Quality Cleaning Products R.C., Inc. v. SCA Tissue North America, LLC
794 F.3d 200
1st Cir.2015Background
- QCP entered a non-exclusive distribution agreement with SCA in 1997 (Act 75 governs distributor relations in Puerto Rico). QCP alleged SCA promised to extend all promotions and discounts equally to QCP.
- QCP claims SCA breached the agreement in 2001 by making a discounted deal with Bunzl and granting Bunzl a 5% profit/discount on sales to other Puerto Rican distributors.
- QCP filed suit for breach of contract under Act 75 on December 7, 2012 — roughly eleven years after the alleged 2001 breach.
- SCA moved to dismiss under Act 75’s three-year statute of limitations; the district court dismissed as time-barred, finding the accrual date was at or about 2001 and that the “continuing violation” doctrine did not apply.
- QCP sought reconsideration asserting for the first time a discovery-rule theory (claiming it only learned of the Bunzl agreement in 2011); the district court denied the Rule 59(e) motion and this appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Whether federal or Puerto Rico law governs accrual for Act 75 claims | Federal accrual law governs; federal rules should determine when a claim accrues even in diversity. | State (Puerto Rico) accrual law governs accrual of state-created causes of action in diversity. | Puerto Rico law governs accrual and statute of limitations in diversity; federal courts must apply state accrual rules. |
| 2) Whether the continuing-violation doctrine delays accrual under Act 75 | The discounts persisted into the limitations period, constituting a continuing violation that tolls accrual. | The Bunzl agreement was a discrete contractual breach in 2001; continuing-violation doctrine (typically in civil-rights/employment contexts) should not extend Act 75 limitations. | The continuing-violation doctrine does not apply to Act 75 breach-of-contract claims; accrual occurred at the time of the discrete breach. |
| 3) Whether the discovery rule delays accrual | QCP first learned of the breach in 2011 (via an e-mail) so the claim accrued then, within three years of filing. | QCP waived the discovery-rule argument by not raising it before the Rule 59(e) motion; even if considered, Act 75 contains no discovery-language and complaint lacked facts to invoke the rule. | The district court did not abuse discretion in denying reconsideration; QCP’s discovery-rule argument was raised too late and need not be reached on the merits. |
Key Cases Cited
- Erlich v. Ouellette, Labonte, Roberge & Allen, P.A., 637 F.3d 32 (1st Cir. 2011) (standard for affirming dismissal on statute-of-limitations grounds in diversity pleading context)
- Heimeshoff v. Hartford Life & Accident Ins. Co., 134 S. Ct. 604 (2013) (cause of action accrues when plaintiff can file suit and obtain relief)
- Ragan v. Merchants Transfer & Warehouse Co., 337 U.S. 530 (1949) (in diversity, a cause of action accrues when local law so declares)
- Guaranty Trust Co. v. York, 326 U.S. 99 (1945) (federal courts in diversity must apply state statutes of limitations)
- Merck & Co. v. Reynolds, 559 U.S. 633 (2010) (discovery rule delays accrual until plaintiff knows or reasonably should know of injury)
- Nat’l R.R. Passenger Corp. v. Morgan, 536 U.S. 101 (2002) (distinguishes continuing violations from discrete acts for accrual and timeliness purposes)