Draft-Line, Corp., v. The Hon Company

January 6, 1993
[NOT FOR PUBLICATION]
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
No. 92-1076
DRAFT-LINE CORP.,
Plaintiff, Appellant,
v.
THE HON COMPANY,
Defendant, Appellee.
No. 92-1173
DRAFT-LINE CORP.,
Plaintiff, Appellee,
v.
THE HON COMPANY,
Defendant, Appellant.
No. 92-1653
DRAFT-LINE CORP.,
Plaintiff, Appellant,
v.
THE HON COMPANY,
Defendant, Appellee.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Jose Antonio Fuste, U.S. District Judge]
Before
Selya, Circuit Judge,
Coffin, Senior Circuit Judge,
and Cyr, Circuit Judge.
Thomas Lincoln with whom Jose A. Feliciano was on brief for
Draft-Line Corp.
John F. Malley, III for The Hon Company.
COFFIN, Senior Circuit Judge. These are cross-appeals
arising out of a diversity suit based on the Puerto Rico Dealers'
Act, Act No. 75 of June 24, 1964, as amended, 10 L.P.R.A. 278-
278d. Plaintiff, Draft-Line Corp., is a retail dealer in office
furniture; defendant, The Hon Company, is a stateside
manufacturer and supplier. After a ten year relationship, during
which time Draft-Line was Hon's sole distributor in Puerto Rico,
Hon entered into sales distribution relationships with four other
Puerto Rico dealers. Draft-Line filed a lawsuit charging that
Hon illegally terminated an exclusive dealership, i.e., without
"just cause." The company claimed $248,604 for statutory damages
measured by five years of past profits, $500,000 for loss of
investment and good will, $500,000 for loss of future profits,
and $500,000 for "[l]oss of the business which was devoted solely
to the distributorship of defendant's products."
The relevant history of the parties' relationship can be
briefly stated. In 1977 Hon began a six month trial period,
treating Draft-Line as an exclusive dealer. When the period had
expired, there was no further discussion of exclusivity, but in
fact Draft-Line was Hon's only Puerto Rico dealer for ten years.
Credit terms were the ultimate cause of the rift between supplier
and dealer. They started out at net 30 days, then liberalized to
net 60 days, until 1981. By this time Draft-Line was finding it
difficult to make payments, since the shipments from Hon often
did not arrive until after payments were due. In 1981 Hon
decided to require cash in advance of shipment. Draft-Line was
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unable to expand its sales of Hon products because of its
inability to obtain financing that would allow the handling of
larger volume. In 1987 Hon announced that it was taking on four
other dealers, none of whom were given any better terms than were
given to Draft-Line.
Over the decade from 1977 to 1987, Draft-Line's orders from
Hon (and Hon's total sales in Puerto Rico) averaged some $60,000
a year. Between the end of 1987 and 1989, after the
establishment of the four new dealerships, Hon's sales in Puerto
Rico multiplied ten-fold to $669,490 in 1989. Draft-Line, on the
other hand, after a two year hiatus in which it practically
ceased selling Hon products, resumed selling at its former rate
of $60,000 in 1990. It remains a Hon dealer.
On this record, defendant moved for summary judgment on the
grounds that, as a matter of law, it had established "just cause"
for terminating Draft-Line's exclusive relationship and that
Draft-Line had failed to identify any genuine issue of material
fact as to damages. The court's grant of summary judgment rested
solely on the complete absence of any factual showing of damages.
The court observed, moreover, that it was unlikely that Draft-
Line had been damaged. Its own sales had held up well, showing
that its customers had not been taken by the new dealers, and it
was even likely that Draft-Line would be helped by the new and
expanded exposure of Hon's products.
The court addressed what it perceived to be plaintiff's
basic position -- that Law 75 authorizes automatic damages in
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case of any violation. The provision invoked, 10 L.P.R.A.
278b(d), states that in the event of a violation, a dealer may be
indemnified "to the extent of the damages caused him . . . on the
basis of the following factors:" investment in plant and
inventory, good will (listing such determinants as age of
dealership, volume of sales, proportion of dealer's business and
of Puerto Rican market), and profits realized over the past five
years.
The court reasoned that if any part of this statute were to
be read as justifying the automatic grant of damages, the result
would be tantamount to awarding punitive damages, contrary to
Puerto Rico policy. It cited the Puerto Rico Supreme Court's
pronouncement in Marina Industrial, Inc. v. Brown Boveri Corp.,
114 D.P.R. 64, 90 (1983), that the factors above noted are "only
guidelines for the fixing of the damages and do not bind the
court to automatically award indemnity applying each and every
factor." Judge Cerezo quoted from the same source in Computec
Systems Corp. v. General Automation, Inc., 599 F. Supp. 819, 825
(D.P.R. 1984): "[The factors] are not to be imposed
automatically without their being proven and connected to the
breach of contract or detrimental act."
We conclude that the district court did not err in granting
summary judgment to defendant Hon on the ground that there was no
showing by Draft-Line that there was a genuine issue of fact
relating to damages meeting the standards of Anderson v. Liberty
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Lobby, Inc., 477 U.S. 242 (1986), and Celotex Corp. v. Catrett,
477 U.S. 317 (1986).
Hon, inexplicably, has sought to mount a cross-appeal
challenging a "finding" that it had terminated its exclusive
relationship with Draft-Line without "just cause." It was unable
to give us any authority for the proposition that a party
receiving a favorable judgment from the trial court has anything
to appeal. It is true that the court began its opinion by
referring to the termination of the exclusive nature of the
parties' relationship as improper. But at several other places
in the opinion the court made it crystal clear that it could not
reach the "just cause" issue on the record made and therefore
could not give defendant summary judgment on this issue. And its
phrasing of its final action was solely confined to damages.
This cross-appeal should never have left counsel's desk.
Affirmed. No costs.
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