DocketNumber： 94-1067
Filed Date： 12/14/1994
Status： Precedential
Modified Date： 3/3/2016
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________
No. 94-1067
CASAS OFFICE MACHINES, INC.,
Plaintiff, Appellee,
v.
MITA COPYSTAR AMERICA, INC., ET AL.,
Defendants, Appellants.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Gilberto Gierbolini, U.S. District Judge] ___________________
____________________
Before
Torruella, Circuit Judge, _____________
Campbell, Senior Circuit Judge, ____________________
and Boudin, Circuit Judge. _____________
____________________
Ricardo F. Casellas, with whom Mario Arroyo, and Fiddler, _____________________ _____________ ________
Gonzalez & Rodriguez, were on brief for appellants. ____________________
Luis A. Melendez-Albizu, with whom Luis Sanchez-Betances, Sanchez ________________________ _____________________ _______
Betances & Sifre, Nilda M. Cordero de Gomez, and Jorge E. Perez-Diaz, ________________ _________________________ ___________________
Federal Litigation Division, United States Department of Justice, were
on brief for appellee.
____________________
December 14, 1994
____________________
CAMPBELL, Senior Circuit Judge. Mita Copystar of _____________________
America, Inc. ("Mita") appeals from the district court's
order granting summary judgment and issuing a permanent
injunction in favor of Casas Office Machines, Inc. ("Casas").
The action began when Casas sued Mita and two fictitious
defendants, John Doe and Richard Roe, in the Superior Court
of Puerto Rico, San Juan Part. Organized under the laws of
California and with its principal place of business in New
Jersey, Mita removed the action to the United States District
Court for the District of Puerto Rico. After removal, Casas,
by an amendment to its complaint, replaced the fictitious
defendants with two named defendants, Caguas Copy, Inc. and
Oficentro J.P., Inc., which, like Casas, are Puerto Rico
corporations. Complete diversity of citizenship between the
parties was thus destroyed, although this fact was not called
to the district court's attention at the time. The district
court proceeded to deny Mita's motions to dismiss and for
summary judgment, and it allowed Casas's motion for a
permanent injunction enjoining Mita from impairing a contract
entered into with Casas. Now, for the first time on appeal,
Mita points out the jurisdictional problem caused by the
addition of the nondiverse parties. Mita asks us to vacate
the judgment below and order the district court to remand the
action to the Superior Court of Puerto Rico. Mita also
attacks the district court's decision on the merits, arguing
-2-
that summary judgment was improper and that the district
court erred in granting the permanent injunction.
I.
Incorporated in Puerto Rico, Casas sells and
distributes office and photocopying equipment in that
Commonwealth. In 1983, Casas entered into an agreement with
Mita, a supplier of office and photographic equipment, to
distribute Mita products in Puerto Rico. As noted, Mita is a
California corporation with its principal place of business
in New Jersey. Following a period of strained business
relations, Casas and Mita executed a second agreement in 1989
(the "1989 Agreement") granting Casas the exclusive right to
distribute Mita's products in the "Greater San Juan" area.
Paragraph 5 of the 1989 Agreement, however, provided that
Casas's inability to meet or exceed 85% of a set sales quota
would result in termination of the exclusivity provisions of
the contract. Asserting that Casas had failed to achieve the
85% threshold, Mita terminated Casas's exclusive distribution
rights but retained Casas as a distributor and
designated two new distributors in the "Greater San Juan"
area.
Casas responded on February 1, 1991, by suing Mita,
John Doe, and Richard Roe1 in the Superior Court of Puerto
____________________
1. Paragraph 3 of Casas's complaint said:
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Rico, San Juan Part. Casas alleged that (1) Mita had
deprived Casas of its exclusive distribution rights without
just cause in violation of P.R. Laws Ann. tit. 10, 278-
278d 91976) (referred to in the complaint and hereinafter as
"Law 75"), (2) defendants had conspired to deprive Casas of
its right to sell and distribute Mita products, (3) Mita had
impaired Casas's exclusive distribution agreement, and (4)
defendants had intentionally interfered with Casas's
contractual relationship with Mita. Casas sought preliminary
and permanent injunctive relief, as well as monetary damages.
Alleging the existence of diversity jurisdiction,
Mita removed the action to the United States District court
for the District of Puerto Rico on March 6, 1991.
Thereafter, Casas amended its complaint twice. An amendment
____________________
Codefendants John Doe and Richard Roe are
fictitious names used to refer to
defendants whose names are unknown at
present. Said defendants are the natural
persons and/or corporate and/or judicial
entities who together with MITA have
conspired, with knowledge of the
contractual relationship between MITA and
Casas, to deprive the latter of said
contractual relationship, directly and
indirectly interfering therewith, causing
the damages hereinafter itemized. To __
plaintiff's best knowledge and _________________________________________
understanding, John Doe and Richard Roe _________________________________________
are citizens and residents of the _________________________________________
Commonwealth of Puerto Rico and are also _________________________________________
liable to plaintiff pursuant to the _________________________________________
allegations mentioned hereinafter. _________________________________
(emphasis added).
-4-
filed on March 9, 1992, added a fifth count,2 and eliminated
Casas's request for a preliminary (but not a permanent)
injunction. By a second motion to amend, brought on May 14,
1992, Casas sought to replace the fictitious defendants with
Caguas Copy, Inc. ("Caguas") and Oficentro J.P., Inc.
("Oficentro") the corporations that Mita had designated as
new distributors in the Greater San Juan area upon
terminating Casas's exclusive distribution rights. Paragraph
3 of Casas's Second Amended Complaint read:
Codefendants Caguas Copy, Inc. and _________________________________________
Oficentro J.P., Inc. are, upon _________________________________________
information and belief, corporate _________________________________________
entities organized pursuant to the laws _________________________________________
of the Commonwealth of Puerto Rico, with _________________________________________
Principal offices located at Suite B-3, _________________________________________
Goyco Street # 10, Caguas, P.R., and _________________________________________
Diamante Street # 24, Villa Blanca, _________________________________________
Caguas, P.R., respectively. Said ______________________________
defendants are the corporate and/or
judicial entities who together with MITA
have conspired, with knowledge of the
contractual relationship between MITA and
Casas, to deprive the latter of said
contractual relationship, directly and
indirectly interfering therewith, causing
the damages hereinafter itemized. To __
plaintiff's best knowledge and _________________________________________
understanding, Caguas Copy, Inc. and _________________________________________
Oficentro J.P., Inc. are citizens and _________________________________________
residents of the Commonwealth of Puerto _________________________________________
Rico and are also liable to plaintiff ____
pursuant to the allegations mentioned
hereinafter.
____________________
2. Count Five alleged that defendants had illicitly and
tortiously contracted for the distribution of Mita products
in Puerto Rican territories in which Mita had granted Casas
the exclusive right to distribute its products.
-5-
(emphasis added). Four days later, on May 18, 1992, Casas
moved the district court for an expedited review of its
second motion to amend its complaint. Such review was
necessary, said Casas, because Oficentro was under the
protection of the United States Bankruptcy Court for the
District of Puerto Rico which had ordered that all
creditors file their proof of claims on or before June 8,
1992 and Casas could not file a proof of claim until its
motion to amend was granted. The district court allowed
Casas's second amendment in early June 1992.
In the meantime, Mita had moved for summary
judgment on February 12, 1992. It argued primarily that (1)
Mita did not impair its contractual relationship with Casas
because it merely enforced its rights under the terms of the
1989 Agreement, (2) even if it were found that Mita impaired
its contractual relationship with Casas, Mita had just cause
to do so, and (3) Casas's suit was barred by the equitable
doctrine of laches. On March 16, 1992, Casas opposed Mita's
motion for summary judgment, and brought a cross-motion for
partial interlocutory summary judgment on its Law 75 claims
(Counts One and Three), renewing its request for a permanent
injunction.3 Mita, in turn, filed, on April 13, 1992, an
____________________
3. In its original complaint, Casas had requested the
district court to
issue a permanent injunction against
Mita, ordering it [(1)] to cease and
-6-
opposition to Casas's cross-motion for summary judgment in
which it maintained, inter alia, that (1) permanent _____ ____
injunctive relief is not available under Law 75, and (2)
ordering permanent injunctive relief in this case would be
unconstitutional. Finally, in a separate motion, filed on
June 4, 1992, Mita sought to dismiss Casas's complaint on the
grounds that Casas had engaged in a fraud upon the court.
The United States magistrate judge reviewed Mita's
motions to dismiss and for summary judgment, as well as
Casas's cross-motion for summary judgment. In a report and
recommendation issued on September 2, 1993, the magistrate
judge concluded that (1) Casas had not committed fraud on the
court, (2) Casas was not barred by the doctrine of laches
from pursuing its claims under Law 75, (3) Mita did not have
just cause under Law 75 to terminate Casas's exclusive
distribution rights because it failed to demonstrate that the
quota provision in the 1989 Agreement was reasonable at the
____________________
desist from continuing with the acts
which constitute impairment of the terms
of the distribution relationship existing
between it and Casas, . . . [(2)] to
abstain from appointing, choosing,
designating or arranging for other
additional distributors and/or in
substitution of Casas[,] and . . . [(3)]
to abstain from terminating and/or
altering the distribution relationship
existing between both parties or
performing any act or omission whatsoever
in impairment thereof, all pursuant to
the provisions of Law 75.
-7-
time of Casas's nonperformance, (4) a permanent injunction
may be ordered under Law 75, and (5) Mita had impaired its
contractual relationship with Casas. Consequently, the
magistrate judge recommended that the district court deny
Mita's motions to dismiss and for summary judgment, and grant
Casas's cross-motion for summary judgment.
In its opinion and order filed on November 18,
1993, the district court adopted all of the magistrate
judge's recommendations, thereby granting Casas's cross-
motion for summary judgment on its Law 75 claims (Counts One
and Three).4 Casas Office Machines v. Mita Copystar ________________________ ______________
Machines, 847 F. Supp. 981, 983 (D.P.R. 1993). In a judgment ________
entered the same day, the district court denied Mita's
motions to dismiss and for summary judgment, and granted
Casas's motion for an injunction permanently enjoining Mita
from impairing the 1989 Agreement without just cause.5 ____________________
Mita, pursuant to 28 U.S.C. 1292(a)(1) (1988),6 appeals
____________________
4. The district court did not decide Counts Two, Four, and
Five of Casas's complaint, and, to our knowledge, they remain
unresolved.
5. The district court emphasized in its opinion and order
that it was not placing Mita in involuntary servitude.
According to the district court, Mita could impair its
contractual relationship with Casas in the future if it could
demonstrate just cause for doing so.
6. Section 1292(a)(1) provides in relevant part:
[T]he courts of appeals shall have
jurisdiction of appeals from:
-8-
from this interlocutory decision. Mita argues principally:
(1) that diversity jurisdiction was defeated when Caguas and
Oficentro were substituted for the fictitious defendants; (2)
that the district court improperly entered summary judgment;
and (3) that the district court improperly issued a permanent
injunction.
II.
Before we reach the issue of subject matter
jurisdiction, we respond to Casas's challenge to our
appellate jurisdiction. Casas maintains that, under Carson ______
v. American Brands, Inc., 450 U.S. 79, 101 S. Ct. 993, 67 L. ______________________
Ed. 2d 59 (1981), jurisdiction under 1292(a)(1) does not
exist unless the appellant demonstrates that the district
court's interlocutory order "might have a serious, perhaps
irreparable, consequence, and that the order can be
effectually challenged only by immediate appeal." 450 U.S.
at 84 (internal quotations omitted). According to Casas,
Mita has failed to satisfy these requirements. Casas's
argument is not well taken.
____________________
(1) Interlocutory orders of
the district courts of the
United States . . ., or of the
judges thereof, granting,
continuing, modifying, refusing
or dissolving injunctions, or
refusing to dissolve or modify
injunctions, except where a
direct review may be had in the
Supreme Court.
-9-
The Supreme Court has said that 1292(a)(1)
provides appellate jurisdiction over two types of orders:
those "that grant or deny injunctions and [those] that have
the practical effect of granting or denying injunctions and
have ``serious, perhaps irreparable, consequence[s].'"
Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, __________________________ _______________
287-88, 108 S. Ct. 1133, 99 L. Ed. 2d 296 (1988) (quoting
Carson, 450 U.S. at 84). Thus, courts of appeals, in ______
determining whether they have appellate jurisdiction under
1292(a)(1), must, in the first instance, decide "``whether the
order appealed from specifically [granted or] denied an
injunction or merely had the practical effect of doing so.'"
Morgenstern v. Wilson, 29 F.3d 1291, 1294 (8th Cir. 1994) ___________ ______
(quoting Kausler v. Campey, 989 F.2d 296, 298 (8th Cir. _______ ______
1993)). If the interlocutory order in question "expressly
grants or denies a request for injunctive relief, the Carson ______
requirements need not be met and the order is immediately
appealable as of right under 1292(a)(1)." Morgenstern, 29 ___________
F.3d at 1294-95 (observing that the majority of the circuits
agree with this principle, and citing cases); see Feinstein ___ _________
v. Space Ventures, Inc., 989 F.2d 49, 49 n.1 (1st Cir. 1993) ____________________
(accepting appellate jurisdiction under 1292(a)(1), and
noting the distinction between "an interlocutory order which
has the incidental effect of denying [or granting] injunctive
relief" and an order that "clearly and directly grant[s] a[n]
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. . . injunction"). On the other hand, "if an order merely
has the practical effect of granting or denying an
injunction, the Carson . . . test[s] must be satisfied." ______
Morgenstern, 29 F.3d at 1295. ___________
Here, the district court's order expressly granted
Casas's motion for an injunction barring Mita from impairing
the 1989 Agreement without just cause. Casas, 847 F. Supp. _____
at 990. Accordingly, for the reasons discussed, the district
court's order was immediately appealable as of right, and
Mita was not required to satisfy the Carson criteria. Thus, ______
we have appellate jurisdiction. We now consider our subject
matter jurisdiction.
III.
Mita argues that there is no subject matter
jurisdiction in federal court because complete diversity of
citizenship was destroyed when the fictitious defendants were
replaced with Caguas and Oficentro after removal. Although
Mita raises this issue for the first time on appeal, we are
obliged to address it because a defense of lack of
jurisdiction over the subject matter is expressly preserved
against waiver by Fed. R. Civ. P. 12(h)(3). E.g., Halleran ____ ________
v. Hoffman, 966 F.2d 45, 47 (1st Cir. 1992). Casas responds _______
that, diversity jurisdiction, once established at the time of
removal, could not be lost by replacement of the fictitious
defendants with Caguas and Oficentro, which Casas describes
-11-
as nondiverse, dispensable parties. Alternatively, if ___________
jurisdiction was indeed defeated by the substitution of
Caguas and Oficentro after removal, Casas asks us to restore
it, nunc pro tunc, by dismissing the diversity-spoiling _______________
defendants without prejudice. _________________
A.
This case involves no federal question.
Jurisdiction stands or falls upon diversity of citizenship.
It has long been settled that a "lack of ``complete diversity'
between the parties deprives the federal courts of
jurisdiction over the lawsuit." Sweeney v. Westvaco Co., 926 _______ ____________
F.2d 29, 41 (1st Cir.) (citing Strawbridge v. Curtiss, 7 U.S. ___________ _______
(3 Cranch) 267, 2 L. Ed. 435 (1806)), cert. denied, 112 S. _____________
Ct. 274, 116 L. Ed. 2d 226 (1991). There was complete
diversity between the parties on March 6, 1991, when Mita
removed the case to federal court: Casas is a Puerto Rico
corporation, and Mita was incorporated in California and
maintains its principal place of business in New Jersey.
That the fictitious defendants, John Doe and Richard Roe,
might reside in Puerto Rico as suggested by Casas in the
original complaint was properly disregarded under 28
U.S.C. 1441(a) (1988), which provides in relevant part:
"For purposes of removal . . ., the citizenship of defendants
sued under fictitious names shall be disregarded." After
removal, however, Casas replaced the fictitious defendants
-12-
with Caguas and Oficentro, which were clearly identified as
Puerto Rico corporations, like Casas itself. The issue is
whether this substitution, which unquestionably destroyed
complete diversity, also defeated federal subject matter
jurisdiction. We hold that it did.
Casas argues that as diversity jurisdiction was
established at the commencement of the proceeding, it was not
later defeated by the mere naming of the fictitious parties,
who were dispensable, not indispensable. E.g., Freeport- ____ _________
McMoRan Inc. v. K N Energy, Inc., 498 U.S. 426, 428, 111 S. _____________ ________________
Ct. 858, 112 L. Ed. 2d 951 (1991) (per curiam) (holding that,
because there was complete diversity when the action
commenced, diversity jurisdiction was not defeated by the
addition of a nondiverse plaintiff, which was not
indispensable); Wichita R.R. & Light Co. v. Public Util. __________________________ _____________
Comm'n, 260 U.S. 48, 54, 43 S. Ct. 51, 67 L. Ed. 124 (1922). ______
Under the general principle reflected in the above cases, the
existence of federal jurisdiction here might seem to depend
simply upon whether Caguas and Oficentro were dispensable or
indispensable parties. But "[f]ederal courts are courts of
limited jurisdiction, and . . . may exercise only the
authority granted to them by Congress." Commonwealth of ________________
Mass. v. Andrus, 594 F.2d 872, 887 (1st Cir. 1979); e.g., _____ ______ ____
Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 374, 98 __________________________ ______
S. Ct. 2396, 57 L. Ed. 2d 274 (1978) ("The limits upon
-13-
federal jurisdiction, whether imposed by the Constitution or
by Congress, must be neither disregarded nor evaded.").
Thus, specific legislative directives override the general
principles announced in these cases, e.g., 28 U.S.C. ____
1367(b) (Supp. V 1993) (supplemental jurisdiction).7 Here,
as we explain below, Congress has indicated that federal
diversity jurisdiction is defeated so long as, after removal,
fictitious defendants are replaced with nondiverse, named
defendants, regardless of whether they happen to be
dispensable or indispensable to the action.
As part of the Judicial Improvements and Access to
Justice Act of 1988, Pub. L. No. 100-702, 102 Stat. 4669
(1988), Congress enacted 28 U.S.C. 1447(e) (1988), which
provides:
If after removal the plaintiff seeks
to join additional defendants whose
joinder would destroy subject matter
jurisdiction, the court may deny joinder,
____________________
7. Under 28 U.S.C. 1367(b), for instance, federal courts,
sitting in diversity, "shall not have supplemental
jurisdiction . . . over claims by plaintiffs against persons
made parties under Rule 14, 19, 20, or 24 of the Federal
Rules of Civil Procedure . . . when exercising supplemental
jurisdiction over such claims would be inconsistent with the
jurisdictional requirements of section 1332." This statute,
which refers expressly to both compulsory and permissive
joinder, "does not allow joinder of additional parties if to
do so would defeat the rule of complete diversity." Charles
A. Wright, Law of Federal Courts 9, at 38 (1994). Thus, _____________________
where Congress has specifically so provided, the addition of
nondiverse, dispensable parties will defeat diversity
jurisdiction, even if such jurisdiction has already been
established at the start of the federal proceeding.
-14-
or permit joinder and remand the action
to the State court.
Although this provision relates expressly to joinder, the
legislative history to the Judicial Improvements and Access
to Justice Act of 1988 indicates that 1447(e) applies also
to the identification of fictitious defendants after removal.
H.R. Rep. No. 889, 100th Cong., 2d Sess. 72-73 (1988),
reprinted in 1988 U.S.C.C.A.N. 5982, 6033 ("Th[e] provision ____________
also helps to identify the consequences that may follow
removal of a case with unidentified fictitious defendants.");
e.g., Lisa Combs Foster, Note, Section 1447(e)'s ____ ___________________
Discretionary Joinder and Remand: Speedy Justice or Docket _____________________________________________________________
Clearing?, 1990 Duke L.J. 118, 121, 132 ("[I]f after removal _________
the plaintiff identifies the Doe defendant as a nondiverse
party, then pursuant to section 1447(e) the court may either
deny joinder or permit joinder and remand.").
Federal courts and commentators have concluded
that, under 1447(e), the joinder or substitution of
nondiverse defendants after removal destroys diversity
jurisdiction, regardless whether such defendants are __________
dispensable or indispensable to the action. E.g., Yniques v. ____ _______
Cabral, 985 F.2d 1031, 1034 (9th Cir. 1993); Washington ______ __________
Suburban Sanitary Comm'n v. CRS/Sirrine, Inc., 917 F.2d 834, ________________________ _________________
835 (4th Cir. 1990); Rodriguez by Rodriguez v. Abbott Lab., ______________________ ___________
151 F.R.D. 529, 533 n.6 (S.D.N.Y. 1993); Vasilakos v. _________
Corometrics Medical Sys., Inc., No. 93-C-5343, 1993 WL _________________________________
-15-
390283, at *1-2 (N.D. Ill. 1993); Righetti v. Shell Oil Co., ________ _____________
711 F. Supp. 531, 535 (N.D. Cal. 1989); David D. Siegel,
Commentary on 1988 and 1990 Revisions of Section 1441, in 28 ______________________________________________________ __
U.S.C.A. 1441 (1994) (observing that when a plaintiff moves
to substitute a nondiverse, named defendant for a fictitious
defendant, "the plaintiff will meet the new subdivision (e)
of 1447, which leaves it entirely to the court to determine
whether to refuse the addition and keep the case or allow the
addition and then remand the case for want of federal
jurisdiction (caused by the loss of diversity)"); Foster,
Note, supra, at 121 ("Significantly, section 1447(e) does not _____
require the court, in considering whether joinder of a
nondiverse party should be permitted to deprive the court of
jurisdiction, to determine whether the party is
``indispensable' to the action according to Federal Rule
19(b). Unlike the approach under the Federal Rules, joinder
of a non-indispensable party can deprive the court of
jurisdiction."). We find these decisions persuasive. We
conclude that diversity jurisdiction was lost in the present
case when the court allowed Casas to identify the fictitious
defendants as Caguas and Oficentro.
Section 1447(e)'s legislative history supports this
conclusion. In enacting 1447(e), Congress considered a
proposal that would have allowed the joinder of certain
nondiverse parties and, at the same time, permitted the
-16-
district court, in its discretion, to keep the case and
decide it on the merits. H.R. Rep. No. 889, 100th Cong., 2d
Sess. 72-73 (1988), reprinted in 1988 U.S.C.C.A.N. 5982, _____________
6033-34 ("The most obvious alternative [to 1447(e)] would
be to provide that ``the court may deny joinder, dismiss the
action, or permit joinder and either remand to the state
court or retain jurisdiction.'"); see David D. Siegel, ___
Commentary on 1988 Revision of Section 1447, in 28 U.S.C.A. ___________________________________________ __
1447 (1994); Foster, Note, supra, at 137-38. Congress _____
rejected the proposal, however, because it would have
represented a "departure from the traditional requirement of
complete diversity," and "provide[d] a small enlargement of
diversity jurisdiction." H.R. Rep. No. 889, 100th Cong., 2d
Sess. 72-73 (1988), reprinted in 1988 U.S.C.C.A.N. 5982, _____________
6033-34. We think that, had Congress decided that federal
courts could retain jurisdiction over cases in which
plaintiffs joined or substituted dispensable, nondiverse
defendants after removal, it would have made that plain in
1447(e).
This is not to say that it is unimportant whether a
nondiverse defendant whom a plaintiff seeks to join or
substitute after removal is dispensable or indispensable to
the action. If the defendant is indispensable, the district
court's choices are limited to denying joinder and dismissing
the action pursuant to Fed. R. Civ. P. 19, or else allowing
-17-
joinder and remanding the case to the state court pursuant to
1447(e). See Yniques, 985 F.2d at 1035. If, on the other ___ _______
hand, the defendant is dispensable, the district court has
the options, pursuant to 1447(e), of denying joinder and
continuing its jurisdiction over the case, or permitting
joinder and remanding the case to state court.8 Id. A ___
district court may not, however, do what the court below did
here, that is, substitute the nondiverse, named defendants
for the fictitious defendants thereby defeating federal
diversity jurisdiction and then continue to deal with the
merits of the dispute.
B.
Although diversity jurisdiction was defeated when
Caguas and Oficentro were substituted for the fictitious
defendants after removal, jurisdiction could be restored
retroactively in appropriate circumstances, if Caguas and
Oficentro were dispensable parties, by dismissing them from
the action. In Newman-Green, Inc. v. Alfonzo-Larrain, 490 __________________ _______________
U.S. 826 109 S. Ct. 2218, 104 L. Ed. 2d 893 (1989), the
Supreme Court held that federal courts of appeals have the
authority like that given to the district courts in Fed.
____________________
8. "[A] district court, when confronted with an amendment to
add a nondiverse nonindispensable party, should use its
discretion in deciding whether to allow that party to be
added." Hensgens v. Deere & Co., 833 F.2d 1179, 1182 (5th ________ ___________
Cir. 1987) (describing factors that district courts may
consider in deciding whether or not to permit the addition of
dispensable, nondiverse parties).
-18-
R. Civ. P. 21 to dismiss dispensable, nondiverse parties ___________
to cure defects in diversity jurisdiction. 490 U.S. at 832-
38. Casas asks us to exercise this power here by dismissing
Caguas and Oficentro without prejudice. _________________
Courts may not, of course, dismiss indispensable _____________
parties from an action in order to preserve federal
jurisdiction. But, contrary to Mita's assertions, we
conclude that Caguas and Oficentro are dispensable parties.
Mita's principal contention is that Casas is barred by the
doctrine of judicial estoppel from asserting that Caguas and
Oficentro are dispensable parties because Casas, in a motion
requesting relief from the automatic stay, represented to the
United States Bankruptcy Court for the District of Puerto
Rico that Oficentro is an indispensable party. In that
motion, Casas argued in the bankruptcy court that:
2. Creditor CASAS wishes to duly
serve process, litigate and try the above
mentioned lawsuit in the U.S. District
Court against Debtor [(Oficentro)], and
the other defendants [(Mita and Caguas)]
before a jury. If CASAS is not allowed ________________________
to serve process and litigate its claims _________________________________________
against Debtor, CASAS would be _________________________________________
effectively precluded from obtaining _________________________________________
recovery under its tortious interference _________________________________________
and contract in prejudice of third _________________________________________
party's claims, due to a lack of an _________________________________________
indispensable party. Concomitantly, _________________________________________
CASAS' constitutional right to have a _________________________________________
trial by jury on all its legally tenable _________________________________________
claims would be impaired. ________________________
(emphasis added).
-19-
While this assertion is manifestly at odds with
Casas's present position, we are disinclined under all the
circumstances to find that it created an estoppel. Judicial
estoppel is a judge-made doctrine designed to prevent a party
who plays "fast and loose with the courts" from gaining
unfair advantage through the deliberate adoption of
inconsistent positions in successive suits. See Scarano v. ___ _______
Central R.R. Co., 203 F.2d 510, 513 (3d Cir. 1953). Here, it ________________
does not appear that Casas succeeded in gaining any advantage
as a result of its earlier inconsistent statement made to the
bankruptcy court. While the court granted Casas's motion to
lift the stay, it did so on grounds other than Casas's
representation that Caguas and Oficentro were indispensable.
Mita itself does not allege that it relied on or was
prejudiced by the statement in any way. There is the further
fact that Mita has played as "fast and loose" as has Casas
with the issue of subject matter jurisdiction. It was Mita
the party now seeking remand to the Commonwealth courts
that removed the case here. After the fictitious parties
were identified, it made no effort to remand. Only after the
district court ruled against it did Mita decide that federal
jurisdiction was a mistake. We conclude that Casas is not
estopped from taking the position it adopts now. See Milgard ___ _______
Tempering, Inc. v. Selas Corp., 902 F.2d 703, 716-17 (9th _______________ ___________
-20-
Cir. 1990); 18 Charles Wright et al., Federal Practice and _____________________
Procedure 4477, at 781 (Supp. 1994).9 _________
Mita next argues that Caguas and Oficentro are
indispensable parties under a Federal Rules of Civil
Procedure 19(b) analysis. It submits that, because the
permanent injunction compels it to resume an exclusive
distribution relationship with Casas in the Greater San Juan
area, Caguas's and Oficentro's contractual rights to
distribute Mita products in that area are necessarily
canceled. Moreover, Mita points out that Casas is seeking a
declaratory judgment decreeing Mita's distribution agreements
with Caguas and Oficentro null and void. Under these
circumstances, says Mita, this action cannot "in equity and
good conscience" proceed without Caguas and Oficentro, which
are entitled to protect their contractual interests. We are
not persuaded. A leading commentator writes:
When a person is not a party to the
contract in litigation and has no rights
or obligations under that contract, even
though he may have obligated himself to
abide by the result of the pending action
by another contract that is not at issue,
he will not be regarded as an
indispensable party in a suit to
determine obligations under the disputed
____________________
9. We agree with Casas that International Travelers Cheque _______________________________
Co. v. Bankamerica Corp., 660 F.2d 215, 223-24 (7th Cir. ___ __________________
1981) is distinguishable. In that case, the district court
had expressly relied on plaintiff's previous statement that a
party was indispensable. There was no such reliance in this
case.
-21-
contract, although he may be a Rule 19(a)
party to be joined if feasible.
7 Charles A. Wright et al., Federal Practice and Procedure ______________________________
1613, at 199-200 (1986) (footnotes omitted) (citing cases);
see Ferrofluidics Corp. v. Advanced Vacuum Components, Inc., ___ ___________________ _________________________________
968 F.2d 1463, 1472 (1st Cir. 1992) ("``[I]t is generally
recognized that a person does not become indispensable to an
action to determine rights under a contract simply because
that person's rights or obligations under an entirely
separate contract will be affected by the result of the
action.'" (quoting Helzberg's Diamond Shops, Inc. v. Valley ______________________________ ______
West Des Moines Shopping Ctr., Inc., 564 F.2d 816, 820 (8th ____________________________________
Cir. 1977) (explaining the rationale for the rule))). The
present case fits within this principle. As to Casas's
request for declaratory judgment, Casas, in its appellate
brief, "voluntarily relinquishes its request for a
declaratory judgment seeking the annulment of [Caguas's] and
[Oficentro's] dealership agreements."
Although the only claims before us on appeal are
those alleging violation of Law 75, we note that Caguas and
Oficentro are similarly dispensable parties with respect to
the remaining claims. In each of the remaining claims, the
defendants are alleged to be joint tortfeasors or co-
conspirators and are thus jointly and severally liable. It
is well-established that joint tortfeasors and co-
conspirators are generally not indispensable parties. See ___
-22-
Goldman, Antonetti, Ferraiuoli, Axtmayer & Hertell v. Medfit ___________________________________________________ ______
Int'l, 982 F.2d 686, 691 (1st Cir. 1993); 7 Charles Wright et _____
al., Federal Practice and Procedure 1623, at 346-47 (2d ed. ______________________________
1986) ("[C]o-conspirators, like other joint tortfeasors, will
not be deemed indispensable parties.")
That Caguas and Oficentro are dispensable to this
action does not, in and of itself, compel their dismissal.
While the Supreme Court held in Newman-Green that "the courts ____________
of appeals have the authority to dismiss a dispensable
nondiverse party," 490 U.S. at 837, it "emphasize[d] that
such authority should be exercised sparingly," id. The Court ___
explained: "the appellate court should carefully consider
whether the dismissal of a nondiverse party will prejudice
any of the parties in the litigation. It may be that the
presence of the nondiverse party produced a tactical
advantage for one party or another." Id. at 838. In this ___
context, Mita argues that Casas gained a tactical advantage
by Caguas's and Oficentro's presence in the case because
Casas was able to obtain financial and business records under
Federal Rules of Civil Procedure 33(a) and 34(a), which apply
expressly to parties. We do not agree, however, with Mita's
suggestion that these records would have been beyond Casas's
reach had Caguas and Oficentro not been designated as
parties. Under Fed. R. Civ. P. 34(c), "A person not a party
to the action may be compelled to produce documents and
-23-
things or to submit to an inspection as provided in Rule
45."10
Thus, neither Casas nor Mita gained a significant
tactical advantage by the presence of Caguas and Oficentro in
the lawsuit. Nevertheless, we are concerned that Caguas and
Oficentro could themselves face prejudice if dismissed from
this suit. Caguas and Oficentro, while initially
characterized as John Doe and Richard Roe, were contemplated
as parties to this litigation from the start, and have
actively participated in it since June of 1992, when they
were substituted for the fictitious defendants. Had the
jurisdictional defect been called to the district court's
attention at that point, the district court would have either
dismissed Caguas and Oficentro from this action, thereby
requiring Casas to sue them separately in the commonwealth
court, or joined them to this action, thereby remanding the
entire case to the commonwealth court. Either way, Caguas
and Oficentro would have had their liability determined in a
single proceeding. Instead, because of the jurisdictional
oversight, dismissal of Caguas and Oficentro at this stage
could subject them to a new lawsuit before a new judge in the
Superior Court of Puerto Rico.
____________________
10. Mita baldly asserts that Casas could not have secured
under Rule 45 the documents and information it obtained under
Rules 33 and 34. Mita fails, however, to explain why this
would be so.
-24-
In Newman-Green, there was a similar difficulty. ____________
The problem there was remedied by terminating the litigation
against the dismissed defendant with prejudice. 490 U.S. at
838. A similar remedy may be appropriate in this case. We
note, however, that Newman-Green presents a stronger case ____________
than this one for dismissing the nondiverse party with
prejudice, since the nondiverse party in that case had
already had its claim adjudicated by the district court.
Here, by contrast, Caguas and Oficentro have not yet had
their claims adjudicated by the district court. Since this
case is closer than the case in Newman-Green and since this ____________
issue has not been argued by either party, we think it best
to allow it to be decided initially by the district court, on
remand, where the parties will have an opportunity to present
their arguments.
Accordingly, we dismiss Caguas and Oficentro from
this action to preserve jurisdiction but direct the district
court, on remand, to determine whether the injury to Caguas
and Oficentro from being dismissed from this proceeding is
such that their dismissal should be ordered to be with
prejudice to any further suit by Casas. Caguas and Oficentro
having been dismissed, complete diversity is restored per
Newman-Green, and we retain subject matter jurisdiction over ____________
the claims between Casas and Mita.
IV.
-25-
Having disposed of the jurisdictional issues, we
come to the merits of Mita's appeal. This appeal, of course,
is interlocutory, see note 6, supra, being taken solely from _____
the granting of the injunction against Mita. But the
injunction can stand only if the court properly awarded
summary judgment. We accordingly confront the merits of that
ruling.
On summary judgment, we review the district court's
decision de novo. Velez-Gomez v. SMA Life Assur., Co., 8 __ ____ ___________ _____________________
F.3d 873, 874-75 (1st Cir. 1993). A court of appeals will
uphold summary judgment only if the record, viewed in the
light most favorable to the nonmovant, reveals that there are
no genuine issues of material fact and that the movant is
entitled to judgment as a matter of law. Celotex Corp. v. ______________
Catrett, 477 U.S. 317, 324-25, 106 S. Ct. 2548, 91 L. Ed. 2d _______
265 (1986).
Mita's primary argument is that genuine issues of
material fact preclude the granting of summary judgment to
Casas on its Law 75 claims. Specifically, Mita argues that
genuine issues exist as to: (1) whether Mita impaired its
contract with Casas and (2) whether Mita had "just cause" to
do so. To understand these arguments, we will need to step
back and take a look at the applicable law.
Law 75 protects Puerto Rico-based dealers from
summary cancellation of their dealership contracts by their
-26-
principal suppliers after the dealers have established a
favorable market for the principal's goods. See Warner ___ ______
Lambert Co. v. Superior Court of Puerto Rico, 101 P.R. Dec. ___________ ______________________________
378, 387 (1973), translated in, 1 Official Translations 527, ______________
541 (1973). The stated purpose of the law is to protect
local dealers from abusive practices by suppliers who are
financially stronger than they are. See Medina & Medina v. ___ ________________
Country Pride Foods, Ltd., 88 J.T.S. 6162, 6168 (1988), ___________________________
translated in, 858 F.2d 817, 820 (1st Cir. 1988). Toward _____________
that end, Law 75 prohibits suppliers from taking any actions
that would impair such contracts, unless they have "just
cause" for doing so:
Notwithstanding the existence in a
dealer's contract of a clause reserving
to the parties the unilateral right to
terminate the existing relationship, no
principal or grantor may directly or
indirectly perform any act detrimental to
the established relationship or refuse to
renew said contract on its normal
expiration, except for just cause.
P.R. Laws Ann. tit. 10, 978a.
Law 75 establishes a rebuttable presumption of
impairment when a supplier appoints another dealer in
violation of its exclusive dealership agreement with its
original dealer:
For the purposes of this Act . . . it
shall be presumed, but for evidence to
the contrary, that a principal or grantor
has impaired the existing relationship .
. . when the principal or grantor
establishes a distribution relationship
-27-
with one or more additional dealers for
the area of Puerto Rico, or any part of
said area in conflict with the contract
existing between the parties.
P.R. Laws Ann. tit. 10, 278a-1(b)(2). The district court
adopted the magistrate's determination that this presumption
applied to Mita. Mita disputes this holding on appeal.
However, Mita did not dispute impairment before the district
court and, therefore, waived its right to make the argument
on appeal. Even without the presumption, moreover, Casas
presented ample evidence of impairment of the exclusive
dealership through Mita's appointment of Caguas and
Oficentro, evidence which Mita did not dispute. See, e.g., ___ ____
Draft-Line Corp. v. Hon Co., 781, 844 (D.P.R. 1991), aff'd, ________________ _______ _____
983 F.2d 1046 (1st Cir. 1993); General Office Prods. Corp. v. ___________________________
Gussco Mfg. Inc., 666 F. Supp. 328, 331 (D.P.R. 1987). __________________
Accordingly, the only issue on appeal is whether there was
"just cause" for the impairment.
Law 75's "just cause" limitation applies even where
a contract includes a clause providing for termination under
specified circumstances. Because many such termination
clauses were tied to distribution quotas or goals, amendments
to Law 75 in 1988 clarified what "just cause" meant in the
context of contracts that contain such clauses:
The violation or nonperformance by the
dealer of any provision included in the
dealer's contract fixing rules of conduct
or distribution quotas or goals because
it does not adjust to the realities of
-28-
the Puerto Rican market at the time of
the violation or nonperformance by the
dealer shall not be deemed just cause.
The burden of proof to show the
reasonableness of the rule of conduct or
of the quota or goal fixed shall rest on
the principal or grantor.
P.R. Laws Ann. tit. 10, 278a-1(c)(1988). Thus failure to
meet a distribution quota will only constitute just cause for
impairment under Law 75 if that quota is shown to be
"reasonable" given the state of the Puerto Rican market at
the time of the alleged violation. See Newell Puerto Rico ___ __________________
Ltd. v. Rubbermaid, Inc., 20 F.3d 15, 22-23 (1st Cir. 1994). ____ ________________
The contract between Mita and Casas granted Casas
an exclusive dealership in the greater San Juan area, so long
as Casas met 85% of a specific performance quota.11 Mita
terminated the exclusive dealership when, it alleges, Casas
failed to meet 85% of the quota. Under Law 75, however, Mita
could not impair its contract without just cause. Under the
above provisions of Law 75, Mita had "just cause" to
terminate the exclusivity provision only if the quota was
adjusted to the realities of the Puerto Rican market at the
time of Casas's failure to meet the quota. Moreover, Law 75
____________________
11. The quota called for Casas to sell 300 copiers and to
generate $450,000 in sales of such copiers during the first
13 months of the contract, between April 1, 1989 and April
30, 1990. Thus, to preserve the exclusivity provision, Casas
had to sell 255 copiers (85% of 300). If Casas fell below
255 copiers, it could still retain a nonexclusive dealership
unless its sales were 50% below quota, in which event Mita
could terminate any relationship whatsoever.
-29-
places on Mita's shoulders the burden of proving the
reasonableness of the quota. Thus, once Casas moved for
summary judgment and alleged an absence of evidence showing
that the quota provision was reasonable, Mita was required to
come forth with such evidence in order to survive summary
judgment. Celotex, 477 U.S. at 325 (Where the nonmovant has _______
the burden of proof, the movant need do no more than aver "an
absence of evidence to support the nonmoving party's case".);
Pagano v. Frank, 983 F.2d 343, 347 (1st Cir. 1993). ______ _____
Mita contends that it submitted evidence sufficient
to raise a genuine issue of material fact as to the
reasonableness of the quota. It points to letters between
its counsel and Casas's counsel, and a declaration by
Masaharu Ishidoya, vice president of Mita's international
division, describing the negotiation of the quota.
Ishidoya's declaration indicated that Casas itself requested
that the exclusivity provision be conditioned upon a yearly
performance goal. At his deposition, Ishidoya indicated that
the 300 copier quota in the contract was a negotiated
reduction from a quota of 500 copiers first proposed by Mita.
The 1989 contract contained express language in which Casas
"acknowledges that the annual quotas . . . adjust to the
realities of the market" in Puerto Rico. Ishidoya states in
his declaration that he relied upon Casas's representations
to that effect. Mita also submitted a copy of the letter it
-30-
sent to Casas, terminating the exclusive dealership with
Casas. In that letter, Mita stated it was terminating the
exclusivity provision in the contract because Casas had
failed to meet the quota percentages set forth in the
contract.
Mita further submitted the declaration of Rafael
Martinez Margarida, the Managing Partner and Partner-in-
Charge of Management Consulting Services at Price Waterhouse.
Mita retained Martinez as an expert witness to testify as to
the reasonableness of the contract quota. In his
declaration, Martinez stated that he examined Puerto Rico's
External Trade Statistics ("PRETS") for imports of copy
machines to Puerto Rico for the period of 1985-1990. The
declaration included the following table:
YEAR QTY. IMPORTED VALUE GROWTH OVER PRIOR YEAR ____ _____________ _____ ______________________
1985 3,054 3,427,143 N/A
1986 4,170 6,058,273 77%
1987 7,375 8,103,991 34%
1988 6,026 8,148,662 1%
1989 7,056 9,259,856 14%
1990 8,983 10,032,200 8%
Martinez noted that the value of imports increased every year
between 1985 and 1990. Martinez also noted that the quota in
the contract was a projection based on Casas's actual sales
figures in 1985 (279 units), 1986 (153 units) and 1987 (230
units). Finally, Martinez noted that Casas's sales for 1989
(80 units) and 1990 (110 units) decreased significantly,
while the overall number of imports increased during that
-31-
same period. Martinez concluded that the quota was
reasonable given the historical trend, that Casas "failed to
capitalize on the opportunities available in a growing
market," and that its failure to meet the quota "cannot be
attributable to the conditions of the Puerto Rico market for
photocopying machines."
Casas points to various alleged flaws in Martinez's
methodology, and argues that these flaws require that his
declaration be completely excluded as unprobative and
incompetent. Casas argues that, in failing to deduct from
the import figures the number of copiers exported from Puerto
Rico, Martinez based his conclusions on an inaccurate picture
of the internal copier market. Casas also argues that these
same import figures include imports of all categories of
copiers, not just the categories of copiers that Casas sold
as part of its exclusive dealership agreement, and thus do
not accurately reflect the precise market in which Casas was
operating.12 Casas also argues that the quota, although
based on historical sales figures, unreasonably required
____________________
12. Casas also argues that the yearly data was irrelevant,
since Mita must provide evidence about the market on or about
May 1990, when the contract was terminated. This is plainly
wrong. Law 75 requires Mita to prove the reasonableness of
the quota "at the time of the violation or nonperformance by
the dealer." P.R. Laws Ann. tit. 10, 278a-1(c). Casas's
alleged nonperformance occurred during the period between
April 1989 and May 1990. Under the plain terms of Law 75, it
is the condition of the market during that period that is
relevant, not the condition of the market at the precise
point of the contract's impairment by the supplier.
-32-
Casas to double its market share in 13 months. Finally,
Casas argues that Martinez failed to consider various
relevant factors in his analysis, including the effect of
increased intrabrand competition, changes in the number of
dealers in the market, the effect of Hurricane Hugo, and the
impact of the local economic recession. Accordingly, Casas
argues, Martinez's declaration must be excluded, and Mita's
remaining evidence is insufficient to raise a genuine issue
of fact.
The district court found that Mita had failed to
present evidence sufficient to raise a genuine issue as to
the reasonableness of the quota. The court stated:
The magistrate found, and we agree,
that the quota provision was unreasonable
at the time of Casas' nonperformance. In
support of its claim that the quota was
reasonable, Mita presented an unsworn13
declaration by Rafael Martinez Margarida,
a certified public accountant (CPA). In
this declaration the CPA asserted that
his examination of the Puerto Rico
External Trade's [sic] Statistics (PRETS)
reflected a growing market for
photocopying machine imports from the
period of 1985 to 1990, inclusive. Thus,
he concluded, Casas' failure to meet the
quota could not be attributed to market
conditions.
As the magistrate found, Casas proved
that Mita's argument was based on
erroneous statistics. Among the factors
cited by the magistrate which we find
most convincing, the CPA's report failed
to take into account essential aspects of
____________________
13. The unsworn declaration was made under pain and
penalties of perjury. 28 U.S.C. 1746.
-33-
the Puerto Rican market such as the
effects of Hurricane Hugo and the
recession on the economy. The CPA's
report also failed to take into account
the effect of intrabrand rivalry on
Casas's market share, a rivalry fostered
by Mita's impairment of Casas' exclusive
distributorship.
Additionally, Mita's data as to the
market for copying machines in Puerto
Rico erroneously included types of
copying apparatus that were not machines
manufactured by Mita and sold to Casas.
Thus, Mita's evidence exaggerated the
size of the market by including within it
devices such as thermocopying mechanisms,
which were not among those apparatuses
made and sold to Casas by Mita, and
minimized market conditions by failing to
include negative factors such as
Hurricane Hugo, the recession, the
intrabrand rivalry etc. Clearly, Mita's
evidence fails to create a sufficient
question to prevent the entry of summary
judgment in Casas' favor since Mita has
the burden of proving that the quota's
[sic] were reasonable at the time of
Casas' nonperformance, given the legal
presumption that they were not
unreasonable.
Thus, it was "unreliable, lacked
probative value, and does not constitute
competent evidence." [Citing Magistrate's
Report.] Mita claims now that its
failure to submit more probative evidence
was due to its lack of time in which to
gather and present it. We find this
excuse pathetic and unconvincing.
Casas, 847 F. Supp. at 988-89. Mita argues that, _____
in granting summary judgment to Casas, the district court
exceeded its authority by improperly weighing the conflicting
evidence, supra, and deciding an issue of material fact,
notably, that the quota provision was unreasonable at the
time of Casas's nonperformance. In particular, Mita claims
-34-
that the district court improperly discredited Martinez's
testimony and that this constituted error since
determinations of credibility and how much weight to accord
testimony cannot be made at summary judgment and must be left
to the fact finder at trial. See Greenburg v. Puerto Rico ___ _________ ___________
Maritime Shipping Auth., 835 F.2d 932, 936 (1st Cir. 1987). _______________________
Casas responds that the district court did not
weigh Martinez's declaration, but instead properly excluded
it under Fed. R. Civ. P. 56(e)14. Under Rule 56(e),
affidavits supporting or opposing summary judgment must set
forth facts that would be admissible in evidence. A district
court may exclude expert testimony where it finds that the
testimony has no foundation or rests on obviously incorrect
assumptions or speculative evidence. Quinones-Pacheco v. ________________
American Airlines, Inc., 979 F.2d 1, 6 (1st Cir. 1992) ________________________
(excluding expert opinion where based on flawed assumptions);
Merit Motors, Inc. v. Chrysler Corp., 569 F.2d 666, 673 (D.C. __________________ ______________
Cir. 1977) (excluding expert testimony for failure to
consider important factors). Such decisions are reviewed for
____________________
14. Fed. R. Civ. P. 56(e) provides:
Supporting and opposing affidavits shall
be made on personal knowledge, shall set
forth such facts as would be admissible
in evidence, and shall show affirmatively
that the affiant is competent to testify
to the matters stated therein.
Fed. R. Civ. P. 56(e).
-35-
abuse of discretion. Quinones-Pacheco, 979 F.2d at 6. Casas ________________
argues that the district court properly excluded Martinez's
declaration as based on flawed data and, faced with a lack of
evidence as to the reasonableness of the quota, properly
entered summary judgment in its favor.
A. Martinez's Declaration was not Excludable _________________________________________
It is not clear that the district court meant to
treat Martinez's declaration as excludable under Fed. R. Civ.
P. 56(e). The court nowhere articulated such a ruling. But
if we assume the court meant to exclude the declaration as
incompetent for summary judgment purposes, we think it went
too far. We may accept that Martinez's opinion, standing
alone, was worth little more than the inferences a fact
finder might reasonably draw from the factual data stated in
his declaration. Martinez was not said to have had some
special familiarity with, or expertise in, the Puerto Rico
copier market, apart from the data he presented and sought to
interpret. However, that data, including the PRETS and
Casas's past sales figures, was admissible and, examined in a
light most favorable to Mita, tends to support Martinez's
conclusion that the quota was reasonable. We see no basis
under Fed. R. Civ. P. 56(e) for excluding the entire
declaration altogether.
Under Rule 56(e), an affidavit must meet three
requirements. It:
-36-
[1] shall be made on personal knowledge,
[2] shall set forth such facts as would
be admissible in evidence, and [3] shall
show affirmatively that the affiant is
competent to testify to the matters
stated therein.
Fed. R. Civ. P. 56(e). Unless a party moves to strike an
affidavit under Rule 56(e), any objections are deemed waived
and a court may consider the affidavit. See Davis v. Sears, ___ _____ ______
Roebuck & Co., 708 F.2d 862, 864 (1st Cir. 1983). The moving _____________
party must specify the objectionable portions of the
affidavit and the specific grounds for objection. See 10A ___
Charles Wright et al., Federal Practice & Procedure 2738 at ____________________________
507 (2d ed. 1983). Furthermore, a court will disregard only
those portions of an affidavit that are inadmissible and
consider the rest of it. See Lee v. National Life Assur., ___ ___ _____________________
632 F.2d 524 (5th Cir. 1980) ("Where the affidavit includes
both competent and incompetent evidence, the Court should
disregard the incompetent evidence, but give full
consideration to that which is competent. . . . This is
nothing more than the procedure which would be followed at
trial."); Wright, 2738 at 509.
In moving below to strike the Martinez deposition
under Rule 56(e), Casas made much the same arguments it now
makes on appeal. Casas did not argue under the first clause ___
in Rule 56(e) that Martinez lacked personal knowledge ___________________
sufficient to testify as to the PRETS and sales figures. Nor
did Casas argue under the third clause that Martinez was
-37-
incompetent to provide his expert interpretation of these. ___________
Rather, Casas argued, under the second clause of Rule 56(e),
that the facts contained in the declaration were not
admissible in evidence because, in essence, they were simply
not sufficiently material to, and probative of, the
reasonableness of the quota.
The district court characterized the declaration as
containing "erroneous statistics." Casas, 847 F. Supp. at _____
988. But neither Casas nor the court asserted that the
figures in the declaration were not accurate reproductions of
Puerto Rico's External Trade Statistics, nor did they dispute
the correctness of the other data mentioned in the
declaration. The court's reason for calling the statistics
"erroneous" seems not to have been their inaccuracy as such
but rather its belief that they did not constitute an
accurate measure of the Puerto Rico copier market. The
district court also criticized the alleged failure of
Martinez's declaration to account for the impact of Hurricane
Hugo, the effect of the local recession, and the impact of
intrabrand rivalry, matters raised in Casas's materials.
But the increase in copier imports between 1989 and
1990, as reflected in the PRETS, implicitly rebutted Casas's
evidence that the hurricane and the local recession had had a
materially adverse effect on the Puerto Rican copier market.
In finding that the declaration failed to consider these
-38-
"essential aspects" of the market, the district court
overlooked the relevant inference that could be drawn from
the rise in copier imports shown in the PRETS figures.15
See Adickes v. S.H. Kress & Co., 398 U.S. 144, 158, 90 S. Ct. ___ _______ ________________
1598, 26 L. Ed 2d 142 (1970); Aponte-Santiago v. Lopez- _______________ ______
Rivera, 957 F.2d 40, 41 (1st Cir. 1992) (the court at summary ______
judgment "must view the evidence and all factual inferences
therefrom in the light most favorable to the non-moving
party").
Casas's argument that the PRETS and other data did
not account for the impact of intrabrand competition is more
troubling. See infra. While the PRETS figures suggest that ___ _____
the market grew in spite of the hurricane and recession, they
indicate nothing directly about the possible impact of
increased intrabrand competition. However, it is one thing
to note this silence of the evidence, another to exclude the
PRETS figures because of it. Evidence may be relevant and
admissible even though, standing alone, it fails to address
____________________
15. The cases that Casas cites in its brief, Quinones- _________
Pacheco and Merit Motors, are distinguishable. In Quinones, _______ ____________ ________
the expert testimony with respect to damages was based on an
assumption that was clearly unsupported by the record, namely
that the plaintiff was permanently disabled. 979 F.2d at 6.
Similarly, in Merit Motors, the expert testimony failed to ____________
account for significant factors that were clearly relevant to
the issue at hand. 569 F.2d at 673. By contrast, in this
case, it remains open to debate whether Hurricane Hugo, the
recession, or intrabrand competition had an effect on the
Puerto Rico market, and what that effect was, if any. The
impact of these factors is precisely the issue to be
resolved.
-39-
every issue raised in a case. As noted below, Mita presented
other evidence that arguably bolsters its position that the
quota was reasonable. Given the unlikelihood of ever
unearthing irrefutable statistical evidence, we do not think
the PRETS and other statistics, and accompanying inferences,
were so weak that they should be rejected as material
evidence in this case.
The district court found that the PRETS figures
were also "erroneous" because they included other categories
of copying machines that were not the types of machines sold
by Casas. Casas, 847 F. Supp. at 988. Casas pointed to the _____
fact that the 1990 PRETS figure included imports of five
categories of copiers, while Casas sold copiers in only three
of these categories. This "exaggerated the size of the
market." The absolute size of the market was not, however,
the issue. Rather, the issue was the trend in the market,
i.e. whether the market was increasing or decreasing, whether
Casas's sales were consistent with the trend, and whether the
quota was consistent with Casas's historical market share.
Martinez explained in his deposition that it was necessary to
include the additional categories in the 1990 PRETS figures
in order to obtain comparable yearly data, since prior to
that year the data for the copier market had not been broken
up into the five subcategories. The inclusion of these
categories did not necessarily make his testimony about the
-40-
trend in the market any less probative. Casas did not attack
the comparability of the figures and failed to present
evidence suggesting that excluding the categories, if this
had indeed been possible, would have resulted in a different
trend.
We conclude that the reasons set forth by the
district court were insufficient bases for rejecting the
Martinez declaration altogether, assuming this was what the
court intended to do. Nor do we find Casas's additional
arguments sufficient for its outright exclusion. Casas
complains: that Martinez failed to deduct export figures from
the import figures in order to obtain a true measure of the
internal copier market; that Martinez failed to consider the
fact that the quota, according to Casas, required Casas to
double its market share within thirteen months; that Martinez
failed to consider the fact that during the period of the
contract, Casas had a smaller region of exclusive dealership
than before.
While these additional arguments are not without
force, a party may not exclude, on summary judgment, relevant
and otherwise admissible factual evidence solely on the
ground that the evidence leaves a number of unanswered
questions or that it appears somewhat less persuasive than
the movant's evidence offered in rebuttal. If there are
genuine issues of fact, the nonmovant is entitled to have
-41-
these resolved in the trial forum, where the fact finder
hears live witnesses and can better assess all the facts.
We conclude if the district court intended to do
so that it did not have sufficient grounds for excluding
Mita's declaration under Fed. R. Civ. P. 56(e).
B. Sufficiency of Mita's Evidence to Raise Issue of Fact _____________________________________________________
Having found no adequate basis to exclude from
consideration Martinez's declaration, we next consider
whether that declaration and Mita's other evidence were
sufficient to raise a genuine issue of fact as to the
reasonableness of the quota in light of the Puerto Rico
market.16
It is instructive first to review the summary
judgment standard. "By its very terms, this standard
provides that the mere existence of some alleged factual
dispute between the parties will not defeat an otherwise
properly supported motion for summary judgment, the
requirement is that there is no genuine issue of material _______ ________
fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-48 ________ ___________________
(1986). For a dispute to be "genuine," there must be
sufficient evidence to permit a reasonable trier of fact to
____________________
16. Casas does not address this issue on appeal. Casas's
only argument on appeal is that the district court properly
excluded the Martinez declaration. Although this could be
interpreted as a concession that summary judgment was
improper if the Martinez declaration was admissible, we
nevertheless proceed to address the key summary judgment
issue.
-42-
resolve the issue in the non-movant's favor. Boston Athletic _______________
Ass'n v. Sullivan, 867 F.2d 22, 24 (1st Cir. 1989); Astra _____ ________ _____
Pharmaceutical Prod., Inc. v. Beckman Instruments, Inc., 718 __________________________ _________________________
F.2d 1201, 1204 (1st Cir. 1983). The evidence cannot be
merely colorable, but must be sufficiently probative to show
differing versions of fact which justify a trial. However,
the evidence must at all times be viewed in the light most
favorable to the nonmovant, and all doubts and reasonable
inferences must be resolved in the nonmovant's favor.
Adickes 398 U.S. at 158; Rogen v. Ilikon Corp., 361 F.2d 260, _______ _____ ____________
266 (1st Cir. 1966). Moreover, this court may not weigh the
evidence. Summary judgment "admit[s] of no room for
credibility determinations, no room for the measured weighing
of conflicting evidence such as the trial process entails
. . . ." Greenburg, 835 F.2d at 936. If the facts permit _________
more than one reasonable inference, the court on summary
judgmentmay notadopttheinferenceleastfavorabletothenonmovant.
Viewing Mita's evidence in its most favorable
light, we think that, although the question is close, Mita's
evidence and the reasonable inferences therefrom are
sufficient to raise a genuine issue as to the reasonableness
of the quota. First, the contract executed by the parties
contains a clause in which Casas expressly agreed that the
quota was reasonable in light of the realities of the Puerto
Rico market. We do not suggest that such a clause was
-43-
binding, since public policy would presumably not permit the _______
provisions of Law 75 to be contracted away.17 However, we
think Casas's express agreement in the contract that the
quota was reasonable is admissible evidence tending to
establish the reasonableness of the quota at the time Casas
signed the contract. Bolstering the weight of Casas's
concession were the letters from Mita's attorneys and
Ishidoya's testimony showing that Casas had been successful
in renegotiating the quota downward from 500 to 300 copiers.
Its ability to do so suggests a degree of parity in the
parties' bargaining positions, making it more likely that
Casas really believed the quota to be reasonable at the time
it signed the contract.18
In addition, inferences from the PRETS and
historical sales figures contained in Martinez's declaration
____________________
17. Cf. P.R. Laws Ann. tit. 30, 3372 (1991) ("The ___
contracting parties may make the agreement and establish the
clauses and conditions which they may deem advisable,
provided they are not in contravention of laws, morals, or
public order."); In re Pagan Ayala, 117 D.P.R. 180, 187 & n.4 _________________
(1986), Translated in, 17 Official Translations 216, 223 & ______________
n.4 (1986) (suggesting that contracts exempting attorneys ex
ante from malpractice suits are void).
18. Casas argues that any evidence of reasonableness of the
quota at a time prior to the period of nonperformance was
irrelevant here. However, viewed in the light most favorable
to Mita, we think that evidence of reasonableness immediately
prior to the term of the contract was material. Combined
with Martinez's declaration indicating that the Puerto Rico
copier market did not subsequently decrease, but rather grew,
this evidence is probative of the continuing reasonableness
of the quota between April 1989 and May 1990, the relevant
period. See note 12, supra. ___ _____
-44-
suggest that if the quota was reasonable when the contract
was signed, it remained so during the term of the contract.
The contract required Casas to sell 255 copiers (85% of 300)
during a 13-month period in order to retain its exclusive
dealership. This figure was not grossly out of line with
Casas's historical 12-month sales figures: (297 in 1985, 153
in 1986, and 230 in 1987). The PRETS figures indicate that
the market for copiers actually increased during the term of
the contract (from 7,056 in 1989 to 8,983 in 1990). If the
quota was based roughly on past sales, and if the market for
copiers did not suffer any decrease, it could be inferred
from this evidence that the quota was reasonable in light of
the Puerto Rico market.
Casas, to be sure, presented much persuasive
evidence in opposition. Summary judgment, however, is not a
substitute for trial. We do not think Casas's evidence so
undermined Mita's case that Mita can be said to have failed
to raise a genuine issue of fact concerning the
reasonableness of the quota. At most, it indicated that many
issues of fact remained to be resolved at trial. Casas
presented a declaration by its president, stating that he
thought the quota unreasonable and that Mita had imposed the
quota unilaterally by threatening to cancel their preexisting
distribution relationship. Mita's vice president, however,
asserted that he "relied on Casas' representations that the
-45-
performance goal and the related percentages were reasonable
for the relevant market." Mita's evidence tends to suggest
that the quota was arrived at through bargaining, Casas
having persuaded Mita to lower the quota from 500 to 300
copiers. The Casas declaration also states that Hurricane
Hugo and the local recession had an effect on the copier
market. As we have previously said, however, Mita's PRETS
figures minimized these effects by showing that the copier
market increased during the term of the contract.
Casas's strongest argument is that Mita's
statistical evidence of market growth and of past sales fails
to account for the fact that, prior to 1988, Casas was the
only distributor of Mita products for all of Puerto Rico
(even though its contract then was nonexclusive). By
contrast, during the term of the contract, Casas argues, it
faced stiff intrabrand competition. Its exclusive dealership
covered only a portion of Puerto Rico, the greater San Juan
area. While it could also sell Mita products elsewhere in
Puerto Rico on a nonexclusive basis, it now faced competition
from two other authorized Mita dealers outside the exclusive
San Juan area as well as from alleged unauthorized sales of
Mita's copiers by Caguas and Oficentro. According to Casas,
its competitors sold 327 Mita copiers during the 13-month
period of the contract. Casas argues that Mita's past sales
figures simply do not address the issue of this increased
-46-
intrabrand competition, hence they say nothing as to the
quota's reasonableness during the relevant period.
But we do not think that this argument so
undermines Mita's case as to eliminate any contested factual
issue. It is unclear how to assess the effects of intrabrand
competition in calculating the reasonableness of the quota.
The fact that other nonexclusive dealers were able to sell
327 Mita copiers during the relevant period outside of San
Juan is a double-edged sword. While, to be sure, these sales
suggest that Casas faced stern competition, it also indicates
the existence of a strong demand for Mita copiers on which
Casas was presumably free to capitalize to the extent it was
capable. It is unclear, moreover, in measuring quota
reasonableness, how intrabrand competition is to be
distinguished from the effects of competition from copiers
made by other manufacturers. Such interbrand competition
would have existed earlier as well as in 1989-90. While the
new factor of intrabrand competition doubtless weakens the
predictive value of Casas's earlier sales figures, it does
not totally vitiate their relevance to quota reasonableness.
Casas knew when it signed the contract that its exclusivity
would be limited to the San Juan area, and presumably also
knew of the intrabrand competition it faced elsewhere. The
evidence permits an inference that in Casas's then judgment
the quota was reasonable despite the anticipated interbrand
-47-
and intrabrand competition. Thereafter, the overall trend in
copier imports was up suggesting at least, as one possible
interpretation of the data that Casas's poor performance
was due not to lack of opportunity but to some fault of its
own.
We conclude that Mita presented evidence sufficient
to raise a genuine issue as to the reasonableness of the
quota. Particularly where the standard here,
"reasonableness," is so amorphous, and "hard" evidence to
prove "reasonableness" so obviously difficult to come by and
subject to multiple interpretations, we are disinclined to
deny Mita its day in court by raising the threshold barrier
of proof too high. See Rogen, 361 F.2d at 265-66 (suggesting ___ _____
that delicate issues of fact "may well indicate a preference
for the antennae of the factfinder over the cruder instrument
of summary judgment"); Newell, 20 F.3d at 23 (deferring to ______
the jury's judgment that supplier failed to meet its burden
of proving that a quota was "reasonable" under Law 75). To
the extent that we have doubts about the appropriateness of
summary judgment, we are required to resolve them in Mita's
favor.
Throughout its brief, Casas repeatedly asserts that
Mita has failed to satisfy its burden of proving that the
quota is reasonable. This misapprehends the burden Mita
faces at summary judgment. Mita is not required to prove
-48-
that the quota was reasonable. Rather it was only required
to present evidence sufficient to raise a genuine issue of
fact as to reasonableness. The burden is one of producing
enough evidence to show that it is entitled to a trial, not
that it will necessarily be successful at trial. See First ___ _____
Nat'l Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 288- _____________________ ________________
89, 88 S. Ct. 1575, 20 L. Ed. 2d 569 (1966) ("It is true that
the issue of material fact required by Rule 56(c) to be
present to entitle a party to proceed to trial is not
required to be resolved conclusively in favor of the party
asserting its existence; rather, all that is required is that
sufficient evidence supporting the claimed factual dispute be
shown to require a jury or judge to resolve the parties'
differing versions of the truth at trial.") We believe Mita
has satisfied this burden. We conclude that Mita has
presented evidence sufficient to raise a genuine issue of
material fact as to the reasonableness of the quota given the
condition of the Puerto Rican copier market. Weighing the
evidence, assessing the credibility of the experts: these are
task that must be left to the trier of fact.19
____________________
19. Without making too much of this, we note that Casas in
its brief almost concedes that there exist disputed issues of
fact. After listing the evidence it presented about the
unreasonableness of the quota, it states: "Among others, this
evidence raises material questions of fact as to the effect
of Hurricane Hugo, the recession, the intrabrand competition
of MITA machines, and the manipulation of statistical
information by MITA's expert in order to artificially create
a 'growing market'." We agree.
-49-
V.
In accordance with this opinion, we hereby dismiss
Caguas and Oficentro from this suit and remand to the
district court to determine whether the dismissal of Caguas
and Oficentro should be with or without prejudice. Having
determined that the district court erred in granting Casas's
motion for partial summary judgment, we vacate the court's
order granting Casas a permanent injunction. The parties'
claims will proceed in the district court consistently with
this opinion.20
So ordered. Each party shall bear its own costs. __________ ___________________________________
____________________
20. We do not reach Mita's remaining argument that, even if
summary judgment was proper, the district court's issuance of
the permanent injunction was improper.
-50-
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Merit Motors, Inc. v. Chrysler Corporation , 569 F.2d 666 ( 1977 )
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Gilbert Yniques Angel Diaz Carl S. Ramos John Balderama ... , 985 F.2d 1031 ( 1993 )
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International Travelers Cheque Company v. Bankamerica ... , 660 F.2d 215 ( 1981 )
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Helzberg's Diamond Shops, Inc. v. Valley West Des Moines ... , 564 F.2d 816 ( 1977 )