Portugues-Santana v. Rekomdiv International, Inc., et al
Filing
OPINION issued by Michael Boudin, Appellate Judge; Bruce M. Selya, Appellate Judge and Timothy Belcher Dyk, Appellate Judge. Published. [10-2018]
Case: 10-2018
Document: 00116264682
Page: 1
Date Filed: 09/22/2011
Entry ID: 5582036
United States Court of Appeals
For the First Circuit
No.
10-2018
VICTOR OMAR PORTUGUES-SANTANA,
Plantiff, Appellee,
v.
REKOMDIV INTERNATIONAL and RICHARD DOMINGO,
Defendants, Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR
THE DISTRICT OF PUERTO RICO
[Hon. Gustavo A. Gelpi, U.S. District Judge]
Before
Boudin, Selya, and Dyk,* Circuit Judges.
Joseph H. Reinhardt, for appellants.
Ralph Vallone, Jr., for appellee.
September 22, 2011
*
Of the Federal Circuit, sitting by designation.
Case: 10-2018
Document: 00116264682
DYK,
Circuit
Page: 2
Judge.
Date Filed: 09/22/2011
Rekomdiv
Entry ID: 5582036
International,
Inc.
("Rekomdiv") and Richard Domingo (collectively "defendants") appeal
from a district court judgment.
Portugues-Santana v. Rekomdiv
Int'l, Inc., No. 07-1103 (D.P.R. Apr. 28, 2010).
The district
court awarded damages against the defendants in the amount of
$625,000 based on a jury verdict finding the defendants liable for
"dolo" (i.e., fraud).
We affirm-in-part and remand for further
proceedings consistent with this opinion.
I.
We recite the facts in the light most favorable to the
verdict.
See Ramos v. Davis & Geck, Inc., 167 F.3d 727, 731 (1st
Cir. 1999).
Victor Omar Portugues-Santana ("Portugues") wished to
open a Victoria's Secret franchise in Puerto Rico and sought
assistance in establishing a relationship with Victoria's Secret
from defendant Domingo, who was employed by defendant Rekomdiv.
Domingo in turn recommended that Portugues work with former Senator
Birch Bayh, a partner at Venable, LLP, to assist Portugues in
establishing a business relationship with Victoria's Secret.
Domingo explained to Portugues that Bayh "had successfully achieved
a
Victoria's
Secret
franchise
for
the
Philippines,"
Trial
Transcript at 43, Portugues-Santana v. Rekomdiv Int'l, Inc., No.
07-103 (D.P.R. Sept. 7, 2010), ECF No. 162, and that "Victoria's
Secret owed many favors to [Bayh]" so "this was, for all purposes,
-2-
Case: 10-2018
Document: 00116264682
Page: 3
Date Filed: 09/22/2011
Entry ID: 5582036
a done deal," id. at 56.
Domingo informed Portugues that he "must retain Venable"
before the firm would be able to "help him or assist him in getting
[a] Victoria's Secret [franchise]."
J.A. 138.
Domingo also made
clear that Portugues must hire Rekomdiv, in addition to Venable, in
order to complete the deal.
Portugues testified that, during this
time period, Domingo repeatedly represented to him that obtaining
the Victoria's Secret franchise was a "done deal."
Portugues also
testified that he relied on Domingo's representations when he
entered into retainer agreements with Venable and Rekomdiv.
Portugues paid a $400,000 retainer fee to Venable and a $100,000
business broker's fee to Rekomdiv.
In addition to the $100,000
business broker's fee, Portugues made another $125,000 payment to
Rekomdiv. After entering into the retainer agreement, Venable sent
an e-mail to Portugues informing him that a Victoria's Secret
franchise was not available because Victoria's Secret did not use
a franchise or distributor model, but assuring Portugues that
Venable would explore other ways "to present [Portugues] as a
worthy business partner for [Victoria's Secret] in Puerto Rico."
App. Selected Tr. Ex. 3.
Portugues subsequently filed suit against Rekomdiv and
Domingo alleging that Domingo's false representations as to the
availability of a franchise fraudulently induced him to enter into
retainer agreements with Venable and Rekomdiv.
-3-
At the same time,
Case: 10-2018
Document: 00116264682
Page: 4
Date Filed: 09/22/2011
Entry ID: 5582036
Portugues filed suit against Venable and Bayh, alleging breach of
contract.
Portugues settled with Venable and Bayh before the suit
against the defendants went to trial.
For simplicity in the
remainder of this opinion, we refer to both Venable and Bayh as
"Venable."
At trial, the district court held that no independent
mention of the settlement agreement with Venable could be made by
the defendants.
The jury returned a verdict in favor of Portugues,
finding the defendants liable for dolo and assessing damages of
$625,000.
The defendants filed a post-trial motion requesting
judgment as a matter of law under Federal Rule of Civil Procedure
50, a new trial under Federal Rule of Civil Procedure 59, and an
offset
of
the
settlement.1
damages
The
award
district
by
court
the
amount
denied
this
of
the
Venable
motion.
The
defendants timely appealed, and we have jurisdiction pursuant to 28
U.S.C. § 1291.
II.
The defendants first argue that the district court's jury
instruction on the issue of dolo was unfairly prejudicial and thus
warrants a new trial.
Dolo can take two forms: (1) dolo in the
1
Though the defendants use the term remittitur in
arguing that The defendants argue that the damages award should be
reduced by the amount of the Venable settlement, this practice is
properly described as offsetting the damages award. See, e.g.,
Villarini-Garcia v. Hospital del Maestro, 112 F.3d 5, 7-8 (1st Cir.
1997).
-4-
Case: 10-2018
Document: 00116264682
formation
of
contracts,
contractual obligations.
Page: 5
and
(2)
Date Filed: 09/22/2011
dolo
in
the
Entry ID: 5582036
performance
of
See, e.g., P.C.M.E. Commercial, S.E. v.
Pace Membership Warehouse, Inc., 952 F. Supp. 84, 92 (D.P.R. 1997).
Here, the defendants were found liable for dolo in the formation of
contracts between Portugues and Rekomdiv and Venable.
Dolo occurs
where the "[w]rongful representations or omissions . . . affect[]
the freedom of consent of one of the contracting parties."
Ocaso,
S.A., Compania De Seguros y Reaseguros v. P.R. Maritime Shipping
Auth., 915 F. Supp. 1244, 1257 (D.P.R. 1996).
The Puerto Rico
Civil Code provides that no valid contract exists without "[t]he
consent of the contracting parties,"
31 L.P.R. § 3391, and
"[c]onsent given by . . . deceit [is] void," Id. § 3404; see also
id. § 3409.
Here, the district court instructed the jury that, in a
civil case, "a Plaintiff must [prove] his claim by a preponderance
of the evidence and any other requirements a particular claim may
have."
J.A. 213.
With respect to the dolo claims, the court
instructed that, "under Puerto Rico contract law, fraud that
affects a contracting party is commonly referred to as 'dolo' or
deceit," J.A. 214, and "[w]hile the standard of proof in civil
cases . . . is preponderance of the evidence, in dolo cases the
party alleging fraud has the burden of presenting evidence which is
clear, solid, and convincing," J.A. 215. The court reiterated this
instruction, stating that "the Plaintiff has to prove its case by
-5-
Case: 10-2018
Document: 00116264682
Page: 6
Date Filed: 09/22/2011
Entry ID: 5582036
a preponderance of the evidence, but as to the dolo claim, that
preponderance of the evidence and that evidence must be clear,
solid, and convincing." J.A. 216. The defendants objected to this
instruction at trial, arguing that "mixing the preponderance of the
evidence [standard] with a strong, clear, and convincing [standard]
could confuse the jury."
but
concluded
that,
J.A. 228.
"because
The court noted the objection,
Puerto
Rico
law
is
somewhat
conflicting," an explanation of both standards was warranted to
ensure that the jury does not "go[ ] below the preponderance
[standard]."
Id.
The defendants maintain that the correct standard for
dolo claims is strong, clear, and convincing evidence.
Portugues,
on the other hand, argues that the correct standard for dolo claims
is preponderance of the evidence and that, if anything, the jury
instruction given by the district court was too favorable to the
defendants.
We review claims of instructional error "under a two-
tiered standard."
Cir. 2010).
United States v. Jadlowe, 628 F.3d 1, 14 (1st
"[W]e
consider
de novo
whether
'an
instruction
embodied an error of law,' but 'we review for abuse of discretion
whether the instructions adequately explained the law or whether
they tended to confuse or mislead the jury on the controlling
issues.'" Id. (quoting United States v. Silva, 554 F.3d 13, 21 (1st
Cir. 2009).
Although opinions of both this court and the federal
-6-
Case: 10-2018
Document: 00116264682
Page: 7
Date Filed: 09/22/2011
Entry ID: 5582036
district court for the District of Puerto Rico recite the "strong,
clear, and convincing" standard of proof for dolo claims, we
conclude that these cases relied on outdated Puerto Rico Supreme
Court cases and should no longer be followed.2
This line of
outdated cases began in 1936 with Texas Co. (P.R.) Inc. v. Estrada,
50 P.R.R. 709, 713-14 (P.R. 1936), in which the Puerto Rico Supreme
Court held that a party alleging dolo could meet its burden only
with
evidence
that
is
"solid,"
"clear
and
convincing,"
and
"unquestionable." In Monclova v. Financial Credit Corp., 83 P.R.R.
742, 747-48 (P.R. 1961), the Puerto Rico Supreme Court reaffirmed
this standard, holding that a party alleging fraud must prove its
existence with solid, clear, and convincing evidence.
Cases from
this court and the federal district court for the District of
Puerto Rico that recite the strong, clear, and convincing standard
ultimately relied on Monclova or other federal cases.3
In 1982, the Puerto Rico Supreme Court made clear that it
2
See,
Refund, 515 F.3d
Reynolds Tobacco
Imports Inc. v.
1993).
e.g., Puerto Rico Electric Power Auth. v. Action
57, 66-67 (1st Cir. 2009); Prado Alvarez v. R.J.
Co., 313 F. Supp. 2d 61, 76 (D.P.R. 2004); F.C.
First Nat'l Bank, 816 F. Supp. 78, 87 (D.P.R.
3
For example, in Puerto Rico Electric, this court
recited the "strong, clear, unchallengeable, convincing and
conclusive" standard, citing two district court cases as authority.
515 F.3d at 67 (citing Prado Alvarez, 313 F. Supp. 2d at 77; F.C.
Imports, 816 F. Supp. at 87). Both of the district court cases
cited in Puerto Rico Electric ultimately relied on Monclova. See
Prado Alvarez, 313 F. Supp. 2d at 77 (citing F.C. Imports, 816 F.
Supp. at 87); F.C. Imports, 816 F. Supp. at 87 (citing Monclova, 83
P.R.R. at 747).
-7-
Case: 10-2018
Document: 00116264682
Page: 8
Date Filed: 09/22/2011
Entry ID: 5582036
had abandoned the solid, clear, and convincing standard recited in
Texas Co. and Monclova in favor of the preponderance of the
evidence standard.
See De Jesus Diaz v. Carrero, 112 D.P.R. 631,
12 P.R. Offic. Trans. 786 (P.R. 1982).
In De Jesus Diaz, the court
stated:
In Carrasquillo v. Lippitt & Simonpietri Inc.,
98 P.R.R. 646, 649 (P.R. 1970), and in Garcia Lopez v.
Mendez Garcia, 102 D.P.R. 383, 386 (P.R. 1974), we
abandoned the classification of 'solid,' 'clear and
convincing,' and 'unquestionable' evidence set forth in
Texas Co. . . . to note that the general rule that fraud
is not presumed only means that the one affirming it must
prove it with reasonable certainty, with preponderance of
evidence that satisfies the trier's conscience. In this
way, the obstacle of requiring a higher degree of
evidence, which served no other purpose but to give the
agent of fraud a special protection other defendants do
not have, was eliminated.
112 D.P.R. 631.
In cases decided after De Jesus Diaz, the Supreme Court
of Puerto Rico has uniformly held that a preponderance of the
evidence standard applies to claims of fraud. See, e.g., Acosta v.
P.R. Bd. of Exam'rs of Eng'rs, 161 D.P.R. 696, 706-707 (P.R. 2004)
("Fraud is never presumed, but must be established by the party
alleging its existence 'with reasonable certainty, by preponderance
of evidence . . . .'"); Gonzalez Cruz v. Quintana Cortes, 145
D.P.R. 463, 471 (P.R. 1998) ("Some time ago we abandoned the
requirement of solid, clear, convincing and irrefutable evidence to
prove fraud.
The general rule that fraud is not assumed only means
that he who claims it must prove it to a reasonable certainty, that
-8-
Case: 10-2018
Document: 00116264682
Page: 9
Date Filed: 09/22/2011
is, with a preponderance of evidence . . . .").
Entry ID: 5582036
Thus, contrary to
the arguments advanced by the defendants and the jury instruction
given by the district court, Puerto Rico law requires that a party
alleging dolo establish its existence only by a preponderance of
the evidence.
The instruction given by the district court, which seems
to blend the preponderance standard with the more stringent strong,
clear, and convincing standard, is actually more favorable to the
defendants than the instruction to which they were entitled.
result, we find any error to be harmless.
Pateman, 958
F.2d
448,
471
(1st
Cir.
As a
See Putnam Res. v.
1992)
(explaining
that
application of the wrong standard of proof is reversible error only
if the variance "worked to the detriment of the losing party").
III.
The defendants also argue that the district court should
have granted their motion for judgment as a matter of law because
Portugues failed to meet his burden of proof on the dolo claim.
When reviewing a jury verdict, "[t]he verdict must be upheld unless
the facts and inferences, viewed in the light most favorable to the
verdict, point so strongly and overwhelmingly in favor of the
movant that a reasonable jury could not have returned the verdict."
Borges Colon v. Roman-Abreu, 438 F.3d 1, 14 (1st Cir. 2006)
(internal quotation marks omitted).
Under
Puerto
Rico
law,
-9-
dolo
in the
formation
of a
Case: 10-2018
Document: 00116264682
Page: 10
Date Filed: 09/22/2011
Entry ID: 5582036
contract is essentially fraud in the inducement, which exists when
a party is "induced [by false statements] to execute a contract
which . . . he [otherwise] would not have made."
31 L.P.R. § 3408;
see also Lummus Co. v. Commw. Oil Ref. Co., 280 F.2d 915, 930 n.21
(1st Cir. 1960).
The party alleging such fraud must demonstrate:
"(1) a false representation by the defendant; (2) the plaintiff's
reasonable and foreseeable reliance thereon; (3) injury to the
plaintiff as a result of the reliance; and (4) an intent to
defraud." P.R. Electric Power Auth. v. Action Refund, 515 F.3d 57,
66 (1st Cir. 2008) (citing 31 L.P.R. § 3408).
The defendants argue that Portugues failed to demonstrate
that his reliance on the representations of the defendants was
reasonable.
retainer
The defendants cite the fact that, after entering the
agreement
with
Venable
and
making
the
$400,000
$100,000 payments to Venable and Rekomdiv respectively,
and
Portugues
was told by Venable that a Victoria's Secret franchise was not
available because Victoria's Secret did not "use a franchise or
distributor model for any of its stores."
that,
in
education
light
and
of
this
business
statement,
experience
a
The defendants argue
person
should
have
with
Portugues'
questioned
the
assurances made by the defendants.
The defendants' arguments are unavailing.
At least with
respect to the Venable retainer agreement, the statements were made
after the formation of the contract, and accordingly are not
-10-
Case: 10-2018
Document: 00116264682
Page: 11
Date Filed: 09/22/2011
Entry ID: 5582036
relevant to a claim of dolo in the formation of the contract.4
any
event,
in
the
same
e-mail
stating
that
a
franchise
In
was
unavailable, Venable assured Portugues that it would explore other
ways "to present [Portugues] as a worthy business partner for
[Victoria's Secret] in Puerto Rico."
The statements made by
Venable to Portugues are not inconsistent with the expectation
that, even if a franchise was not available, some other form of
business relationship would be established between Portugues and
Victoria's Secret.
Additionally, Portugues testified that, during
this time period, the defendants continued to assure him that
obtaining the Victoria's Secret franchise was a "done deal."
The
question
the
of
whether
representations
accorded to
testimony.
the
of
Portugues
reasonably
defendants
turns
the
evidence
and
the
on
relied
the
credibility
on
weight
of
the
to
be
witness
When the evidence and testimony is viewed in the light
most favorable to the verdict, see Borges Colon, 438 F.3d at 14,
the evidence clearly supports a verdict favorable to Portugues.
IV.
The
defendants
next
argue
that
the
district
court
committed reversible error by precluding the defendants at trial
from introducing evidence of the settlement agreement between
4
See Acosta & Rodas, Inc. v. Puerto-Rican Am. Ins. Co.,
112 D.P.R. 583, 617, 12 P.R. Offic. Trans. 730 (P.R. 1982)(holding
that the court should consider "the circumstances prior and
contemporary to the . . . contract" when considering a dolo claim).
-11-
Case: 10-2018
Document: 00116264682
Page: 12
Date Filed: 09/22/2011
Entry ID: 5582036
Portugues and Venable to support the arguments in favor of reducing
the damages award.
We review a district court's decision to admit
or exclude evidence for abuse of discretion.
McDonough v. City of
Quincy, 452 F.3d 8, 19 (1st Cir. 2006).
Federal Rule of Evidence 408 prohibits the admission of
evidence that a party has "accept[ed] a valuable consideration in
compromising or attempting to compromise the claim" when such
evidence is "offered to prove liability for, invalidity of, or
amount of a claim that was disputed as to validity or amount."
In
other words, Rule 408 bars the admission of a settlement agreement
to prove the validity or invalidity of a claim or its amount.
See
McInnis v. A.M.F., Inc., 765 F.2d 240, 246 (1st Cir. 1985); McHann
v. Firestone Tire & Rubber Co., 713 F.2d 161, 166 (1st Cir. 1983).
This prohibition applies equally to settlement agreements between
a defendant and a third party and between a plaintiff and a third
party.
McInnis, 765 F.2d at 247.
This is so because "[t]he
admission of such evidence would discourage settlements in either
case."
Id.
In McHann, the district court admitted into evidence a
settlement agreement between McHann and a third party. 713 F.2d at
165.
The court informed the jury of the settlement amount and
explained
that,
compensation
for
if
the
all
jury
found
"that
damages
which
the
this
sum
plaintiff
was
is
full
legally
entitled to recover, then [the jury] must return a verdict for the
-12-
Case: 10-2018
Document: 00116264682
Page: 13
Date Filed: 09/22/2011
Entry ID: 5582036
defendant . . . since a person may only recover once for any
particular injury."
Id.
This court vacated the judgment, noting
that "the district court erred in allowing the [settlement] into
evidence" because, "[u]nder Rule 408, a defendant cannot prove the
invalidity
or
amount
of
a
plaintiff's
claim
plaintiff's settlement with a third person."
quotation marks omitted).
by
proof
of
a
Id. at 166 (internal
Instead of allowing the settlement into
evidence, the court should have examined the settlement agreement
itself
and
"deduct[ed]
the
received from any judgment."
amount
that
McHann
ha[d]
already
Id. at 166 n.10.
As previously explained by this court in McHann, Rule 408
clearly prohibits the admission of a settlement agreement at trial
for the purpose of arguing a reduction in the damages award.
See
713 F.2d at 166.
V.
Though
the
district
court
properly
excluded
the
settlement agreement at trial, we conclude that the district court
erred by not considering the settlement agreement in connection
with the defendants' post-trial motion for an offset of the damages
award.
See McHann, 713 F.2d at 166.
Portugues himself recognizes in his brief on appeal that
consideration by the court of the Venable settlement was a proper
subject for a post-trial motion, but argues that the defendants
failed properly to present the argument following the jury verdict.
-13-
Case: 10-2018
Document: 00116264682
We disagree.
Page: 14
Date Filed: 09/22/2011
Entry ID: 5582036
In a post-trial motion, the defendants argued that
the damages award should be offset by "the amount received by
Plaintiff in the [settlement] with Venable."
Defendants Motion
Under Rules 50(b), 59(a)(1), & 59(c) at 3, 4 Portugues-Santana v.
Rekomdiv Int'l,
No.
07-CV-01103
(D.P.R.
May
26, 2010).
The
defendants argued that, without an offset in the amount of the
Venable settlement, Portugues "will collect twice for the same
[claims]."
Id. at 19, 21.
Based on McHann, the district court was required to
determine post-trial whether the damages award should be offset by
the amount of the Venable settlement.
The district court failed to do so.
See 713 F.2d at 166 n.10.
We thus remand to the district
court to determine whether the damages award should be offset by
the amount of the settlement between Portugues and Venable.
We
express no opinion as to whether an offset would, in fact, be
required.
Affirmed-in-part and remanded for further proceedings.
No costs.
-14-
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?