Before us are an appeal and cross-appeal arising from an action brought by B. Fernández & Hnos., Inc. (“BFH”) and Caribbean Warehouse Logistics (“CWL”) against Kellogg USA, Inc. (“Kellogg USA”) in the United States District Court for the District of Puerto Rico. Jurisdiction was based on diversity of citizenship. The district court dismissed the case, finding that Kellogg Caribbean Services, Inc. (“Kellogg Caribbean”), a non-party entitled to intervene in the matter, was an indispensable party to the action under Federal Rule of Civil Procedure 19 whose joinder would destroy complete diversity.
In the appeal, plaintiff BFH challenges the district court’s indispensability determination. BFH argues that the court erroneously denied two motions that would have rendered Kellogg Caribbean dispensable to its action against Kellogg USA. In the cross-appeal, Kellogg USA and Kellogg Caribbean protest the court’s decision, upon dismissal of BFH’s action, to deny them costs and attorneys’ fees.
We conclude that, even had the court granted BFH’s motions, consideration of the Rule 19 factors guiding the indispensability analysis continue to support the dismissal. Additionally, we find no error in the district court’s denial of costs and fees. Thus, we affirm the district court’s judgment.
I. Background
We have previously discussed in detail the relevant background facts of this case.
See B. Fernandez & Hnos., Inc. v. Kellogg USA, Inc.,
For a number of years, BFH was Kellogg Company’s exclusive agent in Puerto Rico. BFH purchased certain Kellogg brand cereal products for resale to customers in Puerto Rico, acting pursuant to written distribution agreements with various Kellogg entities. BFH also developed and implemented marketing plans for Kellogg products in Puerto Rico.
In 1992, BFH’s relationship with the Kellogg family of companies began to change. In that year, BFH signed a nonexclusive, written distribution agreement with Kellogg USA (“the 1992 agreement”). The 1992 agreement would serve as the last written distribution agreement between BFH and a Kellogg entity. Further, Kellogg Caribbean was incorporated in 1993 and took over BFH’s duties of developing and implementing marketing plans for Kellogg cereal products in Puerto Rico. Sometime after Kellogg Caribbean’s incorporation, Kellogg USA assigned its rights and obligations under the 1992 agreement to Kellogg Caribbean.
During and after these developments, BFH continued to purchase Kellogg products for resale in Puerto Rico. In 1996, BFH established a distribution center to house its inventory of Kellogg products and, at Kellogg Caribbean’s urging, created an affiliate company, CWL, to provide logistic and warehousing services at the center.
In October 2004, Kellogg Caribbean and BFH signed an Inventory Repurchase agreement (“the 2004 agreement”) under which Kellogg Caribbean purchased BFH’s inventory of Kellogg products. A purpose of this agreement was to allow Kellogg Caribbean to consolidate its warehouse and administrative functions into one facility. The 2004 agreement also notified BFH that Kellogg Caribbean had been assigned Kellogg USA’s interest in the 1992 agreement and provided that the 2004 agreement and “the activities it contemplates do not extinguish, supersede, or terminate the [1992 agreement], which, except as expressly modified by this [2004 agreement], continues in full force and effect.” The 1992 agreement, however, contained terms indicating that it expired in December of 1992.
After purchasing BFH’s inventory of Kellogg products, Kellogg Caribbean hired CWL to manage Kellogg Caribbean’s warehouse operation. There was no written contract for these services.
In November of 2004, Kellogg Caribbean informed BFH that it was exercising a provision in the 1992 agreement entitling Kellogg Caribbean to sell Kellogg’s “Cereal in a Cup” and “Fruit Snacks” products directly to Puerto Rico retailers. BFH would remain the distributor of other Kellogg products.
BFH, contending that Kellogg Caribbean’s decision violated its exclusive right to distribute Kellogg products in Puerto Rico, sued Kellogg USA in the United States District Court for the District of Puerto Rico. Jurisdiction was premised on diversity of citizenship. Specifically, BFH claimed that Kellogg USA, by permitting
While the action was pending, Kellogg Caribbean notified CWL that it was ending their warehouse services agreement. As a result of this decision, BFH moved to join CWL as a plaintiff and to amend its complaint to add a count alleging that Kellogg USA “and/or its affiliates” violated Law 75 by terminating the warehouse services agreement. The district court granted the motions. The plaintiffs sought declaratory and injunctive relief, as well as damages.
After BFH and CWL secured a temporary restraining order requiring CWL’s reinstatement at the distribution center, Kellogg Caribbean moved “to intervene and dismiss for lack of an indispensable party.” The district court denied Kellogg Caribbean’s motion to intervene and, after an evidentiary hearing, entered a preliminary injunction requiring Kellogg USA “and/or its affiliates” to specifically perform the agreements with BFH and CWL pending trial. Kellogg Caribbean appealed from the denial of its motion to intervene, and Kellogg USA and Kellogg Caribbean filed an interlocutory appeal from the entry of the preliminary injunction.
In that appeal we concluded that Kellogg Caribbean met the requirements for intervention.
Kellogg I,
On remand, BFH sought both to remove CWL as a party and to file an amended complaint. Taking its cue from our opinion in Kellogg /, BFH’s proposed amended complaint excluded all claims relating to CWL and requested only money damages against Kellogg USA rather than injunc-tive relief.
The district court denied both BFH’s motion to drop CWL and the motion to amend the complaint. The court concluded that Kellogg Caribbean was indispensable to BFH’s action against Kellogg USA and consequently dismissed BFH’s action without prejudice. Sua sponte, the court also denied Kellogg USA and Kellogg Caribbean costs and attorneys’ fees.
II. Discussion
Both sides appeal. BFH challenges the district court’s dismissal of the action, ar
A. Indispensability
We determined in
Kellogg I
that Kellogg Caribbean could not intervene in BFH’s action against Kellogg USA because its intervention would destroy diversity jurisdiction.
Kellogg I,
Federal Rule of Civil Procedure 19(b) specifies four factors to guide the indispensability inquiry. These include:
(1) To what extent a judgment rendered in the person’s absence might be prejudicial to the person or those already parties; (2) the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; (3) whether a judgment rendered in the person’s absence will be adequate;
(4) whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder.
Fed.R.Civ.P. 19(b). The Second Circuit has observed that no set weight is afforded to any of the factors,
Associated Dry Goods Corp. v. Towers Fin. Corp.,
The foundation of BFH’s argument is its claim that the district court erroneously denied its motions to drop CWL as a party and to amend the complaint. As a result, the court analyzed the indispensability issue as if CWL were still a party to the action and as framed by the first amended complaint.
3
Had BFH’s motion been granted, the argument continues, Kellogg Caribbean would be dispensable because the motions served to eliminate any prejudice Kellogg Caribbean might suffer as a result of BFH’s action against Kellogg
We need not determine whether the district court erroneously denied BFH’s motions to amend because, even had the court granted the motions, Kellogg Caribbean would remain indispensable to the action. 4 There are two reasons for this conclusion.
1.
First, all four 19(b) factors still militate in favor of finding Kellogg Caribbean indispensable to BFH’s action against Kellogg USA. The first factor concerns the potential prejudice to the absentee if the action goes forward. BFH appears to suggest that dropping CWL as a party and removing claims relating to CWL would eliminate a potential source of prejudice to Kellogg Caribbean’s interests because BFH’s action against Kellogg USA will not require any interpretation of CWL’s warehouse services agreement with Kellogg Caribbean.
But this course, at most, would only eliminate one potential source of prejudice. If BFH secures a judgment against Kellogg USA, the judgment could still harm Kellogg Caribbean’s interest in an entirely different agreement — its 2004 agreement with BFH. The judgment would effectively stand for the proposition that BFH and Kellogg USA have an exclusive, unwritten distribution agreement. Although the judgment may not have collateral estoppel effect against Kellogg Caribbean as a non-party, such a judgment would serve as persuasive precedent that -the 2004 agreement Kellogg Caribbean reached with BFH is invalid to the extent that the 2004 agreement established that Kellogg USA assigned a non-exclusive, written distribution agreement with BFH to Kellogg Caribbean. That precedent could prejudice Kellogg Caribbean in future litigation whether Kellogg Caribbean is attempting to enforce or defend the 2004 agreement.
5
See Acton Co. of Mass. v. Bachman Foods, Inc.,
Nonetheless, BFH points to 19(b)’s second factor and argues that a court could shape relief in this case to minimize or eliminate the prejudicial effect of proceeding without Kellogg Caribbean. During our first examination of this case we did state that on remand the district court could consider shaping relief in such a manner so as to avoid prejudicing Kellogg Caribbean’s interests.
Kellogg I,
The argument is unconvincing. As an initial matter, it is not at all clear that money damages could be awarded in this case. In its proposed amended complaint, BFH states that Kellogg USA has breached an exclusive, unwritten distribution agreement. Unsurprisingly, BFH does not, however, suggest that this agreement has any set expiration date. Moreover, although BFH suggested at oral argument that it is willing to limit the damage request, it also acknowledges that damages it has suffered as a result of Kellogg USA’s alleged breach are “not easily calculable ... and increase on a daily basis.” Given the apparent recurring nature of the alleged breach, and the admitted difficulty in quantifying money damages, some form of injunctive relief may be necessary. See 12 Corbin on Contracts § 1142 at 194 (interim ed.2002) (noting money damages may be inadequate and specific performance necessary if, among other things, there is a recurring injury which requires “multiple actions for damages” and there is “difficulty in determining the amount of damages to be awarded for defendant’s breach”).
But even assuming an award of money damages could be fashioned pursuant to a judgment in favor of BFH, as we have said the judgment itself could still prejudice Kellogg Caribbean. Although an award of money damages would not require Kellogg Caribbean to perform under BFH’s agreement with Kellogg USA, the judgment itself would still serve as persuasive precedent that Kellogg Caribbean’s 2004 agreement with BFH, at least to the extent that it extends the 1992 agreement, is invalid. The potential for prejudice remains no matter how relief is sliced.
See Picciotto v. Cont’l Cas. Co.,
The third and fourth 19(b) factors also favor finding Kellogg Caribbean indispensable. The third factor concerns whether, if the action proceeds without the absentee, the judgment rendered will be adequate. A judgment is “adequate” if it furthers the public interest in “complete, consistent, and efficient” resolution of controversies.
See Provident Tradesmens Bank & Trust Co. v. Patterson,
Here, proceeding without Kellogg Caribbean would not further this public interest for two reasons. First, it would not efficiently resolve the dispute in this case. As we have emphasized, and as BFH acknowledges, the question of whether or not BFH has an exclusive agreement with Kellogg USA depends in significant part on the meaning and effect of the 2004 agreement that BFH reached with Kellogg Caribbean. That is a question with which Kellogg Caribbean’s rights are inextricably bound.
See Envirotech v. Bethlehem Steel Corp.,
Second, proceeding without Kellogg Caribbean would unnecessarily create the possibility of inconsistent judgments. For example, BFH could secure a judgment against Kellogg USA after proving that it has an exclusive, unwritten agreement with Kellogg USA that Kellogg USA breached. We explained that such a judgment could practically prejudice Kellogg Caribbean, but we have also noted that the judgement may not have a collateral estop-pel effect against Kellogg Caribbean. Therefore, it remains possible that in a different action another court could conclude that BFH has a non-exclusive, written agreement with Kellogg Caribbean by virtue of a valid assignment of the 1992 agreement by Kellogg USA.
With respect to the fourth and final 19(b) factor, we do not see why BFH will be without an adequate remedy if we uphold the district court’s dismissal of the action. We are aware of no impediment, not of its own making, preventing BFH from pursuing its asserted cause of action in the courts. of the Commonwealth of Puerto Rico.
See Picciotto,
2.
Turning to the second reason, in
Kellogg I
we foresaw the possibility that Kellogg Caribbean could be so central to this dispute as to render it indispensable to any action concerning the dispute.
See Kellogg I,
In
H.D. Corp. of Puerto Rico v. Ford Motor Co.,
As was true of the absentee in
H.D. Corp.,
Kellogg Caribbean’s alleged role here is apparent from the face of the proposed second amended complaint. One count alleges with respect to the October 2004 agreement that an “affiliate [of Kellogg USA] used words and insidious ma
Given that Kellogg Caribbean was a central player — perhaps even the primary actor — in the alleged breach, the practical course here, as it was in
H.D. Carp.,
is to proceed in a forum where the absentee may be joined.
See Freeman v. Northwest Acceptance Corp.,
In sum, considering especially the potential prejudice to Kellogg Caribbean if the federal action proceeds in its absence and the centrality of Kellogg Caribbean’s alleged role in the dispute, the interests weigh decidedly toward finding Kellogg Caribbean indispensable. Consequently, we affirm the district court’s dismissal of the action. 6
B. Costs and attorneys’ fees
In their cross-appeal, Kellogg USA and Kellogg Caribbean contend that the district court’s sua sponte denial of costs and attorneys’ fees without explanation constituted an abuse of discretion. We note that it appears neither party had the opportunity to file a bill of costs or a motion for attorneys’ fees.
As to the denial of costs, the contention is that, because the court dismissed BFH’s action against Kellogg USA, the Kellogg entities are prevailing parties and are presumptively entitled to recover their costs of suit under Federal Rule of Civil Procedure 54(d). The Kellogg entities identify two grounds in support of their request for attorneys’ fees. First, they assert that when a party prevails under Law 75 a court may grant that party attorneys’ fees. Second, they claim that BFH made base
We review the denial of both costs and attorneys’ fees for abuse of discretion.
See Janeiro v. Urological Surgery Prof'l Ass’n,
Assuming that Kellogg USA and Kellogg Caribbean can be considered prevailing parties within the ambit of cost recovery doctrine, the district court’s unexplained decision to deny costs does not constitute an abuse of discretion because the reason for its denial is readily apparent from the record. This case, like many other cases calling for an indispensability determination under Rule 19(b), presented a close question that required considered balancing. As such, the record supports the district court’s determination that each side should bear its own costs.
See San Juan Dupont Plaza Hotel Fire Litig.,
As to attorneys’ fees, Kellogg USA and Kellogg Caribbean do not explain in their opening brief why they should be entitled to fees, but rather make the argument in their reply brief. Accordingly, the argument is waived.
Wills v. Brown University,
AFFIRMED
Notes
. Kellogg USA and Kellogg Caribbean are affiliates of each other and subsidiaries of non-party Kellogg Company.
. The district court had denied intervention after concluding that Kellogg Caribbean's interests were sufficiently represented by Kellogg USA. We disagreed noting, among other things, that "The potential for this litigation to have a greater adverse impact on Kellogg Caribbean is a sufficient basis for concluding that Kellogg USA may not serve as an adequate proxy.”
Id.
(citing
Mat. Union Fire Ins. Co. v. Rite Aid of S. Carolina, Inc.,
. BFH appears to concede that with CWL as co-plaintiff, and under its first amended complaint which requested injunctive relief, Kellogg Caribbean is an indispensable party. As noted, we stated as much in
Kellogg I. See Kellogg I,
. We have no hesitation in proceeding to answer the indispensability question. Although a district court is generally in the preferred position to make an indispensability determination, and should normally be given the first opportunity to analyze the question, we have noted that some situations favor us deciding the joinder issue on appeal. See
Olympic Mills Corp.,
. BFH contends that this potential source of prejudice is a chimera. It argues that Kellogg USA could not have assigned any interest in the 1992 agreement because the agreement, according to its terms, had expired in 1992. Its argument misses the point. Kellogg Caribbean argues that the 2004 agreement explicitly establishes that the 1992 agreement is still in operation. There is language in the 2004 agreement that arguably supports this contention. If BFH prevails in establishing that it has an exclusive, unwritten distribution agreement with Kellogg USA, however, the judgment would serve to substantially weaken Kellogg Caribbean’s argument regarding the validity of the 2004 agreement and, thus, its ability to enforce or defend the agreement itself.
. Although the district court properly dismissed this action without prejudice, we may quibble with the manner in which it did so. The court appeared to add Kellogg Caribbean to the action and then dismiss the action, on the ground that it no longer possessed subject matter jurisdiction over the case. More likely, Kellogg Caribbean should not have been joined in the first place precisely because joining Kellogg Caribbean as a party would destroy subject matter jurisdiction. See 7C Charles Alan, Arthur R. Miller & Mary Kay Kane, Federal Practice & Procedure § 1917, at 477-78 (2d ed.1986). Thus, the action should have been dismissed for non-joinder of Kellogg Caribbean pursuant to Rule 19(b).
. We additionally note that an award of attorneys' fees under Law 75 is within the district court’s discretion. P.R. Laws Ann. Tit. 10 § 278e.