Disaster Solutions LLC v. City of Santa Isabel ( 2021 )

United States Court of Appeals
For the First Circuit
No. 20-1841
DISASTER SOLUTIONS, LLC,
Plaintiff, Appellant,
v.
CITY OF SANTA ISABEL, PUERTO RICO,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Raúl M. Arias-Marxuach, U.S. District Judge]
Before
Lynch and Selya, Circuit Judges,
and McCafferty,* District Judge.
Rafael Baella-Silva and B&B Law Firm, PSC on brief for
appellant.
Johanna Emmanuelli Huertas and Pedro E. Ortiz-Alvarez, LLC on
brief for appellee.
December 17, 2021
* Of the District of New Hampshire, sitting by designation.
MCCAFFERTY, District Judge. Disaster Solutions, LLC
appeals the district court's dismissal of its breach of contract
lawsuit against the City of Santa Isabel, a Puerto Rico
municipality. On appeal, Disaster Solutions contends that the
district court erred by granting the City's motion to dismiss based
on the court's conclusion that Disaster Solutions did not allege
facts from which an enforceable contract against the City could be
found under Puerto Rico law and that the district court abused its
discretion in denying a motion to alter or amend the judgment. We
affirm.
BACKGROUND
I. Services that Disaster Solutions Provided to the City
after Hurricane Maria
The following facts, which we accept as true for purposes
of our decision, are drawn from Disaster Solutions' amended
complaint and the documents attached to it. Disaster Solutions
provides emergency services, such as damage assessments and food
and water distributions, to local governments after natural
disasters. This case arises from services that Disaster Solutions
provided to the City of Santa Isabel following Hurricane Maria,
which hit Puerto Rico in late September 2017. In its amended
complaint, Disaster Solutions alleged that it performed these
services pursuant to various documents: a "Purchase Order," three
"Resource Request Forms," and a "Letter of Authorization." It
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alleged that these documents, together, are an enforceable
contract and that the City breached this contract when it failed
to pay invoices from Disaster Solutions.
Specifically, in late September 2017 soon after
Hurricane Maria hit, the City sent Disaster Solutions a "Purchase
Order." The Purchase Order listed assorted job titles (e.g., "Task
Force Leaders" and "Finance Section Chief") and their associated
hourly labor rates. The total amount to be paid is listed as
"$TBD."
Next, during the first week of October, the City issued
"Resource Request Forms" to Disaster Solutions, which provided
additional, but still limited, details about the services that
Disaster Solutions would provide. Finally, the City sent a "Letter
of Authorization," which provided a summarized list of duties to
be undertaken by Disaster Solutions, but contained no information
about how much Disaster Solutions would be paid for providing these
services.
Between October 2 and October 12, Disaster Solutions
performed services for the City. On October 12, however, the City
directed Disaster Solutions to stop operating in the City.
Disaster Solutions complied and stopped all operations.
On October 22, 2017, Disaster Solutions invoiced the
City. The City did not make any payment on the invoice, so Disaster
Solutions sent a second invoice in November 2017. Disaster
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Solutions began charging the City past-due interest in January
2018. The City has not paid Disaster Solutions. In its amended
complaint, Disaster Solutions alleged that the total amount owed
by the City at the time was $368,879.89.
II. Disaster Solutions' Lawsuit Against the City
Disaster Solutions filed this breach of contract action
in the District of Puerto Rico in November 2018. The City moved
to dismiss the action under Federal Rule of Civil Procedure
12(b)(6). The City asserted that Disaster Solutions failed to
plead facts showing that, under Puerto Rico law, it and the City
had formed an enforceable contract. Disaster Solutions filed a
memorandum of law in opposition, arguing that the contract was
enforceable. It also asserted that Puerto Rico's governor could
suspend Puerto Rico's requirements for contracting with
municipalities during a state of emergency and referenced
emergency procurement procedures implemented by Executive Order
2017-047, which was issued by Puerto Rico's governor just prior to
Hurricane Maria's landfall.
While considering the City's motion, the district court
directed the parties to file a copy of the emergency procurement
procedures that were referenced in but not provided with Disaster
Solutions' objection. The district court also requested
supplemental briefing from the parties about whether any federal
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laws or regulations preempted Puerto Rico's requirements limiting
how contracts can be formed with municipalities.
Both the City and Disaster Solutions filed briefs in
response to the district court's direction. Disaster Solutions,
however, did not present any argument about federal preemption of
Puerto Rico's laws, and it stated that it did not have a copy of
the emergency procurement procedures requested by the court
because Disaster Solutions had not had an opportunity to conduct
discovery due to the City's motion to dismiss.
After receiving that briefing, the district court
granted the City's motion to dismiss and entered judgment against
Disaster Solutions. It reasoned that Disaster Solutions failed to
show that it met the requirements under Puerto Rico law for forming
an enforceable contract with a Puerto Rico municipality such as
the City. The court found that the Purchase Order, Resource
Request Forms, and Letter of Authorization did not constitute a
written contract, which, the district court stated, is a
requirement to form an enforceable contract between a private party
and a Puerto Rico municipality. The district court noted that
Executive Order 2017-047 did not modify these requirements.
Accordingly, the district court dismissed Disaster Solutions'
suit.
About a month after the district court's decision,
Disaster Solutions moved under Federal Rule of Civil Procedure
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59(e) for reconsideration of the district court's judgment,
offering two new arguments. First, Disaster Solutions argued that
two letters from the Puerto Rico comptroller and two different
executive orders issued by the Puerto Rico governor modified Puerto
Rico's requirements for forming contracts with municipalities,
namely, as to when those contracts must be registered with the
comptroller. In support of that argument, Disaster Solutions
attached to its motion the comptroller's letters and Puerto Rico
Executive Orders 2017-053 and 2017-072. Second, Disaster
Solutions argued that a presidential emergency declaration, the
Robert T. Stafford Disaster Relief and Emergency Assistance Act,
42 U.S.C. § 5121 et seq., and the General Service Administration's
("GSA") Disaster Purchasing Program and the Local Preparedness
Acquisition Act, see 40 U.S.C. § 502(c), preempted Puerto Rico's
requirement that contracts be in written form and be submitted to
the comptroller.
The district court denied Disaster Solutions' motion for
reconsideration. First, the district court observed that Disaster
Solutions had failed to present its argument that Puerto Rico law
had been modified by Executive Orders 2017-053 and 2017-072 and
the comptroller's letters in any prior pleading or filing. The
district court also noted that Disaster Solutions did not argue
that these documents were unavailable earlier. Thus, the district
court found that the argument was not appropriately raised in
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Disaster Solutions' motion. The district court also rejected the
argument on its merits, reasoning that even considering the
executive orders and the comptroller's letters, a written contract
registered with the comptroller was still necessary to create an
enforceable contract. The court found that Disaster Solutions'
documents still failed to meet those requirements.
Second, the district court found that Disaster
Solutions' argument that federal law preempted Puerto Rico's
requirements for forming contracts with municipalities was
likewise waived because it was not raised in response to the City's
motion to dismiss or in response to the court's request that the
parties brief whether any federal laws or regulations preempted
Puerto Rico's requirements for forming contracts with
municipalities. The district court also rejected Disaster
Solutions' preemption argument on the merits, finding that the GSA
guidelines identified by Disaster Solutions as preempting Puerto
Rico's rules in fact expressly assert that state and local
procurement regulations must be followed even when using the
Disaster Purchasing Program.
DISCUSSION
Disaster Solutions argues that the district court erred
by granting the City's Rule 12(b)(6) motion to dismiss and by
denying its Rule 59(e) motion for reconsideration. It contends
that it had a written contract with the City, that Puerto Rico's
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rules on creating enforceable contracts with municipalities are
preempted by federal law, and that Puerto Rico Executive Order
2017-053 extended the time to comply with Puerto Rico's rules on
creating enforceable contracts with municipalities after Hurricane
Maria.
I. Subject Matter Jurisdiction
As an initial matter, we briefly address the district
court's jurisdiction to hear this case by virtue of the parties'
diversity of citizenship, 28 U.S.C. § 1332(a).1 Prior to issuing
this opinion, we directed counsel for Disaster Solutions to file
an affidavit of jurisdictional facts about the citizenships of
Disaster Solutions' members, which were not pleaded in its amended
complaint. See D.B. Zwirn Special Opportunities Fund, L.P. v.
Mehrotra, 661 F.3d 124, 125-26 (1st Cir. 2011) (per curiam)
(observing that, for purposes of diversity jurisdiction, limited
liability companies are citizens of every state of which any of
its members is a citizen). Disaster Solutions timely responded to
the court's inquiry, and its response demonstrates that its two
members are Florida citizens. Therefore, the facts submitted by
Disaster Solutions are sufficient to demonstrate that complete
diversity exists in this lawsuit -- both Disaster Solutions'
1 This court has an obligation "to satisfy itself both of its
own subject-matter jurisdiction and of the subject-matter
jurisdiction of the trial court . . . ." Royal Siam Corp. v.
Chertoff, 484 F.3d 139, 142 (1st Cir. 2007).
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members are citizens of Florida and the City is a Puerto Rico
municipality. Accordingly, we turn to the substance of Disaster
Solutions' appeal.
II. District Court's Orders Granting Motion to Dismiss &
Denying Motion for Reconsideration
We review the grant of a motion to dismiss de novo.
Harry v. Countrywide Home Loans, Inc., 902 F.3d 16, 18 (1st Cir.
2018). In doing so, "we accept as true all well-pleaded facts
alleged in the complaint and draw all reasonable inferences
therefrom in the pleader's favor." Alston v. Spiegel, 988 F.3d
564, 571 (1st Cir. 2021) (quoting Santiago v. Puerto Rico, 655
F.3d 61, 72 (1st Cir. 2011)). We review for abuse of discretion
the denial of a motion to alter or amend judgment -- i.e., for
reconsideration -- under Rule 59(e). Negrón-Almeda v. Santiago,
528 F.3d 15, 25 (1st Cir. 2008). In short, the district court (A)
did not err in finding that Disaster Solutions failed to plead
facts sufficient to demonstrate the existence of an enforceable
contract against the City, and (B) did not abuse its discretion by
declining to revisit its decision in light of Disaster Solutions'
Rule 59(e) motion.
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A. Motion to Dismiss: Existence of Written Contract
Under Puerto Rico law,2 to establish that an enforceable
contract exists, a plaintiff must show (1) that the contracting
parties consented to enter the contract; (2) "[a] definite object
which may be the subject of the contract"; and (3) "[t]he cause
for the obligation which may be established." See P.R. Laws Ann.
tit. 31, § 3391.
Contracts between private parties and Puerto Rico
municipalities, however, are not enforceable unless additional
requirements are met. See Las Marías Reference Lab'y Corp. v.
Mun. of San Juan, 159 P.R. Dec. 868, 2003 PR Sup. LEXIS 133, at *6
(2003). As relevant here, a contract between a Puerto Rico
municipality and a private party must be in writing and must be
sent to Puerto Rico's comptroller within 15 days of the contract's
execution. See P.R. Laws Ann. tit. 2, § 97; P.R. Laws Ann. tit.
21, § 4354 ("No disbursement whatsoever shall be authorized with
2 Both parties present their arguments on the assumption that
Puerto Rico law on contract formation in general applies to this
case. We likewise assume that Puerto Rico's law on contract
formation, in general, applies in this case. See New Ponce
Shopping Ctr., S.E. v. Integrand Assurance Co., 86 F.3d 265, 267
(1st Cir. 1996) ("Generally, where the parties ignore choice of
law issues on appeal, we indulge their assumption that a particular
jurisdiction's law applies.").
Additionally, Puerto Rico enacted a new Civil Code that became
effective November 28, 2020. Because the alleged contract was
formed prior to the effective date of the new Civil Code, we apply,
as the parties have, Puerto Rico law as it was under the 1930 Civil
Code.
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regard to contracts without the evidence that the contract was
sent to the Office of the Comptroller of Puerto Rico as provided
in 97 et seq. of Title 2 and its regulations."); Ocasio
Carrasquillo v. Rosa Berríos, 21 P.R. Offic. Trans. 29, 47 (1988).
"[M]unicipal contracts that are not sent to the [Puerto Rico
comptroller] are not enforceable because these are not deemed
legally perfected." Las Marías, 2003 PR Sup. LEXIS 133, at *8.
These rules are "rigorously applied," and "it is presumed that the
parties that contract with a municipality know that they need to
conduct themselves in keeping with these specifications." Id.There are no exceptions, and equitable remedies are inapplicable.
See id. at *8, *14.
The district court correctly found that the documents
Disaster Solutions filed do not constitute a written contract. As
the district court explained in its order dismissing Disaster
Solutions' suit, the documents do not establish a complete contract
reducing agreed-upon terms between the City and Disaster Solutions
into writing. See P.R. Laws Ann. tit. 31, § 3391. In particular,
Disaster Solutions asserts that the documents, read together,
contain all the terms necessary to form a valid written contract,
but it did not plead facts showing an agreement between it and the
City to treat the documents in that manner. For example, the
Letter of Authorization, which was signed by the City's mayor but
by no one representing Disaster Solutions, does not indicate that
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the incomplete terms from the Purchase Order and Resource Request
Forms were accepted by the City and supplemented by the Letter of
Authorization. Likewise, neither the Purchase Order nor the
Resource Request Forms reference the Letter of Authorization.
B. Motion for Reconsideration: Federal Preemption &
Modification of Rules by Puerto Rico Executive
Order
To evade the fact that it had no written contract with
the City, Disaster Solutions argues that the declaration of a
natural disaster under the Stafford Act and the consequently-
invoked Disaster Purchasing Program preempt Puerto Rico's contract
law. Similarly, it contends that Executive Order 2017-053, issued
by the governor of Puerto Rico, and an associated letter from the
comptroller modified Puerto Rico's rules on contracting with
municipalities. Disaster Solutions, however, concedes that it
invoked these arguments for the first time in a post-judgment
motion for reconsideration under Rule 59(e).
A motion for reconsideration under Rule 59(e) should be
granted only if the district court's decision "evidenced a manifest
error of law, if there is newly discovered evidence, or in certain
other narrow situations." Biltcliffe v. CitiMortgage, Inc., 772
F.3d 925, 930 (1st Cir. 2014). However, such a motion is not a
place "for a party to undo its own procedural failures" and a party
should not be allowed to "advance arguments that could and should
have been presented to the district court prior to judgment."
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Iverson v. City of Bos., 452 F.3d 94, 104 (1st Cir. 2006) (quoting
Aybar v. Crispin-Reyes, 118 F.3d 10, 16 (1st Cir. 1997)).
Accordingly, arguments that could have been but were not presented
to the district court prior to judgment are not preserved for
appeal. Id. at 104.
As noted, Disaster Solutions does not dispute that it
failed to raise its preemption argument before the district court
prior to its motion to alter or amend judgment. Moreover, the
district court directed the parties to submit arguments about
whether federal law and regulations preempt Puerto Rico's laws on
contracts with municipalities. Even with that additional
opportunity, Disaster Solutions failed to present its preemption
argument prior to its post-judgment motion under Rule 59(e).
Disaster Solutions, therefore, waived the preemption argument it
presents to this court on appeal. See Biltcliffe, 772 F.3d at
930; Iverson, 452 F.3d at 104.
Disaster Solutions also argues that Executive Order
2017-053 and the associated comptroller's letter operate to extend
the time to comply with the requirement that contracts be submitted
to the comptroller. This argument too was first presented in the
post-judgment Rule 59(e) motion.3 Disaster Solutions attached to
3 Disaster Solutions referenced Executive Order 2017-053 in
passing in its response to the district court's request for
supplemental briefing, but Disaster Solutions did not develop the
argument as presented in its motion for reconsideration, did not
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its Rule 59(e) motion the executive order and letter that
ostensibly support this argument, but Disaster Solutions does not
explain why it could not have submitted these public documents
earlier. Disaster Solutions had two opportunities to do so: in
its objection to the City's motion to dismiss and in its response
to the district court's directive that the parties supplement their
briefing with the emergency procurement procedures. Thus, as with
its preemption argument, Disaster Solutions waived this argument
by failing to present it prior to its motion for reconsideration.
See Biltcliffe, 772 F.3d at 930; Iverson, 452 F.3d at 104.
Finally, Disaster Solutions contends that we should
overlook its waivers because neither the district court nor this
court may ignore clear errors. In exceptional circumstances, a
party's failure to timely offer a meritorious argument in a civil
suit can be excused if the district court's error was plain --
that is, the error was "clear or obvious," the error affected the
appellant's "substantial rights," and the error "seriously
impaired the fairness, integrity, or public reputation of judicial
proceedings." Fothergill v. United States, 566 F.3d 248, 251-52
attach a translated copy of Executive Order 2017-053, and did not
reference the comptroller's letters. In any event, Disaster
Solutions acknowledged in its response to the supplemental
briefing request that Executive Order 2017-053 required contracts
to be in writing notwithstanding any other putative modification
to Puerto Rico's requirements for forming contracts.
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(1st Cir. 2009); see also Acevedo-Garcia v. Monroig, 351 F.3d 547,
570 (1st Cir. 2003).4 Disaster Solutions, however, does not show
that the district court clearly or obviously erred in granting the
City's motion to dismiss. See Town of Norwood v. New Eng. Power
Co., 202 F.3d 408, 417 (1st Cir. 2000) ("[I]t is normally not error
at all, let alone plain error, for a court to ignore a possible
claim or defense that a party fails to proffer and pursue."); cf.
Amcel Corp. v. Int'l Exec. Sales, Inc., 170 F.3d 32, 35 (1st Cir.
1999) (indicating that the plain error doctrine should generally
not be applied when the party with the burden of proof fails to
pursue a pertinent argument that would advance their cause). And,
the district court's denial of Disaster Solutions' Rule 59(e)
motion on waiver grounds was, as discussed above, consistent with
First Circuit caselaw and thus well within the district court's
discretion. See Biltcliffe, 772 F.3d at 930; Iverson, 452 F.3d at
104.
CONCLUSION
For the foregoing reasons, we affirm the district
court's dismissal of Disaster Solutions' suit under Rule 12(b)(6)
and its denial of Disaster Solutions' post-judgment motion for
reconsideration under Rule 59(e).
Disaster Solutions incorrectly points to Federal Rule of
4
Civil Procedure 54 as the source of the plain error doctrine.
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