Medina & Medina, Inc. v. Hormel Foods Corporation
840 F.3d 26
| 1st Cir. | 2016Background
- Medina & Medina (Puerto Rico distributor) began distributing Hormel retail refrigerated products in Puerto Rico by verbal agreement in 1988; no written contract.
- Medina alleged it was Hormel’s exclusive distributor in Puerto Rico and complained over years that Hormel sold to mainland distributors who resold into Puerto Rico, undermining Medina.
- In 2008–09 Hormel sold an upgraded "Supreme Party Platters" product directly to Costco Southeast (shipped from Atlanta), bypassing Medina; Medina sued in Feb 2009 under Puerto Rico Law 75 seeking declaration of exclusivity and damages, and later added a claim that Hormel refused to sell new products to Medina because of the lawsuit.
- Hormel counterclaimed that Medina never had airtight exclusivity and sought declarations and damages for alleged interference by Medina.
- The district court held Medina’s exclusivity claim time-barred under Law 75’s three-year statute of limitations, found Hormel liable for the Costco sales but not liable for refusing to sell new products; both parties appealed.
- The First Circuit affirmed the statute-of-limitations bar for Medina’s exclusivity claim, held the Costco-related claim is also time-barred (reversing district court liability for the Costco sales), and affirmed that Hormel was not obligated to sell new products to Medina.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Medina has an exclusivity right enforceable under Law 75 (scope: "airtight" v. island-based exclusivity) | Medina: Exclusive Puerto Rico retail refrigerated distributor; Hormel must protect against third-party interference (did not disclaim "airtight" exclusivity) | Hormel: Medina sought "airtight" exclusivity (preventing Hormel from selling to mainland customers who resell into PR); no such agreement existed | Court: Medina’s pleaded and litigated theory amounted to airtight exclusivity; exclusivity claim is time-barred under the three-year rule |
| When statute of limitations accrued for exclusivity claims | Medina: Accrual should not be pinned to 2005–2006 letters; claims about Costco and new products are distinct and timely | Hormel: Letters and course of dealing in 2005–2006 put Medina on notice; accrual triggered then, so suit filed in 2009 is untimely | Held: Medina was on notice by Jan 2006 (and earlier facts); exclusivity claim accrued then and is barred (filed after three years) |
| Whether Hormel’s direct sales of Supreme Party Platters to Costco violated Law 75 | Medina: Costco sales bypassed Medina and impaired the exclusive distributorship — damages follow from exclusivity breach | Hormel: Costco sales effectively mirror sales to mainland distributors; if exclusivity claim is time-barred, Costco claim is likewise time-barred | Held: Costco claim was premised on the same exclusivity theory, so it is time-barred; district court’s liability for the Costco sales was reversed |
| Whether Hormel violated Law 75 by refusing to offer new retail refrigerated products to Medina | Medina: Historical practice and exclusivity obliged Hormel to offer new products to Medina; refusal was detrimental | Hormel: No contractual obligation to supply every new product; refusal not unlawful | Held: No evidence Hormel bound to sell all new products; refusal did not violate Law 75; judgment for Hormel affirmed |
Key Cases Cited
- General Office Products Corp. v. Gussco Mfg., Inc., 666 F. Supp. 328 (D.P.R. 1987) (where exclusivity covers Puerto Rico, principal must take affirmative steps to stop third‑party resales into PR)
- Irvine v. Murad Skin Research Labs., Inc., 194 F.3d 313 (1st Cir. 1999) (once a principal is put on notice that products are reaching an area of limited distribution rights, it must take prompt action)
- Basic Controlex Corp. v. Klockner Moeller Corp., 202 F.3d 450 (1st Cir. 2000) (a letter announcing a principal’s plan to use other distributors can trigger Law 75’s statute of limitations)
- Vulcan Tools of P.R. v. Makita USA, Inc., 23 F.3d 564 (1st Cir. 1994) (Law 75 protection depends on the contract terms; non‑exclusive dealers don’t get converted into exclusives by statute)