MD Distributors, Corp. v. Dutch Ophthalmic Research Center International B.V.
Filing
18
OPINION AND ORDER re 7 Motion to Dismiss. The Court GRANTS Dutch Ophthalmic's motion to dismiss pursuant to Rule 12(b)(6). Accordingly, this case is DISMISSED without prejudice. Judgment shall be entered accordingly. Signed by Judge Francisco A. Besosa on 07/23/2018. (brc)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
MD DISTRIBUTORS, CORP.,
Plaintiff,
v.
Civil No. 18-1120 (FAB)
DUTCH OPHTHALMIC RESEARCH
CENTER INTERNATIONAL B.V.,
Defendant.
OPINION AND ORDER 1
BESOSA, District Judge.
Dutch Ophthalmic Research Center International B.V. (“Dutch
Ophthalmic”) moves to dismiss plaintiff MD Distributors, Corp.
(“MD Distributors”)’s complaint pursuant to Federal Rule of Civil
Procedure 12(b)(6) (“Rule 12(b)(6)”).
(Docket No. 7.)
For the
reasons set forth below, this Court GRANTS Dutch Ophthalmic’s
motion to dismiss.
I.
Background
MD Distributors specializes in medical equipment sales in
Puerto Rico and the Caribbean.
(Docket No. 1, Ex. 1 at p. 5.)
Dutch Ophthalmic “manufactures and sells ophthalmic instruments.”
Id.
The business relationship between the parties commenced in
2005, when MD Distributors began operating as
1
Dutch Ophthalmic’s
Brett Uslaner, a second-year student at Fordham University School of Law,
assisted in the preparation of this Opinion and Order.
Civil No. 18-1120 (FAB)
2
exclusive distributor in Puerto Rico.
In
2014,
the
“Agreement”),
parties
which
entered
named
MD
into
(Docket No. 12 at p. 3.)
a
written
Distributors
agreement
as
“the
(the
exclusive
distributor of [Dutch Ophthalmic’s] products in the markets of
Puerto Rico, the Dominican Republic, and the islands of St. Thomas
and St. Croix.”
(Docket No. 1, Ex. 1 at p. 5.)
One year later, the parties entered into an amended agreement
(the “Amended Agreement”).
(Docket No. 7, Ex. 1.)
Section 1.1 of
the Amended Agreement states that “[the Amended Agreement] between
[Dutch Ophthalmic] and [MD Distributors] dated July 23, 2015 . . .
supersedes and replaces all previous understandings, agreements or
contracts, written or verbal between [Dutch Ophthalmic] and [MD
Distributors].”
(Docket No. 7, Ex. 1 at p. 15.)
Dutch Ophthalmic
and MD Distributors agreed that:
[A]ll Annexes hereto and all non-contractual obligations
arising out of or in connection with this Agreement shall
be exclusively governed by and construed and interpreted
in accordance with Dutch law, with the exclusion of Dutch
International private law and the United Nations
Convention on Contracts for the International Sales of
Goods (Vienna Sales Convention).
(Docket No. 7, Ex. 1 at p. 21.)
The Amended Agreement also sets
forth a forum selection clause, providing that “[a]ll disputes
arising
from
this
Agreement
(whether
contractual
or
non-
contractual) shall be submitted to the exclusive jurisdiction of
the competent court of Rotterdam.”
(Docket No. 7, Ex. 1 at p. 21.)
Civil No. 18-1120 (FAB)
On
January
5,
2017,
3
“[Dutch
Ophthalmic]
informed
[MD
Distributors] of the unilateral cancelation and/or nonrenewal of
the [Amended Agreement].”
(Docket No. 1, Ex. 1 at p. 6.)
response,
commenced
MD
Distributors
an
action
against
In
Dutch
Ophthalmic in the Puerto Rico Court of First Instance for breach
of contract pursuant to Puerto Rico Law 75, P.R. Laws Ann. tit. 10,
sections 278 et seq. (Puerto Rico Law 75”), and Article 1802 of
the Puerto Rico Civil Code, P.R. Laws Ann. tit. 31, section 5141,
alleging that Dutch Ophthalmic breached the Amended Agreement
without just cause.
(Docket No. 1 at p. 1.)
Dutch Ophthalmic removed this action to this Court pursuant
to 28 U.S.C. § 1446 on March 2, 2018.
Id.
According to Dutch
Ophthalmic, the forum selection and choice of law clauses set forth
in Section 12 of the Amended Agreement require dismissal of this
action pursuant to Rule 12(b)(6).
(Docket No. 1 at p. 2.)
MD
Distributors contends, however, that the forum selection clause
and choice of law provisions are unenforceable for the following
reasons:
(1) the Amended Agreement is void, (2) the clauses
violate public policy pursuant to Puerto Rico Law 75, (3) the forum
is inconvenient, and (4) the Rotterdam Court will not apply Law 75.
(Docket No. 12 at p. 3.) The arguments set forth by MD Distributors
are unavailing.
Civil No. 18-1120 (FAB)
II.
4
Standard of Review
The First Circuit Court of Appeals “treat[s] 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).”
Rivera v. Centro Médico de Turabo, Inc., 575 F.3d
10, 15 (1st Cir. 2009).
pleaded
facts
in
the
Courts “assume the truth of all wellcomplaint
and
indulge
all
reasonable
inferences that fit the plaintiff’s stated theory of liability.”
Rivera, 575 F.3d at 13 (quoting Centro Médico del Turabo, Inc. v.
Feliciano de Melecio, 406 F.3d 1, 5 (1st Cir. 2005) (internal
quotation marks and citation omitted).
Forum selection clauses are “prima facie valid,” and are
enforced barring three conditions:
(1) the clause was the product
of “fraud or overreaching,” (2) “enforcement would be unreasonable
and unjust,” or (3) “enforcement would contravene a strong public
policy of the forum in which suit is brought, whether declared by
statute or by judicial decision.”
Rafael Rodríguez Barril, Inc.
v. Conbraco Indus., Inc., 619 F.3d 90, 93 (1st Cir. 2010) (quoting
M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972)).
party
challenging
enforcement
of
shoulders a “heavy burden of proof.”
the
forum
selection
The
clause
Bremen, 407 U.S. at 17.
The
standard set forth in Bremen governs this Court’s analysis because
the
“Puerto
Rico
Supreme
Court
has
adopted
the
federal
Civil No. 18-1120 (FAB)
5
jurisprudence on this issue.”
Stereo Gema, Inc. v. Magnadyne
Corp., 941 F. Supp. 271, 273 (D.P.R. 1996) (Laffitte, J.) (citing
Unisys Puerto Rico, Inc. v. Ramallo Bros. Printing, Inc., 128
D.P.R. 842 (1991); see also Silva., 239 F.3d at 387 n. 1 (noting
that “there is no conflict between federal common law and Puerto
Rico
law
regarding
the
enforceability
of
forum-selection
clauses.”).
III. Discussion
The
parties
mandatory.
concur
that
the
forum
selection
clause
is
Docket Nos. 12 at p. 11; 17 at p. 5; See Rafael
Rodríguez Barril, Inc. v. Conbraco Indus., Inc., 619 F.3d 90, 92
(1st Cir. 2010) (noting that the “opening question is whether the
forum specified in the selection clause is mandatory or merely
permissive”) (citation omitted).
The dispositive inquiry in this
action is whether the forum selection clause is enforceable.
MD
Distributors challenges the enforceability of the forum selection
clause pursuant to the three Bremen factors.
A.
The forum selection clause was not a product of fraud or
overreaching
1.
Overreaching
MD Distributors argues that the forum selection
clause is unenforceable because the Amended Agreement is a contract
of adhesion.
(Docket No. 12 at p. 8.)
“A contract of adhesion is
Civil No. 18-1120 (FAB)
6
a contract offered by the authoring party on a take it or leave it
basis rather than being negotiated between the parties.”
575 F.3d at 19 n. 7.
Rivera,
MD Distributors anchors its argument on the
proposition that it did not have an opportunity to negotiate the
clause, seek the advice of counsel, or “understand the nature of
some of the clauses contained in the contract.”
(Docket No. 12 at
p. 13.)
This argument fails.
In Carnival Cruise Lines,
Inc. v. Shute, the Supreme Court of the United States held that
forum selection clauses in contracts of adhesion are presumptively
valid.
499 U.S. 585, 593 (1991) (citing Bremen, 407 U.S. at 13).
The First Circuit Court of Appeals has repeatedly echoed the
holding in Carnival Cruise Lines.
See Rivera, 575 F.3d at 19 (“The
mere fact that a contract is one of adhesion does not render it
per se unenforceable.”); Bull HN Info. Sys., Inc. v. Hutson, 229
F.3d 321, 331 (1st Cir. 2000) (“[O]f course, even a contract of
adhesion is enforced unless unconscionable or unfair.”).
MD Distributors argues that the Amended Agreement
“was the result of an overwhelming bargaining power exerted by a
global company in The Netherlands over a local corporation in
Puerto Rico that is owned by one person.”
p. 12.)
(Docket No. 12 at
Pursuant to Bremen, overreaching consists of “unfair
exploitation
of
[a
party’s]
overwhelming
bargaining
power
or
Civil No. 18-1120 (FAB)
7
influence over the other party.”
Distributors’
selection
argument
clause
are
fails
Rivera, 575 F.3d at 21.
because
unambiguous,
the
and
terms
nothing
of
in
the
the
MD
forum
record
suggests that the inequality in bargaining power among the parties
is so disproportionate that the forum selection clause must be
voided.
See Silva, 239 F.3d at 386 (enforcing forum selection
clause where “clause was written in plain language and the contract
was of reasonable length.”); Stereo Gema, 941 F. Supp. at 277
(rejecting claim that forum selection clause was unenforceable due
to party’s lack of awareness where “[t]he terms of the clause
[were] clear . . . [and the parties were of] roughly comparable
bargaining power) (citing Lambert, 983 F.2d at 1121).
In these
circumstances, this Court presumes that each party at a minimum
read and understood the terms of the Amended Agreement.
See
Rivera, 575 F.3d at 21 (holding that “knowledge [of the contract]
is imputed as a matter of law”). Consequently, the forum selection
clause was not a product of overreaching.
2.
Fraud
The record demonstrates that the forum selection
clause was not a product of fraud.
The First Circuit Court of
Appeal’s decision in Rivera is illustrative.
In Rivera, the
plaintiff argued that (1) no one explained the forum selection
clause to him or informed plaintiff that he could seek an attorney,
Civil No. 18-1120 (FAB)
8
that (2) he did not attempt to negotiate, and that (3) he did not
understand the legal implications of the terms.
Id. at 20.
The
First Circuit Court of Appeals held that these circumstances did
not constitute fraud and that the forum selection clause was
enforceable.
Id.
MD Distributors sets forth identical arguments,
stating that it “failed to understand the legal implications and
ramifications of [signing the Amended Agreement],” that it did not
“have any say in its language, or its terms and conditions,” and
that the Amended Agreement “had language that no one discussed or
explained to [MD Distributors].” (Docket No. 12 at pp. 10 and 13.)
MD Distributors’ argument that the Amended Agreement “should be
considered null and void because of [Dutch Ophthalmic’s] deceitful
conduct,” without more, cannot sustain Dutch Ophthalmic’s motion
to dismiss.
See Stereo, 941 F. Supp. at 276 (rejecting challenge
to forum selection clause where “[plaintiff] was told that if he
did not sign the agreement, [the defendant corporation] would not
supply [him] with its products.”).
B.
Enforcement of the forum selection clause would not be
unreasonable or unjust
MD Distributors contends that it would be unjust and
unreasonable to litigate the breach of contract action in The
Netherlands.
(Docket No. 12 at p. 11.)
To invalidate a forum
selection clause, “the resisting party must show that trial in the
Civil No. 18-1120 (FAB)
9
contractual forum will be so gravely difficult and inconvenient
that he will for all practical purposes be deprived of his day in
court.”
Bremen, 407 U.S. at 18 (emphasis added).
MD Distributors
argues that because all of the business records and witnesses are
located in Puerto Rico, litigation in a foreign jurisdiction
regarding the Amended Agreement is prohibitively difficult.
This argument is unconvincing.
The First Circuit Court
of Appeals has held that “something considerably more than the
mere inconvenience of traveling to litigate in a different, even
faraway
foreign
jurisdiction,
contractual agreement to do so.”
is
required
to
overcome
a
In re Mercurio, 402 F.3d 62, 66
(1st Cir. 2005) (citation omitted); see Royal Bed & Spring Co. v.
Famossul Industria e Comercio de Moveis Ltda, 906 F.2d 45, 49 (1st
Cir. 1990) (“[A] showing of inconvenience as to a foreign forum
would not be enough to hold a forum-selection clause unenforceable,
especially if that inconvenience was known or contemplated by the
parties at the time of their agreement.”).
MD Distributors does
not allege that the relevant business records cannot be submitted
or
that
witnesses
Ultimately,
inconvenience.
MD
cannot
appear
Distributors’
before
argument
the
Rotterdam
centers
on
Court.
mere
“The fact that another location would prove more
convenient to the party resisting the agreed upon location[,
however,] is not sufficient to meet the ‘heavy burden’ required to
Civil No. 18-1120 (FAB)
10
obviate a forum selection clause.”
Antilles, 526 F. Supp. 2d at
208 (quoting Carnival, 499 U.S. at 595).
Accordingly, enforcement
of the forum selection clause would not deprive MD Distributors of
judicial recourse.
Courts
have
construed
this
standard
strictly.
In
McDonnell Douglas Corp. v. Islamic Republic of Iran, 758 F.2d 341
(8th Cir. 1985), the Eighth Circuit Court of Appeals held that a
forum
selection
clause
requiring
litigation
in
Iran
was
unenforceable, reasoning that Iran’s post-revolutionary political
climate and war with Iraq rendered its judicial system incapable
of providing an adequate remedy.
Id. at 345-46.
Similarly, in
Tokio Marine & Fire Ins. Co. v. M/V TURQUOISE, 2001 WL 939826, *3
(D.S.C. 2001), the defendant moved to dismiss the plaintiff’s inrem claim pursuant to a foreign selection clause, which prescribed
South Korea as the mandatory forum.
Id. at *3.
The clause was
unenforceable because South Korea did not permit in-rem suits.
Id. This case does not present any comparable obstacles that would
deprive MD Distributors of pursing the breach of contract claim
against Dutch Ophthalmic in The Netherlands.
Consequently, MD
Distributors fails to overcome the exceedingly high threshold
required pursuant to Bremen.
Civil No. 18-1120 (FAB)
C.
11
Enforcement of the forum selection clause
contravene the public policy of Puerto Rico
does
not
MD Distributors argues that enforcement of the forum
selection clause contravenes the public policy of Puerto Rico,
(Docket No. 12 at p. 16.)
Law
75,
which
serves
“to
MD Distributors relies on Puerto Rico
protect
the
distributors working in Puerto Rico.”
interest
of
commercial
Gemco Latinoamericana, Inc.
v. Seiko Time Corp., 623 F. Supp. 912, 918 (D.P.R. 1985) (Laffitte,
J.); P.R. Laws Ann. tit. 10, §§ 278 et seq.
Puerto Rico Law 75
states that:
[a]ny stipulation that obligates a dealer to adjust,
arbitrate or litigate any controversy that comes up
regarding his dealer's contract outside of Puerto Rico,
or under foreign law or rule of law, shall be likewise
considered as violating the public policy set forth by
this chapter and is therefore null and void.
P.R. Laws Ann. tit. 10, § 278b–2.
pursuant to Law 75.
MD Distributors is a “dealer”
See Triangle Trading Co. v. Robroy Indus.,
Inc., 952 F. Supp. 75, 77 (D.P.R. 1997) (Casellas, J.) (noting
that a dealer pursuant to Puerto Rico Law 75 is a person “having
effectively in his charge in Puerto Rico the distribution, agency,
concession or representation of a given merchandise or service’”)
(quoting P.R. Laws Ann. tit. 10, § 278(a)).
MD Distributors
asserts that the forum selection clause is unenforceable because
(1) “the interpretation [of the forum selection clause] falls
outside the ambit of federal common law; and (2) if the case were
Civil No. 18-1120 (FAB)
12
transferred to Rotterdam, “there is no certainty that Puerto Rico’s
Law 75 would even be applied.”
(Docket No. 12 at pp. 6 and 16.)
This argument is flawed for two reasons. First, it rests
on a false assumption that the public policy of Puerto Rico is
dispositive.
On the contrary, courts have frequently upheld forum
selection clauses pertaining to claims arising pursuant to Puerto
Rico Law 75.
See, e.g., Royal Bed, 906 F.2d at 49 (upholding forum
selection clause prescribing Brazil as mandatory forum); Antilles,
526 F. Supp. 2d at 210 (same; England); Stereo Gema, 941 F. Supp.
at 273 (same; California); see also Puerto Rico Surgical Techs.,
Inc. v. Applied Med. Distribution Corp., No. 10-1797, 2010 WL
4237927, at *3 (D.P.R. Oct. 26, 2010) (Pieras, J.) (holding that
clause in exclusive distribution agreement designating California
as the forum did not contravene a strong public policy of Puerto
Rico).
Second, MD Distributors’ argument is inconsistent with
Piper Aircraft Co. v. Reyno, 454 U.S. 235, the leading case on the
forum non conveniens doctrine. In Piper, the Supreme Court stated:
The Court of Appeals erred in holding that plaintiffs
may defeat a motion to dismiss on the ground of forum
non conveniens merely by showing that the substantive
law that would be applied in the alternative forum is
less favorable to the plaintiffs than that of the present
forum. The possibility of a change in substantive law
should ordinarily not be given conclusive or even
substantial weight in the forum non conveniens inquiry.
Civil No. 18-1120 (FAB)
13
Id. at 247. Accordingly, this Court finds that the forum selection
clause does not contravene the public policy of Puerto Rico.
Because the forum selection clause is enforceable, dismissal is
warranted pursuant to Rule 12(b)(6).
IV.
Conclusion
For the reasons set forth above, the Court GRANTS Dutch
Ophthalmic’s motion to dismiss pursuant to Rule 12(b)(6).
No. 7.)
(Docket
Accordingly, this case is DISMISSED without prejudice.
Judgment shall be entered accordingly.
IT IS SO ORDERED.
San Juan, Puerto Rico, July 23, 2018.
s/ Francisco A. Besosa
FRANCISCO A. BESOSA
UNITED STATES DISTRICT JUDGE
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