Flovac, Inc. v. Airvac, Inc.

Filing 163

MEMORANDUM AND ORDER. DENIED 144 MOTION for Attorney Fees; NOTED 159 INFORMATIVE Motion. Signed by Judge Salvador E. Casellas on 3/30/2017.(JRD)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
FLOVAC, INC.,
Plaintiff,
Civil No. 12-1348 (SEC)
v.
AIRVAC, INC., ET AL.,
Defendants.

MEMORANDUM AND ORDER
Flovac, Inc. (Flovac) brought this antitrust suit against its competitor, Airvac,
Inc. (Airvac) and its president, under sections 1 and 2 of the Sherman Act, 15 U.S.C. §§
1–2, and its local counterpart. P.R. Laws Ann. tit. 10, §§ 258, 260. Flovac also asserted
a local law claim for tortious interference under Puerto Rico’s general tort statute. P.R.
Laws Ann. tit. 31, § 5141. The Court granted Airvac’s motion for summary judgment,
see Flovac, Inc. v. Airvac, Inc., 84 F. Supp. 3d 95 (D.P.R. 2015), and the First Circuit
affirmed, 817 F.3 849 (1st Cir. 2016). Pending before the Court is Airvac’s motion for
attorney’s fees under both Puerto Rico Rule of Civil Procedure 44.1(d) and Federal Rule
of Civil Procedure 11(b). The motion is denied.
Under the “American Rule,” absent a statutory provision allowing it, a prevailing
party in federal court is not entitled to recover attorney’s fees. See Alyeska Pipeline
Service Co. v. Wilderness Society, 421 U.S. 240, 247 (1975). But where state law
supplies the basis of the decision—either in diversity or supplemental jurisdiction—
federal courts must apply the state’s substantive law governing attorney’s fees.
For more than five decades, the First Circuit has consistently applied Rule 44.1(d)
of the Puerto Rico Rules of Civil Procedure, which governs the imposition of attorney’s

Civil No. 16-1123 (SEC)

Page 2

fees in local courts, “as a matter of substantive right.” Pan Am. World Airways, Inc. v.
Ramos, 357 F.2d 341, 342 (1st Cir. 1966); Dopp v. Pritzker, 38 F.3d 1239, 1252 (1st
Cir. 1994); Citibank Glob. Markets, Inc. v. Rodríguez Santana, 573 F.3d 17, 30 (1st Cir.
2009); Gómez v. Rodríguez-Wilson, 819 F.3d 18, 23 (1st Cir. 2016).
Under Rule 44.1(d), a court must grant a reasonable sum in attorney’s fees to a
prevailing party if it finds that the opposing party or its lawyer acted obstinately or
frivolously “in the course of litigation.” Dopp, 38 F.3d at 1254 (italics in the original).1
This requires a determination that a litigant has been “unreasonably adamant or
stubbornly litigious, beyond the acceptable demands of the litigation, thereby wasting
time and causing the court and the other litigants unnecessary expense and delay.” De
León v. Corporación Insular de Seguros, 931 F.2d 116, 127 (1st Cir. 1991). The
offending party’s conduct, at the very least, must have started “a litigation that could
have been avoided,” unnecessarily delayed the proceedings, or forced the other party to
“embark on needless procedures.” Fernández v. San Juan Cement Co., 18 P.R. Offic.
Trans 823, 830 (1987) (internal citations omitted). In this analysis, courts must consider
the “personality” of the case as a whole. Dopp, 38 F.3d at 1253.
Airvac requests an award of attorney’s fees under Rule 44.1(d) arguing that
Flovac brought a tortious interference claim under Puerto Rico law that was clearly timebarred. While this may be true, Airvac has not shown that this claim was significant or
that Flovac’s conduct was obstinate considering the context of the litigation as a whole.

1

Other circuits have held that statutes allowing attorney’s fees for the conduct of an attorney or party during the
litigation are procedural and thus inapplicable even if state law provides the basis of decision. See In re Larry's
Apartment, L.L.C., 249 F.3d 832, 838 (9th Cir. 2001) (“when fees are based upon misconduct by an attorney or
party in the litigation itself, rather than upon a matter of substantive law, the matter is procedural”) and First Bank
of Marietta v. Hartford Underwriters Ins. Co., 307 F.3d 501, 529 (6th Cir. 2002) (holding that the Ohio statute
providing for attorney’s fees is procedural and thus inapplicable because it is “based upon the conduct of the parties
and the attorneys in filing and litigating [a] claim,” and moreover, conflicts with the procedural requirements of
Fed. R. Civ. P. 11(c)(2)); cf. Dopp, 38 F.3d at 1252-1254 (applying Puerto Rico Rule of Civil 44.1(d) and noting
that a finding of obstinacy under that Rule “depends on a party’s conduct in the course of litigation”).

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Airvac could have raised the statute of limitations defense when it first filed its motion
to dismiss but did not do so. And at the summary judgment stage, Flovac was not
excessively stubborn. It actually conceded the material facts on this claim, admitting
that it had “knowledge of the injury and the author of the damage” well over a year
before filing suit. See Sterling Merch., Inc. v. Nestle, S.A., 546 F. Supp. 2d 1, 2 (D.P.R.
2008) (reiterating that tortious interference claims have a one-year limitations period).
That Flovac failed in its attempt to delay the trigger date of the limitations clock by
resorting to the “continuing damages” doctrine is, on its own, insufficient to make a
finding of obstinacy. See Dopp, 38 F.3d at 1254 (that a party’s claim ultimately fails
does not automatically entail a finding of obstinacy or frivolousness).2 Considering the
context of the case as a whole, the Court does not find that Flovac insisted on its tortious
interference claim “beyond the acceptable demands of the litigation.” De León, 931 F.2d
at 127.
Next, Airvac asserts that Flovac engaged in dilatory tactics by requesting several
extensions of the discovery deadline and failing to produce its calculations of damages
in their initial disclosures. But Airvac does not cite any authority where Puerto Rico
Rule of Civil Procedure 44.1(d) is used to impose attorney’s fees for discovery related
matters.3 Neither does Airvac provide context showing that the nature of these delays
was “beyond the acceptable demands of litigation” as required to support a finding of
obstinacy. See De León, 931 F.2d at 127. Airvac cites Newell Puerto Rico, Ltd. v.
Rubbermaid Inc., 20 F.3d 15, 24 (1st Cir. 1994) and Fajardo Shopping Ctr. S.E. v. Sun
Alliance Ins. Co. of P.R., 999 F. Supp. 213 (D.P.R. 1999), neither of which involved the
imposition of attorney’s fees for discovery related issues. In the former, the First Circuit

2

This is especially true here, since the Puerto Rico Supreme Court recently recognized that its precedents on the
“continuing damages” doctrine have been imprecise and contradictory. See Rivera Ruiz v. Municipio Autonomo
de Ponce, 2016 TSPR 197 (2016).
3

Fed. R. Civ. P. 37, which provides a wide gamut of sanctions for failing to comply with the discovery provisions
of Rule 26 and court orders, is the appropriate vehicle for obtaining attorney’s fees on these matters.

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affirmed the District Court’s denial of attorney’s fees. In the latter, it was clear that the
defendant had “engaged in one dilatory tactic after another, including objecting to every
single report rendered by the Special Master, insulting him, making conclusory
statements without any support whatsoever, and even arguing that the Court ha[d]
deprived him of rights which he either waived or did not adequately preserve.” Id. at
234. Flovac’s actions in this case are not even in the same ballpark.
Last, Airvac posits that even if attorney’s fees are not warranted under Puerto
Rico law, they are still appropriate as sanctions under Fed. R. Civ. P. 11(c). But Airvac
may not recover attorney’s fees under Rule 11 because it has not shown that it complied
with the Rule’s twenty-one-day safe harbor provision. Fed. R. Civ. P. 11(c)(2). This
omission is fatal. See Lamboy-Ortiz v. Ortiz-Vélez, 630 F.3d 228, 244 (1st Cir. 2010)
(reversing the District Court’s imposition of Rule 11 sanctions because the moving party
failed to serve the motion “on opposing counsel at least twenty-one days prior to filing
with the court so as to provide the adversary time to withdraw the challenged paper,
claim, contention, or defense”). And Rule 11(d) specifies that these sanctions are
inapplicable to discovery related matters, which are covered by Federal Rules of Civil
Procedure 26 & 37. Nothing more need be said. Airvac’s motion for attorney’s fees is
denied.
IT IS SO ORDERED
In San Juan, Puerto Rico, this 30th day of March, 2017.
S/ Salvador E. Casellas
SALVADOR E. CASELLAS
U.S. Senior District Judge