101 F.R.D. 467 | D.P.R. | 1984
OPINION AND ORDER
This action for declaratory judgment and injunctive relief was filed under the diversity grant of jurisdiction on December 10, 1979 by National Safe Corporation (National), the principal or supplier in a distributorship agreement with defendant Texidor Security Equipment, Inc. (Texidor). Plaintiff seeks a declaration that it had “just cause,” as defined by Law 75 of June 24, 1964, P.R.Laws Ann., Tit. 10 Sec. 278 et seq., to terminate the contractual relationship or that defendant was not a “dealer” within the meaning of the statute. In the alternative, it seeks a declaration that Law 75 is unconstitutional. Texidor counterclaimed alleging that plaintiff’s acts constituted a violation of Law 75. Extensive discovery
National’s response to our show cause order leaves many questions unanswered. Its explanation on why it directed its complaint solely at Texidor and not at Enterprises or, for that matter, against both of them, makes no sense. The complaint itself states the reasons for terminating the relationship with Texidor. These are based on Texidor’s poor sales performance, not on any threat of legal action expressed in the letter sent by Texidor’s attorney after National had informed of its decision to end the contract. A reading of the entire complaint shows that the post-termination letter incident is not an event isolated from the rest of the allegations, most of which painstakingly assert how Texidor failed to meet National’s expectations and why it acted correctly in terminating its dealership with Texidor. The complaint does not even hint that Texidor was an unrelated third party that fitted itself in Enterprises’ shoes and threatened them with a Law 75 claim. Even assuming that National did not learn about Enterprises until Gabriel Texidor’s deposition in May 1981, something which is contrary to the evidence on record, after such date there was no attempt by National to amend its complaint in order to seek declaratory relief against the one it now claims was its real dealer in Puerto Rico. National’s allegations in support of declaratory and injunctive relief have nothing to
The shakiness of National’s position is also apparent in its characterization of the allegations challenging the applicability of Law 75 to Texidor as a justification for bringing its action solely against Texidor. National’s allegations on the inapplicability of Law 75 to Texidor have nothing to do with its last minute argument that dealership rights lie elsewhere. Until the day before trial its contention on the inapplicability of Law 75 to Texidor was based on lack of exclusivity of the dealership and not on the absence of any commercial relationship with Texidor on account of the assignment of its distributorship rights. ■ Placing the blame on Texidor because it knew of the existence of Enterprises serves only to muddy the waters even more. The existence of Enterprises and its relationship to Texidor and to National itself were known to National long before the filing of its declaratory action. Its argument that, since Texidor knew of the existence of Enterprises, Enterprises should have sued cuts both ways for National could just as well have filed its action against Enterprises or against both Enterprises and Texidor. Likewise, its contention that Texidor, Sr.’s brief deposition testimony on the Texidor-Enterprises relationship shows that distributorship rights were completely transferred ignores the bulk of the evidence on record and plaintiff’s own conduct and admissions throughout its business dealings with defendant.
The basic premise underlying plaintiff’s argument is that Enterprises is the only party with capacity to sue it under Law 75. Since the Law 75 counterclaim was not filed by Enterprises, plaintiff seeks its dismissal as procedurally defective. Its lack of standing argument looks to Rule 17(a), Federal Rules of Civil Procedure, which requires that “[ejvery action ... be prosecuted in the name of the real party in interest.” A “real party in interest” has been defined as one who possesses the substantive right being asserted, United States v. 936.71 Acres of Land, State of Fla., 418 F.2d 551, 556 (5th Cir.1969). Aside from the general reluctance of courts to apply wooden interpretations to the rules of procedure when substantive rights are at stake, see e.g.: United Mine Workers v. Gibbs, 383 U.S. 715, 724, 86 S.Ct. 1130, 1137, 16 L.Ed.2d 218 (1965), Rule 17 and others contain provisions that avoid defeating substantive rights. They were designed precisely to leave behind the old practice of placing too heavy an emphasis on rigid applications that foreclose legitimate claims filed against a technically incorrect defendant from reaching the court. See generally: 6 Wright and Miller, Federal Practice and Procedure, Sec. 1541. Rule 17(a) provides that:
No action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or joinder or substitution of, the real party in interest; and such ratification, joinder, or substitution shall have the same effect as if the action had been commenced in the name of the real party in interest.
Thus, a mere “ratification” by the alleged real party not included in the action to the effect that the party suing is capable of enforcing the right and that it will be bound by the results of that action is deemed sufficient to cure any objections of this nature. See: Audio-Visual Marketing Corp. v. Omni Corp., 545 F.2d 715, 719 (10th Cir.1976); Motta v. Resource Shipping and Enterprises Co., 499 F.Supp. 1365, 1369 (S.D.N.Y.1980); Clarkson Co. Ltd. v. Rockwell Intern. Corp., 441 F.Supp. 792, 797 (N.D.Cal.1977). The last sentence of Rule 17 clearly suggests that by merely joining the real party claimed any objections based on the running of limitations periods would be fore
The ‘main thrust’ of this passage [the last sentence of Rule 17(a) ] ‘is to allow a correction in parties after the statute of limitations has run, despite the valid objection that the original action was not brought by the real party in interest.’ 3A Moore’s Federal Practice, Par. 17.-15-1 at 17-182. (Emphasis added.) Although Prevor thus may have been able to continue the case simply by having its parent company ratify its act in commencing suit, or by substituting or joining the parent, Prevor’s failure to do so cannot properly provide grounds for dismissal where it was, in its own right, a proper plaintiff.
Id. (Emphasis added.) Other courts, however, favor a balancing approach. The joinder or substitution provision of the rule is not applied unless some injustice will result and the failure to have instituted the action correctly is due to some excusable mistake. See: Crowder v. Gordons Transports, Inc., 387 F.2d 413, 418 (8th Cir.1967). Sometimes courts have looked to the relation back criteria of Rule 15(c), Federal Rules of Civil Procedure, as guidance in applying the last sentence of Rule 17(a), Federal Rules of Civil Procedure. See e.g.: Metropolitan Paving Co. v. International U. of Op. Eng., 439 F.2d 300, 306 (10th Cir.1971) cert. denied, 404 U.S. 829, 92 S.Ct. 68, 30 L.Ed.2d 58. Rule 15(c), Federal Rules of Civil Procedure, permits an amendment changing a party to relate back to the date of the original filing, overcoming any statute of limitations problems, if the claim made by the new party arises out of the occurrence or transaction set forth in the original pleading and if,
[Wjithin the period provided by law for commencing the action against him, the party to be brought in by amendment (1) has received such notice of the institution of the action that he will not be prejudiced in maintaining his defense on the merits, and (2) knew or should have known that, but for a mistake concerning the identity of the proper party, the action would have been brought against him.3
The principal element required is notice to the parties opposing the amendment, an element which is measured in terms of the prejudice that would result in allowing or refusing the amendment. See: Yorden v. Fiaste, 374 F.Supp. 516, 518-21 (D.Del.1974) and cases there cited. In Williams v. United States, 405 F.2d 234 (5th Cir.1968), an action for personal injuries was filed against the United States by a minor through his mother as next friend. At an advanced stage of the proceedings, the mother requested leave to amend the complaint to appear as a plaintiff in her own right. The government opposed arguing that her action was time barred and the district court denied a request to amend. The Court of Appeals reversed finding that the United States had sufficient notice of the claim and of the existence of the immediate relative to have arrived at the reasonable inference that such an action could have been possible. Id. at 239. In the context of a real party in interest joinder the analysis of hardship must be oriented to the purposes of the rule which are to protect “a defendant from facing a subsequent similar action brought by one not a party to the present proceeding and to ensure that any action taken to judgment will have its proper effect as res judicata.” Prevor-Mayorsohn Caribbean v. Puerto Rico Marine, 620 F.2d 1, 4 (1st Cir.1980).
Although the parties have not addressed the substantive law which would determine Texidor’s capacity to bring the counterclaim, it appears that Puerto Rico’s Civil Code permits the assignment of rights, credits or actions, see: P.R.Laws Ann., Tit. 31 Sec. 3941 and Robles v. Superior Court, 85 PRR 640, 647-49 (1962); Ojeda v. Fernandez, 32 PRR 688, 692 (1924). The Code provides that contracts are valid only
In this case plaintiff contends that there is no dispute that Texidor transferred all of its rights to Enterprises in the manner required by Puerto Rico law thus extinguishing Texidor’s interest and claims in the dealership contract and precluding it from seeking its enforcement. This is based on testimony given by Gabriel Texidor, Sr., president of Texidor, during his deposition to the effect that a few months after the dealership had begun he informed National that Texidor would operate as Enterprises and that all its sales be processed in Enterprises’ name. This testimony marks one instance in a record which, viewed in its entirety, points to a conclusion quite different from that of plaintiff. This excerpt of the deposition was subsequently clarified by Texidor, Sr. in an affidavit where he states that Texidor “has at no time ... relinquished, waived or assigned its rights as [plaintiff’s] dealer in Puerto Rico” and that “the only function of [Enterprises] was that of appearing as agent of [Texidor] in the processing of purchase orders for [plaintiff].” He declared under oath that all merchandise bought from National was always shipped to Texidor and that efforts to obtain the sales billed in Enterprises’ name were made by Texidor. Affiant also states that Texidor would deliver, install and provide maintenance to the products sold and would hold itself to the general public as the representative of National products in Puerto Rico. In terms of accounting, he stated that all commissions derived from sales of plaintiff’s products, including those made in Enterprises’ name, were paid directly to Texidor and were reflected in Texidor’s account books. The record supports this sworn statement. In particular, it is supported by the depositions of plaintiff's own officers-directors, present and former, who continuously refer to Texidor as the party to deal with in Puerto Rico. As indicated in these depositions, National’s sales and collection records were not separated to reflect dealings made with each corporation. They were considered as one entity throughout the relationship. Important communications regarding the distributorship, such as providing or canceling a line of credit, were made to Texidor, not to Enterprises. In various communications sent by National to consumers of its products in Puerto Rico it refers them to Texidor as its authorized dealer in Puerto Rico. Even the financial analysis made by Texidor’s expert to canvass the special damages claimed under the Law 75 counterclaim, a study made before the real party issue was raised, did not separate the entities in terms of sales to one or the other but treated all loss of sales, special losses and damages as falling on one corporation. However, by far the most revealing document in support of Tex-idor’s position is National’s own verified complaint. There it refers to Texidor as the entity to which it sold its products during the years the relationship lasted, the entity which it considered was not providing an effective sales performance; the party to whom it communicated its intention of starting its own distributing operations in Puerto Rico, the entity with which it meets to find an “amicable solution” to
Accordingly, Texidor is ORDERED within ten (10) days after notice to file a sworn statement by a person duly authorized to represent and act on behalf of Enterprises Inc. stating that it was not assigned Texi-dor's rights as plaintiff's dealer, that Enterprises’ only function was as Texidor’s agent in processing purchase orders, that Enterprises possesses no substantive right to sue plaintiff, that all rights stemming from the relationship with plaintiff are held by Texidor and that Enterprises will be bound by the results of this action. In this manner Texidor’s compliance with Rule 17 will be established without any doubt and no possible injury can befall plaintiff if the counterclaim is prosecuted by Texidor alone.
Finally, the Court rules that plaintiff’s inexcusable delay, short of obstruction of the proceedings, in bringing this matter to its attention is in itself sufficient to deny the dismissal motion. See: Hefley v. Jones, 687 F.2d 1383, 1388 (10th Cir.1982); McLouth Steel Corp. v. Mesta Machine Co., 116 F.Supp. 689, 691 (D.C.Pa.1953) aff'd. on other grounds 214 F.2d 608 (3rd Cir.) cert. denied 348 U.S. 873, 75 S.Ct. 109, 99 L.Ed. 687. Plaintiff and its attorney are expressly admonished that any future conduct of this sort shall be severely sanctioned.
SO ORDERED.
. Reference is to Texidor deposition of May 1981 on assignment of rights to Enterprises.
. We make no pronouncement on the nature or precise characteristics of this distributorship since this appears to be one of the main issues in the case.
. Although drafted in terms of new defendants, it has been suggested that the rule can be applied by analogy to amendments changing plaintiffs. See: Federal Rules of Civil Procedure Advisory Committee’s Note to Rule 15(c).
. Plaintiff’s attorney is reminded of the provisions of 28 U.S.C. Sec. 1927 and the responsibility now imposed upon signing papers and motions pursuant to Rule 11, Federal Rules of Civil Procedure, as amended, which have been in effect since August 1, 1983.