Bancredito International Bank Corporation v. Data Hardware supply Inc et al

Filing 18

OPINION AND ORDER granted 14 Motion for Leave to Reply to 13 Opposition; granted 12 Motion for Reconsideration of 11 Order; granted retroactively 9 Motion for Extension of Time to Respond to 7 Motion to Dismiss; granted in the alternative 7 Motion to Dismiss; denied 8 Motion to Dismiss; denied 15 Motion to Set Aside Deadline in 6 CMO. Plaintiff shall execute process upon Dayco Telecom C.A. by 12/23/2018; Answer to Complaint by defendants Data Hardware Supply, Inc. and Franco D'Agostino due by 12/21/2018. Signed by Judge Carmen C. Cerezo on 12/6/2018. (mld)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
BANCREDITO INTERNATIONAL
BANK CORPORATION
Plaintiff
vs
DATA HARDWARE SUPPLY, INC.;
FRANCO D’AGOSTINO; DAYCO
TELECOM C.A.
Defendants

CIVIL 18-1005CCC

OPINION AND ORDER
Having considered plaintiff Bancrédito International Bank Corporation’s
(“Bancrédito”) Motion for Reconsideration of Order Entered on May 17, 2018
(d.e. 12) filed on May 18, 2018, noting that Bancrédito opposed defendant
Dayco Telecom C.A.’s (“Dayco”) Motion to Dismiss or to Quash for Insufficient
Service of Process (d.e. 7) before the Court entered the May 17, 2018 Order,
Dayco’s Opposition (d.e. 13) filed on May 22, 2018, conceding Bancrédito in
fact opposed its motion on a timely basis, and plaintiff’s Reply tendered in its
Motion for Leave to File Reply (d.e. 14) filed on May 23, 2018, which is
GRANTED, plaintiff’s Motion for Reconsideration is GRANTED. Accordingly,
the portion of the May 17, 2018 Order (d.e. 11) granting Dayco’s Motion to
Dismiss or to Quash for Insufficient Service of Process (d.e. 7) as unopposed
is VACATED.
Bancrédito’s Request for Extension of Time (d.e. 9) filed on April 2, 2018,
requesting an extension of eighteen (18) days to respond to defendants’
motions, is GRANTED, retroactively. The Court notes that Bancrédito filed a
Response in Opposition on April 20, 2018 (see d.e. 10).

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Before the Court are now Dayco’s Motion to Dismiss or to Quash for
Insufficient Service of Process (d.e. 7), seeking dismissal under Fed. R. Civ.
P. 12(b)(2) and 12(b)(5), and defendants Data Hardware Supply, Inc. (“Data
Hardware”), Franco D’Agostino (“D’Agostino”), and Dayco’s (collectively the
“Defendants”) Motion to Dismiss (d.e. 8), seeking dismissal under Fed. R. Civ.
P. 12(b)(6) for failure to state a claim, both filed on filed on March 16, 2018.
In support of its motion to dismiss or to quash for insufficient service of
process, Dayco claims Bancrédito served process upon a third party who is not
the agent authorized to accept service on Dayco’s behalf. In moving to dismiss
for failure to state a claim, defendants argue that the relevant agreements
executed between the parties contain forum selection clauses that require all
litigation be resolved in the state courts of Puerto Rico. Bancrédito responded
to both motions on April 20, 2018 in its Consolidated Opposition to Motions to
Dismiss filed by Co-defendants at Dockets Nos. 7 and 8 (d.e. 10). Bancrédito
claims it served Dayco sufficiently by serving the third party, who then
forwarded the complaint and summons to Dayco’s attorney. Dayco’s lawyer
in turn had informed plaintiff he was authorized to accept service on behalf of
defendant D’Agostino (see d.e. 10-6, p. 1). Bancrédito reasons that service of
process upon Dayco was sufficient because the entity’s lawyer was notified of
the complaint. With respect to the failure to state a claim, Bancrédito argues
that the forum selection clauses are conferrals of jurisdiction to Puerto Rico
state courts and not exclusions of this Court’s jurisdiction.
Having considered Dayco’s motion asserting improper service of process,
defendants’ motion for failure to state a claim, and plaintiff’s Response,

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defendant Dayco’s motion is GRANTED in the alternative and service of
process upon Dayco is QUASHED and defendants’ motion to dismiss is
DENIED.
I.

LEGAL BACKGROUND
A.

Insufficient Service of Process under Fed. R. Civ. P. 12(b)(5)

“A party filing a motion under Fed. R. Civ. . 12(b)(5) [contests] the delivery or
the lack of delivery of the summons and the complaint.” Ramirez de Arellano v.
Colloides Naturels Int'l, 236 F.R.D. 83, 85 (D.P.R. 2006). Fed. R. Civ. P. 4(h)
sets forth the requirements for serving summons on corporate defendants. A
corporation, partnership or association may be served in the United Stated by
the manners provided under state law pursuant to Fed. R. Civ. P. 4(e)(1) or by
delivering a copy of the summons and complaint to an officer, a managing or
general agent, or any other agent authorized by statute (see Fed. R. Civ.
P. 4(h)(1)).
“Under Puerto Rico law, as it relates to serving corporations and
associations, there are two relevant sources which govern such service:
Rule 4.4(e) of the Puerto Rico Rules of Civil Procedure, and the Puerto Rico
Law on Corporation. Provided that the Law on Corporations applies to
corporations organized in Puerto Rico, thus inapplicable to the case at bar, the
Court [turns to] Rule 4.4(e). Rule 4.4(e) of Appendix III of Title 32 of the Puerto
Rico Laws Annotated [likewise] establishes that a corporation is to be served
by delivering a copy of the summons and of the complaint to an officer,
managing or general agent, or to any other agent authorized by appointment

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or designated by law to receive service of process.” Ramirez de Arellano,
236 F.R.D. at 86.
When considering a Motion to Dismiss under Fed. R. Civ. P. 12(b)(5),
“district courts possess broad discretion to dismiss the action or retain the case
and quash the service made on the defendant.” Id. at 85.
B. Forum Selection Clauses under Fed. R. Civ. P. 12(b)(6)
Courts in the First Circuit “treat a motion to dismiss based on a forum
selection clause as a motion alleging the failure to state a claim for which relief
can be granted under Rule 12(b)(6).” Claudio de Leon v. Sistema Universitario
Ana G. Mendez, 775 F.3d 41, 46 1st Cir. 2014) (citing Rivera v. Centro Médico
de Turabo, Inc., 575 F.3d 10, 15 (1st Cir. 2009)). In considering the motion,
district courts “may consider ‘documents the authenticity of which are not
disputed by the parties,’ ‘documents central to plaintiffs' claim,’ and ‘documents
sufficiently referred to in the complaint.’” Id. (citing Rivera, 575 F.3d 10 at 15).
“Under federal law, the threshold question in interpreting a forum selection
clause is whether the clause at issue is permissive or mandatory. Permissive
forum selection clauses . . . authorize jurisdiction and venue in a designated
forum, but do not prohibit litigation elsewhere . . . In contrast, mandatory forum
selection clauses contain clear language indicating that jurisdiction and venue
are appropriate exclusively in the designated forum.”

Claudio de Leon,

775 F.3d at 15 (citing Rivera, 575 F.3d at 17). The First Circuit has interpreted
forum-selection clauses containing commanding words such as “shall” or
“must” as mandatory.

See, e.g., Silva v. Encyclopedia Britannica, Inc.,

239 F.3d 385, 388-89 (1st Cir. 2001) (finding the forum-selection clause

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mandatory when it states that “[t]his Agreement shall be governed and
construed by the laws of the State of Illinois and all actions involving this
Agreement must be brought in the State of Illinois.”).
II.

DISCUSSION
A.

Service of Process Upon Dayco

“The party raising the insufficiency of service has . . . the absolute burden
of specifically establishing to the Court how plaintiff failed to satisfy the
requirements of the service provision utilized.”

Ramirez de Arellano v.

Colloides Naturels Int'l, 236 F.R.D. 83, 85 (D.P.R. 2006) (referring to Photolab
Corp. v. Simplex Specialty Co., 806 F.2d 807, 810 (8th Cir. 1986)). In its
motion, Dayco argues that Bancrédito served third party Vanessa Camacho
(“Camacho”), an employee of Nationwide Management Services, Inc., who is
not its agent authorized to accept service on its behalf.
Bancrédito responds that the summons was delivered to Camacho at the
address 8950 SW 74th Court, Ste. 1803, Miami, Florida 33156, listed as the
address for Dayco Properties (d.e. 10-1, p. 2) and Dayco Holding Corp.
(d.e. 10-2), Dayco Telecom of FLA, Inc. (d.e. 10-7 and d.e. 10-8) in exhibits
attached to its Response (see d.e. 10, ¶¶ 2-3). It reasons that third party
Camacho must be authorized to receive summons on behalf of Dayco because
an email from defendants’ counsel suggests Camacho gave defendants’ lawyer
a copy of the complaint and summons (see d.e. 10, ¶¶ 5-7 and 10-5). It also
adds an email exchange between the parties’ respective counsel where
defendants’ attorney states he accepted service on behalf of defendants
D’Agostino and Data Hardware (see d.e. 10-6).

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“[F]ederal courts have held that an affidavit denying agency, standing
alone, may be sufficient to overcome the presumption of proper service created
by the return of service.” Blair v. City of Worcester, 522 F.3d 105, 112
(1st Cir. 2008) (referring to Hornick v. S.&M. Trucking Co., 208 F.Supp. 950,
952 (M.D. Pa. 1962); Metropolitan Theatre Co. v. Warner Bros. Pictures,
16 F.R.D. 391, 392-93 (S.D.N.Y. 1954); Puett Elec. Starting Gate Corp. v.
Thistle Down Co., 2 F.R.D. 550, 551 (N.D. Ohio 1942)). Dayco attaches an
affidavit (d.e. 7-2) to its motion where Camacho states that she is not an
employee, officer, agent of process, or authorized representative of Dayco
(see d.e. 7-2, ¶ 7). Her affidavit also clarifies that Dayco Holding Corp. and
Dayco Telecom, C.A. are different entities (see id. at ¶ 6). Neither Bancrédito’s
arguments nor the exhibits attached to its response refute Camacho’s
statements. Dayco has therefore overcome the presumption of proper service.
Accordingly, Dayco’s Motion to Dismiss for Insufficient Service of Process is
GRANTED in the alternative and Bancrédito’s service of process upon Dayco
is QUASHED.
B. Forum Selection Clauses Applicable to Defendants
The Personal and Corporate Collateralized Loan Agreement (d.e. 8-1)
(the “Loan Agreement”), the Credit Assignment Contract (d.e. 8-2), Promissory
Notes (d.e. 10-9 and d.e. 10-10), and Guaranty of Payment (d.e. 10-11) are all
central to Bancrédito’s claim and referred to in its complaint. The Loan
Agreement, the Credit Assignment Contract, and the Promissory Notes were
executed by defendant Data Hardware. The Guaranty of Payment in turn was
executed by defendant D’Agostino. None of these documents include Dayco

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as a signing party. Dayco is consequently not subject to any of the forum
selection clauses referred to by the parties. For this reason, defendants’
Motion to Dismiss is DENIED as to Dayco.
We consider the agreements relevant to defendants Data Hardware and
D’Agostino to conclude that none of the forum selection clauses in these
agreements deprive this Court of jurisdiction.
1.

Loan Agreement, Credit Assignment Contract, and Promissory
Notes

The forum selection clause of the Loan Agreement states that:
This Loan Agreement and any and all collateral documents shall be
governed by and construed in accordance with the laws of the
Commonwealth of Puerto Rico. The borrower (Data Hardware)
expressly agrees to the exclusive jurisdiction of the courts of the
Commonwealth of Puerto Rico in any and all claims related to or
arising out of the terms of this Agreement and hereby expressly
waives any right to be sued in the courts of its jurisdiction of
domicile or residency and further waives and agrees not to
question in any such proceeding the jurisdiction of the courts of the
Commonwealth of Puerto Rico.
d.e. 8-1, p. 2.
Pursuant to this language, Data Hardware consents that all claims
related to the Loan Agreement be decided in the courts of the Commonwealth
of Puerto Rico. Because it limits jurisdiction exclusively to the courts of the
Commonwealth of Puerto Rico, the clause is mandatory.
The forum selection clause of the Loan Agreement states that:
For all purposes of this contract the parties agree that this
transaction shall be governed by the laws of the Commonwealth of
Puerto Rico and they further agree that any claims arising as a
consequence of the same shall be filed exclusively before the
courts of the Commonwealth of Puerto Rico. CLIENT (Data
Hardware) expressly waives any other jurisdiction that might
be able to address the matter for reasons of domicile or

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residence and expressly waives its use of any defense of
inconvenient forum.
d.e. 2, § Tenth.
This language limits the filing of any claims related to the Loan
Agreement to the courts of the Commonwealth of Puerto Rico. It is also
mandatory.
The forum selection clauses in the Promissory Notes state that:
The Issuer (Data Hardware) hereby expressly consents to the
jurisdiction of the courts of the Commonwealth of Puerto Rico in
any and all claims related to or arising out of the terms of this Note
and hereby expressly waives any right to be sued in the courts
of its jurisdiction of domicile or residency and further waives
and agrees not to question in any such proceeding the jurisdiction
of the courts of the Commonwealth of Puerto Rico and waives any
defense based on forum non conveniens.
d.e. 10-9 at p. 3 and d.e. 10-10 at p. 3.
Pursuant to this language, Data Hardware consents to the jurisdiction of
the courts of the Commonwealth of Puerto Rico waives its right to be sued in
the courts of Florida. It is therefore permissive and provides for the potential
jurisdiction of other courts, except those in Florida.
None of these clauses limit jurisdiction to the state courts of the Puerto
Rico at the exclusion of this federal court.
In their motion, defendants argue that the phrase “courts of the
Commonwealth of Puerto Rico” has been interpreted by this Court and the First
Circuit as referring solely to the state courts of Puerto Rico and excluding this
federal court. But none of the cases held that this language means what

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defendants suggest.1 They discuss forum selection clauses that are different
from the ones at issue in the case at bar aside from including the phrase
“courts in the Commonwealth of Puerto Rico.” Defendants err in relying on
case law instead of turning to the text of the forum selection clauses
themselves to determine their scope.
The forum selection clauses in the Loan Agreement, the Credit
Assignment Contract, and the Promissory Notes include a waiver of jurisdiction
in the signing party’s place of domicile or residence. See supra language in
bold. The clauses prohibit the parties from litigating in Florida and force them
instead to do so in Puerto Rico.

When the phrase “courts in the

Commonwealth of Puerto Rico” is read in the context of the waiver of litigation
in Florida, it is clear that Bancrédito intended to force any case related to these
documents to be litigated in any court located in Puerto Rico, state or federal.
If Bancrédito intended to limit jurisdiction to the state courts of Puerto Rico, it
could have done so explicitly.
Because the forum selection clauses in the Loan Agreement, Credit
Assignment Agreement, and Promissory notes do not mandate jurisdiction in
the state courts of Puerto Rico, defendants’ motion is DENIED as to defendant
Data Hardware.
1

The First Circuit declined to follow Bristol Babcock, Inc. v. PREPA, 930 F.Supp. 710,
711 (D.P.R. 1996) in Autoridad de Energia Electrica de Puerto Rico v. Ericsson Inc.,
201 F.3d 15, 19 (1st Cir. 2000); this court did not hold that the phrase “courts in the Commonwealth
of Puerto Rico” means only Puerto Rico state courts in Action Corp. v. Toshiba America Consumer
Products, Inc., 975 F.Supp. 170 (1997) but rather concluded that a “superior court or district court
having jurisdiction over the merits of the dispute is competent to hear the case” (id. at 174-176);
and in León Figueroa v. Tropigas de Puerto Rico, Inc., Civ. No. 06-1504, 2008 WL 11357941
(D.P.R. 2008), this Court found that the phrase “courts in the Commonwealth of Puerto Rico” was
ambiguous in the context of the specific forum selection clause discussed therein and read the
phrase to include this Court.

CIVIL 18-1005CCC
2.

10

Guaranty of Payment

The forum selection clause in the Guaranty of Payment states that:
Guarantor (D’Agostino) hereby severally submits to the jurisdiction
of the state and federal courts in the Commonwealth of Puerto
Rico for purposes of any action arising from or growing out of this
Guaranty, and further agree that the venue of any such action may
be laid in San Juan Puerto Rico. Nothing contained in this
Guaranty, however, shall be deemed to constitute, or to imply the
existence of, any agreement by Lender to bring any such action
only in said courts or to restrict in any way any of Lenders’s
remedies or rights to enforce the terms of this Guaranty as, when
and where Lender shall deem appropriate, in its sole discretion.
d.e. 10-11, p. 3.
Pursuant to this language, D’Agostino consents to the jurisdiction of both
state and federal courts in Puerto Rico while permitting Bancrédito to file suit
in courts outside of Puerto Rico if it desires. The forum selection clause is
therefore permissive.
Because the Guaranty of Payment’s forum selection clause does not
mandate jurisdiction in the state courts of Puerto Rico, defendants’ motion is
DENIED as to D’Agostino as well.
III.

CONCLUSION
For the above-stated reasons, Dayco’s Motion to Dismiss for Insufficient

Service of Process (d.e. 7) is GRANTED in the alternative and defendants’
Motion to Dismiss (d.e. 8) for failure to state a claim is DENIED.
Bancrédito’s service upon Dayco is hereby QUASHED.

Plaintiff is

GRANTED until DECEMBER 23, 2018 to execute service of process upon
Dayco.

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Defendants Data Hardware and D’Agostino in turn SHALL answer the
complaint WITHIN FIFTEEN (15) DAYS’ notice of this Order as required under
the March 1, 2018 Case Management Order (d.e. 6).2
SO ORDERED.
At San Juan, Puerto Rico, on December 6, 2018.

S/CARMEN CONSUELO CEREZO
United States District Judge

2

Defendants’ Motion to Vacate or Set Aside Case Management Order (d.e. 15) filed on
June 1, 2018, requesting to vacate or set aside the deadline to file an answer to the Complaint
scheduled in the Case Management Order (d.e. 6), is therefore DENIED.