Opposition Brief — A. M. Capen's Co. v. American Trading & Production Corp.

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. ELDED

>) AUG 14 2000

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No. 99-2012 AQEEICE OF THE GLERN |

IN THE ,

Supreme Court of the United States

A.M. CAPEN’S CO., INC.,

Petitioner,

Vv.

AMERICAN TRADING AND PRODUCTION CORPORATION,

BLAS ROSSY-ASENCIO and RAFAELA FULANA DE TAL,

Respondents.

On PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT

BRIEF IN OPPOSITION

|

José ENRIQUE COLON-SANTANA

Attorney for Respondents

Ave. César Gonzalez #513

Hato Rey, Puerto Rico 00918

(787) 763-4111

161580 @ Counsel Press LLC

(800) 274-3321 + (800) 359-6859

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STATEMENT PURSUANT TO RULE 29.6

Respondent, American Trading and Production

Corporation, has no parent corporation and no publicly held

company owns 10% or more of its stock.

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TABLE OF CONTENTS

Statement Pursuant to Rule 29.6 .............-.

Tabbbe OF CORMOMNS oak ccs ceca esi eseeseisenss

“Tobie of Cited Authorities... 0.55 svccrxaee se.

Reasons for Denying the Writ .................

Factual Backerownd «2... icc ces series cieires

I. Neither The Record Nor The Decision Of The

First Circuit Court Of Appeals Raise The

Question Presented For Review ..........

Il. The First Circuit Ruling Does Not Conflict

With Either Puerto Rico Dealers’ Act Nor

Puerto Rico Supreme Court Precedent

Ill. This Case Does Not Have Far-reaching

Implications In The Federal Judiciary And

The Commonwealth Relations, It Is Simply

An Opinion Of Statutory Construction .

Oiiieiee 8. cbivenns eee

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11

21

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TABLE OF CITED AUTHORITIES

Page

Cases:

A. M. Capen’s Co, Inc. v. American Trading and

Production Corporation, 74 F.3d 317 (1st Cir.

ea hae Caled rR CANS ba haw Se ok 7

Blair v. Oesterlein Co., 275 U.S. 220 (1927) ..... 5

Cruz Ramos v. Brother Int'l Corp., 445 F. Supp. 983

(D.P.R. 1978), aff'd mem. sub nom., 588 F.2d 817

SR SSSR ER: ea grea ts og aa 9,10

Draft Line Corp. v. The Hon Co., 781 F. Supp. 841

ae a ahr ono cs ah G's «as « 4604 bs 21

Ebi, Inc. v. Gator Industries, Inc., 807 F.2d 1 (1st

Oe ee fo i aN i'n ed ohh AA 9

Erie R.R. Co. v. Tompkins, 304 U.S. 64 (i938) ...8i2

Fornaris v. Ridge Tool, 423 F.2d 563 (1st Cir. 1970)

Fornaris v. Ridge Tool Co., 400 U.S. 41 (1970) .. 8,14

Frisey v. Schultz, 487 U.S. 474 (1988) .......... 14

Gloria Blimzer v. Marriot International, Inc., 81

EE, © REE. ov ck vended edveccanve 12

iv

Cited Authorities

Page

Gonzalez v. Brown Group, Inc., 628 F. Supp. 436

CEA es SEE 0c beeen ha ean ea eae ee oe 9

Haring v. Prosise, 462 U.S. 306 (1983) ......... 14

Heckler v. Campbell, 461 U.S. 458 (1982) ....... 3

Holloway v. United States, 526 U.S. 1 (1999) .... 11

:

J. Soler Motors v. Kaiser Jeep Int'l, 108 D.P.R. 134 |

a | SR erm ea, rope npr Or eye eee 17

|

( Lugo v. Matthew Bender & Co., Inc., 579 F. Supp. |

ae ee a CE is x bore ne cesses 10

Mario R. Franceschini, Inc. v. Riley Co., 591 |

2 F. Sop. 416 COP. FOGG) oes ccc cv issue g

Miree v. Dekalb Country, 433 U.S. 25 (1977) .... 4

Moore v. Illinois, 408 U.S. 786 (1972) .......... 5

Morales v. Gregg Shirt Makers, Inc., 682 F. Supp. :

kg | SER P TORT OCTETS ere eee 10

New Orleans v. Dukes, 427 U.S. 297 (1976) ..... 4

Representaciones Ebi, Inc. v. Gator Industries, Inc.,

629 F. Supp. 662 (D.P.R. 1986), aff'd sub. nom. -

Ebi, Inc. v. Gator Ind@ustries, Inc., 807 F.2d 1 (Cir.

SE oa 5 «Wee eee eee 9

scieeaiiiaaiiaiaaiiiaiilaiiiis

Cited Authorities

San Juan Mercantile Corp. v. Canadian T, ransport

Co. Ltd., 108 P.R.R. 211 (1978) .............

Soler Motors, Inc. v. Kaiser Jeep Int’l Corp., 108

Pn ROE IME 6 oda ee a ck

Sudouest Import Sales Corp. v. Union Carbide

Corp., 569 F. Supp. 1547 (D.P.R. |

Sudouest Import Sales Corp. v. Union Carbide

Corp., 732 F.2d 14 (Cir. 1 1984), aff'd, 569

F. Supp. 1547 (D.P.R. 1983) ................

Tacon v. Arizona, 410 U.S. 351 oo: Beane

Triangle Trading Co. v. Robroy Industries, Inc., slip

op. at 2 (Ist Cir., Dec. 29, 1999) .............

University of California Regents y. Bakke, 438 U.S.

PPI 6655s a

Warner Lambert v. Ti ribunal Superior, 101 P.R.R.

PUR EREEE os bys bee eo ae

Page

vi

Cited Authorities

Page

Statutes:

Mo. Rev. Stat. § 400(1) (1974 and Supp. 1975) ... 6

Mo. Rev. Stat. § 405 (1974 and Supp. 1975) ..... 6

Mo. Rev. Stat. § 407 (1974 and Supp. 1975) ..... 6

Mo. Rev. Stat. § 410 (1974 and Supp. 1975) ..... 6

N.J. Rev. Stat. § 56:10-4 (1971) ............... 6

NJ. Rev. Stat. § S6:1G-S CISFA). 2. kev ieeeine, 6

United States Constitution:

Article 1, § 8, clause3 ............... ; apna 3

Other Authorities:

Antonetti, Puerto Rico Dealers Act Fourteen Years

(ber, 33 Cath. 1 BAGS TGA ss 0 eau n kes onan 7

18 Diario de Sesiones, Comision de Industria

y Comercio, May, 14, 1964 .............. 16, 18, 19

Lawrence Tribe, American Constitutional Law,

See I, BIE gino ues ae eR eee 5

Cited Authorities

Page

Mario Rodriguez-Vidal, The conceptual just cause

for the Lawful Termination of a Dealership Under

the Dealers Contract Law of Puerto Rico, 58 Rev.

~~ TOE, CFs Oe CUOUOD: ks dec ccchcrwektee ds 10

Salomone, Puerto Rico's Distributors’ Law: Law Ta,

A Primer, 18 Rev. Jur. 67 (1983) ............. 7

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REASONS FOR DENYING THE WRIT

The sole question presented for review by the Petition,

albeit segmented in three issues by Capen’s, is one of

statutory interpretation. That is, whether Puerto Rico Dealers

Act of 1964 (Act 75) express language and purpose in its

definition of a “dealer” under the law, only applies to a

distributor that has its place of business in Puerto Rico.

Petitioner argues that the First Circuit Court of Appeal’s

opinion improperly holds that it does. However, the First

Circuit Court’s decision, Honorable Judge Torruellas

Presiding, and whose rehearing en banc was denied, is not

in conflict with Act 75’s plain language and legislative

history, nor Puerto Rico Supreme Court’s holdings. Petitioner

has made a “federal case” out of what is, and always should

have been, nothing more then a contract dispute between

two continental United States’ corporations, Petitioner with

its sole and principal place of business in New Jersey, and

Respondent with its principal place of business in Missouri.

The First Circuit’s ruling is proper in all respects and

Respondents respectfully urge this Honorable Court to deny

the Petition for Writ of Certiorari.

FACTUAL BACKGROUND

The exception Respondents take to Petitioner’s statement

of facts is its averment that Capen’s was not required to have

any kind of physical presence in Puerto Rico in order to

engage as a dealer in Puerto Rico. This is a misstatement

since it gives the impression that Respondent American

Trading did not require it or had some kind of opinion to

give on the business’ site options. Capen’s is a New Jersey

corporation with its principal place of business in New

Jersey. Said state is also the sole site where Petitioner has

2

an office, a business place and a warehouse. American

Trading is an entity with principal place of business in

Missouri. Capen’s made a giant leap, in its effort to do some

legal remedies shopping, and filed in the Federal Court for

the District of Puerto Rico two separate diversity actions

against Respondents. Both cases were consolidated at the

district and court of appeals level.' The First Circuit Court

of Appeals made a clear and specific statement of facts, to

which Respondents adhere. Petitioner’s App. 1.

I.

NEITHER THE RECORD NOR THE DECISION OF

THE FIRST CIRCUIT COURT OF APPEALS RAISE

THE QUESTION PRESENTED FOR REVIEW

While, as Respondents will show, Petitioner’s claims

are not a fair reading of Judge Torruellas’ First Circuit panel

opinion and order, it must be first stated that the arguments

of Certification to the Puerto Rico Supreme Court, and the

constitutional claims against the Dealers’ Act, were never

brought to the attention of the First Circuit Court nor were

they part of its ruling.

Where the ground presented has not been raised below,

this court has decline to decide arguments not raised

1. The case against Respondents Mr. and Mrs. Blas Rossy, was

based on Petitioner’s claim of contractual interference. Said action

was legally dependent on the main litigation against American

Trading. Having no remedies under Act 75, Respondent American

Trading could terminate or modify at will the agreement with

Capen’s, thereby the Rossy’s liability was terminated pursuant the

First Circuit’s opinion, and Petitioner has not raised this issue as a

question in its Petition.

3

by Petitioner in the Court of Appeals. Heckler v. Campbell,

461 U.S. 458, 468-469 n.12. While this Court is

... largely dependent upon the assertions made

by the parties as to what that record will

demonstrate concerning the manner in which a

federal question was raised below; Webb v. Webb,

451 U.S. 493, 494 (1980), this Honorable Court

may note that nowhere in the First Circuit Court’s

opinion is any federal question mentioned. App.

1. Also, in Petitioner’s enumeration of error on

its cross appeal the sole error argued on its claim

was that the Puerto Rico District Court made an

erroneous interpretation of Act 75’s damage

formula as applied to a contractual impairment

case versus a termination claim. As admitted by

Petitioner ... A.M. Capen’s filed a cross-appeal

in disagreement with the sum awarded”.

Petitioner’s brief at page 10.

Petitioner, as a matter of law, alleged only diversity of

citizenship as the basis for its filing of the lawsuit in the

United States District Court for the District of Puerto Rico.

Capen’s did not rely on federal question jurisdiction. Capen’s

complaint seeked recovery under Puerto Rico Dealers Act

of 1964, on the grounds of breach or contract. There is not a

single indication that Petitioner alleged a violation of Puerto

Rico Dealers Act of the Federal Constitution nor any remedy

upon such claim. Thereby, petitioner’s timid reference to

Article 1, § 8, clause 3 of the Constitution of the United

States in its Petition has no relevance to the controversy

decided by Honorable Judge Torruellas’ First Circuit Court

of Appeals’ panel. In its Petition Capen’s argues that the

First Circuit ruling will have a“... discriminating [effect]

4

against interstate commerce”, brief at page 18; that “. . . there

has been no showing that change in the statute’s coverage

cannot be promoted by alternative means that do not burden

interstate commerce”; and that “[t]he First Circuit did not

address this issue and therefore its decision is thus open to a

constitutional attack”. /bid. at 18. This Supreme Court,

should not give any consideration to this constitutional claim

brought by Capen’s for the first time in this litigation, since

“.. . It was neither pleaded, argued nor briefed either in the

District Court or in the Court of Appeals ... Cf Lawn vy.

United States, 355 U.S. 339, 362-363 n.16 (1958)”, Miree v.

Dekalb Country, 433 U.S. 25, 34 (1977)?.

Respondents sustain that the questions presented by

Petitioner are not properly before this Honorable Court.

It was not raised by Capen’s on the record before the district

2. This Supreme Court has held, when reviewing equal

protection challenges, such as Capen’s has made for the first time

in its request for Certiorari, to local economic regulations of the

Puerto Rico Dealers Act, that:

When local economic regulation is challenged

solely as violating the Equal Protection Clause, this

Court consistently defers to legislative determinations

as to the desirability of particular statutory

discriminations. See, e.g., Lehnhausen v. Lake Shore

Auto Parts Co., 410 U.S. 356 (1973). Unless a

classification trammels fundamental personal rights or

is drawn upon inherently suspect distinctions such as

race, religion, or alienage, our decisions presume the

constitutionality of the statutory discriminations and

require only that the classification challenged be

rationally related to a legitimate state interest.

New Orleans v. Dukes, 427 U.S. 297, 303 (1976).

5

court nor at the First Circuit Court. This is only an ordinary

case and “[iJt is only in exceptional cases, and then only in

cases from the federal courts, that questions not pressed or

passed upon below are considered here. Dwingan v. United

States, 274 U.S. 195”. Blair y. Oesterlein Co., 275 US. 220,

225 (1927). There is no reason to deviated from this rule

now. Tacon v. Arizona, 410 U.S. 351, 352 (1973); Moore v.

Illinois, 408 U.S. 786, 799 (1972); Stanley v. Illinois, 405

U.S. 645, 658 n.10 (1972); and University of California

Regents v. Bakke, 438 U.S. 265, 283 (1978) all cases decided

in the context of federal constitutional issues on review of

State court decisions.

On the basis of equal protection and economic

regulation,

... Itis significant that the [Supreme] Court never

wholly abandoned the position that legislatures,

at least in their regulatory capacity, must always

act in furtherance of public goals transcending the

shifting summation of private interest through the

political process. The pluralist thesis that there

exist no public interest beyond that summation

(note omitted) never became judicial dogma in

economic life any more than in other sectors of

human concern.

Lawrence Tribe, American Constitutional Law, 2d Edition,

1988, p. 583. See also Op. cit., page 582 n.16 and citations

thereunder.

Equality is not violated, as claimed by Petitioner, by the

fact that the Commonwealth requires, as a matter of law,

that the persons claiming protection under its laws to reside

6

within its borders, have offices, and pay taxes, to say the

least. As a matter of fact, the states where Petitioner could

have filed and litigate its claim, have the same statutory

requirements as the Commonwealth of Puerto Rico does.’

Since the Certification request, and the constitutional attack

on the law as the record will show, were not even mentioned

by Petitioner in its errors, nor its briefs at the District or the

Court of Appeals’ level, this questions are not reviewable.

THE FIRST CIRCUIT RULING DOES NOT CONFLICT

WITH EITHER PUERTO RICO DEALERS’ ACT NOR

PUERTO RICO SUPREME COURT PRECEDENT

Petitioner Capen’s claims as question C that the First Circuit

Court of Appeals “added” a “physical presence requirement”

to Act 75 thereby invaded the Commonwealth’s Legislative

Branch and has the overreaching interpretative consequence of

“discriminating” against dealers, such as Capen’s, that do not

pay taxes to Puerto Rico, have no address, no telephone, no

taxes, no p.o.. box, no warehouse, no office and no agents in

the Commonwealth.

Petitioner’s claims are mistaken. In the case of Fornaris v.

Ridge Tool, 423 F.2d 563 (1st Cir. 1970), the First Circuit Court

of Appeals had an opportunity to examine the law and held that

the Act could not validly apply td contracts entered before its

3. Missouri Law only applies to distributors with a place of

business in Missouri. Mo. Rev. Stat. § 407 .400(1) (1974 and Supp.

1975) (definition of “franchise). Mo. Rev. Stat. §§ 407 .405, 407

410 (1974 and Supp. 1975). New Jersey has a Franchise Practices

Act which applies only to a franchisee who establishes a “place of

business” in New Jersey, § 56:10-4., and that such a termination

only can be based on “good cause”. N.J. Rev. Stat. § 56:10-5 (1971).

7

enactment. As discussed later, this Honorable Supreme Court

reversed said decision on abstention grounds. During this first

years it was not a happy understanding with the Puerto Rico

Dealers Act of 1964. See Antonetti, Puerto Rico Dealers Act

Fourteen Years Later, 83 Com. L. J. 453 1978, and

see Salomone, Puerto Rico's Distributors’ Law: Law 75,

A Primer, 18 Rev. Jur. 67, ( 1983).

Respondents must state that at the preliminary

injunctions stage of this case the First Circuit (or First panel

as designated by the petitioner) held and agreed with the

District Court in that petitioner Capen’s’ dealership status

was “a close matter”. A. M. Capen’s Co, Inc. y. American

Trading and Production Corporation, 74 F.3d 317, 319

(Ist Cir. 1996), petitioner’s appendix at page 19. The First

Circuit Court (in the injunction’s opinion), also noted that:

[t]his is an appeal from a grant of preliminary

injunctive relief. When an appeal comes to us in

that posture, the appellant’s “conclusions as to

the merits of the issues presented on preliminary

injunction are to be understood as statements of

probable outcomes”, rather than as comprising the

ultimate law of the case.

App. 28. Finally, the First Circuit’s injunction opinion solely

sustained that “the law of Puerto Rico most probably

applies”. App. 28.

Contrary to Capen’s representations of what happened

after the first panel issued the preliminary injunction’s

opinion, Respondents affirm that at the “damages’ ” opinion,

12 F. Supp. 2d 222 (1998), which was appealed and cross

appealed, the district court held on footnote number | that:

8

Later, at the hearing on damages, Plaintiff

confirmed that all goods sold in Puerto Rico were

sold F.O.B. Continental U.S.A. and further that

no taxes whatsoever were paid in Puerto Rico.

The matter of dealership, hence, is extremely close

since Plaintiff therefore contributes slimly to the

Puerto Rican economy raising serious doubts as

to legislative intent in the coverage of Plaintiff

under the Act.

Ibid. at 223-231.

The First Circuit incursion in Act 75 is not new. It has

decided many cases pertaining to Puerto Rico Dealers Act

of 1964. The reading of the law and its history, as applied to

the facts, AFTER TRIAL, of the instant case is not a prime

for the Court of Appeals, and no mistake has been committed.

Thirty years have elapsed since the opinion issued by this

Supreme Court in the case of Fornaris v. Ridge Tool Co.,

400 U.S. 41 (1970). In Fornaris, this court reversed on

abstention grounds the First Circuit Court’s holding that Act

75, precisely the same statute claimed by petitioner to apply

on its behalf, was unconstitutional. Three years later, Puerto

Rico’s Supreme Court in Warner Lambert v. Tribunal

Superior, 101 P.R.R. 378 (1973) held that Puerto Rico

Dealers Act could not be enforced in a contract entered before

the law was approved. In San Juan Mercantile Corp. v.

Canadian Transport Co. Ltd., 108 P.R.R. 211 (1978), and

Soler Motors, Inc. v. Kaiser Jeep Int'l Corp., 108 P.R.R.

134 (1978), Puerto Rico’s Supreme Court redefined the

“dealer” concept by considering certain duties in order to

qualify, as well as clarifying that the introduction of

intermediaries in the distribution chain does not impedes the

application of Act 75 against the principal manufacturer.

9

After this rulings, and in accordance with them, federal

courts have had the opportunity to interpret and apply the

concept of “dealer”. Cruz Ramos v. Brother Int'l Corp., 445

F. Supp. 983 (D.P.R. 1978) (distinguishes duties of dealer

and sales representative, finding that plaintiff could not

maintained an action under Act 75); Ebi, Inc. v. Gator

Industries, Inc., 807 F.2d 1 (1st Cir. 1986) (the statute’s

definition of “dealer” cannot fairly be read to include sales

representatives who made no investments in promotion,

inventories or facilities, took no risk in credit, collections,

shipment and delivery of goods and are paid commissions

on orders finally accepted by the principal); Sudouest Import

Sales Corp. v. Union Carbide Corp., 569 F. Supp. 1547

(D.P.R. 1983) (performance not within definition of dealer),

affirmed in Sudouest Import Sales Corp. v. Union Carbide

Corp., 732 F.2d 14 (Cir. 1 1984) (representative did not

handle manufacturer’s product (shipping, delivery, storage]

nor billing and receipts, and whose involvement in sales and

promotional activities was limited, is not a “dealer” under

Puerto Rico Dealers’ Act), aff'd, 569 F. Supp. 1547 (D.P.R.

1983); Representaciones Ebi, Inc. v. Gator Industries, Inc.,

629 F. Supp. 662 (D.P.R. 1986), aff’’d sub. nom. Ebi, Inc. v.

Gator Industries, Inc., 807 F.2d 1 (Cir. 1 1986) (no ‘dealer/

principai relation under Act 75 found where it did not invest

in advertisement or promotional literature, had no inventories

or items in stock, and did not assume credit or payment risk);

Gonzalez v. Brown Group, Inc., 628 F. Supp. 436, 440

(D.P.R. 1985) (Gonzalez was more of a commission

salesperson albeit he expanded the market, he assumed no

financial risk, no responsibilities for the business once the

orders were submitted to the principal’s main office, and

had no authority to approve or reject sale); Mario R.

Franceschini, Inc. v. Riley Co., 591 F. Supp. 414, 420(D.P.R.

1984) (it is an essential characteristic included in a “dealer”

10

under Act 75 market development for a product or service

through promotion, closing on sales contracts, and acting

on its own with full ownership of the goods sold); Lugo v.

Matthew Bender & Co.,Inc.,579 F. Supp. 638 (D.P.R. 1984),

(the test for considering a party a dealer or an employee, is

the nature and degree of control or right to direct the worker,

whether work performed is within business of the party

sought to be charged, investment required, delegation of

performance, who furnishes equipment, materials and

assistance, degree of initiative and judgment, generation of

profit and losses, and independent business with the party to

be charged); Morales v. Gregg Shirt Makers, Inc., 682

F. Supp. 142 (D.P.R. 1988) (sales representative for shirt

manufacturer is not a “dealer” under Act 75, even though

representative increased sales of manufacturer’s goods an

average of 53% over predecessor, since Morales had no

responsibility to deliver goods, collection of money, no credit

risk or price setting, maintained no inventory, and took no

significant entrepreneurial risk); Cruz Ramos v. Brother

International Corp., 445 F. Supp. 983 (D.P.R. 1978) (sales

representative who had no obligation to purchase inventory;

had no warehousing facilities; employed no salesmen nor

had any of the responsibilities of the distribution is not

protected by the Act and found only to be a commissioned

salesman), aff'd mem. sub nom., 588 F.2d 817 (1st Cir. 1978);

and Triangle Trading Co. v. Robroy Industries, Inc., slip

op. at 2 (Ist Cir., Dec. 29, 1999). See also Mario Rodriguez-

Vidal, The conceptual just cause for the Lawful Termination

of a Dealership Under the Dealers Contract Law of Puerto

Rico, 58 Rev. — Jur. UPR 261, 264 n.10 (1989).

11

Ill.

THIS CASE DOES NOT HAVE FAR-REACHING

IMPLICATIONS IN THE FEDERAL JUDICIARY AND

THE COMMONWEALTH RELATIONS, IT IS SIMPLY

AN OPINION OF STATUTORY CONSTRUCTION

The First Circuit’s holding simply made an statutory

construction of the Puerto Rico Dealers Act of 1964. It did

not create, nor invent its language, its purpose nor its

legislative history as Petitioner appears to argue.

This Supreme Court noted and held, in the context of

reading federal statutes, that

[w]riting for the Court in United States v.

Turkette, 452 U.S. 576, 593 (1981), Justice White

reminded us that the language of the statutes that

congress enacts provides “the most reliable

evidence of its intent”. For that reason, we

typically begin the task of Statutory construction

by focusing on the words that the drafters have

chosen. In interpreting the statute at issue, “[w]e

consider not only the bare meaning” the critical

word or phrase “but also its placement and

purpose in the statutory scheme”, Bailey v. United

States, 516 U.S. 137, 145 (1995).

Holloway v. United States, 526 U.S. | (1999).

Under the principles of Erie R.R. Co. v. Tompkins, 304

U.S. 64, 78, the Commonwealth of Puerto Rico’s laws supply

the substantive rule of decision in this diversity case. As a

matter of comity, the federal courts are bound to accent an

12

asserted rule of state law where the evidence and

jurisprudence is sufficiently conclusive, and the asserted

rules are established with sufficient definiteness and finality.

Except in matters governed by the federal

constitution or by Acts of Congress, the law to be

applied in any case is the law of the State. And

whether the law of the State should be declared

by its Legislature in an statute or by its highest

court in a decision is not a matter of federal

concern.

Erie at 78.

Honorable Judge Selya, for First Circuit, has comment

on the role of a federal court when adjudicating issues

controlled by state law. He stated:

In its barest essence, borrowing state law demands

nothing more than interpreting and applying the

rules of substantive law enunciated by the state’s

highest judicial authority, or, on questions to

which that tribunal has not responded, making an

informed prophecy of what the court would do in

the same situation.‘ See Moores v. Greenberg,

834 F.2d 1105, 1112 (Cir. 1, 1987). In the latter

- 4. Footnote number | to the above cited Blimzer First Circuit’s

Opinion:

“Indeed, this kind of predictive approach is among our

conceptions of law itself. See Oliver Wendell Holmes,

The Path of the Law, 10 Harv. L. Rev. 457, 461 (1897)

(“the prophecies of what the courts will do in fact, and

nothing more pretentious, are what I mean by law”.)

13

instance, we seek guidance in analogous state

court decisions, persuasive adjudication by courts

of sister states, learned treatises, and public policy

considerations identified in state decisional law.

See Ryan v. Royal Ins. Co., 916 F.2d 731, 734-35

(Cir. 1, 1990); Kathios v. General Motors Corp.,

862 F.2d 944, 949 (Cir. 1, 1988). As long as these

signposts are legible, our task is to ascertain the

rule the state court would most likely follow under

the circumstances, even if our independent

judgment on the questions might differ. See

Moores, 834 F.2d at 1107 n.3.” Gloria Blimzer

v. Marriot International, Inc., 81 F.2d 1 148, 1151

(Cir. 1. 1996).

Of course, this Supreme Court in the voice of Honorable

Judge Rehnquist has stated in Weinberger v. Rossi, 456 U.S.

25, 28 (1981), that:

Simply because the question presented is entirely

one of statutory construction does not mean that

the question necessarily admits of an easy answer.

Chief Justice Marshall long ago observed that

“[w]here the mind labours to discover the design

i of the legislature, it seizes every thing from which

aid can be derived. .. .” United States v. F isher,

2 Cranch 358, 386 (1805). More recently, the

Court has stated: -

“Generalities about statutory construction help us

little. They are not rules of law but merely axioms

of experience. They do not solve the special

difficulties in construing a particular statute. The

variables render every problem of statutory

14

construction unique.” United States v. Universal

Corp., 344 U.S. 218, 221 (1952) (citations

omitted).

This is particularly important when a Puerto Rican

Statute is in controversy. This Honorable Supreme Court has

declared that “[t]he relations of the federal courts to Puerto

Rico have often raised delicate problems. It is a Spanish-

speaking Commonwealth with a set of laws still impregnated

with the Spanish Tradition. Federal Courts, reversing Puerto

Rican courts, were inclined to construe Puerto Rican laws

in the Anglo-Saxon tradition which often left little room

for the overtones of Spanish culture. Out of that experience

grew a pronouncement by this Court that a Puerto Rican

court should not be overruled on its construction of local

law unless it could be said to be “inescapably wrong”.

See Bonet v. Texas, 308 U.S. 463, 471”. Fornaris v. Rigde

Tool, at 42-43.

Following this Supreme Court’s normal practice, it

should “defer to the construction of a state statute given it

by the lower federal courts. . . to reflect our belief that district

courts and court of appeal are better schooled and more able

to interpret the laws of their respective states. Brockett v.

Spokane Arcodes, Inc., 472 U.S. 491, 499-500 (1985)”.

Frisey v. Schultz, 487 U.S. 474, 482 (1988). As a matter of

fact and law, it is the practice of this court ... “to accept a

reasonable construction of state law by the court of appeals

‘even if an examination of state — law issue without such

guidance might have justified a different conclusion’. Bishop

v. Wood, 426 U.S. 341, 346 (1976)”, cited in Haring v.

Prosise, 462 U.S. 306, 314 n.8 (1983).

15

The legislative history of Act 75 Supports the

interpretation of the provision that the First Circuit Court,

Judge Torruella Presiding, derived from its language and

context. The legislative Committee that submitted reports

on the various bills that ultimately became the Puerto Rico

Dealer’s Act (Act 75) and its subsequent amendments

expressly suggested that Act 75 would cover claims only

from dealers who operate in Puerto Rico under similar

requirements as do comparable statutes in New Jersey and

Missouri. App. 9.

The Legislative record clearly points out to the purpose

of the law to protect dealers in and within the

Commonwealth’s borders. The express language of the law

when defining dealer clearly provides that the dealer must

have in his charge “in Puerto Rico” said distribution.

The Commonwealth’s Senate Report supportive of the

Act’s purpose states in part that:

The problem created in the distribution,

System in Puerto Rico has worsened recently by

the ill-timed actions of local and foreign |

manufacturing companies that, without just cause,

terminate their relationships with their dealers and

agents in Puerto Rico, as soon as the latter have

created a favorable market for their products, thus

frustrating the legitimate exportations and

interests of those who so efficiently carried out

their responsibilities.‘

5. Recientemente se ha recrudecido el problema creado en el

sistema de distribucién en Puerto Rico por la accion intempestiva

de empresas manufactureras domésticas y del exterior que, sin causa

(Cont’d)

16

18 Diario de Sesiones, Comision de Industria y Comercio,

May, 14, 1964 page 1531.

The Commonwealth, when enacting Act 75 considered

that it could not remain indifferent to the abuses and

exploitation of the distributors in Puerto Rico. See Statement

of Motives. It further states as a justification in support of

the law that: “. . . the reasonable stability in the distribution

relationships in Puerto Rico is vital to the general economy

of the country, to public interest, and, IN THE

EXERCISE OF POLICE POWER, considers necessary

to regulate, in its pertinent part, said relationships to avoid

abuses”... . See 18 Diario de Sesiones at 1724. (Translation

ours).

On the other hand, Hon. Representative Mr. Iglesias-

Silva expressed himself in support of the legislative intent

of the then P. C. 1012 when indicating:

“Mr. President: Go ahead.

Mr. Iglesias-Silva: Mr. President and Brothers of

the House: This project words off the

discrimination to which agents representatives of

import entities in Puerto Rico...

(Cont'd)

justificada, dan por terminadas sus relaciones con sus distribuidores

y agentes en Puerto Rico, tan pronto como éstos han creado un

mercado favorable para sus productos, frustrando las legitimas

expectativas e intereses de los que tan eficientemente han cumplido

con sus responsabilidades.

17

In the last months this event has occurred in

Puerto Rico, individuals that have represented

American entities for fifteen, twenty years, that

dedicated all their youth to produce and raise the

standard of a given product to abstain higher

benefits, without notice or compensations for the

years they sacrificed to create the market for said

product were ripped off, as it there performance

of many years were worthless, and it is casually

this Proposal who comes to correct this mistake

present in our Island, AND IT IS NECESSARY

AND IMPORTANT FOR US TO PROTECT

THOSE PERSONS RESIDING IN PUERTO

RICO who engage in the representation of

principals United States’ or anywhere on Earth.

On account of this I am in favor of the proposed

bill and will vote for its approval.

Mr. President: For the approval of the motion.

(The bill was subject to vote and approved).°®

(Emphasis added).

6. See also J. Soler Motors y. Kaiser Jeep Int'l, 108 D.P.R.

134, 140 (1978).

Mr. President: “Sr. Presidente: Adelante.

Sr. Iglesias Silva: Sefior Presidente y Compaiieros

| de Camara: Este Proyecto viene a conjurar un discrimen

| que se ha venido cometiendo hasta ahora con los agentes

| comisionistas de casas importadoras en Puerto Rico.

(Cont'd)

'

3

ai,

18

Subsequent amendments proposed to Act 75 approved

in 1966 reaffirmed that the Commonwealth’s purpose when

enacting said law was that only distributors within the borders

of the Commonwealth of Puerto Rico were the subjects to

be protected under the Distributor’s Act. The Senate’s

Comision de Industria y Comercio when considering P.S.

266, enacted into law as Act 105 June 23, 1966, at the Diario

de Sesiones, page 578, concluded that:

For the above stated reasons, and considering

that the proposed amendments tend to offer Puerto

Rican businessman more guarantees, impeding

(Cont'd)

En los ultimos meses ha sucedido ese fenomeno

en Puerto Rico que individuos que representaron casas

americanas por espacio de quince, veinte afios, que toda

su juventud la dedicaron a la produccion y a levantar el

standard de ese producto para obtener los mayores

beneficios, sin avisarle y sin recompensar el numero de

afios que ellos perdieron en el sacrificio para levantar

ese producto, se les quité asi como si el trabajo que

ellos realizaron durante muchos afios no valiera nada, y

es casualmente este Proyecto de Ley quien viene a

corregir esa falla que existe en nuestra Isla, y es

necesario e importante que nosotros protejamos a

los individuos residentes en Puerto Rico que se

dedican a representar casas de los Estados Unidos o de

cualquier sitio del mundo.

Por tal concepto yo estoy a favor del Proyecto y

lo votaré a favor.

Sr. Presidente: A la aprobacion de la mocién.

(Se somete a votacion el Proyecto y es aprobado.)

Sr. Presidente: Aprobado. Adelante.”

19

that Act 75’s dispositions be avoided in their reach

and original intention, your commission has the

; honor of proposing the Senate the approval of said

measure, without amendments.

Luis Mufioz Rivera

President

Rafael Picé-Secretary’

On the other hand, the Comisién de lo Judicial (Judiciary

Commission) of the House of Representatives, at page 1522,

Diario de Sesiones 1966, sustained that:

The amendments respond to the ill-timed

action of domestic and foreign manufacturers

who, without just cause, terminate their

relationship with their representatives and agents

in Puerto Rico as soon as the latter have created

a favorable local market.* (Emphasis added).

7. “Por las razones anteriormente expuestas, y por

considerar que las enmiendas que se proponen tienden

a ofrecer mayores garantias a los comerciantes

puertorriquenos, evitando que las disposiciones de

la Ley num. 75 puedan ser evadidas, en su alcance e

intencion original. Vuestra Comisién tiene el honor

de proponer al Senado la aprobacién de dicha medida,

sin enmiendas.

Respetuosamente sometido,

Luis Mujfioz Rivera,

President

Rafael Picé

Secretario

8. “Las enmiendas corresponden a la necesidad de evitar

practicas indeseables ocurridas durante los ultimos anos, mediante

(Cont'd)

20

The proposed amendment covered situations where the

distributor instead of being terminated is prejudiced by

impairment actions or omissions of the principal.

Act 75’s legislative history demonstrate that it was

enacted to protect ONLY persons residents of Puerto Rico,

doing business in Puerto Rico and thereby paying taxes to

the Commonwealth and the municipalities within its borders.

Why?, because:

The dealers Act was enacted by the Puerto

Rican Legislature to prevent the economic

exploitation of local dealers.

“The Legislature had observed that dealers

in Puerto Rico once they had established a

favorable market for a principal’s products were

particularly vulnerable to summary termination”.

(Emphasis added) Draft Line Corp. v. The Hon

Co. 781 F Supp. 841, 843.

As upheld by the Commonwealth’s Supreme Court in

San Juan Mercantile, supra, at 215, “the definition of dealer

and dealers’ contract in this section are too schematic and

require delimitation in light of the purpose of the law”’.

(Cont'd)

las cuales empresas domésticas y del exterior obligan indirectamente

a los distribuidores, concesionarios 0 agentes en Puerto Rico a

abandonar la relacion contractual una vez que han creado el mercado

local favorable.”(Emphasis Added).”

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21

Puerto Rico’s United States District Judge Fusté in Draft

Line, supra, stated in footnote 7 that

Medina & Medina (88 JTS 6162) could be read

as opening Law 75 up to a more liberal in one

which treats the economic interests of both parties

equally in all situations. But that would be

contrary to the history of the law as an

instrument for the protection of local dealers.

(Emphasis added).

Thereby, considering the plain language of the law, its

legislative record, and the statute as a whole, it is evident

why the First Circuit Court of Appeals held that the sole

purpose of Act 75 was no other than to protect dealers in

Puerto Rico, with place of business within the

Commonwealth not non resident merchants such as

Petitioner.

CONCLUSION

For the foregoing reasons, the petition for writ_of

certiorari should be denied.

Respectfully submitted,

JOSE ENRIQUE COLON-SANTANA

Attorney for Respondents

Ave. César Gonzalez #513

Hato Rey, Puerto Rico 00918

(787) 763-4111