ltd., sub-
mitted in evidence by plaintiff, concerning employee atten-
dance, it states the following:

“ATTENDANCE

His primary and basic responsibility toward the Company
is to be in attendance for his job regularly and punctually.
A satisfactory attendance record is one of the requirements
for employment with KCL.

When an employee is not punctual and is not in regular
attendance on his job, this interrupts the flow of work in his
department and creates an additional burden which falls on
his co-workers. Therefore, his annual merit-based raise in
wages may be affected by a poor attendance record.

The Company has provided protection to assure your
income in cases of necessary absences. Nevertheless, the Com-
pany expects that you will make use of these allowed absences
only when they are necessary and justified.

Once in a while all of us need time off to attend to matters
which cannot be handled during non-working hours.
Moreover, emergencies sometimes arise which require that we
be absent from work for short periods of time. Your supervisor
must be advised when these cases occur and the lost time shall
be considered approved time off without pay.

Nevertheless, if you wish to be compensated, the Company
will permit you to make up the lost time by working overtime.

This arrangement must be discussed with your supervisor.
Those individuals who abuse this privilege shall not be
allowed to make up the lost time and they will also be
damaging their annual evaluation. |

When an employee is absent se must notify his supervisor
of this before 10:00 A.M. If your illness, etc., does not allow

A-39

you to return to work for several days, you must keep your
supervisor informed at least once a week.

You will be given an attendance card at the start of each
month. Your supervisor will mark your arrival and departure
times on this card, as well as periods of absence. At the close
of every two weeks, your attendance record must be signed
by you and approved by your supervisor before being sent to
the Personnel Department.” (Emphasis supplied) pp. 8-9.

On the other hand, as for the benefits which Kodak grants
the employee if he is absent for illness, said Manual provides:

“SICK LEAVE

The Company developed sick leave to protect you from loss
of income owing to absences resulting from an illness or accident.
The benefits of this plan are available only when you are ill. You
are not eligible for benefits under this plan when you miss
work due to illness of other members of your family.

If an employee misses work for a medical or dental appoint-
ment, the time lost from his job shall be considered as sick
leave. You must advise your supervisor immediate[ly] before

-leaving for such appointments.

If an employee is absent for more than three days due to a
medical reason, he or she must obtain a medical certificate
before returning to work.

If you suffer an accident or illness which results in a short-term
disability (fewer than 130 consecutive working days), you may
be eligible to receive compensation for “lost pay” from a govern-
ment plan (State Insurance Fund, Non-Occupational Disabiiity,
etc.). Nevertheless, the Company understands that this compen-
sation is only a minimal help which will not permit you to cover
all your financial obligations uuring your disability. Therefore,
the Company will pay the difference between your basic wages
and the disability benefits received. The maxirmum benefits

A-40

under this program are based on accrued sick leave on the basis
of the employee’s years of service at the Company. See the Sick
Leave Table provided below.*

After 100/of your sick leave is exhausted, the Company will
continue paying the difference between 50/ of your basic pay
and the disability benefits received up to a date equivalent
to 130 working days from the date on which your disability
commenced. An individual qualifies for the benefits under the
program of continuing to receive 50/ of wages, if he has been
employed for one year before the occurrence of the illness or
disability. Therefore, employees with less than one year of
service qualify only for the benefits under the plan of 100/com=
pensation for sick leave. ‘

As a new employee of Kodak Caribbean, Ltd., you will
accrue 1.25 days per month for every month in which you
work 120 hours up to a maximum of 15 working days. After
a full year of service, you will be entitled to compensation
for absences due to illness for the time indicated below. When
130 working days of continuous absence expire, you will be
eligible for the benefits under the ‘Long-Term Disability
Plan.’” (Emphasis supplied), pp. 13-14.

The trial court, in turn, made the following findings of fact:

“1. Plaintiff's dismissal was due to her absences over the
years during which she worked for defendant, particularly
during 1984 and 1985.

2. That before 1984, 1985, plaintiff was never told that her
absenteeism could affect her in her job.

3. Plaintiff complied with company rules concerning
absences; they were justified by illness.

4. Plaintiff was a highly competent employee; she had
received recognition for her work several times during 1984
and 1985, and had even obtained the ‘Billy T. Files Award’.

5. The smooth running and normal functioning of defen-
dant was not altered by plaintiff's absences.

ee a ee ee

A-41

IV
DISMISSAL AND JUST CAUSE

In Puerto Rico there is no absolute prohibition against the
dismissal of an employee. If there is just cause, he may be
dismissed. Article 1 of Act No. 80, supra, 29 L.P.R.A. sec.
185a, provides an economic remedy, indemnity, for the
employee who has been dismissed without just cause. Article
2, 29 L.P.R.A. sec. 185b, for its part, establishes a series of
circumstances or acts which may lead to a justified dismissal,
some imputable to the employee, others to the employer or
the company’s financial state. “On the other hand, there is
no law whatever that requires the employer, upon dismissing
the employee, to do so in a given fashion, either in writing
or with prior notice. Nor does our legislation oblige the
employer to inform the laborer at the time of the dismissal
or thereafter, of the reasons it had to dismiss him, except to
defend itself against a court action.” Delgado Zayas, supra,
p. 123; Article 11 of Act No. 80, supra, 29 L.P.R.A. sec. 185.

The company manual which contains the rules and regulz-
tions of the job and establishes the standards, benefits and
privileges which the employer will enjoy, form [sic] a part of
the work contract. As a general rule, a pattern of non-
compliance with these standards or rules could give rise to a
justified dismissal. Nevertheless, the absence of reasonableness
of these standards could turn the dismissal into a capricious
or arbitrary, and therefore, unjustified one. On the other
hand, the benefits and privileges established therein constitute
the employee’s rights, and a dismissal in violation thereof
could also result in an unjustified dismissal.

In interpreting the provisions of the Kodak Employee
Manual, which forms a part of the work contract between
plaintiff Santiago and Kodak, it should be kept in mind not

A-42
[page 9165:]

only that its clauses should be interpreted “in relation to one
another, giving to those that are doubtful the meaning which
mey appear from the consideration of all of them together”,
Article 1237 of the Civil Code, 31 L.P.R.A. sec. 3475, but
rather, this being a typical contract of adhesion in the prepa-
ration of which the employee did not participate, the obscure
or ambiguous clauses must be construed liberally in favor of
the employee, thus promoting, to the extent possible, juridical
equality in contractual matters. Article 1240 of the Civil
Code, 31 L.P.R.A. sec. 3478; Gonzalez v. Coop. de Seguros
de Vida de P.R., 17 D.P.R. 659, 662 (1986); Herrera v. First
National City Bank, 103 D.P.R. 724, 727 (1975); R. C.
Leasing v. Williams Int., Ltd., 103 D.P.R. 163, 167 (1974);
Barreras v. Santana, 87 D.P.R. 227, 231-233 (1963); J.R.
Velez Torres, Curso de Derecho Civil, San Juan, Rev. Jur.
U.I.A. (1990), T. IV, Vol. Il, Chap. III, p. 95.

V
APPLICATION OF THE RULES OF LAW TO THE FACTS

In its brief, Kodak argues that it was established that plain-
tiff Santiago’s dismissal “was due to her chronic absenteeism
motivated by her inability to perform her functions owing to
her health condition and that during her absence another
salesperson had to cover the route assigned to her”. It states
that plaintiff herself “admitted engaging in the absences
reflected on the attendance cards [and she added that] they
were justified by reason of her illness and that she complied
with the requirement of notice established in the Employee
Manual.” It goes on to allege that in said Manual, it is estab-
lished “that a good attendance record is a condition for
working at Kodak and that the absenteeism of employees
affects departmental production and imposes an additional
burden on the other co-workers”. It also argues that “log-

A-43

ically, it affects the smooth running and normal functioning
of the company”. And that because of her disability, plaintiff
engaged in a pattern of absenteeism which “rendered her
functions of little or no value to the company”. From all of
this it concludes that the dismissal was not “out of mere
caprice on the part of the company or without reason relating
to the smooth and normal functioning of the company”.
Article 2, Act Number 80, supra. 29 L.P.R.A. sec. 185b. It
concludes its argument by stating that “Santiago’s disability
to perform her functions from February 1985 until January
1986 is more than justified cause for her separation”. It is
incorrect.

The Kodak Employee Manual, in addition to establishing
the attendance standards to which defendant Kodak alludes,
also contains a specific plan concerning the benefits to which
an employee is entitled when he has to be absent due to an
illness or accident. It becomes obvious then, that the standards
of attendance have been tempered by the benefits provided
by the company regarding absences due to illness or accidents.

Said Manual, regarding benefits for absences due to illness
or accidents, provides that if an employee is absent for more
than three (3) days for a medical reason, he must obtain a
medical certificate before returning. It also establishes a com-
pensatory payment plan, depending on years of service, for
those employees who are forced to go on sick leave for a term
of less than one hundred thirty (130) consecutive working
days. This is termed “short-term disability”. When the
employee’s illness surpasses this term, he is eligible for the
benefits of what is termed “Long-Term Disability Plan”.

Let us see what the specific facts of this case were. Plaintiff
Santiago began absenting herself from her job in April of
1984. On April 23rd of that same year, she presented a med-
ical certificate from Dr. Juan R. Rios Troche in which he
stated that plaintiff was in a physical and mental state of

A-44

extreme exhaustion and that he had “recommended, for her
emotional recovery, that she not be subjected to situations
which generate anxiety or stress for her and that [she should]
stop working for an indefinite time”. She continued absenting
herself, for the same reason, during the months of June to Sep-
tember of 1984. On February 19, 1985, plaintiff was again
absent from her job owing to illness. In compliance with the
provisions of the Manual, she would call periodically to her
job to indicate her state of health. The trial court ruled as
an issue of fact that plaintiff Santiago complied with Kodak’s
rules regarding absence owing to illness.

At the time she was dismissed, on May 30, 1985, plaintiff
Santiago was enjoying the illness-based benefits which were
offered in her work contract, regardless of whether the illness
was job-related or not.

Plaintiff was dismissed precisely because she was enjoying
said benefits. Defendant Kodak neither alleged nor proved
that plaintiff did not qualify for the benefits provided in its
own Employee Manual for absences owing to illness. A dis-
missal, because of supposed “chronic absenteeism”, under the
specific circumstances of this case, is an unjustified one. The
benefits provided by the Employee Manual are available for
all those employees who are ill and vouch for their illness.
Kodak could not justifiably dismiss plaintiff Santiago because
she had availed herself of the “short-term disability” benefits
plan provided by the Employee Manual. The errors indicated
were not committed.

Wherefore, judgment shall be entered confirming the par-
tial summary judgment entered on March 27, 1989 and the
judgment entered on April 24, 1989, issued by the Superior
Court, Carolina Part.

MiriaM NAVEIRA DE RoODON
Associate Justice

A-45
JUDGMENT

For the reasons stated in the foregoing Opinion, judgment
is entered confirming the partial summary judgment entered
on March 27, 1989 and the judgment entered on April 24,
1989, issued by the Superior Court, Carolina Part.

So said and ordered by the Court and certified by the Chief
Clerk. Associate Justice Negron Garcia disqualified himself.
Associate Justice Rebollo issued a Dissident Opinion.

Francisco R. Acrair LLApo
Chief Clerk

NOTES 92 JTS 11

' Plaintiff initially filed a complaint based on Act No. 80 of
May 30, 1976, as amended, then amended it and made the
claim by alleging violation of Article 5a of the Workmen's
Compensation Act.

* On the advice of counsel, plaintiff went to the Fund four
(4) days after being fired.

* See also concurring opinions of Associate Justice Rebollo-
Lopez and Hernandez-Denton in Sifontes Ramos v. Oliver
Exterminating Services Corporation, of April 5, 1991, 128
D.P.R. (1991), 91 J.T.S. 37.

* Deposition, p. 62.

* The Employees’ Manual of Kodak Caribbean. Ltd., pro-
vides the following table:

“TABLE FOR SICK LEAVE

Years of Service Compensation in Working Days
100 % 50 %

1 to 4 years 30 days 100 days

5 to 14 years 60 days 70 days

over 15 years 90 days 40 days

A-46

DISSIDENT OPINION ISSUED BY
ASSOCIATE JUSTICE REBOLLO LOPEZ —
92 JTS 11

San Juan, Puerto Rico, on January 30, 1992.

We are unable to subscribe and endorse the Opinion issued
today by a majority of the members of the Court in the instant
case,

The Opinion issued, in open violation of the definitive and
repeated rule of case law that the Workmen’s Accident Com-
pensation Act must be liberally interpreted in favor of the
worker or employee, erroneously limits and restricts the rights
thereof, unduly benefiting the employers, based on a restric-
tive construction of said Law.

On the other hand, the majority Opinion is one which is
not only juridically incorrect. but contradictory. In our
humble consideration, it cannot have any other effect but to
utterly confuse our trial courts and the professional class; a
situation which, instead of fostering the simplification of
labor-management controversies, will have the effect of con-
siderably augmenting, and complicating, litigation in this
area of law at the trial court level.

Unfortunately, we have not had the necessary time to state
in writing, adequately and specifically, the grounds in support
of the above assertions. Perhaps, in the near future, we shall
have the opportunity to do so. Nevertheless, we could not
remain silent in the face of the grave injustice committed,
against the working class in general and the litigant in partic-
ular, by the majority Opinion issued in the instant case.

FRANCISCO REBOLLO LopEz
Associate Justice

ee ne ee ee ee

A-47

JURISPRUDENCE OF THE
SUPREME COURT OF PUERTO RICO

January 15, 1993 Vol. XVI — No. 12 1992-93

92 JTS 175
IVAN PORTO ano ns spouse, MILDRED SIURANO., e1 AL...
PLAINTIFFS- APPELLEES
v.
BENTLEY PUERTO RICO. INC., ET AL..
DEFENDANTS-APPELLANTS.

No. RE-89-123
JUDGMENT OF THE SUPERIOR COURT, MAYAGUEZ PART
THE HON. ANGEL GONZALEZ ROMAN, JUDGE

REVIEW
San Juan, Puerto Rico, December 23. 1992
CITED AS JTS 175
OPINION OF THE SUPREME COURT WRITTEN BY
MR. ASSOCIATE JUSTICE REBOLLO LOPEZ

Attorneys for Appellant: Carl Schuster & Anibal [rizarry
(Law Firm of McConnell, Valdes. Kelley, Sifre, Griggs &
Ruiz Suria.

Attorney for Appellees: Enrique Alcaraz Micheli (Law Firm
of Ferrer and Alcaraz).

DAMAGES: LIBEL AND DEFAMATION.

Mr. Porto was fired from his job for allegedly having
wrongfully appropriated a company vehicle. The discharged

\
\

\

A-48

employee and his wife filed a lawsuit for damages against the
employer, alleging false imputations in the letter of dismissal
(wrongful appropriation of the vehicle). The Superior Court
found for plaintiffs, determining that the letter of dismissal
falsely imputed the commission of a crime to plaintiff, which
damaged his reputation. The defendants appealed to the
Supreme Court. Said Court, in an opinion written by Mr.
Associate Justice Rebollo Lopez, revoked the decision of the
lower court, ruling that the requirements of “publication” of
the defamatory information had not been met and that, in
any case, intracorporate publication or communication is con-
ditionally privileged. Mr. Associate Justice Alonso Alonso
wrote a Concurring Opinion. Mr. Associate Justice Fuster
Berlingeri wrote a Dissenting Opinion.

NORMATIVE SUMMARY

1. Constitutional Law, Right to Privacy, Damages, Libel and
Defamation.

In Puerto Rico, the main source of protection against defama-
tory expression is the Constitution of the Commonwealth of
Puerto Rico (Article II, Section 8).

2. Id., Freedom of Speech and of the Press.

The right to privacy recognized in Section 8 of Article II of
the Constitution of the Commonwealth of Puerto Rico —
manifested through the defamation action — is opposed to the
fundamental right of freedom of speech and of the press recog-
nized in Section 4 of Article II.

3. Id.

The force of the provisions of the Libel and Slander Act (32
LPRA sec. 3141) is conditioned on not being incompatible
with the constitutional right that governs in the area of
freedom of speech and of the press, and the right to privacy,
under the constitutions of Puerto Rico and the United States.

Wale Ch A aetna BOS:

Po ta Oe nab ese gn UL *

Sia

De en Tere nn TT Pett ae

A-49

4. Damages, Libel and Slander.

Puerto Rico can regulate in the area of libel and slander as
long as absolute liability is not imposed in cases in which the
claimant is a “private figure.” For that reason, the norm
requiring negligence governs in the imposition of liability in
all damages actions for libel brought by private persons. The
norm of absolute liability, or liability without fault or negli-
gence, cannot govern.

ae ee StS

5. Id.

: Action for defamation (libel and slander) is one of compensa-
: tion for damages aimed at vindicating the social interest in
the reputation of the person. Plaintiff must prove that the
| information published is false and that its publication caused
‘ him real damages.

i

6. Id.

j In order for a plaintiff to prevail in defamation actions where
the plaintiff is a private figure and the defendant outside the
media, and the exercise of freedom of speech is present, plain-
tiff must prove negligence on the part of the defendant in pub-
lishing the information.

7. Id., Publication Requirement.

One of the essential elements in a cause of action for libel
between private persons is the “publication” of the false and
defamatory expressions. The element of publication exists
when the defamatory statement is communicated to a third
person, that is, someone other than the person defamed.
Defamatory words or statements made to the defamed person
F himself does not constitute publication, unless a third person
learns of the conversation. The element of publication does
not exist when it is the affected person himself who communi-
cates the defamatory statements to third persons.

Hd PA Cinta da Par eS sage MAL ly oer

Se ee Te eS

aX.

i aerate

A-50

8. Id., Labor Law

In the area of labor-management relations, any “external”
communication of the libelous statement by the company to
a person other than the affected employee automatically con-
tains the element of publication.

9. Id.

In the area of labor-management relations, the element of
“publication” is present in communications regarding an
employee among members of the employer corporation. This
is due to the fact that the reputation of the affected employee
in his job clearly is impaired by defamatory intracorporate
communications. Should the defamatory statements made by
a corporate officer about a particular employee become
known to the other employees of the company, they affect the
opinion and respect the other employees have for the
employee in controversy.

10. Id.

A person's reputation at his job can be impaired by any
intracorporate communication; if such a communication is
proved, the element of “publication” is satisfied for a libel or
defamation action.

1. Id.

Communication between the superior of the discharged
employee (plaintiff) and the company’s personnel director
regarding the reason for the dismissal does not constitute an
intracorporate communication for purposes of satisfying the
element of publication in a libel action.

12. Id., Conditionally Privileged Communications.

In the area of labor-management relations, common law has
recognized the need for and importance of conditional immu-
nity to promote the free flow of communication between
employer and employee. The existence of restricted privilege
has extended to the following communications: communi-

.
i
:
4
4

A-51

cations from the employer to the managers or supervisors of
a dismissed employee informing them of the reasons for the
dismissal; communications to prospective employers
informing them of the reason the employee was dismissed;
statements made on employees’ performance evaluation
sheets; reference information about an employee to other
potential employers; communications between supervisors
and personnel employees.

13. Id.

There is conditioned privilege for employers to communicate
freely the reasons for the dismissal of an employee to those
persons with a right to that information.

14. Id.

Communication by a dismissed employee’s manager and
supervisor to the company’s personnel director informing him
of the reasons the employee was dismissed (alleged wrongful
appropriation of a company vehicle) is privileged.

FULL TEXT OF THE OPINION

Appellee Ivan Porto worked in the materials department as
a receiving clerk for appellant corporation Bentley Puerto
Rico, Inc. He worked for said company for two years and
three months under an employment-at-will contract.

Appellant company had a single motor vehicle (a Ford van)
assigned to the purchasing department. Said vehicle was
assigned to a driver or chaffeur, who used it during the com-
pany’s business hours. Outside of business hours, the vehicle
only could be used with the authorization of the purchasing
supervisor, or other Company officer, in cases of emergency
or accident. When the driver of the vehicle ended his shift,
the keys to the vehicle were kept in one of the drawers of the
desk of Mrs. Carmen Delia Vargas, supervisor of the pur-
chasing department.

A-52

Such being the situation, during the week of August 9,
1985, plaintiff-appellee Ivan Porto received authorization
from his immediate supervisor, Mr. Luis J. Berga, materials
manager, to use the vehicle when he was required to work
overtime, outside the company’s regular business hours.
Under the authorization, the appellee was obliged to return
the vehicle before the start of business on the following day.

On Tuesday, August 13, 1985, appellee used the company’s
automobile; this was because he missed the ride a co-worker
was to provide him and his personal car was still out of
service. On that particular day, plaintiff did not obtain the
corresponding authorization from his immediate supervisor,
Luis Berga, since Berga was in the United States. Nor did he
obtain authorization from any other company officer. In view
of this situation and because of the hour he finished working, '
appellee informed the only other employee who was still on
the premises, Mr. Andres Santos,” that he would use the com-
pany vehicle. Appellee then entered the office of the pur-
chasing supervisor, took the keys to the vehicle, and drove off
in it. Appellee stopped at the main gate to the plant and noti-
fied the guard who was on duty that he was using the com-
pany vehicle. Plaintiff-appellee returned the vehicle before
7:00 a.m. the following day.

Upon his return to Puerto Rico, Mr. Berga conducted an
investigation into the incident. On August 18, 1985, Mr. Ivan
Porto was dismissed from his job. On that date, Mr. Berga
handed appellee a letter of dismissal in which it was stated
that he was being dismissed for having violated Rule 2 of the
Company’s Rules of Conduct, which sanctioned “wrongfully
appropriating property of the company or of another
employee.””

Subsequently, on June 5, 1988, Mr. Ivan Porto and his wife,
in their personal capacity and in representation of the legal
partnership of community property and of their minor chil-
dren, filed suit for damages against appellant corporation in
the Superior Court of Puerto Rico. Mayaguez Part. In the suit,
they claimed damages of $100,000.00 for the alleged false,

A-53

slanderous and libelous imputations made against Porto by his
employer in firing him. The suit alleged that at the time of
dismissal, appellee Porto was falsely accused of having wrong-
fully appropriated the company vehicle and that said accusa-
tion arose from the letter of dismissal dated August 16, 1985.4

Defendant-appellant answered the complaint, and after the
corresponding procedural actions, the court of first instance
entered judgment in favor of plaintiff. As a question of fact
and of law, the court of first instance determined that the
letter of dismissal falsely imputed the commission of a crime
to plaintiff and that said letter caused damage to his repu-
tation.°®

Dissatisfied, defendant-appellant sought review of the deci-
sion by this Court. In synthesis, appellant alleged that the
court of first instance erred in imposing liability on the appel-
lant corporation when the essential elements for a cause of
action independent of the dismissal had not been established,
with the exclusive relief being the severance pay established
by Act No. 80, which the corporation paid; that the court
erred in concluding that libelous staternents were made when
the requirement of “publication” was absent: that it com-
mitted a serious error in weighing the evidence and con-
cluding that plaintiff had authorization to use the vehicle; and
that it erred in granting certain items of damages which were
not supported by the evidence.®

The review requested was granted. Both parties have
appeared. We are now ready to resolve the appeal and pro-
ceed to do so.

In this jurisdiction the general rule, regarding the matter
in controversy, is to the effect that a laborer or worker hired
under an employment-at-will contract who is dismissed
without just cause is entitled only to the exclusive relief
provided under Act No. 80 of May 30, 1976, 29 L.P.R.A. sec.
185a-186i; Rivera v. Security Nat. Life Ins. Co., 106 D.P.R.

nn

A-54

517, 527 (1977); Arroyo v. Rattan Specialties, Inc., 117
D.P.R. 35, 65 (1986). Said statute provides for indemnifica-
tion equivalent to one month’s salary plus one week of com-
pensation for each year of service with the employer. (29
L.P.R.A. sec. 185(a)). |

Nevertheless, in Rivera v. Security Nat. Life Ins. Co.,
supra, p. 527, we recognized that the relief provided in the
labor laws ... “does not exclude the civil liability of an
employer for tortious conduct incurred in for reasons other
than the mere violation of (these laws).” In other words, with
respect to a mere dismissal without just cause, an employee
only has available the relief provided by Act No. 80, supra;
that notwithstanding, if other tortious actions that are
independent of the dismissal coincide with it, then the
employer can he held liable on the basis of said conduct.’

In the case before us, plaintiff-appellee claimed damages
caused, not for the mere dismissal carried out by the
employer, but rather for the alleged defamatory imputations
made by the employer in the letter of dismissal. This cause
of action of damages for defamation is independent of the dis-
missal of the employee, so if the plaintiff-appellee establishes
and fulfills the requirements of said action, the employer is
obliged to redress the damages caused to plaintiff.

II

This case revolves around a libel action within an employer-
employee relationship, in which both parties are “private
persons” and the alleged defamatory statement is not of public
or general interest. In our jurisdiction, the principal source
of protection against defamatory expression is the Constitution
of the Commonwealth of Puerto Rico. Section 8 of Article II
of our constitution recognizes the right of “every person to
protection against abusive attacks on his honor, reputation
and private or family life.” This right, which is manifested
through action for defamation, is in opposition to the fun-
damental right of freedom of speech and of the press, Article

'
;
'
;
'

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II, Section 4 of the Constitution of the Commonwealth of
Puerto Rico. Mendez Arocho v. El Vocero de P.R., 92 JTS
94; Villanueva v. Hernandez Class, 91 JTS 58, 129 DPR ____
(1991); Clavel v. El Vocero de P.R., 115 DPR 685, 690-691
(1984); Cortes Portalatin v. Hau Colon, 103 DPR 734, 738
(1975).

On the other hand, since the beginning of the century and
before our Constitution of 1952 was adopted, protection
against defamatory statements in our jurisdiction arose from
the Act of February 19, 1902, which established civil action
for damages in cases of libel and slander in Puerto Rico. 32
L.P.R.A. Sec. 3141,

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386002_1211%3A3. Public record. Not legal advice.