Petition for Writ of Certiorari — DJ Manufacturing Corp. v. Tex-Shield, Inc.

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IN The

OFFICE @F THE CLEHK

Supreme Court of the Anited States

October Term, 2003

DJ MANUFACTURING CORPORATION,

Petitioner,

Vv.

TEX-SHIELD, INC.,

XYZ INSURANCE CO., CREATIVE APPAREL,

BLUCHER USA, BLUCHER GMBH.,

Respondents.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the First Circuit

PETITION FOR A WRIT OF CERTIORARI

JOSEPH H. REITER

Counsel of Record

KOSTOS AND LAMER, P.C.

Attorneys for Petitioner

1608 Walnut Street

Suite 1300

Philadelphia, PA 19103

(215) 545-0570

QUESTIONS PRESENTED FOR REVIEW

Where a sole source New Jersey supplier, under the

ultimate control of a foreign (i.e., German) corporation, in a U.

S. Department of Defense procurement favors aU. S. Mainland

offeror over a Puerto Rican manufacturer of chemical and

biological protective wear by offering (and selling) its sole-

source, patented product at a substantially lower price to the

Mainland manufacturer, while at the same time and on the same

procurement offering the same product to the Puerto Rican

offeror at a substantially higher Price; is such price

discrimination not unlawful under 10 Laws of Puerto Rico

(“L.P.R.”) §264 entitled “Sales in Puerto Rico at prices

different than from those at which articles sold elsewhere,”

which provides, in pertinent part, that:

It shall be unlawful to sell, contract to sell, offer to

sell ... articles in Puerto Rico ... at prices which are

substantially different from prices or quoted

by such seller for goods ...to buyers located outside

of Puerto when such diff erence in price is granted

e aco tor in Puerto Rico.

(emphasis added)?

Is not the lower court's ruling, that the difference in

prices under the statute refers only to a supplier offering its

product in Puerto Rico at a substantially lower price, to the

exclusion of prejudicial over-pricing, in conflict with

established rulings of this Court that where a statute presents no

ambiguity and leads to no absurd or odd result, there is no room

for construction, and, therefore, represents plain error,

warranting this Court's corrective action, especially where the

prejudicial pricing interfered with Federally-mandated “full and

open” competition in Federal procurements?

As an alternative to acting on this Petition for Certiorari,

should the Court certify the question of interpretation of 10

L.P.R. §264 to the Supreme Court of Puerto Rico, inasmuch as

(1) both parties at different times have suggested that the lower

court do so, and (2) protection of its citizens, and particularly

small businesses such as the Petitioner, is the announced intent

of the Puerto Rico Legislature in enacting its own antitrust laws,

and the construction of 10 L.P.R. §264 is one of first

impression?

LIST OF PARTIES

The names of the parties to this proceeding, which this

Court is requested to review are: (1) DJ Manufacturing

Corporation (DJM), a Puerto Rico Corporation, plaintiff,

appellant and petitioner here; (2) Tex-Shield, Inc., a Delaware

Corporation, defendant, appellee and respondent (Tex-Shield,

Inc. is wholly-owned by Blucher USA, which in turn is wholly-

owned by Blucher GmbH, a German Corporation). '

' When the District Court dismissed the underlying action (page 25a of

Appendix), it dismissed all counts and all defendants, and an appeal was

taken only to the dismissal of Tex-Shield, Inc. and only to the count relating

to 10 L-P.R §264, entitled "Sales in Puerto Rico at prices different from at

which articles are sold elsewhere." Consequently, review is sought only to

that portion of the judgment as it relates to Tex-Shield, Inc. and 10 L.P.R.

§264.

TABLE OF CONTENTS

Page

Questions Presented for

Review......... pacqeceveeusncosccossescccessscoosceocess » |

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ee Ci inecnccresncstnccssciassesevanecexacnes v

CE BI is cnsncinnnsccseninecnsecesiantsnssneecenes 1

Statement of Jurisdiction.................seececceeccees 1

RRNSERGEE OE COMIB. ccnscccrcccrcnnvcccscseesscesssonssonce 2

Reasons for Granting the Writ...................ssese 5

Ss ciennnsnentcncnccnasncnsecssasnntvesiecsnncsonsas 15

TABLE OF CITATIONS

Cases Cited:

Page

BFP v. Resolution Trust Corp., 511 U.S. 531,

537-38, 128 L.ed 2° 556 (1994)...........sssessccessssees 10

Caminetti v. U.S., 242 U.S. 470, 490(1917).......... ... 8

Chicago v. Environmental Defense Fund, 511 U.S.

328, 337, 128 L. Ed 302, 311 (1994)...........ccccseeseee 9

Elkins v. Moreno, 435 U.S. 647, 662 n. 16

(AGTE)...corecececesceserscrccecessscnssessesasesnccocsscosesees id

F.T.C. v. Morton Salt, 334 U.S. 37, 50

(IDED). crccesrcccesaccccevcnccocsssnsvsevesssnnncassessodsenens 12

Dept. of Housing and Urban Dev. v. Rucker,

535 U.S. 125, 122 S. Ct. 1230, 52 L. Ed 158 (2002)...... 7

Palmer v. Hoffman, 318 U.S. 109, 118

CIDED)...ccccveceresevececcccsnccconsesacesevsennssonenssssesace 13

Proper v. Clark, 337 U.S. 472, 489

(IDEB).. .ccaveccoccocecccncescccecessnescvesnsonssseossonsonsnes 13

Suarez & Co., Inc. v. Dow Brands, Inc. 337 F.3d

5 Tie TI ce ceinnicninsiseisinensinssnicensieidiniteiiscnitabilaiaia 10

The Tungus v. Skovgaard, 358 U.S. 588, 555

Contents

Table of Citations (Cont'd)

U.S. v. Durham Lumber Co., 363 US 522, 526-7

(19GB)... .ccccccccccccecccccccccccccccccccscccccccsccsocccooocecs 13

US. v. Gonzalez, 520 U.S. 1 (1997)..........cccccccceees 8

U.S. v. Wiltberger, 5 Wheat 73, 5 L. Ed 37, 42

(128)... ccreccocccscsccsrccscoccccercccccecscecscesosocsceoccss 7

Other Authorities:

. Estrella Arturo, “Anti-Trust Law In Puerto

Rico,” 28 Revista del Colegio de Abogados

de Puerto Rico 505, 624-25 (1968).............sssesseee 11

Von Kalinowski on Antitrust 2"° Ed Vol. 7

Chapter 153 at page 153-10..............sscccccceeeeeees 12

vii

Contents

APPENDIX

Page

Appendix A — Order on Petition For Rehearing By

Court of Appeals For The First Circuit,

Entered October 20, 2003... la

Appendix B — Copy of Docket, Court of Appeals

POP TO FeO CHOU ccccccccsccscosccescsencncees 3a

Appendix C-— Decision By The United States

Court of Appeals For The First Circuit on

Petition For Rehearing, dated October

Appendix D — Decision By The United States

Court of Appeals For the First Circuit,

dated July 28, 2003 (withdrawn)................ 18a

Appendix E — Opinion and Order by the United

States District Court for the District of

Puerto Rico, dated June 28, 2002..............+ 3la

Appendix F — Award Of Arbitrator, dated

January 20, 1999 in DJ Manufacturing

Corporation v. Tex-Shield, Inc., American

Arbitration Association, No. 13 130

Appendix G — The Anti-Monopoly Act of 1964:

February 20, 1964 Hearing on S. 594

eee

Appendix (Cont’d)

& H. 909 before Senate Civil Juridical

Committee, House Committee on

Commerce & Industries & House

Committee; Testimony of Hiram

Cancio (Certified English translation, from

Appellee’s Appendix submitted to the Court

of Appeals, pages 26-27)........+-sessssesereeres 76a

poeta

OPINIONS IN THE COURTS BELOW

1) D.J. Manufacturing Corp. v. Tex-Shield, Inc., 347 F. 3d 337

(1* Cir. 2003, decided October 20, 2003, affirming U.S. District

Court, District of Puerto Rico). Petitioner’s Appendix at page

6a.

2) DJ. Manufacturing Corp. v. Tex-Shield, Inc., published in

advance sheet at 337 F. 3d 56 (1* Cir. 2003, decided on July 28,

2003, reversing and remanding, U. S. District Court, District of

Puerto Rico). Even though that decision was withdrawn, it is

included in Petitioner's Appendix at page 18a.

3) DJ. Man ing Corp. v. Tex-Shield, Inc., 275 F. Supp.

2d. 109, 2002 U.S. Dist. LEXIS 25329 (D.P.R., 2002), initially

reversed and remanded (see Petitioner’s Appendix at page 18a),

at 337 F.3d 56 (1* Cir. 2003), but affirmed in a subsequent

decision on October 20, 2003, at 347 F. 3d 337 (1% Cir. 2003).

Petitioner’s Appendix at page 31a.

STATEMENT OF JURISDICTION

The Opinion of the Court of Appeals from which relief

is sought, 347 Fed. 3d 337, was entered October 20, 2003. A

timely Petition for Rehearing with Suggestion for Rehearing en

banc was filed by DJM ou October 31, 2003, which Petition

was denied November 19, 2003. See Petitioner’s Appendix at

Page la, 3a.

This Court has jurisdiction pursuant to 28 USC

1254(1).

STATEMENT OF THE CASE

The Complaint filed by D.J. Manufacturing

Corporation (“DJM”) in the District Court of Puerto Rico

against Tex-Shield, Inc. (“TSI”) among others, charged TSI

with discriminating against DJM on U.S. Department of

Defense procurements over a period of several years, by

offering required goods, specifically Saratoga Filter Cloth, to

DJM at a substantially higher price than it was offering and

selling the same goods to DJM’s mainland competitor. TSI

was (and is) the sole source of the goods in question, i.e., the

goods could (and can) only be purchased in the U.S. from TSI.

TSI manufactures, sells and is the sole domestic source

for a patented product, Saratoga Filter Cloth, which the

Department of Defense (DOD) requires for use in the

manufacture all of its biological and chemical protective

clothing and equipage. TSI, a Delaware corporation, is wholly-

owned by Blucher USA, which in turn is wholly-owned by

Blucher GmbH, a German Corporation. Blucher GmbH holds

the patent for Saratoga Filter Cloth; this cloth is the active

component in DOD chemical and biological protective

clothing. Anyone wishing to compete for a DOD contract for

chemical protective clothing must use Saratoga Filter Cloth,

which it must purchase from TSI.

TSL in addition to being the sole source supplier for

Saratoga Filter Cloth, also engages in the manufacture and sale

of finished chemical protective suits. ? As such, it is at least a

potential competitor of DJM.

The price discrimination complained of in the

Complaint was so substantial that it enabled the favored

mainland cut, make and trim contractor to win an award on a

multi-million dollar, competitively-bid DOD contract. Had

DJM been offered the same goods at the same price as its

Mainland competitor, it would have received the contract

award.

Because of price discrimination, DJM’s Complaint

charged TSI et.al. with violating a Puerto Rico Antitrust Statute,

10 L.P.R. §264, entitled, "Sales in Puerto Rico at prices

different from those at which the articles are sold elsewhere."

That provision reads, in full, as follows:

It shall be unlawful to sell, contract to sell, offer

to sell, or participate in any step for the sale of

articles in Puerto Rico, after making due

allowance for differences in costs incident to the

delivering of goods in Puerto Rico and the costs

of handling such goods in Puerto Rico, at prices

which are substantially different from the prices

charged or quoted by such sellers for goods of the

same grade or quality to buyers located outside of

Puerto Rico, when such difference in price is

granted with the purpose of destroying competition

or eliminating a competitor located in Puerto Rico.

* The facts in the Petition are gleaned from lower court opinions. TSI’s

manufacturing and selling of finished chemical suits does not appear in those

opinions; nevertheless this fact was uncovered in an ancillary proceeding and

was before the lower courts. See, e.g., Petitioner’s Appendix at page 9a.

No Answer to DJM’s Complaint was ever filed by any

of the defendants. TSI filed only a Motion to Dismiss. On that

Motion, the District Court dismissed, with prejudice, DJM's

Complaint, in toto, for failure to state a cause of action against

any defendant. See, DJ Manufacturing Corporation v. Tex-

Shield, Inc., 275 F. Supp 2d 109, 125-26 (D.P.R. 2002).

In so doing, the District Court, having both 10 L.PR.

§264 and snippets of its legislative history before it, concluded

that §264 was modeled exclusively after the Federal Anti-

Dumping Act of 1916, 15 U.S.C. §72, despite the obvious use

of dissimilar language, and, therefore, did not target the

situation here, where a Puerto Rican company was quoted a

substantially higher price than a state-side competitor for the

same article. See 275 F. Supp. 2d at page 125.

DJM appealed, but only as to the TSI and only as to the

counts relating to 10 L.P.R. §264, waiving all other possible

errors. The Court of Appeals, which had before it the same

_ snippets of legislative history that were before the District

Court, found that 10 L.P.R. §264 targeted both discriminatory

higher (Robinson Patman type) and lower (anti-dumping type)

pricing, as DJM had argued from the start; that such a

construction of §264 was based on the plain ordinary language

found in the statute, and that language did not lead to an absurd

or odd result.

Nevertheless, the Court of Appeals, upon TSI’s later

Petition For Rehearing, vacated its decision. It then concluded

from the legislative history of 10 L.P.R. §264 that, despite the

use of the word "different" four times in §264, the Puerto Rico

legislature really meant the word “different” to exclude

discriminatory high pricing, and to include only unreasonably

low pricing. In doing so, the Court below overlooked the fact

that in 10 L-P.R. §263(f), * the section immediately preceding

§264, the legislature used the term "at unreasonably low prices"

when it meant to target only unreasonably low prices (to the

exclusion of unreasonably high prices).

Additionally, the courts below reached their decisions

by misreading what, at best, is ambiguous and limited

legislative history, and by ignoring professorial comment made

Subsequent to the enactment of 10 L.P.R. §264, which

comment, in civil law jurisdictions such as Puerto Rico, is given

considerable weight. That professorial comment, including

comment from one of the drafters of §264 in particular,

proclaims that §264 embraces both higher and lower anti-

competitive pricing.

REASONS FOR GRANTING THE WRIT

THE DECISION OF THE COURT BELOW HAS SO

FAR DEVIATED FROM AND CONFLICTED WITH

THIS COURT'S DECISIONS, RENDERED OVER TWO

* 10 LPR. §263(f) in fll reads as follows: “It shall be unlawful to sell or

execute any contract for the sale of goods at unreasonably low prices for the

Purpose of destroying competition or eliminating a competitor.” The

legislature obviously knew the difference between the meanings of “low”

Prices and “different” prices and gave fair warming to all that the offering of

goods at substantialty higher prices was illegal, by using the word “different.”

CENTURIES, CONCERNING STATUTORY

CONSTRUCTION, AS TO CALL FOR THIS COURT'S

INTERVENTION IN EXERCISE OF ITS POWERS OF

SUPERVISION

(A) No Ordinary Case.

This is no ordinary statutory construction, diversity

case; nor is it an ordinary anti-trust case. First, it impacts on the

integrity of the competitive U. S. Government procurement

system. Were the lower court's decision to stand, a foreign

corporation, whose national interests may or may not coincide

with those of the United States, can dictate by price

manipulation who and who does not receive a U. S.

Government chemical suit contract. Secondly, the lower court's

precedent impacts on the public fisc. Had DJM been offered

the same pricing as its stateside competitor, the contract cost to

the Government would have been significantly less. _

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ns a

Thirdly, the precedent set by the lower court impacts

severely and adversely on the Puerto Rican economy.

According to the New York Times Almanac, the Puerto Rican

economy is burdened by a very high (12%) unemployment rate

and endures a very low yearly per capita income of only $9,800

— significantly lower than any of the 50 states, Guam and the

Virgin Islands.

(B) In conflict with almost two centuries of

Supreme Court decisions.

As early as 1820, reaching back in history, Mr. Chief

Justice Marshall wrote:

The intention of the legislature is to be collected

from the words they employ. Where there is no

ambiguity in the words, there is no room for

construction.

The case must be a strong one indeed which would

justify a court in departing from the plain meaning

of words especially in a penal act, in search of an

intention which the words themselves did not suggest.

U.S. v. Wiltberger, 5 Wheat 73, 5 L. Ed 37, 42 (1820). 4

In an unbroken line of cases reaching into the twenty-

first century, the Supreme Court bas steadfastly ruled that

legislative intent must be drawn from the plain ordinary |

language of a statute, unless crediting such language results in

an odd or absurd result.”

Most recently in the case of Department of Housing

And Urban Development v. Rucker, 535 U.S. 125 122 S. Ct.

1230, 52 L. Ed 2d 158 (2002), the Court was presented with an

issue as to the meaning of the expansive word "any" in a statute

and regulation requiring HUD to include in its leases a

provision "that the tenant, any member of the household, a

* The underlying action in this petition is a civil action, however 10 LPR.

§264 isa penal statute.

° For an extensive review of U. S. Supreme Court decisions on the subject,

edging Company ed States.

173-77 (2003).

guest, or another person under the tenant's control shall not

engage in. . .[aJny drug related criminal activity at or near the

premises[s]" under penalty of eviction.” A tenant whose

household members were found using drugs challenged the

eviction proceeding on grounds that she was innocent and had

no knowledge of the drug use. The lower court, straining to find

an ambiguity, searched the legislative history and erroneously

concluded that the term "any," if given its literal meaning, could

not have been the congressional intent. In reversing and

remanding, the Supreme Court found resorting to legislative

history improper where the statutory text is “unambiguous” and

does not lead to "absurd" result. 535 U.S. at 132-133. To the

same effect, see U.S. v. Gonzalez, 520 U.S. 1, 6 (1997).

Perhaps most easily understood and most frequently

cited is the case of Caminetti v. U.S., 242 U.S. 470, 490 (1917).

Therein, the Court reiterated the principle that statutes must be

read as written, and that it is from the words used that

legislative interest is gleaned. The Court stated:

W)hen words are free from doubt they must

— be taken as the final expression of legislative

intent . . . the language being plain, and not

leading to absurd or wholly impracticable

consequences, it is the sole evidence of the

ultimate legislative intent.

_ (emphasis added).

Here, the lower courts failed to take the words used by

the Puerto Rico legislature as final. The words “prices which

are substantially different" are plain and unambiguous. The

Appeals Court found them to be so in its July 28, 2003

decision, subsequently withdrawn (Petitioner’s Appendix page

25a). Indeed, it found this still to be the case in its October 20,

2003 decision, review of which is sought. Even there the Court

of Appeals stated:

We begin by noting that the different price

language does not appear ambiguous when

considered in isolation . . . .[T]he [Puerto Rico]

legislature chose the broader term "substantially

different" which could cover both higher and lower

pricing....

347 F. 3d at 340 (Petitioner’s Appendix, page 12a).

Clearly, in this setting it was error to delve further into

the legislative intent, since the language used is unmistakably

Clear and leads to no absurd result. Further, the words used

were the final words which found their way into the statute that

was read, voted on and signed by the governor, irrespective of

what happened before the vote and the governor's signature.

For the sake of argument, however, even if a committee

report could be read to suggest that "different" meant only

"less," that report would not be the final expression of

legislative intent. As Caminetti, supra, teaches, it is the

unambiguous words which are the final expression of intent.

Directly on point is Chicago v. Environmental Defense

Fund, 511 U.S. 328, 337, 128 L. Ed 302, ener Therein

this Court stated:

But it is the statute, and not the Committee

Report, which is the authoritative expression

of the law, and the statute prominently omits

reference to generation. As the Court of Appeals

cogently put it: "Why should we, then; rely upon

a single word in a committee report that did not

result in legislation? Simply put we shouldn't.”

In the instant case the legislature could easily have

limited the reach of 10 L.P.R. §264 to "low" pricing. After all it

used a term meaning exactly that in 10 L.P.R. §263(f). In this

connection, this Court, again in BFP v. Resolution Trust Corp.,

511 U.S. 531, 537-38, 128 L. Ed. 2™ 556 (1994), relying on

Chicago v Environment Trust, supra, stated:

. . Congress acts intentionally and purposely

when it includes particular language in one

section of a statute but omits it in another.

Without doubt the Puerto Rico legislature should be entitled to

this same presumption.

commentators.

As the lower court has recognized:

Puerto Rico is a civil law jurisdiction and follows

the rule of such jurisdictions of heavier reliance

on learned commentators than common law

jurisdictions. See J. H. Merryman, THE CIVIL LAW

TRADITION — 56-57 (2d ed. 1985) (The civil law is a

law of Professors . . . the common law is still a law of

the judges’).

Suarez & Co., Inc. v. Dow Brands, Inc. 337 F.3d 1, 8 (1"Cir |

2003). |

With this in mind, the writing of Dr. Arturo Estrella ° in his law

review article “Antitrust Law In Puerto Rico,” 28

Revista del Colegio de Abogados de Puerto Rico 505, 624-25

(1968) i is significant. First, directing his attention to 10 L.P.R.

§264" he writes, "its main purpose" (emphasis added) was to

protect against dumping. Obviously, in his mind, and to

anyone else reading 10 L.P.R. §264, it had at least one other

purpose. He then goes on to say, “the phrase substantially

different’ was used with the intention of outlawing lower

prices." Again this comment, when read in context, does not

tule out proscribing discriminatory higher prices. Neither of

these quotes rejects the plain meaning of 10 L.P.R. §264 which

outlaws lower and higher prices. Dr. Estrella makes this clear

in a subsequent passage, wherein he flatly states that 10 L.P.R.

§264 was also designed to target Robinson-Patman Act type,

geographic price discrimination. He writes, still directing

himself to 10 L.P.R. §264:

This local provision may be of value as a

complement to applicable Federal statutes, such

as the Anti-Dumping law and the prohibition against

geographic price discrimination under Sections 2(a) and

3 of the Robinson-Patman Act, ....

ibid at page 625 (emphasis supplied).

° Estrella also testified before the legislature. His article reviews the

legislation after its passage wherein the legislature let stand the term

“substantially different," obviously choosing not to limit 10 L.P.R. §264 to

only lower pricing in Puerto Rico.

” 10 L. P.R. §264 is Section 8 in the Puerto Rico Anti-monopoly Act as it was

passed by the legislature.

Inexplicably, or perhaps for reasons best understood by

the lower court, it ignored this pithy observation that 10 L.P.R.

§264 has a dual purpose, made by a legal commentator

who helped draft the legislation. Whatever the reason, the

omission of this crucial comment is troubling.

Of further note, especially in civil law jurisdictions, is

how Julian O. VonKalinowski describes 10 L.P.R. §264 in his

treatise on antitrust law. Conspicuously, the treatise, in parsing

the Puerto Rico Antitrust Act, does not label 10 L.P.R. §264 an

anti-dumping statute at all. Rather, the treatise describes it by

label as a “Locality Price Discrimination" measure.

VonKalinowski on Antitrust, 2™ ed Vol.7, Chapter 153, at page

153-10. |

(D) Nothing im the snippets of legislative history

impeaches the plain, ordinary language or meaning of 10

L.P.R. §264 as passed by the legislature and signed by the

governor.

It is not surprising that the legislature sought to question

only the dumping aspects of 10 L.P.R. §264. The harm caused

by discriminatory overcharging is easily understood. F.T.C. v.

Morton Salt, 334 U.S. 37, 50 (1948). Dumping, where the

consumers get a bargain (albeit temporarily), is not so easily

understood. Consequently, the testimony of the statute’s

proponents dealt with the dumping as part of 10 L.P.R. § 264.

In this regard, the Honorable Mr. Reyes Delgado, a legislator,

demonstrated the legislative mindset when he challenged the

testimony of Secretary of Justice Cancio by commenting: "No,

if he sells more cheaply in Puerto Rico all the better. Our

people benefit from that." See, Petitioner’s Appendix at page

79a. Mr. Reyes Delgado was also upset that a Puerto Rican

company might sell goods cheaper elsewhere, while charging

Puerto Rico residents more. He states: “No, no, why, why

should we allow our people to be exploited in such a fashion,

while the people in Mexico are not. Goods manufactured by

the hands of our work force, transported to Mexico . . . and then

selling in Mexico at a lower price than here." ibid.

These remarks demonstrate a keen legislative interest in

protecting local residents from higher price discrimination, and

the legislature satisfied this interest by enacting 10 L.P.R. §264

using the expansive term "different" rather than the limiting

term "lower." Thus §264, as enacted, targets both dumping and

price discrimination.

Exercise of the Court's supervisory power here is

warranted, and the usual preference given a lower court's

construction of local law is not earned where there is "plain

error," e.g., Palmer v. Hoffman, 318 U.S. 109, 118 (1943);

where the decision is "clearly wrong," e.g., The Tungus v.

Skovgaard, 358 U.S. 588, 596 (1959); is "unreasonable," e.g.,

Proper v. Clark, 337 U.S. 472, 489 (1949); or is "clearly

erroneous," e.g., U.S. v. Durham Lumber Co., 363 U.S. 522,

526-7 (1960).

The lower Court's holding that "substantially different"

means only "substantially lower" to the exclusion of

"substantially higher" is to invent “new speak,” and enter the

Humpty Dumpty world of English usage. ®

* Lewis Carroll in Through the Looking Glass has Humpty Dumpty explain

to Alice: "When I use a word [i}t means just what I choose it to mean —

neither more nor less.”

This is something this Court has not permitted and should not

permit.

(E) Certification as an alternative

Both DJM and Tex-Shield, during Petition for

Rehearing phases before the lower Court, have specifically

requested that the interpretation of 10 L. P.R. §264 be certified

to the Supreme Court of Puerto Rico, pursuant to its Rule 27, 4

L.P.R. App I-A. Resort to the highest court in Puerto Rico is

appropriate since the construction of 10 L.P.R. §264 is one of

first impression. The Court of Appeals, first finding no

ambiguity, then vacating that decision and finding ambiguity,

all on the same record, must be disquieting to Puerto Rico

businesses. Precedent in this Court permits such a certification,

even when not requested, as in Elkins v. Moreno, 435 U.S. 647,

662 n. 16 (1978).

CONCLUSION

The Writ should be granted, or in the alternative, the

interpretation of 10 L.P.R. §264 should be certified to the

Supreme Court of Puerto Rico.

Respectfully submitted,

JOSEPH H. REITER

Counsel of Record

KOSTOS AND LAMER, P.C.

Attorneys for Petitioner

1608 Walnut Street

Suite 1300

Philadelphia, PA 19103

(215) 545-0570

Appendix A — Order on Petition For Rehearing By

Court Of Appeals For The First Circuit, entered

November 19, 2003 (see Appendix B)

United States Court of Appeals

For the First Circuit

No. 02-2114

DJ MANUFACTURING CORPORATION

Plaintiff - Appellant

TEX-SHIELD, INC.

Defendant - Appellee

XYZ INSURANCE CO.; CREATIVE APPAREL;

BLUCHER USA; BLUCHER GMBH Defendants

Defendants

Order of Court Before

Chief Judge Boudin, Torruella, Selya, Lynch, Lipez, and

Howard, Circuit Judges

The Panel of judges that rendered the decision in

this case having voted to deny the petition for rehearing

and the suggestion for the holding of a rehearing en bane

having been

carefully considered by the judges of the court in regular

active service and a majority of said judges not having voted

to order that the appeal be heard or reheard by the court en

banc,

Appendix A

It is ordered that the petition for rehearing and the

suggestion for rehearing en bane be denied.

By the Court:

By: RICHARD CUSHING DONOVAN

Richard Cushing Donovan, Clerk

cc: Eugene F. Hestres Velez, Esq.

Rosa Bayonet-Tartak

Marc Lamer

Pedro Jimenez-Rodriguez

Michael McCall

Camelia Montilla-Alvarado

Daniel M. Abuhoff

Timothy K. Beekan

Appendix B — Copy of Docket, Court of Appeals

For The First Circuit

US Court of Appeals for the First Circuit

Case Summary

Court of Appeals Docket #: 02-2114 Filed: 9/10/02

Nsuit: 3410 Anti-trust

DJ Manufacturing v. Tex-Shield, Inc., et al Appeal

from: U.S. District Court of PR

Lower court information:

District: 0104-3 : 97-01'457 lead: 97-01457

Ordering Judge: Jay A. Garcia-Gregory

* 10/6/03

10/20/03

ORDER filed by Chief Judge Michael

Boudin, Judge Juan R. Torruella,

Judge Bruce M. Selya, Judge- Sandra

L.Lynch, Judge Kermit V. Lipez and

Judge Jeffrey R. Howard. Appellee

Tex-Shield’s, petition for panel

rehearing is granted and the petition

for rehearing en banc is denied as

moot. Accordingly, this court's opinion

of July 28, 2003, withdrawn, and the

judgment entered July 28, 2003, is

vacated. (frnk)

OPINION. Judge Juan R.Torruella,

Judge Bruce M. Selya, and Judge

Kermit V.Lipez. Signed Judge Juan R.

Torruella, Authoring Judge.

PUBLISHED. (cmpa)

10/20/03

11/3/03

11/4/03

11/19/03

Appendix B

JUDGMENT. Judge Juan R. Torruella,

Judge Bruce M. Selya, and Judge

Kermit. V. Lipez. The district court's

dismissal of the compliant is affirmed.

(cmpa)

PETITION filed (fax) by Appellant DJ

Manufacturing for panel rehearing and

for suggestion for rehearing en banco

Certificate of Service dated 10/31/03.

(frnk)

ELECTRONIC DOCUMENT.

Appellant's petition rehearing and

rehearing enbanc on disk. [02-2114]

(campa)

ORDER. Chief Judge Boudin,

Torruella, Selya, Lynch, Lipez, and

Howard, Circuit Judges. The Panel of

judges that rendered the decision in

this case having voted to deny the

petition for rehearing and_ the

suggestion for the holding of a

rehearing en bane having been

carefully considered by the judges of

* the court in regular active service and a

majority of said judges not having

voted to order that the appeal be heard

or reheard by the court en bane, It is

ordered that the petition for rehearing

and the suggestion for rehearing en

banc be denied. (cmpa)

Appendix B

11/26/03 MANDATE ISSUED.[02-2114] (frnk)

12/19/03 RECORD returned to originating

court. (jani)

Appendix C — Decision by the United States

Court of Appeals For The First Circuit on

Petition For Rehearing, dated October 20, 2003

United States Court of

Appeals

For the First Circuit

No. 02-2114

DJ MANUFACTURING CORPORATION,

Plaintiff, Appellant,

TEX-SHIELD, INC.,

Defendant, Appellee,

XYZ INSURANCE CO., CREATIVE APPAREL,

BLUCHER USA, BLUCHER GMBH.,

Defendants.

APPEAL FROM THE UNITED STATES DISTRICT

COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. Jay A. Garcia-Gregory, U.S. District Judge]

Before

Torruella, Selya and Lipez,

Circuit Judges.

Appendix C

Marc Lamer, with whom Kostos & Lamer, PC, Eugene F.

Hestres and Bird, Bird and Hestres were on brief, for

appellant. Timothy K. Beeken, with whom Debevoise &

Plimpton, Daniel M. Abuhoff, Correa, Collazo, Herrero,

Jiménez & Fortufio and Pedro Jiménez were on brief, for

appellee.

ON PETITION FOR REHEARING

October 20, 2003

TORRUELLA, Circuit Judge. Plaintiff-appellant

DJ Manufacturing ("DJM") alleges that Tex-Shield, Inc.

("Tex-Shield") and Creative Apparel Associates ("Creative

Apparel") violated, inter alia, a Puerto Rican antitrust statute,

10 P.R. Laws Ann.§ 264 (2002), by conspiring to destroy

competition in the market for chemical protective clothing in

Puerto Rico.' The district court dismissed the complaint on a

motion to dismiss. After careful review, we affirm.

| The plaintiffs also alleged violations of Sections 1 and 2 of the

Sherman Act, 15 U.S.C. §§ 1 and 2, Sections 2(a), (e), and (f) of the

Robinson-Patman Act, 15 U.S.C. §§ 13(a), (e), (f), the Puerto Rican

statute dealing with price discrimination, 10 L.P.R.A.§ 263, and the

Puerto Rican statute dealing with transactions in restraint of trade, 10

L.P.R.A. § 258. The district court's decision is unchallenged with respect

to these other claims.

Appendix C

I. Facts

Because this is an appeal from a dismissal under Fed.

R. Civ. P. 12(b)(6), "[wJe glean the facts from the amended

complaint, stripped of any rhetorical gloss." Young v.

Lepone, 305 F.3d 1, 4(1st Cir. 2002).

DJM manufactures sewn clothing and equipage for

the United States military. It is a “small disadvantaged

business" under 48 C.F.R. § 19.001 (2003) and a certified

participant in the Small Business Administration's program

for contracts set aside to small disadvantaged businesses

under Section 8(a) of the Small Business Act, 15 U.S.C. §

637(a) (2000).

Defendant Tex-Shield manufactures, and its parent

Blucher GmbH holds a patent for, technology used to

produce a chemical protective material known as "Saratoga

Filter Cloth" (the "Cloth"). The Cloth is a protective shield

against biological and chemical agents sewn into garments

purchased by the United States military and used for

protection against attack by chemical warfare.

In July 1993, the United States Air Force

("USAF")requested bids for the production of 40,000

chemical defense coveralls. The bidding was limited to

businesses participating in the SBA's § 8(a) program, such as

DJM. The USAF specified that the coveralls must be made

using the Cloth and identified Tex-Shield as the sole source.

DJM won the contract.

| DJM then subcontracted with Tex-Shield to buy the

i Cloth for a price of $49.27 per yard. Subsequently, DJM and

—=—= a

Appendix C

Tex-Shield made a "technical services" contract, whereby,

for a fee of $35,000 per month for twelve months, Tex-Shield

agreed to provide DJM with certain technical services.

On June 24, 1994, the Defense Personnel Support

Center("DPSC") solicited proposals for the production of at

least 100,000 chemical and biological suits, with an option

for more. As with the USAF solicitation, the DPSC

solicitation was limited to SBA's § 8(a) program participants.

Also, the solicitation required the suits be made with the

Cloth; again, Tex-Shield was identified as the Cloth's sole

approved source.

In preparing its bid for DPSC, DJM inquired as to the

cost of procuring the Cloth. Tex-Shield quoted DJM a price

of $38.71 per yard for the first 100,000 suits, and $41.07 per

yard for any additional yardage. Tex-Shield quoted DJM a

price of $148.95 for the first 100,000 suits in pre-cut "kits"

and $154.43 per kit for any extra kits. Based on these quotes,

DJM offered DPSC a price of $186.62 per unit for the first

100,000 suits and $183.50 for any more suits. Creative

Apparel bid $179.55 for the first 100,000 suits and $186.02

for any extra. Creative won the contract.

DJM filed a complaint against Tex-Shield, Blucher

USA, Blucher GmbH, and Creative Apparel,” alleging several

federal and state antitrust violations. The complaint included

? Tex-Shield is wholly owned by Blucher USA, which in turn is wholly

owned by Blucher GmbH. Creative Apparel is, like DJM, a clothing and

equipage manufacturer. Tex-Shield, the Cloth's sole supplier, also makes

finished chemical and biological protective clothing.

10a

Appendix C

allegations that Tex-Shield violated § 264 of the Puerto Rico

Anti-Monopoly Act by selling goods in Puerto Rico at prices

different from the price at which the articles were sold

elsewhere.

The district court dismissed all of the claims,

including the § 264 count, for failure to state a cause of

action. See Fed.R. Civ. P. 12(b)(6). In dismissing the § 264

count, the district court read the section only as an anti-

dumping statute, forbidding the sale of goods at lower prices

in Puerto Rico.

DJM appeals only the lower court's dismissal of the §

264 count. :

Il. Standard of Review

We review the district court's resolution of Tex-

Shield's motion to dismiss de novo. Beddall v. State St. Bank

& Trust Co.,137 F.3d 12, 16 (1st Cir. 1998). When a litigant

is facing a summary dismissal, we first accept the complaint's

well-pleaded factual allegations as true, drawing all

reasonable inferences in the plaintiff's favor, and then

determine whether this reading of the complaint justifies

recovery on any cognizable theory. Martin v. Applied

Cellular Tech., Inc., 284 F.3d 1, 6 (1st Cir. 2002).

Iii. Analysis

We begin with the issue of statutory interpretation.

The district court limited the interpretation of the phrase "at

prices which are substantially different" contained in § 264 of

Ila

Appendix C

the Puerto Rico statute to only those situations where a

supplier offers its product at a substantially lower price to

Puerto Rican customers as opposed to non-Puerto Rican

customers, and ruled out those situations where a supplier

charged the Puerto Rican company substantially more than a

non-Puerto Rican company.

Neither this circuit nor the Puerto Rican

commonwealth courts have determined the pricing behaviors ~~

covered by § 264. DJM contends that the statute prohibits

charging either less or more for goods in Puerto Rico. Thus,

DJM argues that the district court erred when it viewed the

statute as an anti-dumping statute that prohibits only the

charging of lower prices in Puerto Rico. Finally, DJM argues

that § 264 is clear on its face and that we should thus refrain

from examining its legislative history. We disagree -- as will

be explained, we find the statute ambiguous and turn to other

sources for aid in construction.

A. Ambiguity

Section 264 states:

It shall be unlawful to sell, contract to sell, offer to

sell, or participate in any step for the sale of articles in

Puerto Rico, after making due allowance for

differences in costs incident to the delivering of goods

in Puerto Rico and the costs of handling such goods

in Puerto Rico, at prices which are substantially

different from prices charged or quoted by such

sellers for goods of the same grade or quality to

buyers located outside of Puerto Rico, when such

difference in price is granted with the

12a

Appendix C

purpose of destroying competition or eliminating a

competitor located in Puerto Rico.

10 P.R. Laws Ann. § 264. Although DJM would have us

consider only the whether the phrase “prices which are

substantially different" ("different price language") could, on

its face, apply to the charging of higher and lower prices, we

must consider the phrase in the context of the entire statutory

provision in order to determine if the statute covers situations

such as the one alleged here. See, e.g., Allied Chem. and

Alkali Workers of Am. Local Union No. 1 v. Pittsburgh Plate

Glass Co., 404 U.S. 157, 185 (1971) (indicating that courts

"must not be guided by a single

sentence or member of a sentence, but look to the provisions

of the whole law”)(internal quotations and citations omitted).

We begin by noting that the different price language

does not appear ambiguous when considered in isolation.

Unlike the Federal Anti-Dumping Act of 1916, which the

district court viewed as a model for this statute, there is no

specific prohibition against charging "a price substantially

less" in Puerto Rico -- instead the legislature chose the

broader term "substantially different," which could cover

both higher and lower pricing.’ Although it

> The Federal Anti-Dumping Act reads in pertinent part:

It shall be unlawful for any person importing or assisting

in importing any articles from any foreign country into the

United States, commonly and systematically to import, sell

or cause to be imported or sold such articles within the

United States at a price substantially less than the actual

market value or wholesale price of such articles, at the

time of exportation to the United States, in the principal

13a

Appendix C

may appear quite obvious that the word "different" could

encompass both higher and lower prices, this does not mean

that the statute is unambiguous and that it clearly

encompasses DJM's claim.

When we consider whether the statute as a whole

encompasses DJM's claim, its ambiguity emerges. In

particular, here we have a situation where the alleged price

discrimination is having a potential detrimental effect not on

the seller's competition (horizontal competition or

competitors), but rather on the buyer's competition (vertical

competition or competitors). On its face, the statute does not

clearly encompass claims involving harm to vertical

competitors caused by the charging of higher prices in Puerto

Rico.

markets of the country of their production, or of other foreign

countries to which they are commonly exported after adding to

such market value or wholesale price, freight, duty, and other

charges and expenses necessarily incident to the importation

and sale thereof in the United States: Provided, that such act

or acts be done with the intent of destroying or injuring an

industry in the United States, or of preventing the

establishment of an industry in the United States, or of

restraining or monopolizing any part of trade and

commerce in such articles in the United States.

15 U.S.C. § 72 (2003) (emphasis added). Clearly, the Puerto

Rican legislature did not merely adopt the provision

wholesale, but rather changed significant portions of it.

l4a

Appendix C

The Robinson-Patman Act, on which this statutory

provision was loosely modeled,‘ has been applied to

secondary line competition and does explicitly cover

effects on non-sellers. See 15 U.S.C. § 13 (2003) (stating "fijt

shall be unlawful for any person engaged in commerce . . . to

discriminate in price between different purchasers of

commodities of like grade and quality... .where the effect

of such discrimination may be substantially to lessen

competition or tend to create a monopoly in any line

of commerce, or to injure, destroy, or prevent competition

with any person who either grants or knowingly receives the

benefit of such discrimination, or with customers of either of

them").

State statutes that cover behavior affecting secondary

line competition do not typically have explicit terms to that

effect -- quite the contrary, where secondary line competition

is not covered, the statutes are explicit. See, e.g., Cal. Bus. &

Prof. Code § 17040 (2003) (prohibiting price discrimination

in a given locality by "any person engaged in the production,

manufacture, distribution or sale of any article or product of

general use or consumption, with intent to destroy the

competition of any regular established dealer in such article

or product"); see also Erwin S. Barbre, Annotation, Validity

and Construction of State Statutes Forbidding Area Price

Discrimination, 67 A.L.R.3d 26(2001) (citing only three

cases involving a finding that state statutes did not apply to

secondary line competition).

* See Arturo Estrella, Antitrust Law in Puerto Rico, 28 Revista del

Colegio de Abogados de Puerto Rico, 505, 624-25 (1968).

——L__

15a

Appendix C

Absent an explicit term to the contrary, § 264 could

apply to secondary line competition, thus encompassing

DJM's claim. It is precisely because the statute could but

does not explicitly encompass DJM's claim that consultation

of other sources would be not only prudent, but necessary.

See, e.g., United States v. O'Neil, 11 F.3d 292, 297-98 (ist

Cir. 1993) (noting that "ambiguity is commonly thought to

exist when statutory language is susceptible to differing, but

nonetheless plausible, constructions").

B. Legislative History

As will presently be seen, the legislative history”

clarifies that the different price language was meant to apply

only to the charging of lower prices. Although on its face the

different price language may appear to include the charging

of higher or lower prices, "[e]ven the most basic general

principles of statutory construction must yield to clear

contrary evidence of legislative intent." National R.R.

Passenger Corp. v. National Ass'n of R.R. Passengers, 414

U.S. 453, 458 (1974). Indeed, the First Circuit has

"overridden literal language where it appeared inadvertent

and undermined [the legislature's] aim." United States v.

Estrella, 104 F.3d 3, 8 (1st Cir. 1997).

* We assume that the official translations included in the record contain

all relevant portions of the legislative history. See, e.g., Estades Negroni

v. Assocs. Corp. of N. Am., 2003 U.S. App.LEXIS 20066, *11 (1st Cir.

2003) (reiterating that “this Court may not consider non-English

documents unless a translation is provided") (quoting Ramos-Baez v.

Bossolo-Lépez, 240 F.3d 92, 94(1st Cir. 2001).

Se ae

16a

Appendix C

The legislative history supports a narrow reading of §

264 as an anti-dumping statute. Most persuasively, a section

in the Senate committee report indicates that "[t]he purpose

of this section is not to prevent merchandise from entering

Puerto Rico at prices that are lower than those prevalent in

other markets. The prohibition is limited to classic

dumping." Diario de Sesiones, Vol. XVIII, at 1708.

Similarly, an article written by Arturo Estrella, the

then Deputy Secretary of Justice, a few years after

the enactment of § 264 indicates that the law's "main purpose

- though not the exact wording - coincides with that of the

United States Anti-Dumping Act of 1916, prohibiting

importation into the United States of articles for sale at prices

that are less than their market value outside the United

States .. ." Arturo Estrella, Antitrust Law in

Puerto Rico, 28 Revista del Colegio de Abogados de Puerto

Rico 505, 624-25 (1968).

According to DJM, the fact that this is the main purpose of

the statute allows for the interpretation that § 264 also applies

to the charging of higher prices in Puerto Rico. If one reads

the entire excerpt, however, it is clear that this reading is not

possible because Estrella states, "The phrase ‘substantially

different' was used with the intention of outlawing ‘lower

prices." Id. (quoting Diario de Sesiones, Vol. XVIII, at

1708).

Although there are only limited portions of legislative

history in the record,° those excerpts indicate

* Only Tex-Shield has provided excerpts of legislative history for this

Court's consideration. In its response brief, DJM merely analyzes the

excerpts provided by its opponents and does not bring to the Court's

17a

Appendix C

that the statute was meant to apply only to lower prices. We

interpret the statute narrowly and hold that it does not

embrace the charging of higher prices by a supplier to a

Puerto Rican company.

Dumping behavior is not alleged here, thus DJM has failed to

state a valid claim under the statute and the

district court properly dismissed the complaint.’

Ili. Conclusion

For the foregoing reasons, the district court's

dismissal of the complaint is affirmed.

Affirmed.

attention any other relevant portions of the legislative history. Previously,

DJM relied on a plain language argument rather than resorting to

legislative history, which certainly suggests that there is little or no

‘history to support DJMs interpretation.

” With regard to the issue of whether the statute applies to vertical

competition, none of the excerpted portions of the legislative history

brought to the Court's attention address the issue. We need not decide if

the statute covers both vertical and horizontal competition, however,

because we find that only cases involving the charging of lower prices in

Puerto Rico can be brought under the provision. °

18a

Appendix D — Decision By The United States

Court of Appeals For The First Circuit,

dated July 28, 2003 (withdrawn)

United States Court of

Appeals

For the First Circuit

No. 02-2114

DJ MANUFACTURING CORPORATION,

Plaintiff, Appellant,

TEX-SHIELD, INC.,

Defendant, Appellee,

XYZ INSURANCE CO., CREATIVE APPAREL,

BLUCHER USA, BLUCHER GMBH.,

Defendants.

APPEAL FROM THE UNITED STATES DISTRICT

COURT

FOR THE DISTRICT OF PUERTO RICO

{Hon. Jay A. Garcia-Gregory, U.S. District Judge]

Before

19a

Appendix D

Torruella, Selya and Lipez,

Circuit Judges.

Marc Lamer, with whom Kostos & Lamer, PC, Eugene F.

Hestres and Bird, Bird and Hestres were on brief, for

appellant. Timothy K. Beeken, with whom Debevoise &

Plimpton, Daniel M. Abuhoff, Correa, Collazo, Herrero,

Jiménez & Fortufio and Pedro Jiménez were on brief, for

appellee.

July 28, 2003

TORRUELLA, Circuit Judge. Plaintiff-appellant

DJ Manufacturing ("DJM") alleges that Tex-Shield, Inc.

("Tex-Shield")and Creative Apparel Associates ("Creative

Apparel") violated, inter alia, a Puerto Rican antitrust statute,

10 P.R. Laws Ann. § 264 (2002), by conspiring to destroy __

competition in the market for chemical protective clothing in

Puerto Rico.' The district court dismissed the complaint on a

motion to dismiss. After careful review, we reverse and

remand for further proceedings.

I. Facts

' The plaintiffs also alleged violations of Sections 1 and 2 of the

Sherman Act, 15 U.S.C. §§ 1 and 2, Sections 2(a), (e), and (fhof the

Robinson-Patman Act, 15 U.S.C. §§ 13(a), (e), (f), the Puerto Rican

statute dealing with price discrimination, 10 L.P.R.A. § 263, and the

Puerto Rican statute dealing with transactions in restraint of trade, 10

L.P.R.A. § 258. The district court's decision is unchallenged with respect

to these other claims.

20a

Appendix D

Because this is an appeal from a dismissal under Fed.

R. Civ. P. Rule 12(b)(6), "[w]e glean the facts from the

amended complaint, stripped of any rhetorical gloss."

Young v. Lepone, 305 F.3d 1, 4 (ist Cir. 2002).

DJM manufactures sewn clothing and equipage for

the United States military. It is a "small disadvantaged

business" under 48 C.F.R. § 19.001 (2003) (and a certified

participant in the Small Business Administration's program

for contracts set aside to small disadvantaged businesses

under Section 8(a) of the Small Business Act, 15 U.S.C. §

637(a) (2000).

Defendant Tex-Shield manufactures, and its parent

Blucher GmbH holds a patent for, technology used to

produce a chemical protective material known as "Saratoga

Filter Cloth" (the "Cloth"). The Cloth is a protective shield

against biological and chemical agents sewn into garments

purchased by the United States military and used for

protection against attack by chemical warfare.

In July 1993, the United States Air Force ("USAF")

requested bids for the production of 40,000 Chemical

Defense Coveralls. The bidding was limited to businesses

participating in the SBA's § 8(a) program, such as DJM. The

USAF specified that the coveralls must be made using the

Cloth and identified Tex-Shield as the sole source. DJM won

the contract.

DJM then subcontracted with Tex-Shield to buy the

Cloth for a price of $49.27 per yard. Subsequently, DJM and

Tex-Shield made a "technical services" contract, whereby,

21a

Appendix D

for a fee of $35,000 per month for twelve months, Tex-Shield

agreed to provide DJM with certain technical services.

On June 24, 1994, the Defense Personnel Support

Center ("DPSC") solicited proposals for the production of at

least 100,000 chemical and biological suits, with an option

for more. As with the USAF solicitation, the DPSC

solicitation was limited to SBA's § 8(a) program participants.

Also, the solicitation required the suits be made with the

Cloth; again, Tex-Shield was identified as the Cloth's sole

approved source.

In preparing its bid for DPSC, DJM inquired as to the

cost of procuring the Cloth. Tex-Shield quoted DJM a price

of $38.71 per yard for the first 100,000 suits, and $41.07 per

yard for any additional yardage. Tex-Shield quoted DJM a

price of $148.95 for the first 100,000 suits in pre-cut "kits"

and $154.43 per kit for any extra kits. Based on these quotes,

DJM offered DPSC a price of $186.62 per unit for the first

100,000 suits and $183.50 for any more suits. Creative

Apparel bid $179.55 for the first 100,000 suits and $186.02

for any extra. Creative won the contract.

DJM filed a complaint against Tex-Shield, Blucher

USA, Blucher GmbH, and Creative Apparel,’ alleging several

federal and state antitrust violations. The complaint included

allegations that Tex-Shield violated § 264 of the Puerto Rico

? Tex-Shield is wholly-owned by Blucher USA, which in turn is wholly-

owned by Blucher GmbH. Creative Apparel is, like DJM, a clothing and

equipage manufacturer. Tex-Shield, the Cloth's sole supplier, also makes

finished chemical and biological protective

clothing.

22a

Appendix D

Anti-Monopoly Act by selling goods in Puerto Rico at prices

different from the articles' price when sold elsewhere.

The district court dismissed all of the consolidated

actions, including the § 264 count, for failure to state a cause

of action. See Fed. R. Civ. P. 12(b)(6). In dismissing the §

264 count, the district court read the section only as an anti-

dumping statute, forbidding the sale of goods at lower prices

in Puerto Rico.

DJM appeals only the lower court's dismissal of the §

264 count, as DJM waived all other appealable errors.

Il. Standard of Review

We review the district court's resolution of Tex-

Shield's motion to dismiss de novo. Beddall v. State St. Bank

& Trust Co., 137 F.3d 12, 16 (1st Cir. 1998). When a litigant

is facing a summary dismissal, we first accept the complaint's

well-pleaded factual allegations as true, drawing all

reasonable inferences in the plaintiff's favor, and then

determine whether this reading of the complaint justifies

recovery on any cognizable theory. Martin v. Applied

Cellular Tech., Inc., 284 F.3d 1, 6 (1st Cir. 2002). Summary

disposals "should be used sparingly in complex antitrust

litigation where motive and intent play leading roles, the

proof is largely in the hands of alleged conspirators, and

hostile witnesses thicken the plot." Poller v. Columbia Broad.

Sys., Inc., 368 U.S. 464, 473 (1962).

23a

Appendix D

iil. Analysis

Two issues require discussion. First, we consider if

the district court erred when it limited the interpretation of

the phrase "at prices which are substantially different" to only

those situations where a supplier offers its product at a

substantially lower price to Puerto Rican customers as

opposed to non-Puerto Rican customers, and ruled out those

situations where a supplier charged the Puerto Rican

company substantially more than a non-Puerto Rican

company. Second, we decide if DJM's complaint alleges

sufficient facts to establish a § 264 claim, including whether

the complaint at least inferentially asserts that (1) Tex-

Shield's alleged conduct is aimed at "destroying competition

or eliminating a competitor located in Puerto Rico"; and (2)

the goods at issue are of the same grade or quality.

A. Statutory Interpretation

Neither this circuit nor the Puerto Rican

commonwealth courts have determined the pricing behaviors

covered by § 264. DJM contends that the statute prohibits

charging either less or more for goods in Puerto Rico. Thus,

DJM argues that the district court erred when it viewed the

statute as an anti-dumping statute that prohibits only the

charging of lower prices in Puerto Rico.

Finally, DJM argues that § 264 is clear on its face and that

we should thus refrain from examining its legislative history.

We agree.

Where the statute's language is clear, and its terms do

not lead to “absurd or wholly impracticable consequences,"

the words used are generally taken as the final expression of

24a

Appendix D

the intended meaning. Caminetti v. United States, 242 U.S.

470, 490(1917); see also United States v. Mo. Pac. R.R., 278

U.S. 269, 277-78 (1929) (“where no ambiguity exists, there is

no room for construction"). Although different canons of

statutory construction may apply when construing statutes in

a civil code system as opposed to statutes in a common law

system, we need not concern ourselves with these differences

because the Puerto Rico legislature provides a clear

command as to the first step of civil code interpretation:

"When a law is clear and free from all ambiguity, the letter of

the same shall not be disregarded, under the pretext of

fulfilling the spirit thereof." 31 P.R. Laws Ann.§ 14 (1967 &

Supp. 1989); see also Pritzker v. Yari, 42 F.3d 53, 66-67 (1st

Cir. 1994) (declining to "wander beyond the four corners" of

a Puerto Rican statute to discern "legislative intent").

Here, the statute is clear regarding the pricing

behavior it targets. Section 264 states:

It shall be unlawful to sell, contract to sell, offer to

sell, or participate in any step for the sale of articles in

Puerto Rico, after making due allowance for

differences in costs incident to the delivering of goods

in Puerto Rico and the costs of handling such goods

in Puerto Rico, at prices which are substantially

different from prices charged or quoted by such

sellers for goods of the same grade or quality to

buyers located outside of Puerto Rico, when such

difference in price is granted with the purpose of

destroying competition or eliminating a competitor

located in Puerto Rico.

25a

Appendix D

10 P.R. Laws Ann. § 264 (emphasis added). Unlike the

Federal Anti-Dumping Act of 1916, which the district court

adopted as the definitive model for this statute, there is no

specific prohibition against charging “a price substantially

less" in Puerto Rico --instead the legislature chose the

broader term "substantially different," which covers both

higher and lower pricing.’

Because we hold the statutory language embraces

both higher and lower prices on its face, we need not enter

the quagmire of legislative history or use other tools of

* The Federal Anti-Dumping Act reads in pertinent part:

It shall be unlawful for any person importing or assisting in

importing any articles from any foreign country into the United

States, commonly and systematically to import, sell or cause to

be imported or sold such articles within the United States at a

price substantially less than the actual market value or wholesale

price of such articles, at the time of exportation to the United

States, in the principal markets of the country of their

production, or of other foreign countries to which they are

commonly exported adding to such market value or wholesale

price, freight, duty, and other charges and expenses necessarily

incident to the importation and sale thereof in the United States:

Provided, That such act or acts be done with the intent of

destroying or injuring an industry in the United States, or of

preventing the establishment of an industry in the United

States, or of restraining or monopolizing any part of trade

and commerce in such articles in the United States.

15 U.S.C. § 72 (2003) (emphasis added). Clearly, the Puerto

Rican legislature did not merely adopt the provision

wholesale, but rather changed significant portions of it.

26a

Appendix D

construction. The district court judge erred in interpreting the

provision too narrowly, and that interpretation is reversed.

B. Sufficiency of Factual Allegations

Having decided the statute includes both higher and

lower price discrimination, we consider whether the

complaint's allegations and any logical inferences therefrom

"justify recovery on any cognizable theory." Martin, 284 F.3d

at 6.

Here, DJM claims that the prices Tex-Shield charged to

Creative Apparel were lower than those quoted to DJM

plainly suffice to survive dismissal.

Even if the statute applies to the alleged charging of

higher prices in Puerto Rico, there are still two possible

obstacles to stating a claim under § 264. First, § 264 prohibits

a supplier from charging different prices for the purpose of

destroying the supplier's "competition or eliminating a

competitor located in Puerto Rico." Second, § 264 requires

that the goods be of "the same grade and quality." The

district court did not address either issue; taking all

inferences in DJM's favor, we find the district court erred in

dismissing the complaint.‘

* This is not a case in which the district court converted the

12(b)6) motion into a motion for summary judgment.

27a

Appendix D

1. Adverse Impact on Competition or Competitor

A well-pleaded § 264 claim must include allegations

that the price discrimination was for "the purpose of

destroying competition or eliminating a competitor located in

Puerto Rico."

In its complaint, DJM contends that Tex-Shield and Creative

Apparel entered into "an agreement" involving, among other

things, investment by Tex-Shield in Creative Apparel as part

of a joint strategy to secure and maintain for the Blucher

defendants monopoly power in United States trade and

commerce in Chemical Protective Cloth . . . and to attempt to

secure and maintain, and to secure and maintain, monopoly

power for Creative [Apparel] in United States trade and

commerce in Chemical Protective Clothing, as well as in

such trade and commerce in the § 8(a) market.

It is not irrational for a monopoly-holder such as Tex-Shield

to act with the intent of sabotaging one of its two

customers.” Such a concerted effort to establish and maintain

monopoly power in the relevant markets, if proven, would

meet § 264's purpose requirement because it would constitute

an intent to harm competition in the chemical protective

clothing market or eliminate DJM as Creative Apparel's

* Both the allegation that Tex-Shield is building “additional

manufacturing operations” near Creative Apparel's plant and the claim

that Tex-Shield is investing in Creative Apparel to "enhance its financial

condition” could, if proven, support a finding of an anti-competitive

purpose to the price differential. Both of these facts suggest a special

relationship between Tex-Shield and Creative Apparel that would make it

logical for them to conspire to destroy competition in the chemical

protective clothing market.

28a

Appendix D

competitor; thus, DJM's pleadings on this count suffice to

meet § 264's intent requirement. Compare In re Compact

Disc Minimum Advertised Price Antitrust Litig., 138 F.

Supp. 2d 25, 28 n.4 (D. Me. 2001) (denying motion to

dismiss where it was “not irrational or implausible to infer

agreement from the facts alleged"), with DM Research, Inc.

v. Coll. of Am. Pathologists, 170 F.3d 53, 55-56 (1st Cir.

1999) (affirming dismissal where complaint "merely

assert[ed] a conspiracy in conclusory terms" and stating that

allegation of some fact pertaining to an agreement would be

necessary to overcome the improbability of a conspiracy

against the interests of one or more of the parties).

2. Goods of Same Grade and Quality

Finally, § 264 requires that DJM allege that Tex-

Shield was quoting different prices for "goods of the same

grade or quality." Defendants argue that "the goods for which

DJM requested a price -- pre-cut fabric kits -- were not the

same grade or quality as the goods on which Creative

Apparel requested a price --uncut cloth on the roll." Although

this argument may ultimately have merit, it does not preclude

inferences from the complaint sufficient to defeat a Rule

12(b)(6) motion.

It is possible to infer from the complaint that the

goods at issue were of the same grade and quality. According

to the complaint, a DPSC report indicates that "Defendant

Tex-shield had, in fact, offered the Blucher Chemical

Protective Cloth to Creative at a significantly lower price

than it had offered the cloth to DJM." Given that the final

product, the chemical protective clothing, had to be

produced according to military specifications that

29a

Appendix D

included use of the Cloth, it is a reasonable inference --

without considering any contrary proof that the goods at issue

(the Cloth) had to be of the same grade and quality.° Cf.

Arruda v. Sears, Roebuck & Co., 310 F.3d 13, 18(1st Cir.

2002)(indicating that in evaluating propriety of 12(b)(6)

motion, the court must "assume the truth of all well-pleaded

facts and indulge all reasonable inferences therefrom that fit

the plaintiff's stated theory of liability").

IV. Conclusion

For the foregoing reasons, the district court's

dismissal of the complaint is reversed and the case is

remanded for further proceedings consistent with this

® We find the defendant’s reliance on Lubbock Glass & Mirror Co. v.

Pittsburgh Plate Glass Co., 313 F. Supp. 1184, 1187, (N.D. Tex. 1970),

unfounded. In Lubbock Glass, the court found that glass, doors frames

and windows could not be considered of like kind and quality when

conveyed in different contracting jobs, because “intangible items, such as

installation, weather conditions, the architect or contractor in charge of

the job and other intangibles make each job unique or different." Id. at

1185. Further the court stated that

commercial installed contracts . . . are a combination of many

ingredients, none of which are subject to exact calculation. A

difference in one ingredient could and probably would occasion

a difference in the total price or bid. Apparently, someone

calculating a bid for a commercial installed contract cannot even

determine exactly the material costs involved.

Id. at 1186-87. The Cloth needed by both DJM and Creative

is the same and the costs involved are easily estimated, as

shown by DJM's own calculation of cutting costs.

30a

Appendix D

opinion. We intimate no view as to whether, after pretrial

discovery, trialworthy issues will be shown to exist.

Reversed and remanded.

3la

Appendix E — Opinion and Order by the United

States District Court for the District of Puerto

Rico, dated June 28, 2002

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

DJ MANUFACTURING CORP.

Civil No. 97-1457

Plaintiff (JAG)

V. Antitrust

TEX-SHIELD, INC., BLUCHER

GMBH, BLUCHER USA, and

CREATIVE APPAREL.

DJ MANUFACTURING CORP.

Civil No. 98-2065

Plaintiff (JAG)

Vv. Antitrust

BLUCHER GMBH, BLUCHER

Defendants. |

USA, and CREATIVE APPAREL. |

' |

Defendants.

OPINION AND ORDER

Plaintiff DJ Manufacturing Corporation (“DJM”) a

corporation organized under the laws of the Commonwealth

32a

Appendix E

of Puerto Rico, brought suit against Blucher GmbH

(“Blucher”), a German Corporation with headquarters

located in Erkrath, Germany, its wholly owned subsidiaries

Tex-Shield (“Tex-Shield”) and Blucher USA (“Blucher

USA”), both Delaware corporations with offices and

principal place of business in New Jersey, and Creative

Apparel Associates (“Creative”), a foreign corporation with

offices and principal place of business in Maine. DJM

brought this action pursuant to the provisions of 15 U.S.C.

§§ 15 and 26 to recover damages for defendants’ alleged

violations of the antitrust laws of the United States,

specifically sections 1 and 2 of the Sherman Act, sections

2(a) and 2(f) of the Clayton Act as amended by the

Robinson-Patman Act (“Robinson-Patman Act”). DJM also

sets forth state law claims under 10 L.P.R.A. §§ 258, 263,

264 (“Puerto Rico Antimonopoly Act”).

Pending before the Court are defendants’ Tex-

Shield’s and Blucher’s motions to dismiss pursuant to Fed.

R. Civ. P. 12(b) (6) (Dockets. No. 77 and 96 respectively)

and Plaintiff's Motion for Entry of Partial Summary

Judgment (Docket No. 104, 108 and 115, respectively). For

the reasons stated below defendants’ Tex-Shield’s and

Blucher’s Motion to Dismiss ate GRANTED. DJM’s

Motion for Entry of Partial Summary Judgment is MOOT.

FACTUAL BACKGROUND

DJM is a corporation that manufactures complex

sewn clothing and equipage for the United States military

agencies. It is a small disadvantaged business as that term is

ee a ee

33a

Appendix E

used in regulations governing federal contracts’, and it is a

certified participant in the Small Business Administration’s

(“SBA”) 8(a) program for contracts set aside to small

disadvantaged businesses, including contracts with United

States military agencies and departments”.

Defendant Tex-Shield manufactures and holds a

patent for certain technology used to produce a chemical

protective material known as “Saratoga Filter Cloth” that is

sewn into chemical protective garments purchased by

agencies and departments of the United States Military.

In July 1993 the United States Air Force (“USAF”)

issued a solicitation for bids for the sale of 40,000 Chemical

Defense Coveralls. The procurement was limited to

businesses participating in the SBA’s 8(a) program, such as

DJM. The USAF specified that the coveralls must be

manufactured using Saratoga Filter Cloth. Tex-Shield was

identified as the sole approved source for the Cloth. DJM

was awarded the contract for the Air Force solicitation for

40,000 coveralls at a unit price of $376.15 for a total

contract price of $15,006,000.

After DIM was awarded the USAF contract, DJM

and Tex-Shield entered into a subcontract which provided

that DJM would buy the Saratoga Filter Cloth from Tex-

Shield at a price of $49.27 per yard. Subsequently, DJM and

Tex-Shield entered into a “technical services” contract

' See 48 C.F.R. 19.001

2 See § 8 (a) of the Small Business Act, 15 U.S.C. § 637(a) (“8(a)

program”).

TROPA ATRESIA PE

34a

Appendix E

whereby Tex-Shield agreed to provide DJM with certain

technical services for a fee of $35,000 per month for a

twelve (12) month period.

On June 24, 1994, the Defense Personnel Support

Center (“DPSC”) issued a solicitation for proposals for the

sale of a minimum of 100,000 chemical and biological suits

and an additional quantity at the option of the DPSC. Just

like the Air Force Solicitation, the DPSC Solicitation was

limited to SBA’s 8(a) program participants. The solicitation

also required that the suits be manufactured from the

Saratoga Filter Cloth produced with the Blucher

Technology; again Tex-Shield was identified as the sole

approved source for the cloth.

Pursuant to the DPSC solicitation, Tex-Shield quoted

DJM a price of $38.71 per yard for the first 100,000 suits,

and $42.07 per yard for any additional quantity. Tex-Shield

also sent DJM a quote to sell the Saratoga Cloth in the form

of pre-cut “kits” at $148.95 for the first 100,000 suits and

$154.43 for any additional quantity. In light of these

numbers, DJM offered DPSC a price of $186.62 per unit for

the first 100,000 suits and $183.50 for any additional

quantity. This time, however, DJM was not awarded the

DPSC contract; instead the DPSC selected Creative.

Creative submitted a bid of $179.55 for the first 100,000

suits and $186.02 for any additional quantity’.

* In its Amended Complaint, DJM does not specify the price Tex-Shield

quoted to Creative. DJM simply avers that Tex-Shield offered Creative,

“Blucher Protective Cloth at a significantly lower price than the price

quoted and offered to DJM....”

35a

Appendix E

MOTION TO DISMISS STANDARD

Under Rule 12(b) (6) of the Federal Rules of Civil

Procedure, a party may, in response to an initial pleading,

file a motion to dismiss the complaint for failure to state a

claim upon which relief can be granted. It is well settled that

“a complaint should not be dismissed for failure to state a

claim unless it appears beyond doubt that the plaintiff can

prove no set of facts in support of his claim which would

entitle him to relief.” See Ports Authority of P.R. V.

Copafiia Panamefia de Aviacién, 77 F. Supp.2d 227, 228

(D.P.R. 1999); citing Conley v. Gibson, 355 U.S. 41, 46-46,

(1957); and Miranda v. Ponce Fed. Bank, 948 F.2d 41 (1°

Cir. 1991).

On a motion to dismiss for failure to state a claim

under Fed. R. Civ. P. 12(b) (6) “all well-pleaded facts are

taken as true, and ...all reasonable inferences are drawn in

favor of the nonmovant.” Gutierrez-Usera v. Puerto Rico

Telephone Co., 967 F. Supp. 35, 37 (D.P.R. 1997). A

complaint must set forth “factual allegations either direct or

inferential, regarding each material element necessary to

sustain recovery under some actionable theory.” See Ports

Authority, 77 F. Supp.2d at 229; citing Romero-Barcelé v.

Hernandez Agosto, 75 F. 3d 23, 28 n. 2 (1* Cir. 1996). The

Court, however, need not accept a complaint’s “bald

assertions or legal conclusions” when assessing a motion to

dismiss. Id., quoting Abbott III v. United States, 144 F. 3d

1, 2 (1* Cir.1988), (citing Shaw v. Digital Equip. Corp., 82 F

3d 1194, 1216 (1* Cir. 1996).

;

PE hte OE Oe Ae ie

36a

Appendix E

Whether DJM will ultimately have enough evidence

to withstand summary judgment and persuade a jury as to

the validity of its claims remains to be seen. The question

here, however, is whether it has alleged enough to survive

the motions to dismiss. The Court of Appeals for the First

Circuit has repeatedly cautioned that Rule 12 (b) (6) is not

entirely a toothless tiger. “Minimal requirements are not

tantamount to nonexistent requirements. The threshold [for

stating a claim] may be low, but it is real. . .” Thus, plaintiffs

are obliged to set forth in their complaint “factual

allegations, either direct or inferential, regarding each

material element necessary to sustain recovery under some

actionable legal theory.” Dartmouth Review v. Dartmouth

College, 889 F. 2d 13, 16 (1* Cir. 1989), citing Gooley v.

Mobil Oil Corp., 851 F. 2d 513, 514 (1* Cir. 1988). In the

antitrust context, a complaint containing vague pleadings

lacking the requisite factual allegations of an antitrust claim

is insufficient to state a cause of action. Gilbuilt Homes, Inc.

v. Continental Homes of New England, 667 F. 2d 209 (1*

Cir. 1981).

PLAINTIFF’S ANTITRUST CLAIMS AS SET FORTH

IN THE AMENDED COMPLAINT

Plaintiff claims in its Amended Complaint that the

Blucher defendants and Tex-Shield have unlawfully

retrained trade or commerce under Section | of the Sherman

Act*. Plaintiff also claims that, having acquired monopoly

“Section 1 of the Sherman Act proscribes contracts, combinations, and

conspiracies “in restraint of trade or commerce among the several

States.” See 15 U.S.C. § 1

37a

Appendix E

power in the relevant line of commerce, have unlawfully

exercised such monopoly power in violation of Section 2 of

the Sherman Act. 15 U.S.C. § 2°.

Plaintiff further maintains that by offering to sell and

selling Saratoga Filter Cloth at higher price to DJM in Puerto

Rico than the prices offered and charged to Creative in

Maine for goods of like grade and quality, all sales being in

interstate commerce, Tex-Shield and the Blucher defendants

substantially lessened competition in the relevant market, in

violation of Sections 2 (a) and (e) of the Robinson-Patman

Act. 15 U.S.C. §§ 13 (a), (e)®. DJM also claims that

> Section 2 makes it illegal to:

“monopolize, or attempt to monopolize, or combine or conspire

with any other person or persons, to monopolize any part of

trade or commerce among the several States. . . .” See 15 U.S.C.

§2

(a) Price; Selection of Customers

It shall be unlawful for any person engaged in commerce, in the

course of such commerce, either directly or indirectly, to discriminate in

price between different purchasers of commodities of like grade and

quality, where either or any of the purchases involved in such

discrimination are in commerce, . . . where the effect of such

discrimination may be substantially to lessen competition or tend to

create a monopoly in any line of commerce, or injure, destroy, or prevent

competition. . .

(e) Furnishing services or facilities for processing, handling, etc.

It shall be unlawful for any person to discriminate in favor of

one purchaser against another purchaser or purchasers of commodities

bought for resale, with or without processing, by contracting to furnish

or furnishing, or by contributing to the furnishing of, any services or

facilities connected with the processing, handling, sales, or offering of

AAR il lee tal patil EVE a hrha i

38a

Appendix E

Creative, knowingly solicited or induced and received

favorable discriminatory treatment in violation of Section

2(f) of the Robinson-Patman Act. 15 U.S.C. § 13(f)’. DJM

maintains that the effect of such conduct has been to

substantially lessen competition, tending to create a

monopoly and destroy competition in the relevant market

and has impaired DJM’s ability to compete in such line of

commerce. DJM asserts that the defendants’ discriminatory

conduct has foreclosed competition in the relevant market, in

violation of Section 2 of the Robinson-Patman Act.

DJM argues that through concerted conduct in

connection with the manufacture, sale and distribution of

Saratoga Filter Cloth and chemical protective clothing in the

relevant market:

1. The Blucher defendants and Tex-Shield have used

their monopoly power over the Saratoga Filter Cloth

and have leveraged and extended their power to

control prices and to exclude competitors in the 8(a)

business segment;

sale of such commodity so purchased upon terms not accorded to all

purchasers on proportionally equal terms.

(Emphasis in Original)

” Section 2 states:

(F) Knowingly inducing or receiving discriminatory price

It shall be unlawful for any person engaged in commerce, in the

course of such commerce, knowingly to induce or receive a

discrimination in price which is prohibited by this section.

(Emphasis in Original)

39a

Appendix E

2. Competition in the manufacture and sale of

chemical protective clothing in the relevant market

has been unreasonably restrained;

3. DJM has suffered antitrust injury by being

rendered unable to purchase, at non-discriminatory

prices, a vital, required manufacturing input

necessary for it to engage in the manufacture and sale

of chemical protective clothing. Unless defendants

are enjoined or the requested relief is granted, DJM

will be effectively eliminated as a competitor in the

relevant line of commerce;

4. The effect of such conduct will be to substantially

lessen competition and tend to create a monopoly in

the manufacture and sale of chemical protective

clothing in the relevant market.

DJM also claims that both the Blucher defendants

and Tex-Shield violated Puerto Rico’s antitrust law*. In

their view, DJM alleges that the Blucher defendants in

® These alleged violation of Puerto Rico’s antitrust laws more or less

parallel the violations of federal antitrust laws set forth in the Amended

Complaint. The relevant sections of the Puerto Rico Monopoly Act

invoked by DJM are patterned after their federal counterparts. We will,

therefore, use federal antitrust case law as a guide in interpreting the

Puerto Rico laws, especially given the dearth of Puerto Rico case law on

these statutes. Therefore, unless otherwise specified, our analysis and

application of federal antitrust case law and statutes to the facts and

claims set forth by DJM will be equally applicable to its Puerto Rico

Monopoly Act claims. See, e.g., See Coastal Fuels of P.R. v. Caribbean

Petroleum, 79 F. 3d 182 (1* Cir. 1996).

40a

Appendix E

combination with Tex-Shield offered and sold the Saratoga

Filter Cloth, in a series of sales outside of Puerto Rico for

less than the Cloth was offered and sold to Plaintiff in Puerto

Rico, after making due allowance for (a) the costs incident to

the delivery of goods in Puerto Rico, (b) the costs of

handling such goods in Puerto Rico, and (c) the costs of the

basic cloth. According to DJM this conduct constituted

unlawful discrimination in price and furnishing of services

and facilities in violation of 10 L.P.R.A. §263”.

DJM also claims that the Blucher defendants, in

combination with Tex-Shield, and others, unlawfully sold

and offered to sell Saratoga Filter Cloth in Puerto Rico at

prices substantially different from the prices which Tex-

Shield quoted and sold these same goods outside of Puerto

Rico after making due allowance for differences in costs

incident to the delivery and handling of the goods in Puerto

Rico, with the purpose of destroying competition and

* Section 263 states:

(a) It shall be unlawful for any person, either directly or

indirectly, to discriminate in price between different purchasers of

commodities are sold for use, consumption, or resale in Puerto Rico, and

where the effect of such discrimination may be substantially to lessen

competition or tend to create a monopoly in any line of commerce in

Puerto Rico or to injure, destroy, or prevent competition. . .

(b) It shall be unlawful for any person to pay or contract for the

payment, or contract contribute to the payment of anything of value to or

for the benefit of a customer of such person as compensation or in

consideration for any services or facilities furnished by or through such

customer in connection with the processing, handling, sale, or offering

for sale of any products or commodities manufactured, sold, or offered

for sale by such person, unless such payment or consideration is

available on proportionally equal terms to all other customers competing

in the distribution of such products or commodities in Puerto Rico.

4la

Appendix E

eliminating DJM as a competitor, all in violation of 10

L.P.R.A. § 264!°.

DJM further alleges that the Blucher defendants in

conspiracy with Tex-Shield and Creative, unreasonably

restrained trade by selling Saratoga Filter Cloth to Creative

and others at a substantially lower price than had it agreed to

sell to plaintiff, in violation of 10 L.P.R.A. § 258)!

In response to DJM’s claims, defendants argue, in

addition to their insufficiency as a matter of law, that all

claims under the Air Force contract are barred because DJM

has already litigated them and are therefore res judicata.

DJM acknowledges that the claims under the Air Force

procurement are res judicata by virtue of arbitration

proceedings held between DJM and Tex-Shield.

Accordingly these claims will be dismissed and the Court

will not address them in this opinion. We proceed,

'° Section 264 states:

It shall be unlawful to sell, contract to sell, offer to sell, or to

participate in any step for the sale of articles in Puerto Rico, after making

due allowance for differences in costs incident to the delivering of goods

in Puerto Rico and the costs of handling such goods in Puerto Rico, at

prices which are substantially different from the prices charged or quoted

by such sellers for goods of the same grade or quality to buyers located

outside of Puerto Rico, when such difference is granted with the purpose

of destroying competition or eliminating a competitor located in Pu

Rico.

'' Section 258 states:

Every contract, combination in the form of trust or otherwise, or

conspiracy in unreasonable restraint of trade or commerce ... is hereby

declared illegal ...

42a

Appendix E

therefore, to address the antitrust claims challenged as

insufficient by defendants in the same order that they are

discussed in the motion to dismiss.

DISCUSSION

I. Conspiracy to Restrain Trade and Attempt to

Monopolize.

DJM alleges that Tex-Shield in combination with

Blucher and Creative, unreasonably restrained trade and

commerce by selling Saratoga Filter Cloth at a substantially

lesser price than it had offered to sell to DJM in violation of

§ 1 of the Sherman Act, 15 U.S.C. § 1 and 10 L-P.R.A. §

258, Puerto Rico’s equivalent to § 1 of the Sherman Act.

DJM also alleges that Tex-Shield conspired with Creative to

use its monopoly power over its patented Saratoga Filter

Cloth to control prices, exclude competitors and gain

monopoly over the 8(a) market in violation of section 2 of

the Sherman Act, 15 U.S.C. § 2.

i. Unlawful Restraint of Trade Claims

DJM’s allegations regarding Blucher’s and Tex-

Shield’s conspiracy in restraint of trade under § 1 of the

Sherman Act are without merit. In antitrust parlance, the

term conspiracy has been construed as a synonym for

agreement. Although nothing in the literal meaning of the

Sherman Act excludes coordinated conduct among divisions

of a corporation or between a parent corporation and its

wholly-owned subsidiary, the Supreme Court has established

43a

Appendix E

that coordinated activity of a parent and its wholly owned

subsidiary must be viewed as that of a single enterprise for

purpose the Sherman Act. See Copperweld Corp. v.

Independence Tube Corp., 467 U.S. 752, 771 (1984). A

parent and its wholly owned subsidiary have a complete

unity of interest. Their objectives are common, not

disparate; their general corporate actions are guided or

determined not by two separate corporate consciousnesses,

but only by one. Id. With or without a formal “agreement,”

the subsidiary acts for the benefit of the parent, its sole

shareholder. If a parent and a wholly owned subsidiary do

“agree” to undertake a course of action, there is no sudden

joining of economic resources that had previously served

different interests, and there is no justification for Sherman

Act scrutiny. Id. Because the ultimate interests of the

subsidiary and the parent are identical, the parent and the

subsidiary must be viewed as a single economic unit, and

hence, legally incapable of conspiring with each other for

purposes of the Sherman Act. Here, given that Tex-Shield is

a wholly-owned subsidiary of Blucher, the Court will

address the claims of alleged conspiracy only as they relate

to the concerted conduct, if any, between Tex-Shield and

Creative.

Despite its broad language, almost from its inception

the Sherman Act has been read to prohibit only those

restraints of trade that are unreasonable (“rule of reason’’).

Board of Trade v. United States, 246 U.S. 231 (1918). To

state a claim under § 1, the plaintiffs must allege that 1) each

of the defendants entered into an agreement (“contract,

combination . . . or conspiracy”), and 2) that agreement was

in “restraint of trade or [interstate] commerce.” See

a le ate

dda

Appendix E

Monahan’s Marine Inc. v. Boston Whaler, Inc., 866 F.2d

525, 526 (1* Cir. 1989). Using the rule of reason approach

the Court finds that, even assuming that Tex-Shield sold its

Saratoga Filter Cloth at a substantially lesser price than it

had previously offered to sell to DJM, these agreements are

not in restraint of trade for Sherman Act purposes. There is

no indication in the complaint that the prices charged by

Tex-Shield in these alleged discriminatory sales were

predatory. Predatory pricing in simple terms means prices

below average costs. See Barry Wright Corp. v. ITT

Grinnell Corp., 724 F.2d 227, 231 (1* Cir. 1983) (defining

“predatory” pricing as pricing below seller’s costs, and

discussing various cost tests; such pricing is predatory

because it is a non-sustainable price that can drive

competitors from the market and free the seller to raise

prices well above competitive levels). It is well established

that a dominant firm can lawfully charge a low, non-

predatory price. Monahan’s Marine, 866 F.2d at 527. As

the Court stated in Monahan’s, this holding is rooted in the

concern that judicial efforts to prevent firms from charging

low, non-predatory prices, despite an occasional beneficial

result, would more often significantly interfere with the

achievement of the Sherman Act’s basic and important low

price objectives. Id. The Court in Monahan’s discussed the

differences of price discrimination under the Robinson-

Patman Act and the Sherman Act. It explained that even

though Plaintiff could have established a violation under the

Robinson-Patman Act had it met all the requirements, that

fact does not establish a Sherman Act violation. Unlike the

Sherman Act, which protects “competition, not

competitors,” Brown Shoe Co. v. United States, 370 U.S.

294, 320, (1962), the Robinson-Patman Act extends its

45a

Appendix E

protection to competitors. It forbids sellers to “discriminate

in price between different purchasers of commodities,”

where such “discrimination tends to “injure, destroy or

prevent competition with any person who .. . receives the

benefit of such discrimination.” The word “with” makes a

considerable practical difference. It means that the Act

protects those who compete with a favored seller, not just

the overall competitive process. Hence, in many

circumstances, the Robinson-Patman Act forbids selective

but non-predatory price cutting. Monahan’s Marine, 866

F.2d at 529.

Like the Court in Monahan’s, this Court finds

nothing anti-competitive in the simple fact that a seller

selectively cuts its prices, or offers other favorable terms, to

some of its dealers, even though such conduct may have a

competitive adverse impact on the non-favored dealers. For

the foregoing reasons the claims, under section | of the

Sherman Act and § 258 of the Puerto Rico Monopoly Act

and for unlawful restraint of trade must be dismissed.

ii. Attempt to Monopolize Claim

DJM’s claims under section 2 of the Sherman Act

must also be dismissed inasmuch as DJM has failed to meet

two indispensable prerequisites applicable to any plaintiff

seeking relief for a violation of § 2 of the Sherman Act: the

requirements of pleading antitrust injury and a relevant

market. In addition, with respect to its conspiracy to

monopolize claims, DJM has also failed to allege specific

facts sufficient to aver a conspiracy.

46a

Appendix E

A. Relevant Market

The Supreme Court has stated that “to establish

monopolization or attempt to monopolize a part of trade or

commerce under section 2 of the Sherman Act, it would . . .

be necessary to appraise the exclusionary power of the

(defendant’s conduct) in terms of the relevant market for the

product involved. Without a definition of that market there

is no way to measure (defendant’s) ability to lessen or

destroy competition.” Walker Process Equipment, Inc. v.

Food Machinery & Chemical Corp., 382 U.S. 172, (1965).

To establish a claim for the violation of § 2, however, a

plaintiff must allege: (1) defendant’s possession of

monopoly power in a legally relevant market; and (2) the

willful acquisition or maintenance of such power. See

United States v. Grinnell Corp., 384 U.S. 563, 570-71

(1966). It is well established, however, that “a patent is an

exception to the general rule against monopolies and to the

right to access to a free and open market.” Precision

Instrument Mfg. Co. v. Automotive Maintenance Co., 324

U.S. 806, 816 (1945). Hence, Tex-Shield has “the right to

exclude others from making, using or selling [its] invention

throughout the United States.” 35 U.S.C. § 154. Tex-Shield,

however, cannot use its lawfully acquired monopoly power

to foreclose competition in a non-patented relevant market.

United States v. Griffith, 334 U.S. 100, 107 (1948). It is,

therefore, necessary for the pleadings, as a threshold matter,

to sketch a non-patented relevant market. See Gilbuilt

Homes, Inc. v. Continental Homes of New England, 667

F.2d 209 (1* Cir. 1981). To assess the potential harm to

competition from Tex-Shield’s alleged misconduct in

violation of § 2 of the Sherman Act the Court must first

47a

Appendix E

make an inquiry into the relevant market. See Spectrum

Sports, Inc. v. McQuillan, 506 U.S. 447, 459 (1993). A

relevant market is composed of a relevant product market

and a geographic market. Id. Thus, to withstand a motion to

dismiss, DJM must allege that Tex-Shield possesses an

illegally acquired monopoly power in some relevant

geographic and product market.

1. The Relevant Product Market

DJM defines the relevant product market as the small

business segment involving manufacture and sale of

chemical protective clothing to the United States defense

procurement agencies by companies eligible to be suppliers

pursuant to the SBA Section 8(a) program. DJM maintains

that the United States has restricted the procurement

contracts objects of this action to participants of the SBA

Section 8 (a) program. Therefore, by reason of the statutory

regulations and requirements only certified SBA 8 (a)

participants may take part of the bidding process in contracts

set aside for small business and other manufacturers cannot

and do not compete for this segment of business. DJM

asserts that the SBA Section 8 (a) segment of the business of

manufacture and sale of chemical protective clothing to the

United States Military constitutes a separate line of

commerce and relevant market for purposes of this action.

DJM argues that, as a result of patents for Saratoga

Filter Cloth, associated know-how, and the preference of the

United States Military for chemical protective clothing made

from Saratoga Filter Cloth, defendants Blucher and Tex-

Shield possess monopoly power in the United States trade

48a

Appendix E

and commerce involving the manufacture, sale and

distribution of chemical protective cloth for use in chemical

protective clothing and equipage. This allegation, however,

fails to set forth that Tex-Shield possesses an illegally

acquired monopoly power over a non-patented relevant

market inasmuch as Tex-Shield has a natural and legal

monopoly over its patented product. See United States v.

Aluminum Co. of America, 148 F. 2d 416, 423-26 (2d Cir.

1945). Hence, to survive dismissal, DJM must define

relevant product market as the national patented and non-

patented chemical protective cloth market. “In considering

what is the relevant market for determining the control of

price and competition, no more definite rule can be declared

than that commodities reasonably interchangeable by

consumers for the same purpose make up that ‘part of the

trade or commerce’, monopolization of which may be

illegal.” See United States v. E.I. du Pont de Nemours &

Co., 351 U.S. 377, 395 (1956).

DJM, however, fails to allege that the relevant product

market is the chemical and biological protective cloth

market. To the contrary, DJM intends to narrow the relevant

product market to the Saratoga Filter Chemical Protective

Cloth brand. In the Amended Complaint there is no mention

of other chemical protective cloths in the market that

compete with the Saratoga Filter Chemical Protective Cloth,

or of other chemical protective cloths that should not be

included in the relevant product market, or of other factors

that make the Saratoga Filter Chemical Protective Cloth a

unique market. See Mathias v. Daily News, L.P., 152

F.Supp. 2d 465,481-82 (S.D.N.Y. 2001). See also E.I.

49a

Appendix E

du Pont de Nemours & Co., 351 U.S. at 393 (“{O]Jne can

theorize that we have monopolistic competition in every

nonstandardized commodity with each manufacturer having

power over the price and production of his own product.

However, this power that, let us say, automobile or soft-

drink manufacturers have over their trademarked products is

not the power that makes an illegal monopoly. Illegal power

must be appraised in terms of the competitive market for the

product.”).

Here, DJM only avers that the Saratoga Filter

Chemical Protective Cloth is a unique market inasmuch as it

is the only brand of chemical protective cloth that the United

States Military is willing to purchase. In sum, DJM alleges

that Tex-Shield has monopolized the market for patented

Tex-Shield chemical protective cloth which have no

competitive or generic equivalent or alternate in the

chemical protective cloth industry. Thus, DJM has failed to

define a relevant product non-patented market inasmuch as

Tex-Shield can use its lawfully acquired monopoly power to

foreclose competition in the patented Saratoga Filter

Chemical Protective Cloth market. See Aluminum Co. of

America, 148 F. at 423-26.

2. The Relevant Geographic Market

DJM also fails to precisely define the relevant

geographic market. DJM’s only allegation that comes close

to defining a geographic market is that Tex-Shield sold the

Saratoga Filter Cloth to Creative outside of Puerto Rico, for

less than the amount it was sold to DJM in Puerto Rico, and

that Tex-Shield’s conduct destroyed competition and

50a

Appendix E

eliminated DJM as a competitor. DJM’s description of Tex-

Shield’s operations, however, indicate a national market, for

it alleges in its Amended Complaint that Tex-Shield has

been designated the sole source by agencies of the United

States Department of Defense for the cloth used in the

Department’s chemical and biological protective garments.

DJM’s “failure to define a geographic market with precision

makes it impossible to assess the potential harm to

competition resulting from [Tex-Shield’s] alleged

misconduct.” See Mathias v. Daily News, L.P., 152 F.

Supp.2d 465,483 (S.D.N.Y. 2001). Thus, DJM has failed to

plead the two essential components of a relevant market.

B. Antitrust Injury

A plaintiff seeking to state a claim for violation of

section 2 of the Sherman Act must allege that it has suffered

an “antitrust injury.” See Atlantic Richfield Co. v. USA

Petroleum Co., 495 U.S. 328, 344 (1990). To support its

“antitrust injury”, DJM avers that preferences were given by

Tex-Shield to Creative by giving Creative more favorable

credit and price terms; and by allowing Creative use of Tex-

Shield’s manufacturing facilities. Hence, DJM’s allegations

of injury amount to one basic proposition- - that DJM was

injured by Tex-Shield’s alleged business venture with

Creative. DJM’s allegations, however, do not constitute the

type of “antitrust injury” necessary to state a claim for relief

under section 2 of the Sherman Act.

To state an “antitrust injury” DJM must demonstrate

“that the challenged action has had an actual adverse effect

Sla

Appendix E

on competition as a whole in the relevant market; to prove it

has been harmed as an individual competitor will not

suffice.” Capital Imaging v. Mohawk Valley Med. Assoc.,

996 F.2d 537, 543 (2d Cir. 1993). “The antitrust laws...

were enacted for ‘the protection of competition, not

competitors.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.,

429 U.S. 477, 488 (1977).

Taking all well-pleaded facts in the Amended

Complaint as true, the Court finds that Plaintiff has not

pleaded enough minimal facts to establish an antitrust injury.

DJM has alleged no facts on how the preferential price

treatment to Creative or the use of joint manufacturing

facilities between Creative and Tex-Shield has had an actual

adverse effect on competition as a whole in the relevant

market. Brunswick Corp., 429 U.S. at 488. DJM’s loss of

one contract is simply not enough to establish an antitrust

injury to competition in the relevant market. In sum, DJM

fails to adequately allege that anyone other than itself was

injured.

el Specific Facts to Aver a Conspiracy

DJM’s pleadings on Tex-Shield’s involvement with

Creative, are also insufficient to establish a conspiracy

between Creative and Tex-Shield to monopolize the relevant

market. DJM has failed to identify how the conspiracy

between Tex-Shield and Creative to manufacture and sell

chemical protective clothing in the relevant market was

formed, operated or maintained, and what specific overt acts,

if any, were performed in furtherance of the conspiracy. See

Day v. Fallon Community Health Plan, Inc., 917 F. Supp 72,

52a

Appendix E

78 (D. Mass 1996); Mathias v. Daily News, L.P., 152 F.

Supp.2d 465,484 (S.D.N.Y. 2001). True, the Supreme Court

has stated that in antitrust cases “dismissals prior to giving

the plaintiff ample opportunity for discovery should be

granted very sparingly.” Hospital Building Co. v. Trustees

of Rex Hosp., 425 U.S. 738, 746 (1976). The Supreme

Court, however, has also recognized that, “[i]t is not. . .

proper to assume that the [plaintiff] can prove facts that it

has not alleged or that the defendants have violated the

antitrust laws in ways that have not been alleged.”

Associated General Contractors of California, Inc. v.

California State Council of nters, 459 U.S. 519, 526

(1983). See also DM Research v. College of American

Pathologists, 170 T.3d 33, 55 (1 Cir. 1999) (“[B]ald

assertions as well as “subjective characterizations” need not

be accepted and “[cJonclusory allegations,” standing alone,

“are a danger sign that the plaintiff is engaged in a fishing

expedition.”). The Amended Complaint does not plead

sufficient facts to establish a conspiracy or an arrangement

to thwart competition in the chemical protective clothing

market to sustain a Sherman Act violation. Thus, DJM has

not only failed to plead what was the relevant market and the

antitrust injury, but has also failed to establish any factual

bases for a conspiracy under Section 2 of the Sherman Act.

Accordingly, DJM’s attempt to monopolize claim must also

be dismissed.

II. Statute of Limitations defense.

A. Parties’ Allegations

53a

Appendix EF

The Blucher defendants argue that since the alleged

wrongful actions by the defendants took place on June 22,

1994, DJM should have initiated this action by June 22,

1998 in order for the claims to be timely. Defendants

maintain that since the complaint was not filed until

September 16, 1998, it is time barred pursuant to the four-

year statute of limitations for antitrust actions. Defendants

assert that in antitrust law, a cause of action accrues and the

statute begins to run when a defendant commits an act that

injures a plaintiff's business and therefore a plaintiff has to

file his claim within four years following the defendant’s

injurious act.

In its opposition, DJM argues that the limitations

period may have been tolled for:‘several months until DJM

discovered that Tex-shield had quoted different prices for the

Saratoga Filter Cloth. In support of its contention, DJM

suggests that a cause of action does not accrue until a

plaintiff has suffered damages as a result of the defendant’s

actions. Accordingly, it submits that DJM could not have

suffered any damages until DPSC awarded the contract to

Creative on September 22, 1994, and therefore the complaint

filed on September 16, 1998 is timely.

Defendants also argue that, even if plaintiff's

argument that the limitations period was tolled for several

months were true, the claims would still be barred because

of DJM’s delay in serving the complaint. Defendants

maintain that plaintiff's more than fifteen-month delay in

service warrants summary dismissal for failure to prosecute.

They argue that Plaintiff's lack of diligence also nullifies the

54a

Appendix E

normal operation of Fed.R.Civ.P.3 by which the statute of

limitations is tolled upon the filling of the complaint.

DJM opposes the service of complaint argument by

stating that the complaint had to be served on Blucher

GmbH in Germany under the complicated terms of the

Hague Convention. Plaintiff maintains the Fed.R.Civ.P.4

specifically excludes a time limitation for the service of

process in a foreign country, and therefore the 120-day

limitation of Rule 4 (j) does not apply to the case at bar.

B. Legal Analysis

15 U.S.C. § 15b states:

Any action to enforce any cause of action

under section 15, 15a, or 15Sc of this title shall be

forever barred unless commenced within four years

after the cause of action accrued.

The parties in the present case agree that the relevant

conduct subject to the complaint took place no later than

June 22, 1994. DJM acknowledges that the acts complained

of occurred more than four years before it filed the

complaint on September 16, 1998. However, DJM seeks to

avoid the time bar on two legal theories, namely, (1) that the

cause of action in connection with the DPSC procurement

accrued on September 22, 1994 (the date DPSC awarded the

contract to Creative rather than DJM) and not on June 22,

1994 (the date of Tex-Shield’s quotation for the Saratoga

Filter Cloth), therefore making the complaint timely; and (2)

55a

Appendix E

fraudulent concealment on the part of the Blucher

defendants.

An antitrust cause of action accrues and the

limitations period commences each time a defendant

comunits an act that injures the plaintiff's business. Zenith

Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 338

(1971). The Court in Zenith pointed out that in the context

of a continuing antitrust conspiracy each time a plaintiff is

injured by an act of the defendants, a cause of action accrues

to recover the damages caused by that act and that, as to

those damages, the statute of limitations runs from the

commission of the act. See Service Merchandise Co., Inc. v.

Boyd Corp., 722 F.2d 945, 953 (1* Cir. 1983), citing Zenith

Radio Corp., 401 U.S. at 338. For statute of limitations

purposes, the focus is on the timing of the cause of ihe

injury, i.e., the defendant’s overt acts, as opposed to the

effects of the overt acts. Peck v. General Motors Corp., 894

F.2d 844, 849 (6™ Cir. 1990). Thus, the overt act of Tex-

Shield’s quotation for the Saratoga Filter Chemical

Protective Cloth fixed the date of accrual of the statute of

limitations.

DJM also argues a fraudulent concealment on the

part of defendants. To invoke the doctrine of fraudulent

concealment, a plaintiff must plead and (later) prove three

elements: (1) wrongful concealment of the relevant conduct

by the defendant; (2) failure of the plaintiff to discover the

operative facts that are the basis of his cause of action within

the limitations period; and (3) plaintiff's due diligence until

discovery of the facts. Berkson v. Del Monte Corzp., 743

56a

Appendix E

F.2d 53, 55 (1" Cir. 1984). The burden rests squarely on the

party pleading fraudulent concealment. Id.

To avoid the bar limitation through invocation of the

concept of fraudulent concealment, the plaintiff must allege

facts showing affirmative conduct on the part of the

defendant which would, under the circumstances of the case,

lead a reasonable person to believe that he did not have a

claim for relief. Silence or passive conduct of the defendant

is not deemed fraudulent, unless the relationship of the

parties imposes a duty upon the defendant to make

disclosure. Rutledge v. Boston Woven Hose & Rubber Co.

576 F.2d 248, 250 (9" Cir. 1978), cited in Berkson, 743 F.2d

at 56. Here, DJM must plead sufficient facts showing that it

exercised due diligence in discovering the defendants’

alleged price-fixing conspiracy and that it reasonably relied

on the defendants’ affirmative acts of concealment. See In

re Compact Disc Minimum Advertised Price Antitrust

Litigation, 138 F.Supp. 2d 25 (D. Me 2001), citing Berkson,

576 F.2d at 250.

The record shows that as early as 1994, DJM had

knowledge that Tex-Shield had offered lower, allegedly

discriminatory prices, te Creative. Furthermore, On July 16,

1997, still withir: the limitations period, DJM initiated Civil

No. 97-1457 against Tex-Shield, for the same series of

events leading to the complaint filed against the Blucher

defendants in Civil No. 98-2065 (both cases are now

consolidated). If DJM wished to bring an action based on its

suspicions, it was under a duty to exercise due diligence in

investigating whether the suspicions were well founded. See

Berkson, 743 F.2d at 56. There is no indicatica in the record

57a

Appendix E

of any efforts by DJM to substantiate its fraudulent

concealment claim. Conclusory allegations will not suffice

to establish a claim of fraudulent concealment. Without any

allegations of due diligence, the plaintiff cannot claim that

its claims were fraudulently concealed. Id. at 56.

In light of the foregoing, the Court finds that the

statute of limitations expired on June 22, 1998, four years

after Tex-Shield’s alleged discriminatory quotation. Hence,

DJM’s claims against the Blucher defendants (Blucher

GmbH and Blucher USA) and Creative are time barred

under the four-year statute of limitations applicable to

antitrust actions. Plaintiff has also failed to successfully

assert fraudulent concealment to avoid the limitations bar.

In view of our conclusion on the running of the

statute of limitations, we need not address Blucher’s

argument that the fifteen-month delay by DSM in service

warrants dismissal for lack of due diligence. We will now

address the remaining claims against Tex-Shield under the

Robinson-Patman Act as well as the state law claims based

on price discrimination.

Ill. Price Discrimination

A. Parties’ Allegations

Defendants have moved for dismissal on the grounds

that the claim cannot go forward because Plaintiff failed to

establish the threshold requirements of (1) two

contemporaneous sales, and (2) harm to competition.

Defendants argn< that a difference in price between a sale to

58a

Appendix E

one person and an offer to another does not constitute “price

discrimination” under Robinson-Patman § 2(a) nor under §

263 of the Puerto Rico Antimonopoly Act. According to the

defendants, a sale at one price and a mere offer to sell at

another price is insufficient to show a Robinson-Patman

violation. Defendants maintain that this is a case in which

defendant, Tex-Shield made an offer to DJM and a sale to

Creative for the DPSC contract and therefore the two or

more sales requirement was not met.

Defendants also argue that DJM failed to establish

that the alleged price discrimination tended to harm

competition as required under the Robinson-Patman Act and

under § 263 of the Puerto Rico Antimonopoly Act. They

argue that the complaint alleges only one instance of Tex-

Shield selling chemical protective cloth at lower prices to a

competitor, namely, the sale to Creative under the DPSC

contract. Moreover, Defendants maintain that the complaint

does not allege any competitive injury supported by factual

allegations. They argue that the complaint is premised on

the injury to the plaintiff, not to competition, which is not

the type of injury that the antitrust laws are meant to prevent.

In opposition to defendants’ motion to dismiss, DJM,

argues that paragraphs 22 and 23 of the Amended Complaint

in Civil No. 97-1457 and paragraphs 44 and 45 of the

Complaint in Civil No. 98-2065, allege a series of

discriminatory sales of Saratoga Filter Cloth outside of

Puerto Rico at a substantially lesser price than those prices

offered and sold in Puerto Rico, during the period of July

1993 through April 1997. DJM asserts that the difference in

price was in the range of $11 to $13 per chemical suit, after

59a

Appendix E

making due allowance for differences in costs incident to the

delivery of goods in Puerto Rico, the costs of handling such

goods in Puerto Rico, and the costs of the basic cloth,

coupled with a $2.3 million prepayment.

Defendants further argue that DJM’s claim under §

264 of the Puerto Rico Antimonopoly Act also fails because

no intent to destroy a competitor can be inferred, inasmuch

as Tex-Shield was ineligible to compete with DJM for

Section 8(a) contracts, and because the prices quoted to DJM

and Creative under the DPSC solicitation were not for goods

of the same grade or quality. Defendants argue that Tex-

Shield is a cloth-supplier to manufacturers such as DJM;

when Tex-Shield provided DJM with a price quote alleged

to be unfairly high, Tex-Shield was not acting with the

purpose of eliminating one of its competitors or destroying

its competition.

DJM claims that a careful reading of § 264 reveals

the statute applies to offers as well as sales (no two-sales

requirement), when the purpose is to destroy competition or

destroy a competitor. DJM also claims that Tex-Shield and

Creative were acting in collusion to eliminate competition in

the market of Section 8 (a) contracts.

B. Legal Analysis

In general, Section 2 (a) of the Robinson-Patman Act

prohibits discrimination in price between purchasers of

goods of like grade and quality, where the effect may be to

60a

Appendix E

substantially lessen competition or to tend to create a

monopoly.

The Puerto Rico price discrimination statute, which

is almost identical to Section 2 (a) of the Clayton Act, also

makes it “unlawful for any person either directly or

indirectly to discriminate in price: between purchasers . . . in

Puerto Rico...” 10 L.P.R.A. § 263.

To establish a prima facie case of price

discrimination under § 2 (a), Plaintiff must plead: “(1) two

or more contemporaneous sales by the same seller; (2) at

different prices; (3) of commodities of similar grade and

quality; (4) at least one of the salles was in interstate

commerce; (5) price discrimination tended to lessen

substantially competition or create a monopoly in any line of

commerce; and (6) this price discrimination injured

plaintiff.” Walpa Constr. Corp. v. Mobile Paint Mfg. Co.,

701 F.Supp. 23, 27 (D.P.R. 1988). DJM’s complaint fails to

allege several of these elements.

In support of its §2 (a) claim, DJM points out to a

series of discriminatory sales, during the period of July 1993

through April 1997, in which defendants allegedly offered

and sold the same Blucher GmbH technology, outside of

Puerto Rico, for a substantially lesser price. However, DJM

mainly relies on the sales of Saratoga Filter Cloth by Tex-

Shield under the Air Force and DPSC procurements to

establish the elements of its price discrimination claim.

Although this Court is bound to accept well-pleaded

factual allegations as true, it certainly has difficulty in

6la

Appendix E

ascertaining the factual bases of the allegations in this case.

Day v. Fallon Community Health Plan, Inc., 917 F.Supp. 72,

75 (D. Mass. 1996). Despite references to a series of sales in

the complaint, plaintiff offers no insight into the specific

nature of the alleged discriminatory sales. Even though

DJM pleads that Tex-Shield made a series of sales to

unspecified parties at prices lower than those charged to it,

there is no indication within the complaint as to the

contemporaneity of the alleged sales or to the overall

conditions surrounding them. DJM does not indicate

whether the parties involved in the alleged series of sales

within this four-year period were competing purchasers or

whether they participated in the § 8 (a) submarket or whether

these sales had any detrimental effect on competition. Since

Plaintiff relies mainly on the sales related to the Air Force

and DPSC contracts, however, we shall turn to those sales to

determine whether they suffice to establish a prima facie

case for price discrimination.

Although it is not entirely clear from the consolidated

complaints and the motions submitted to the Court, it

appears that the procurements involved in this action were

separated by almost one year. The Air Force and DPSC

solicitations were issued on or about July 1993 and June

1994, respectively.

The motions to dismiss presented to the Court are

based on defendants’ argument that as result of the arbitral

award denying DJM’s claims related to the Air Force

contract, they should not to be considered for purposes of

DJM‘’s price discrimination claim. Accordingly, defendants

insist on the absence of the two contemporaneous sales

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Appendix E

required by the statute. Defendants mainly rely on Terry’s

Floor Fashions, Inc. v. Burlington Indus., Inc., 568 F.Supp.

205 (E.D.N.C. 1983). In that case the Court decided that at

least two sales must take place in order to constitute

discrimination and that a sale at one price and a mere offer to

sell at another price is insufficient to show a Robinson-

Patman Act violation. We are not convinced, however, by

defendants’ assertion that in the present case there was only

one sale and a mere offer to sell. DJM clearly points to the

existence of two completed transactions. The sale to DJM

regarding the Air Force contract, even though determined

not to be discriminatory by the arbitral award, could be

considered as a completed transaction for purposes of future

sales such as the one made to Creative regarding the DPSC

contract. As the Supreme Court has stated, “no single sale

can violate the Robinson-Patman Act. At least two

transactions must take place in order to constitute

discrimination. Thus, a contract may be made today which

has no legal defect under the Robinson-Patman Act. A week

later, another sale may be made at a different price or at a

different discount, and the latter taken into consideration

with the former may establish a discrimination... It is plain

that the violation, if there was one, is not inherent to the

contract sued upon...”Bruce’s Juices v. American Can Co.,

330 U.S. 743, 755 (1947).

_ The mere existence of two completed sales at

different prices, however, will not by itself establish a

Robinson-Patman violation. In order to prevail on its

Robinson-Patman Act claim, plaintiff must demonstrate the

existence of two completed comparable sales. Since

discrimination can arise only from pricing disparities in

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Appendix E

reasonable comparable transactions under similar

circumstances, the prohibition of the statute will not be

triggered if the pertinent sales are too far apart. F. Rowe,

Price Discrimination Under the Robinson-Patman Act, § 4.2,

p. 48, citing Chicago Sugar Co. v. American Sugar Refining

Co., 176 F.2d 1, 8 (7° Cir. 1949). Also, the evil at which the

Robinson-Patman Act is aimed is discrimination between

different competing purchasers, where the effect of such

discrimination may be substantially to lessen competition or

to tend toward a monopoly in commerce. For that evil to

exist there must be, of course, at least two different

competing purchasers. Here, the sales to DJM and Creative

occurred almost a year from each other and, furthermore, as

admitted by DJM, Creative was a competitor of DJM during

that time period because it had not obtained its § 8 (a)

certification and therefore could not compete in the bidding

for the Air Force procurement.

Even though DJM points to two completed sales,

these were not the “comparable transactions under similar

circumstances” required by the statute to constitute a

Robinson-Patman violation. In light of the foregoing the

claims under § 2 of the Clayton Act as amended by the

Robinson-Patman Act and § 263 of the Puerto Rico

Antimonopoly Act must be dismissed.

DJM makes separate allegations of unlawful price

discrimination under 10 L.P.R.A. § 264, claiming that

defendants sold, offered to sell and participated in steps for

the sale of Saratoga Filter Cloth outside Puerto Rico at prices

substantially different from the prices offered in Puerto Rico,

64a

Appendix E

with the purpose of destroying competition or eliminating a

competitor.

Even though DJM construes this statute as a price

discrimination provision, it is really meant to be a state anti-

dumping provision, similar to the Federal Anti-Dumping Act

of 1916, prohibiting the sale of articles in Puerto Rico at

prices that are less than their market value in their domestic

market, with the purpose of injuring or destroying

competition in Puerto Rico. Arturo Estrella, Antitrust Law

in Puerto Rico. 28 Rev. Col. Abog. 505, 624-626 (1968).

The phrase “substantially different” in relation to price was

used with the intention of outlawing lower prices. Id.,

quoting Diario de Sesiones, Vol. XVIII, at 1708.'”

The Anti-Dumping Act of 1916”, part of the

Revenue Act of the same year, is directed at sales of articles

imported into the United States and sold at a substantially

lesser price than the market value of such articles at the time

of exportation in the principal markets of the country of

production. United States v. Cooper Corp., 312 U.S. 600,

609 (1941). Dumping has been defined as the selling of a

product below either (a) the cost of production and delivery;

or (b) the price for which a foreign product is sold in its own

market. Wheeling-Pittsburgh Steel Corp. v. Mitsui & Co.,

26 F.Supp.2d 1022, 1023 (S.D. Ohio 1998).

\2 The Senate Report states:

This provision punishes dumping (flooding the market with

merchandise from outside at prices substantially lower that the market

price) with the purpose of destroying competition or eliminating a

competitor in Puerto Rico.

1315 U.S.C. § 72.

65a

Appendix E

Here, DJM makes no allegation regarding the sale of

Saratoga Filter Cloth at prices substantially lower that those

offered in the United States. DJM simply urges a

construction of the statute as one of price discrimination.

We are not convinced by DJM’s argument. It is clear that §

264 of the Puerto Rico Antimonopoly Act addresses the

practice of flooding the Puerto Rican market with

merchandise from foreign markets by offering such products

at prices substantially lower that those offered in the

products’ domestic market, with the purpose of destroying

competition or eliminating a competitor. There are no

allegations to that effect in DJM’s Complaint. Accordingly,

the claim for price discrimination under 10 L.P.R.A. § 264

must also be dismissed.

IV. Bid Rigging

A. Parties’ allegations

Finally, defendants argue that under the theory of bid

rigging set forth in the complaint, DJM has failed to state a

cause under federal antitrust law. Defendants maintain that

DJM’s bid rigging claim is not supported by any antitrust

legislation or case law. To the contrary they contend that bid

rigging under the statute requires a horizontal agreement

(between competitors) designed to permit competitors to

share contracts and fix prices.

Defendants maintain that Creative, the alieged

partner in the bid rigging scheme, is a customer and not a

competitor of Tex-Shield. Accordingly, defendants assert

66a

Appendix E

that because Tex-Shield and Creative did not bid against

each other, DJM’s bid rigging claim is a hollow accusation

having no legal support. Defendants also assert that DJM’s

allegation that Tex-Shield conspired with Blucher to engage

in bid rigging fails to state a claim because Tex-Shield is

Blucher’s wholly-owned subsidiary.

B. Legal Analysis

Plaintiff has advanced a claim for bid rigging

alleging that Tex-Shield combined with Creative to rig the

bidding process in § 8 (a) procurement contracts. Bid

rigging is one of the antitrust violations that “because of its

pernicious effect on competition and lack of any redeeming

virtue are conclusively presumed to be unreasonable and

therefore illegal without elaborate inquiry as to the precise

harm they have caused or the business excuse for their use.”

Northern Pac. Ry. Co. v. United States, 356 U.S. 1, 5 (1958).

United States v. Mobile Materials, Inc., 881 F.2d 866, 869

(10 Cir. 1989), cert. denied, 493 U.S. 1043 (1990). See

U.S. v. Reicher, 983 F.2d 168, 170 (10™ Cir. 1992).

Bid rigging is a very specific type of horizontal

violation of section 1 of the Sherman Act defined as: “Any

agreement between competitors pursuant to which contract

offers are to be submitted to or withheld from a third party. .

..” See United States v. Portsmouth Paving Corp., 694 F.2d

312, 325 (4" Cir. 1982)). See also United States v. David E.

Thompson, Inc., 621 F.2d 1147, 1149-50 (1* Cir. 1980).

Bid-rigging in violation of § 1 contemplates only agreements

between actual or potential competitors. United States v.

Portsmouth Paving Corp., 694 F.2d 312, 325 (4" Cir. 1982);

67a

Appendix E

United States v. W.F. Brinkley & Son Constr. Co., 783 F.2d

1157, 1160 (4 Cir. 1986); United States v. Ashland-

Warren, 537 F.Supp. 433, 445 (M.D. Tenn. 1982) (finding

that bid -rigging schemes are useless unless the offending

group consists of competitors) (criminal prosecution).

Stated another way, “courts have only deemed bid rigging a

per se violation where the agreements have been horizontal.”

MHB Distributors, Inc. v. Parker Hannifin Corp., 800 F.

Supp. 1265, 1268 (E.D.Pa. 1992); Advanced Power Systems

v. Hi-Tech Systems, 801 F. Supp. 1450, 1463 (E.D.Pa.

1992); see Business Electronics v. Sharp Electronics, 485

U.S. 717, 730, 99 L. Ed. 2d 808, 108 S. Ct. 1515 (1988)

(finding that competitor-imposed restraints are horizontal,

while restraints imposed by agreement between firms at

different levels of distribution are vertical). See Zachair,

Ltd. v. Driggs, 965 F. Supp. 741, 747 (D. Md. 1997).

Here, Plaintiff has failed to establish any facts that

would tend to show directly or support the inference that

Tex-Shield is an actual or potential competitor of DJM in the

relevant market. The record clearly shows that Creative is a

Customer of Tex-Shield and neither Creative nor Tex-Shield

bid against each other for § 8 (a) procurement contracts.

There is no evidence of a horizontal relationship between

these two entities. In view of our finding that there is no

horizontal relationship between Creative and Tex-Shield, the

Court concludes that there could be no bid rigging

agreements of the type prohibited by the Sherman Act.

Accordingly the claims for bid rigging must be dismissed.

68a

Appendix E

CONCLUSION

For the foregoing reasons Defendant’s Motions to

Dismiss (Docket No. 77 and 96) are GRANTED. DJM’s

Motion for Entry of Partial Summary Judgment (Docket

Nos. 104, 108 and 115) is now MOOT.

IT IS SO ORDERED.

In San Juan, Puerto Rico, this 28th day of June, 2002.

/s/ Jay A. Garcia-Gregory

JAY A. GERCIA-GREGORY

UNITED STATES DISTRICT JUDGE

69a

Appendix F — Award Of Arbitrator, dated

January 20, 1999 in DJ Manufacturing

Corporation v. Tex-Shield, Inc., American

Arbitration Association, No. 13 130 00470 98

AMERICAN ARBITRATION ASSOCIATION

Arbitration Tribunal

In the Matter of Arbitration between

Re: 13 130 00470 98

DJ MANUFACTURING CORPORATION

TEX-SHIELD, INC.

AWARD OF ARBITRATOR

I, THEE UNDERSIGNED ARBITRATOR, having

been designated in accordance with the Arbitration

Agreement entered into between the above-named Parties

and dated January 21, 1994, and having been duly sworn, and

having duly heard the proofs and allegations of the Parties,

do hereby, FIND, as follows:

1. CLAIMANT'S claim for, relief under the

Robinson-Patman Act (Statement of Claim #21) was

withdrawn during the hearing (See Transcript October 29,

1998, at 288) and is therefore dismissed.

2. CLAIMANT'S claim for relief under 264 of the

Laws of Puerto Rico was not withdrawn but is denied

because the evidence did not establish that a

"discrimination" in quotes actually occurred or that, even if

any difference in quotes did occur, it was with respect to

70a

Appendix F

"goods of like grade or quality" as the wording of the statute

requires. In addition, even assuming that CLAIMANT could

be deemed a "competitor" within the meaning of the statute,

the evidence does not support a finding that the difference

in quotes was the proximate cause of the damages claimed.

This is not a case where CLAIMANT was disadvantaged in

obtaining the contract by virtue of a difference in the terms

quoted to RESPONDENT compared to more favorable

terms offered to a winning bidder. Rather, CLAIMANT'S

contention, and the basis for all it's antitrust damages

claims, is that it was damaged by RESPONDENT'S alleged

failures to act in good faith, animus toward CLAIMANT,

and abuse of its unique position after CLAIMANT obtained

the contract.

3. CLAIMANTS tie-in claim under Section One

of the Sherman Actis denied for several reasons,

including lack of evidence that CLAIMANT was in fact

coerced by RESPONDENT to agree to the alleged tied

product (the allegedly unneeded and unwanted-

technical services contract) in order to obtain the tying

product (continued performance under the subcontract).

Contemporaneous evidence showed the CLAIMANT

conceded that some technical support beyond that

reasonably required by the subcontract was needed at

some price (see CLAIMANT’S own Exhibits C-41 and

C-S4); the objection that services (other than cutting,

sewing and packaging end items and assistance with

CDRLS) were completely unnecessary and solely

exploitative appears never to have been articulated until

this arbitration began would be enforceable or whether

CLAIMANT would be entitled to recovery if

Tla

Appendix F

CLAIMANT had in fact paid more than the reasonable

value of necessary additional services.

4. CLAIMANT'S breach of contract claim based on

delay is denied based on the weight of the evidence as well as

section 13 of the subcontract. As to some aspects of

performance under both the original subcontract and

technical services agreement, however, I find that breaches of

the implied covenants of good faith and good dealing under

New Jersey law have been established.

Those breaches do not operate to provide CLAIMANT with

an affirmative recovery but as a partial defense, estoppel, and

limitation and set-off as to some amounts it would otherwise

owe on the subcontract and technical services contract.

Therefore, I deny CLAIMANT any monetary relief on this

claim.

5. With respect to RESPONDRNTSS first and third

counterclaims for breach and non-payment under both the

subcontract and technical services contract, I award

RESPONDRNT a total net recovery, after all limitations and

set-offs referred to in paragraphs 3 and 4, of FIVE

HUNDRED EIGHTY THREE THOUSAND FOUR

HUNDRED SIXTEEN DOLLARS ($583,415) on all claims

inclusive of all interest and finance charges up to and

including the date of this award.

6. Finding that there were reasonable grounds other

than the duress argument for CLAIMANT'S proceeding

initially in United States District Court in Puerto Rico rather

than in arbitration, and for contesting the applicability and

enforceability of the arbitration clause over the claims sought

72a

Appendix F

to be asserted, I deny all relief on RESPONDENT'S second

counterclaim for breach of the arbitration clause.

7. The compensation of the Arbitrator totaling

SIXTEEN THOUSAND DOLLARS ($15,000.00), shall be

borne equally by the Parties. Therefore, RESPONDENT shall

pay to the American Arbitration Association the sum of

SEVEN HUNDRED TWENTY FIVE DOLLARS ($725.00),

representing that portion of said compensation still due the

Association.

8. The administrative fees and expenses of the

American Arbitration Association totaling EIGHTEEN

THOUSAND FOUR HUNDRED THIRTY FIVE

DOLLARS AND SIXTY CENTS ($18,435.50), shall be

borne equally by the Parties. Therefore, CLAIMANT shall

pay to the American Arbitration Association the sum of

NINE DOLLARS AND NINETY SEVEN CENTS ($9.97),

repreeenting its respective balance of said fees and

expenses still due the Association, and RESPONDENT

shall pay to the American Arbitration Association FIVE

HUNDRED SIXTY DOLLARS ($560.00), representing its

respective balance of said fees and expenses still due the

Association.

(Tr.269-71). Moreover, the testimony and Exhibit C-41 itself

reflect that CLAIMANT believed that willingly accepting the

technical services contract (to the extent that the price was

regarded as over-stated) would help it obtain a favorable

price quotation for a completely different contract, a "tie-in"

that apparently proved illusory but in any event has nothing

to do with the tie-in alleged in this case (See Tr.269-71,1145-

73a

Appendix F

50).

The tie-in claim also raises the interesting

question whether there can be any illegal tie without

foreclosure of competition in the tried product market. There

is contradictory language on this point in the Supreme

Court's Jefferson Parish opinion. Compare Jefferson Parish

Hospital Dist. No.3 v. Hyde. 466 U.S. 2,12(1984) (describing

elements of coercion) with id. at 16 (no effect on competition

when purchaser is forced to buy a completely unwanted

product). The weight of the evidence here was that Claimant

allegedly felt itself forced to purchase what it considered

largely unnecessary or over-priced services rather than that it

was foreclosed from obtaining those services; indeed, it was

clear from the testimony that most of the services depended

on knowledge and information about the patented process

licensed to RESPONDENT and known only to

RESPONDENT and its parent and that CLAIMANT made

- no attempt and felt no need to obtain those services from a

third party. There was thus no foreclosure of potential

competition in the tied product market, the principal evil

against which the prohibition of tie-in sales is directed as

evidenced by its juxtaposition with exclusive dealing

provisions in Section 3 of the Clayton Act.

- Although not articulated precisely in this way, the

claim might nevertheless be actionable under per se rule on

74a

Appendix F

the theory that it allows one with market power to evade

circumstances which would otherwise limit its use of market

power to exact an inflated price. The classic case would be a

monopolist who avoids price regulation by deriving revenues

from an unregulated product or service tied to a price

controlled regulation or service; here, the constraint might be

the original subcontract price which RESPONDENT needed

to negotiate in order to have CLAIMANT obtain the

government contract and allegedly lock CLAIMANT in to

the subcontractor-contractor relationship.

Ultimately, however, I do not need to resolve

this issue because, as noted above, the weight of the evidence

convinces me that RESPONDENT did realize a need to have

available some additional technical services from

RESPONDENT beyond those RESPONDENT could

reasonably have been expected to have provided gratis under

the original subcontract. I also find from the weight of all the

evidence that CLAI~ did receive some such services, and that

the reasonable value of such services, though less than the

technical services contract required in payment, exceeded

any amounts CLAIM can be deemed ever to have paid under

the technical services agreement. Therefore, in addition to

finding an absence of coercion, I do not believe that

CLAIMANT has in fact been damaged by the alleged tie-in

and dismiss this claim. Because I believe that

RESPONDENT did breach its duty of good faith and fair

dealing under both the original subcontract and technical

services agreement, as stated in paragraph 4, I have limited

its recovery to what the evidence convinces me is the

reasonable value of RESPONDENT'S services under the

technical services agreement. I therefore need not reach the

75a

Appendix F

question whether the agreement.

9. This Award is in full settlement of all claims and

counterclaims submitted to this Arbitration.

“/s James B. Kobak, Jr.” ee

James B. Kobak, Jr., Esq./ DA

STATE OF NEW YORK }

SS.:

COUNTY OF NEW YORK )

I, James B. Kobak, Jr., Esq., do hereby affirm upon my oath

as Arbitrator that I am the individual described in and who

executed this instrument which is my Award.

1/20/99 “/s James B. Kobak”

76a

Appendix G — The Anti-Monopoly Act of 1964:

February 20, 1964 Hearing on S. 594 & H. 909

before Senate Civil Juridical Committee, House

Committee on Commerce & Industries & House

Committee; Testimony of Hiram Cancio (Certified

English translation, from Appellee’s Appendix

submitted to the Court of Appeals, pages 26-27)

MR. REYES DELGADO: Or when it is manufactured.

Would this include situations in which goods are

manufactured in Puerto Rico and exported to Mexico at a

price that is lower than the price in Puerto Rico?

MR. CANCIO: Higher.

MR. REYES DELGADO: No, lower.

MR. CANCIO: I don't believe it would apply to such a

situation.

MR. REYES DELGADO: You believe it would not?

MR. CANCIO: Specifically this provision which you are

analyzing applies when, for example, a person produces

goods in New York. And there, in New York, he sells the

product at x dollars, but then, in Puerto Rico, there are others

who are selling that same product and he has to sell, it, let's

say, also at x dollars if he can produce it here cheaply or at x

plus two or three. He who sells in New York at x dollars

presumably sells it in Puerto Rico more expensively, because

of transportation, etc.; comes to Puerto Rico and sells it more

cheaply and then enters into unfair competition with those

others.

77a

Appendix G

MR. REYES DELGADO: Yes, in that case. But suppose a

manufacturer manufactures the goods in Puerto Rico exports

them to Mexico and sells them there for a dollar and in

Puerto Rico sells them at a dollar fifty.

MR. CANCIO: Well I believe the statute does not

contemplate that problem, and it's more of a concern for

Mexico than for Puerto Rico.

MR. REYES DELGADO: No, no. Why, why should we

allow our people to be exploited in such a fashion, while the

people in Mexico are not. Goods manufactured by the hands

of our work force, transported to Mexico which entails some

expense, and then selling in Mexico at a lower price than

here.

MR. CANCIO: No, that is not covered by the statute. I

believe, subject to answering more clearly on a future

occasion, that the statute does not contemplate that situation,

directly, just merely, because one is selling more cheaply or

more expensively. What does happen is that if he, for

example, in selling at a cheaper price in Puerto Rico, is

engaging in a monopolistic practice, we could always

prosecute him.

MR. REYES DELGADO: No, if he sells more cheaply in

Puerto Rico all the better. Our people benefit from that.

MR. CANCIO: Well, if he sells it more cheaply unless it is

done in such a fashion so as to constitute unfair competition.

MR. REYES DELGADO: Correct, correct. However, in my

78a

Appendix G

opinion means should be found in order to deal with the

situation where local production is sold in Puerto Rico at a

higher price than outside Puerto Rico, for example in

Mexico, without any justification. The same thing would

have been made in Puerto Rico.

MR. CANCIO: As I said, I believe this bill does not

provide for such cases. The fact is that we have not seen

that as a problem occurring to the detriment of Puerto

een

United States District Court

For the District of Puerto Rico

- CERTIFIED -

To be a correct translation made

and/or submitted by the interested party

“s/ (signature unreadable)”

Certified Court Interpreter

Administrative Office of the

United States Courts

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.