USCA1 Opinion

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT
____________________
No. 93-1704
R. W. INTERNATIONAL CORP. AND T. H. WARD DE LA CRUZ, INC.,
Plaintiffs, Appellants,
v.
WELCH FOOD, INC., ET AL.,
Defendants, Appellees.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Gilberto Gierbolini, U.S. District Judge]
___________________
____________________
Before
Breyer, Chief Judge,
___________
Coffin, Senior Circuit Judge,
____________________
and Boudin, Circuit Judge.
_____________
____________________
Jose A. Hernandez

Mayoral with whom

Rafael Hernandez Mayoral

__________________________
________________________
on brief for appellants.
Jaime E. Toro-Monserrate with whom Samuel T. Cespedes and
_________________________
___________________
Matilde Nin were on brief for Welch Food, Inc.
___________
Jorge I. Peirats with whom Jacabed Rodriguez Coss was on br
_________________
______________________
for Magna Trading Corp.
____________________
January 20, 1994
____________________

COFFIN, Senior Circuit Judge.

_____________________

The parties in

this action

attempted to negotiate a long-term distribution relationship, but

after a

year of

haggling, defendant

Welch Foods, Inc.

(Welch)

notified plaintiffs R.W. International Corp. (R.W.) and T.H. Ward

de

la

Cruz,

marriage

Inc.,1

because

claimed that

of

that

it was

irreconcilable

the dissolution

of the

calling

off

the

differences.

corporate

Plaintiffs

relationship violated

Puerto Rico Dealers' Contracts Act, P.R. Laws Ann. tit. 10,
(Law 75), and federal and
alleged

claim

of

state antitrust laws.

tortious

interference

the

278

Plaintiffs also
with

contractual

relations against defendant

Magna Trading

Corp., supervisor

of

Welch's operations in Puerto Rico.

The district

court concluded that

the parties had not yet

Law

75,

and

it

the association

between

matured into a relationship protected by

consequently

granted

summary

defendants on the Dealers' Act and tort claims.

judgment

for

It dismissed the

antitrust claims on the ground that plaintiffs had failed to make

the required showing of injury to competition.
caselaw

and circumstances persuades

claims properly were dismissed.

Our review of the

us that only

the antitrust

We therefore reverse the summary

judgment on the other causes of action.

____________________

1 These two related corporations are both in the food

distribution business. According to answers to interrogatories,
R.W. does marketing for mainland corporations and accounting for
De la Cruz, Inc..
De la Cruz, in turn, distributes but does not
purchase products from producers. It makes purchases from Impex
Trading, another related company. See District Court opinion at
___
5 n.2. For convenience, we refer to these companies jointly as
either "plaintiffs" or "R.W.".
-2-

I. Factual Background
__________________

The

facts

underlying

this

dispute

essentially

are

undisputed, with the parties differing only with respect to their

legal significance.

Our review

summary judgment is

plenary.

of the district court's grant of

Cambridge Plating Co. v.
______________________

Napco,
______

Inc., 991 F.2d 21, 24 (1st Cir. 1993).

____
Welch, a producer of fruit

juices and related products, has

sold its products through local distributors in Puerto Rico since

the

1930s.

In 1987,

frozen concentrate
local

broker,

Welch needed

a new

line of products,

Magna Trading,

it

distributor for

and, with the help

identified R.W.

as

its

of its

the most

suitable -- though not perfect -- candidate.

From

the beginning

of Welch's

interest

in R.W.,

company

executives had concerns about R.W.'s handling a competing line of

juice

products

international

under

the

marketing

"Donald
manager

internally that R.W. would

Duck"

label.

Welch's

had

suggested

initially

have to drop the Donald Duck line "to

be a viable option," see App. at 213, but he later

___
R.W.'s

owner, Thomas

measures

to

assure

Ward,

had

that the

agreed

Welch

to

frozen

reported that

undertake

several

concentrates would

receive full support despite the continued presence of the Donald

Duck

products.

commitment by
App.

at

219,

These

included

Welch's for
and

a larger

financial

advertising Welch's product.

-3-

"[a]

trial

period of
contribution

period

with

no

representation,"
from

R.W.

for

Discussion

among the parties

took place through

months of 1988 and, on March 25, Welch's

the early

international marketing

manager wrote to Ward to announce his company's decision:

. . . I am pleased to inform you that Welch's has
reached a decision to continue the frozen concentrate
distribution and sales business begun by
Ventura
Rodriguez in Puerto Rico by transferring our account to
R.W. International.
Confirming our conversation on Monday, Welch's
will proceed to draft an agreement calling for the
appointment of R.W. International in Puerto Rico for a
one-year trial period . . . .
App. at 364.

Four days later,

on March 29, Welch

notified its

customers that it had

made the decision to appoint R.W. International and its
distributing affiliate T.H. Ward de la Cruz Inc. as its
distributors in Puerto Rico for Welch's frozen product
line. This change will go into effect as of this date
and a written agreement is expected to be arrived at in
the near future.
App. at 366 (translation in appendix to appellant's brief).
The

parties

plaintiffs regularly

immediately

submitting purchase

delivering the merchandise

until

three months

submitted

began

later,

doing

business,

orders and

and billing plaintiffs.

however, in

late

a proposed contract to plaintiffs.

with

defendants
It was

June, that

not

Welch

Ward responded in

August

with a

Puerto

Rico

company

appeared to
subjects

were

Of particular

provisions

reflect an effort by

companies

dealership
document,

counterproposal.

to

in

other than

for example, characterized

"just

if

to the

agreement

Welch to bypass

substantial damages

contracts for

the

concern

that

Act 75, which

they

terminate

cause."

The Welch

the relationship with R.W.

-4-

as a

transfer of

between Welch
Act 75.

the contractual

and its prior

the "transfer"

had existed

distributors before the

Welch's draft also

govern the agreement.

arrangement that

specified that New

R.W.'s revised draft,

passage of

York law

would

inter alia, deleted

_____ ____

language and specified that Puerto Rico law would

apply.
In

mid-October, after

a series of

between attorneys, Welch submitted a

agreement, which reinstated all of
primary concern

to R.W.

telephone conversations

third proposed draft of the

the language that had been of

During a visit

to Puerto Rico in early

December and in subsequent correspondence, Welch's

international

marketing

the

manager

negotiations "as

encouraged

Ward

soon as possible."

to

complete

On January 30,

contract

1989, Ward

responded by letter stating that he, too, was anxious to finalize

the agreement, but
insists

that there were a few items "that your lawyer

on and that we feel are not

future relationship."

In

in the best interest of our

response to

an inquiry

about R.W.'s

investing $50,000 in a promotional campaign, Ward noted that

commitment

was not yet

ripe because he had

the

agreed to make this

expenditure "once we as a company[] held a working agreement with

Welch's."

A follow-up

president

of

Magna

letter sent by Ward on February

Trading

reiterated

concerns

8 to the

about

the

"transfer" concept as a means of "avoid[ing] Law 75 constraints."

At this point, the applicability of Law 75 remained the only

significant

point

of

contractual

disagreement

between

the

-5-

parties.

They

had resolved

earlier conflicts

as to

which of

Ward's entities would be named specifically in the contract (only

R.W.), and whether

R.W. would have an

exclusive distributorship

during the one-year trial period (no).

The

companies had been continuing to do business throughout

the negotiation period.

Late in

1988, the relationship appeared

to

be working

well; Magna

wrote to Ward in early

11 percent

by-side

handling of

January

20, he

a special product

promotion.

began to express concern

the Welch

wrote to

discomfort with Ward's

grape

president, Roberto

Giro,

December to commend him for exceeding

the goal on

1989, however, Giro

Trading's

and

Welch's

This

in

about R.W.'s side-

Donald Duck

products.

marketing manager

involvement in a new line

juice products.

Early

by

On

indicating

of Donald Duck

concern escalated, and

Giro wrote

again on March 22 suggesting that R.W. was not giving priority to

Welch products as it had promised to do.
On

March 30,

1989, Welch's

international vice

president,

William Hewins, informed Ward in a letter of Welch's decision "to

discontinue
therefore,
relationship

the existing

pre-trial

putting an end to the

for our frozen

relationship

one-year trial or probationary

concentrate products."

The letter

continued:
As you know, the idea of working together on a one-year
trial basis was, as per your recommendations, to
determine if Welch's frozen concentrates could be
handled to our satisfaction in spite of your handling a
competitive product. The pre-trial relationship proved
to
us that the
conflicts of interest
of your
representing both competing lines are significant and
irreconcilable. . . . An increased level of conflict in
-6-

and,

personal
relations between
our broker
and R.W.
International has also been noted, tracing to conflicts
between the brands represented by the two firms. . . .
Instead of complementing one another, as was your
original premise, these brands represent conflicting
interests for you and us. . . .
Because

Welch

terminated

reached

an agreement

the relationship

in

writing,

the

before

one-year

the parties
trial

period

envisioned at the outset of their dealings never even commenced.

Plaintiffs
complaint

filed this action in

alleges

that

agreement without just

Welch

April 1989.

terminated

Their amended

their

cause in violation of Law

dealership

75; that Magna

Trading tortiously interfered with their contractual relationship

with

Welch; and

threatening,

later

R.W. did not

by seeking

through

defendants

and then

dealership if
and

that

to

improper

agree to drop Donald

war.

procedural grounds,

Welch Foods, Inc., 937 F.2d

__________________
remand,

dismissed

again

antitrust

actually terminating,

monopolize the

a price-cutting

violated

on

bottled

The case
see
___

laws

plaintiffs'

Duck products,

grape juice

was dismissed

market

once on

R.W. International Corp.

_________________________

11 (1st Cir. 1991),

defendants'

by

v.

and, following

motions

for

summary

judgment.

In this appeal, plaintiffs maintain that all of their claims

are viable.
ruling,
govern
operated

They argue

precedent on
the business
for a

year.

that, contrary to the

Law 75 establishes
relationship within
They assert

district court's

that the
which

that this

statute does
____

R.W. and

Welch

arrangement also

provides

a basis for

Magna.

In

their tortious interference

addition,

plaintiffs

argue

that

claim against

their

antitrust

-7-

allegations

were

judgment motion
court

erred

sufficient
and that, if

in

to withstand

defendants'

their showing were

dismissing the

claims

summary

deficient, the

without

first allowing

discovery.
II. Applicability of Law 75
_______________________
Law

75

provision

provides

to

the

that,

contrary,

notwithstanding
the

supplier

contract may terminate a dealership

Laws Ann. tit. 10,
Puerto

Rico

arbitrarily
created a

dealers
terminates

from

contractual

distribution

only for "just cause."

P.R.

The statute was intended to protect

the

harm

caused

a distributorship

favorable market

frustrating the
who

278a.2

in

any

for the

when

once

the

supplier

dealer has

supplier's products,

legitimate expectations and

interests of

"thus

those

so efficiently carried out their responsibilities," Medina &

________

Medina v. Country Pride Foods, Ltd., 858 F.2d 817, 820 (1st Cir.
______
__________________________
1988) (reproducing

in full

translation of

Puerto Rico

Supreme

Court's response to certified question,

(citing

legislative reports)).

"very much

a `one-way street'

the unwarranted

acts of

122 P.R. Dec. 172 (1988)

The Act

has been

described as

designed to protect

dealers from

termination by

suppliers," Nike Int'l

___________

____________________
2 The provision states in full:
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.
-8-

Ltd. v.
____

Athletic Sales, Inc., 689 F.

_____________________

Supp. 1235,

1237 (D.P.R.

1988).
For
dispute

purposes of its summary

that

functions of

R.W.

and

its

Ann. tit.

10,

affiliates

a distributor within

the twelve months the parties

278(a).3

judgment motion, Welch did not

were

performing

the meaning of Law

the

75 during

were doing business, see P.R. Laws

___
Welch's position

was, and is,

that

these operations occurred during a kind of "twilight zone" period

while the parties attempted to
that

would

govern

their

negotiate in good faith the terms

actual

relationship.

Because

the

negotiations failed, the relationship never materialized, and so,

in Welch's view, Law 75 never was implicated.
The district
Law

75 was

not

court accepted this

meant

negotiations preceding
supplier

and

operations in
"would

period

The

abeyance during

a good-faith

court

to sit and

preliminary

that

arms-length

keeping

negotiating process

the principal

literally without any

during that period,

for

noted

wait while

bargaining position every day it

required

of

working agreement between

distributor.

market -- obtaining,

75 to dealings
autonomy

apply to

a completed

allow distributors

loses its
stronger

to

argument, concluding that

waits."

effort, a

Applying Law

however, "would curtail

negotiations."

the

Neither

____________________

3 This provision defines a "dealer" as a "person actually

interested in a
dealer's contract because of
his having
effectively in his charge in Puerto Rico the distribution,
agency, concession or representation of a given merchandise or
service."
-9-

approach

would serve

the statute's

purpose

of "improving

and

permitting a system of free competition."

Plaintiffs' challenge to

this judgment is

Law 75 makes no distinctions

they

assert,

temporary or

be

they

among distributorship arrangements,

described

tentative.

straightforward.

The

as

pre-trial,

preliminary,

only relevant point of

inquiry is

whether R.W. and its affiliates were performing as a dealer under

the

statute; if so,

Law 75 governs.

because Welch concedes

R.W.

thus contends that,

dealer status, its decision

the relationship must be judged

to terminate

under the statute's "just cause"

test.
We
one.

are persuaded that

Their most compelling

language, which defines a

as:

the correct

support is provided by the statutory

"dealer's contract" subject to Law

75

[a] relationship established between a dealer and a

principal or grantor whereby and irrespectively of the
__________________________
manner in which the parties may call, characterize or
_______________________________________________________
execute such relationship, the former actually and
___________________________
effectively takes charge of the distribution of a
merchandise, or of the rendering of a service, by
concession or franchise, on the market of Puerto Rico.

P.R. Laws Ann. tit. 10,

278(b) (emphasis added).

clearly incorporates within

supplier
process
Rico.

plaintiffs' position is

and dealer
of

in

distributing

The statute does

Puerto Rican wholesalers.

The

its reach any arrangement

___

which

the dealer

the supplier's

is

merchandise

insists upon

between a

actually in

not apply to suppliers' simple

It

statute

the

in Puerto

sales to

establishment of

"supplier/dealer" relationship.
established,

But once

the statute applies

that relationship

irrespective of the

is

length of

-10-

time such an arrangement has been in existence, and it explicitly

rejects any efforts by the parties to foreclose
semantic niceties.

Welch's concession

coverage through

that R.W. was acting as a

dealer (for purposes of summary judgment) thus seems dispositive.

Welch, however, asserts that the
as

inclusive

as its

statute is not meant to be

language suggests,

reasons to support this position.

and it

offers several

In our view, each falters upon

close scrutiny.
First,

Welch

provision indicates

claims

that the

that Law

word

75 applies

"established"
only once

have achieved a certain level of stability.

case may have

been working with each other,

The

in the

the parties

parties in this

Welch observes, but

their

failure to reach

their

relationship was never "established" within the meaning of

Law 75.

In support of

agreement on essential

terms meant that

this argument, Welch cites language

from

cases describing the Law 75 relationship as "characterized by its

continuity, stability,

mutual trust,

coordination between

both

parties as independent

entrepreneurs," J. Soler Motors, Inc. v.

______________________

Kayser Jeep Int'l Corp., 108

_______________________
Translation);
122 P.R.
Court

P.R. Dec. 134, 145 (1978) (Official

see also Roberco, Inc. v. Oxford Industries, Inc.,

___ ____ _____________
_______________________

Dec. 117

(1988), Official

of Puerto Rico,

slip op. at

Translation of the
5 (June 30,

Supreme

1988); Medina &

________

Medina, 858 F.2d at 822.

______
We

cannot agree that a relationship is "established" within

the meaning

of Law

75

only after
_____

reached the point at which

a supplier

and dealer

have

their relationship might be described

-11-

as "stable" or "continuous."
protect

from

abrupt

longstanding
benefit

to

and arbitrary

representation
the

Although the statute was enacted to

had provided

manufacturer,

relationships from

termination

the

law

remain stable and

continuous.

858

at

levels

820

substantial
is drafted

whose

economic
to

govern

their inception to ensure that they will both

become and
F.2d

dealers

(Act

75

See Medina & Medina,

___ ________________

bargaining

power

between

manufacturer
dealership
precedent

and dealer "[i]n order to achieve reasonably stable

relationships

cited

by

in

Puerto

Welch describes

Rico").
the

commercial

partnership that gave rise to

the

to

cases

coverage.
may have

exclude fledgling

type

Although

the

of longstanding

Law 75, we do not read

relationships

from

the act's

A well-established dealer may have more to lose -- and

provided more benefit to the

with less tenure,

but the statute

supplier -- than a dealer

makes no distinction

between

them.

Nor can it be said that a relationship is established within

the

meaning

Indeed,

of

Law 75

Welch's counsel

only

if

it is

acknowledged at

committed
oral

to writing.

argument that

relationship subject to the statute may be established

course
because

of dealing,
the parties

but argued

that this

continued to

disagree

was not

through a

such a

over the

case

essential

terms of their affiliation throughout their entire collaboration.

In other words,

Welch contends

that this

relationship was

established because its terms still were being negotiated.

-12-

not

While it is
dimensions

true that the parties

of their future

they were operating

full

year.

relationship, the fact

Plaintiffs

sent

purchase

companies were

commendation from Magna

successful

special

time.

terms for a

orders

to

Welch

March 1988 and March 1989, and

actively

products throughout that

on the

remains that

as business partners under some

____

approximately once a week between

Ward's

had yet to agree

involved in

distributing Welch

As noted above,

Ward received a

Trading's president for its

promotion.

To

be

sure,

effort in a

the relationship

envisioned by

the parties when

they began to do

business never

materialized;

the relationship protected by Law 75, however, was

the one that actually existed.

Welch's
period

second

of

argument,

preliminary

that applying

negotiations

Law

75

improperly

during a

burdens

the

parties' liberty to contract, is the one the district court found

particularly
trial

convincing.

period

will

When parties freely have agreed that a

precede

establishment

of

the

long-term

relationship Law 75 is intended to protect, the company

invoking

the

Act

before

conclusion of

the

trial

asserts,
period

is

tantamount to coercing the parties into a contract neither agreed

to enter.

This is

particularly harmful to the

maintains, because Law 75 is

a supplier who is not
attempted
dealer's

relationship

designed to empower dealers.

allowed to step away from

would

terms and conditions,

financial and legal autonomy.

supplier, Welch

be

forced

into

Thus,

an unsuccessful
accepting

with the consequent

the

loss of its

-13-

We detect several problems with this argument.

In the first

place, as we have noted, the parties in this case were not simply
negotiating
future.

a relationship

R.W.

to

be

activated

sometime

While we

would have no difficulty

that a supplier could break

in accepting

off negotiations, no matter how long

they had been going on, the issue before us is whether

an

actual

dealership

relationship

contemporaneously with the negotiations.

those dealings
term

plan.

the

had been serving as Welch's Puerto Rico dealer for

twelve months.

terminate

in

from Law 75 because

The

statute,

that

existed

Welch wants to insulate

they were part of

however,

Welch can

plainly

a longer-

states that

the

characterization of a relationship (e.g., calling it temporary or

preliminary) does

not affect its

status under

Law 75.

If the

parties are dealing, a dealership exists for purposes of the Act.

This
insist
75's

bright line makes

sense.

suppliers could

on various types of contingency arrangements to avoid Law

restrictions for

substantial periods

Welch's concerns about R.W.'s capacity

a

Otherwise,

potential conflict of

of

time.

Although

to perform in the face of

interest seem legitimate,

delaying Law

75's

coverage until long after the dealership relationship began

would allow Welch to terminate for any reason whatsoever.

for

example, could

regard

for any

business,

if

forsake R.W.

efforts taken
another

be

no

principled

by R.W.

dealer

commission suddenly became

without

available.

distinction

recourse and

to

willing

gear up

to

without

for Welch's

accept

Moreover, there

between

Welch,

smaller

seems to

Welch's one-year

trial

-14-

period

and a

supplier's effort

to designate

five-year "preliminary"

distributorship

long-term relationship.

To rule that a

is

outside the scope

loophole in

of Law 75

a three-

before

deciding

or even
on

contingent relationship

is thus to

allow a significant

the protection the Puerto Rico legislature sought to

provide.
In the

second place, we fail to see

how applying Law 75 in

the circumstances of this case necessarily would require Welch to

continue a relationship it does not want

in a manner to which it

has serious

requires a

justify

objections.

its decision

to

Law 75 simply
terminate a

dealership.

supplier to
If

Welch's

conflict-of-interest concerns about R.W. are legitimate,

we have

no doubt

that this would

constitute "just cause" under

See Medina & Medina, 858 F.2d at 823-24.4

___ ________________
here does not force a

Law 75.

Thus, applying Law 75

contract onto unwilling parties; it simply

imposes conditions on an existing relationship.

Finally, the

liberty of contract argument

as it presumes that

only the supplier will

stumbles insofar

suffer if, to

avoid

____________________
4

Medina & Medina is not precisely on point because it

________________
involved a supplier's decision to totally withdraw from the
Puerto Rico market following good-faith negotiations that failed
to achieve agreement between the parties. There is no indication
here that Welch intended to leave the market rather than find a
new dealer. Nevertheless, we believe the principle underlying
Medina & Medina is equally applicable in these circumstances,
________________
i.e., that a supplier has just cause to terminate if it has
bargained in good faith but has not been able "to reach an
agreement as to price, credit, or some other essential element of
the dealership," 858 F.2d at 824.
This would be true at least
where, as here, the supplier's market in Puerto Rico was well
established before the current dealer relationship and the
supplier's action therefore "is not aimed at reaping the good
will or clientele established by the dealer," id.
___
-15-

application of
they have

Law 75,

the parties

reached final agreement

long-term relationship.

refrain from

dealing until

on all terms to

govern their

The manufacturer and the dealer share an

interest in maximizing sales of the

more to the

product, and it would be

dealer's advantage than to the

market to slip

away while the parties are

negotiations.

We therefore

no

manufacturer's for a

engaged in protracted

disagree with the

district court's

view that dealers will gain unfair advantage in bargaining if Law

75 is triggered as soon as the parties start dealing.
have an

incentive to

time.

To

the

reach agreement

extent

supplier's

diminished by its choice to

been resolved, this

at the

Both sides

earliest possible

future

flexibility

is

begin dealing before all issues have

is a result intended by

the legislators who

enacted Law 75.

In

short, the practical

Act as soon as the

and

dealer

is

effect of activating

the Dealers'

parties start conducting business as supplier

to

ensure

that,

right

from

the

start,

the

relationship is marked by a

certain level of commitment from the

supplier.

entirely

This does

opportunity to

not

evaluate the

through a "test

period."

suitability of

It simply means

can be severed without consequence

the

dealer fails

a meaningful

suppliers engaged in

deprive suppliers
a particular

test.

This should

not trouble

goal is

If, on the other hand,

disintegrates
-16-

match

that the relationship

good-faith negotiations, for their

preliminary "understanding"

the

only for just cause, i.e., if

to produce a long-term working agreement.

a

of

into impasse

over

essential terms,
is

a finding of "just cause" seems likely.

not intended to extend unworkable

prevent arbitrary terminations.

Law 75

relationships, but only to

See Medina & Medina, 858 F.2d at

___ _______________

823-24.
Of course,

whether or not

policy is not our concern.

a

statutes of this kind

are sound

Perhaps a case can be made for having

fixed period during which the relationship is probationary and

the

statutory rights under

for

tenure

academic

arrangements

world.

window, as we

But the

Law 75 do not
in government
legislature

vest; this is typical

employment

has not

and

in the

enacted such

read the present statute, and it is

not for us to

amend the statute in the guise of construction.

Welch's effort to
Medina & Medina and
_________________

bolster its position through

another

case

involving

a novel

question, Nike Int'l Ltd. v. Athletic Sales, Inc.,

________________
____________________
1235

(D.P.R. 1988),

is unavailing.

Puerto Rico Supreme Court held

the Puerto Rico
parties

reach an agreement

Law

75

689 F. Supp.

In Medina & Medina,

________________

the

that a supplier may withdraw from

market without consequence under Law

have bargained in

reliance on

good faith but have

as to price, credit, or

element of the dealership," 858 F.2d at 824.

75 if "the

not been able to

some other essential

Welch contends that

the district court's ruling, allowing the company to call off the
protracted, unsuccessful

negotiations with R.W., is

faithful to

that decision.
In Medina & Medina, however, the Puerto Rico
________________
did not rule that a

Supreme Court

temporary relationship pending completion of

-17-

negotiations is outside the scope of Law 75, but it held that the
failed negotiations
cause
_____

for

the

over price
supplier's

distributorship a year
unclear

and credit
decision

after it began.5

whether a supplier

terms provided
to

terminate

just
____

the

Until that case, it was

could terminate

without consequence

for any reason other than the dealer's adverse actions.

Medina &
________

Medina does help Welch, in that it allows an argument that failed

______
negotiations may support

a finding of "just cause,"

but it does

not bolster the company's argument that preliminary dealings fall

outside Law 75.

In Nike, a federal district court permitted termination of a

____

dealer

who failed

to give

the

contractually required

written

notice to the supplier of its intent to renew the contract.

F.

Supp.

at 1239.

principle

that

agreements
company
their

According to

dealers

may

not

Welch,

Nike stands
____

avoid the

express

to which they willingly subscribe.

689

for the
terms

of

Consequently, the

argues, the district

court properly held

appellants to

own characterization of

the arrangement as

a preliminary

test period.
This
boundaries.
from

an

argument

Nike
____

far

beyond

its legitimate

Nike addressed only whether Law 75 released a dealer

____
explicit

distributorship
to

stretches

renewal

contract.

procedure

contained

in

the

Noting that the statute's purpose was

protect against unjustified termination by the principal, the

________________

____________________

5 The dealership contract between Medina & Medina and

Country Pride contained no time limit. Product prices were set
periodically by mutual agreement. 858 F.2d at 818.
-18-

court ruled that it had no effect on mutual agreements specifying

the manner in which a dealer must notify a supplier of its desire

to continue their

relationship.

other words, while

cause," the parties

the dealer
__________

In

to terminate, other than for "just

may agree
the power

to a

not protect the

contractual procedure

either to

relationship after a given period

75 does

F. Supp. at 1239.

Law 75 takes away from the supplier the right

to make a subjective decision

gives

See 689
___

end or

of time.

dealer from its

to

that

continue the

Nike holds that

____
own failure to

Law

follow

that procedure.
This

case is

simply not

equivalent

to Nike.
____

Welch,

in

essence, claims that the parties agreed that Welch would have the
power

to terminate their

period,

without

precisely the

regard

relationship after a
to

imbalance of power

and the statute invalidates

principal

may

just

not

cause.

preliminary test

This,

to which Law 75

such an agreement.

wield unilateral

however,

was directed,

Under Law

authority

is

to

75, a

terminate a

dealership relationship for other than just cause.

In sum, we find no
commercial dealings
Law 75.

basis upon which to exclude the

between Welch and

R.W. from the

ongoing

embrace of

The district court's grant of summary judgment therefore

must be reversed so that the court may consider whether Welch had
"just

cause" for terminating the relationship.6

judgment

on

the

claim

for

tortious

Because summary

interference

with

____________________

6 We recognize that Welch conceded that R.W. was performing

as a dealer only for purposes of its summary judgment motion, and

that, consequently, this issue also may surface again on remand.

-19-

contractual relation
decision

also

consideration.

must
The

without prejudice
regardless of
75,

there

was premised
be

on the

vacated

and

Law 75

holding, that

remanded

for

further

remand on the tortious interference claim is

to

any argument

the existence of
was

no

contract

Welch

may be

making

a relationship protected
protected

against

that,

by Law

tortious

interference.
III. Antitrust Claims
________________
In January
grape

juice

campaign.

1989, R.W. introduced a new

into

the

market

with

an

Donald Duck bottled

intensive

promotional

Plaintiffs allege that defendants' reaction to the new

product, and R.W.'s representation of it, violated sections 1 and

2 of the Sherman Act, 15 U.S.C.
antitrust

law, P.R.

principal

actions cited by plaintiffs in their amended complaint

were

Laws

(1) discussions in

(`molestia'),
handling

of

discomfort
the

Ann.

1, 2, as well as Commonwealth
tit.

10,

which Welch and

and

`Donald Duck'

258,

The

Magna expressed "anger

preoccupation
bottled

260.

grape

with

Plaintiffs'

juice," Amended

Complaint

at

Welch's own
order to

78;

(2) a

bottled grape

block out the

"massive

promotional campaign"

juice, and a

price cutting

entrance [of] the `Donald

grape juice into the Puerto Rican market," id. at

___
(3) the

decision of

Welch to

terminate

for

war, "in

Duck' bottled
82,

91; and

its relationship

with

plaintiffs because R.W. did not drop representation of the Donald

Duck juice, id. at
___

81.

-20-

The district court granted summary judgment on these claims,

concluding

that plaintiffs had

issue

material

of

constituted

either

fact
a

as

to monopolize

the bottled grape

Of

from

one

of

whether
in

defendants'

restraint

of the Sherman Act,7 or an

greatest significance

Donald Duck
of time,

to

conspiracy

violation of

2.8

failed to demonstrate

trade

to the

court was

Francisco

the stores

in

unlawful conspiracy

Gil,

bottled products had reached, within

80 percent of

actions

juice market in violation

Magna's principals,

at least

of

a genuine

of

a declaration

stating that

a short period

typically carrying

such products.
because

The court

found that summary judgment was proper

"plaintiffs never

competition

has

not

bottled grape juice

responded to

been

Welch's

injured, and

that

claim that
the

was successfully introduced into

[]

Donald Duck

the Puerto

Rico market."
Plaintiffs claim
prematurely
brief

on

argument
in

on appeal

dismissed their
this issue,

that the

court improperly

antitrust claims.

however,

is devoted

to

Much of

and

their

an off-the-mark

concerning the court's failure to treat the allegations

their complaint

liberally.

The court

did not

dismiss the

____________________

7 Section 1 makes unlawful "[e]very contract, combination in

the form of trust or otherwise, or conspiracy, in restraint of
trade or commerce among the several States, or with foreign
nations . . . ." 15 U.S.C.
1.

8 Section 2 makes it
an offense for any person to
"monopolize, or attempt to monopolize, or combine or conspire
with any other person or persons, to monopolize any part of the
trade or commerce among the several States, or with foreign
nations . . . ." 15 U.S.C.
2.
-21-

antitrust

claims

based

on

the

pleadings,

but

ruled

that

plaintiffs had failed to substantiate in any way their conclusory

allegations in

response to

defendants' summary

judgment motion

and accompanying declaration.

decision

Our review of the district court's

consequently focuses solely

on the

appropriateness of

summary judgment.
Section 1 of the Sherman Act.
_____________________________
their

appellate

brief,

underlying their
part

of

the

1 claim

conspiracy

dealership

and

relationship.

the

argued by plaintiffs

unreasonable

restraint

was an alleged

with

Magna)
_____

subsequent

These

As

to

of

trade

threat by Welch
terminate

actual

in

(as

plaintiffs'

termination

actions presumably were alleged

of

the

to violate

the antitrust laws based on their impact in pressuring plaintiffs

to

drop the

Donald Duck

line of products,

thereby suppressing

competition among grape juice manufacturers.

Heavy-handed competitive tactics alone
antitrust
summary

violation, however.
judgment,

dispute as
competition,
___________

as distinguished from

law

to

defendants' actions

e.g., Spectrum Sports, Inc.

____ ______________________
(1993) ("The

To survive defendants' motion for

plaintiffs needed

to whether

do not constitute an

demonstrate

a genuine

caused an

injury to

impact on themselves.

v. McQuillan, 113
_________

directs itself

not against

S. Ct.

See,
___

884, 892

conduct which

is

competitive, even severely so, but against conduct which unfairly

tends

to

destroy

competition itself.");

Copperweld Corp.
_________________

Independence Tube Corp.,

_______________________

467 U.S. 752, 767 n.14

antitrust

were enacted

laws

for

"the

v.

(1984) ("`[T]he
protection

of

-22-

competition, not
___________

competitors."'") (citations
___________

omitted) (emphasis

in original); Clamp-All Corp. v. Cast Iron Soil Pipe Inst., 851

________________
__________________________
F.2d 478,

486 (1st Cir.

not to

actions that

rather

to actions

defendants
products

1988) ("`Anticompetitive' . .

merely injure
that harm

. refers

individual competitors,

the competitive process.").

successfully

entered the

market

during the

relevant

a lack of injury to competition

plaintiffs were obliged to counter that statement with more

bare

Once

presented a declaration averring that the Donald Duck

period of time -- indicating

the

but

allegations

contained

Matsushita Elec. Indus. Co. v.

___________________________

in

their

complaint.

--

than

See
___

Zenith Radio Corp., 475 U.S. 574,

__________________

584-87 (1986).
Plaintiffs

responded with a statement from R.W. owner Ward,

which stated, in relevant part:

2. During the last months of 1988 R.W. International
Corp. became the broker of Donald Duck bottled grape
juice.
3. Shortly after the introduction in the market of the
Donald Duck bottled grape juice, Welch's began an
intensive promotion of their
bottled grape juice

products.
4. This intensive promotion of the Welch's Grape
bottled products caused [] the introduction of the
Donald Duck bottled grape juice be severely suppressed.
5. Upon information and believe [sic], this intensive
promotion was carried out in conjunction with Magna
Trading Corporation to eliminate
the Donald Duck
bottled grape juice from [the] Puerto Rico market.
The

district

insufficient to

court

concluded

generate a

left unchallenged

that

this

genuine factual

defendants'

assertion that

statement

dispute because
the

Donald

was

it

Duck

-23-

bottled juice had deeply penetrated the Puerto Rico market during
the period

of defendants'

allegedly unlawful

conspiracy.

The

court observed:
[A]s the Puerto Rico Supreme Court has recognized,
distributors are in
contact with the
retailers,
consumers, and the different components of the trade.
Medina, 817 F.2d at 823 n.6. Plaintiffs were in the
______
position to show, based on their knowledge of the
Puerto Rico market, the effects of Welch's conduct on
the market . . . . However, other than the conclusory
allegation
that
their line
had
been "severely
suppressed," plaintiffs never responded to Welch's
claim that the competition has not been injured, and
that
the Donald
Duck bottled
grape juice
was
successfully introduced into the Puerto Rico market.
The

district

court's

decision

and

explanation

are

unimpeachable.

Plaintiffs may

Donald Duck products

have felt pressured

in order to preserve

to drop the

the Welch dealership,

and may have suffered economic consequences from Welch's decision

to terminate, but
an

these circumstances are irrelevant

antitrust violation

rebut

is concerned.

insofar as

Plaintiffs' failure

to

defendants' assertion that Donald Duck bottled grape juice

had no problem entering the

competition

was not
___

market -- an implicit assertion that

affected --

fully

justifies the

district

court's decision to grant summary judgment for defendants.

Plaintiffs take
penetration

issue with the significance

figure, arguing

that each

of

of defendants'

the stores

carrying

Donald Duck juice may have had only a single bottle of that brand
while displaying shelves
the

district court,

full of Welch products.

however, that

such

We agree with

information, if

true,

could have been obtained easily by plaintiffs, and its absence is

-24-

thus not a

proper basis upon which to

from defendants.9

withhold summary judgment

See infra at 24-25 (denial of discovery).

___ _____

Section 2 of the Sherman Act.

________________________________
characterizes

Plaintiffs'

defendants' promotional

reduced prices

on its bottled

campaign, in

grape juice, as

claim

which Welch

an impermissible

effort to gain monopoly control of the bottled grape juice market

in Puerto Rico.

In light of R.W.'s

success in introducing

the

Donald Duck juice, this claim is wholly without merit.

The Supreme

Court repeatedly

has recognized

that "cutting

prices in order to increase business often is the very essence of

competition," Matsushita, 475 U.S. at
__________

594.

See also Brook Group

___ ____ ___________

Ltd. v. Brown & Williamson Tobacco Corp., 113 S. Ct.

____
_________________________________
(1993)

(".

differences

Congress

that

competition.");

result

dominant

from

intend

or

further

to

outlaw

the

("`It is in the interest of

firms

to

engage

including price competition.'")

little basis for

not

forces

price

of

Atlantic Richfield Co. v. USA Petroleum Co., 495

______________________
_________________

U.S. 328, 341 (1990)

permit

did

2578, 2586

in

competition to

vigorous

(citations omitted).

believing that Welch was

competition,
There

was

engaged in below-cost

____________________

9 We have not considered Magna's argument that the

1 claim
fails because the requirement for joint action by independent
___________
entities is not fulfilled here in light of Magna's and Welch's
unified economic interest.
The argument does seem to have some
force, however.
See Copperweld, 467 U.S. at 776 (holding that
___ __________
"the coordinated behavior of a parent and its wholly owned
subsidiary falls outside the reach of [ 1]"); Pink Supply Corp.
_________________
v. Hiebert, Inc., 788 F.2d 1313, 1316-17 (8th Cir. 1986)
______________
(corporate
agents
may
lack
"the
independent
economic

consciousness" necessary to be
principal).

conspirators separate from

their

-25-

pricing as opposed to mere

cost

pricing

is

not automatically

competition is not
2588.

Where,

price reduction, although even below-

threatened.

in addition,

See
___

an

antitrust

Brook Group, 113 S.

___________

new product

penetrate the market during the challenged

it

is

evident

that

competition

violation if

is

is

Ct. at

able to

deeply

price-cutting period,

unharmed

and

"summary

disposition of the case is appropriate," id. at 2589.

___
Request for Discovery.
_______________________

Plaintiffs

suggest

that

their

inability to respond with particularity to defendants' motion for

summary

judgment is attributable to the district court's refusal

to lift

stay

antitrust claims.

of

discovery that

had

been

(1st

district court, Sheinkopf

_________
Cir.

discovery

1991), and
.

. .

on

the

The decision whether to allow discovery while

a summary judgment motion is pending rests

of the

imposed

must

"the
show

within the discretion

v. Stone, 927 F.2d

_____

party seeking
that the

additional

facts

sought

1259, 1263

time for

`will, if

obtained,

suffice

to

engender

an

issue

both

genuine

and

were

well

material,'" id. (citation omitted).

___
As

the

district

court

observed,

plaintiffs

situated to explore Welch's impact on competition in

grape

juice market,

and they

had

an obligation

the bottled
to use

their

knowledge and connection with the market to develop some basis to

justify

further

inquiry.10

Plaintiffs,

however,

"never

____________________

10 For example, plaintiffs could have done a sampling of

stores to compare prices and shelf life between the Welch and
Donald Duck products.
If bottles of Donald Duck juice remained
on the shelves for long periods while Welch products enjoyed a
quick turnover, and Welch's prices were substantially lower,
-26-

articulated how discovery from Welch would provide insight on the

impact

of

Welch's

Opinion, at 23-24.

conduct

on

the

Their failure

market."

District

to do so negates

Court

their claim

that the district court erred in denying discovery.

Accordingly,
dismissed

we conclude that

plaintiffs'

Sherman Act, as well as

Rico law.

claims

the district

under sections

court properly
and

2 of

the

under the analogous provisions of Puerto

IV. Conclusion
__________
For

the foregoing reasons,

for defendants
and remand those
this opinion.

on the Law

we vacate the

75 and tortious

summary judgment

interference claims,

issues for further proceedings

consistent with

We affirm dismissal of the antitrust

have not

considered in any

district

court that

claims.

fashion defendants' argument

dismissal of

all

appropriate based on Fed. R. Civ. P.

powers to control the proceedings

We

to the

claims alternatively

is

41 and the court's inherent

before it.

The district court

explicitly sidestepped this issue, and it is not properly

before

us.
Affirmed in part, and vacated and remanded in part.
_____________________________________________________

Each
____

party to bear its own costs.

____________________________

____________________

plaintiffs may have been able to persuade the district court to

grant discovery into the possibility that Welch was engaged in
predatory pricing. See Brook Group, 113 S. Ct. at 2587 (predatory
___ ___________
pricing involves pricing products "in an unfair manner with an
object to eliminate or retard competition and thereby gain and
exercise control over prices in the relevant market").
-27-