Ramos et al v. Willert Home Products
Filing
33
OPINION AND ORDER: For the reasons set forth in this Opinion and Order, the Motion to Dismiss at Docket No. 14 is GRANTED and the Amended Complaint is DISMISSED WITH PREJUDICE in its entirety. Judgment of dismissal shall be entered accordingly. Signed by Judge Raul M. Arias-Marxuach on 1/18/2023. (mrr)
Case 3:22-cv-01247-RAM Document 33 Filed 01/18/23 Page 1 of 15
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
JULIO RAMOS, et al.,
Plaintiffs,
v.
CIVIL NO. 22-1247 (RAM)
WILLERT HOME PRODUCTS, INC.,
Defendant.
OPINION AND ORDER
RAÚL M. ARIAS-MARXUACH, United States District Judge
Pending before the Court is defendant Willert Home Products,
Inc.’s
(“Willert”
or
“Defendant”)
Motion
to
Dismiss
(the
“Motion”). (Docket No. 14). The plaintiffs in this action are Julio
E. Ramos, Margarita Brás Vilella, and the conjugal partnership
composed
by
them
(“Plaintiffs”). 1
Plaintiffs
allege
Defendant
violated Puerto Rico’s Sales Representative Act, commonly known as
Law 21, when it terminated the parties’ sales representative
agreement
without
Alternatively,
just
Plaintiffs
cause.
seek
(Docket
damages
No.
30
“under
the
at
7-10).
traditional
contractual provision of the Civil Code of Puerto Rico.” Id. at 9.
The Complaint also lists J. Ramos & Assoc. as a plaintiff in this case. (Docket
No. 1 at 1). However, the Puerto Rico Corporate Registry shows that J. Ramos &
Assoc. was canceled in 2014, and thus has no standing to sue. (Docket No. 27 at
1). After several opportunities to amend their jurisdictional allegations,
Plaintiffs clarified, and the Amended Complaint reflects, that Julio E. Ramos,
Margarita Brás Vilella, and their conjugal partnership are the real parties in
interest in this case. (Docket Nos. 28; 30 at 1-2).
1
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Civil No. 22-1247 (RAM)
2
For the reasons detailed below, the Motion is GRANTED, and this
action is DISMISSED in its entirety.
I.
Approximately
FACTUAL BACKGROUND 2
forty
years
ago,
Plaintiffs
and
Defendant
entered into an agreement whereby Plaintiffs would distribute and
sell
Defendant’s
Republic.
products
(Docket
No.
30
in
Puerto
¶ 8).
Rico
Pursuant
and
to
the
that
Dominican
agreement,
Plaintiffs have developed, promoted, and expanded the market for
Defendant’s
products
in
Puerto
Rico
by
marketing
Defendant’s
products to clients, following up on orders, and arranging the
shipment of orders. Id. ¶ 10.
On December 30, 2011, Plaintiffs and Puerto Rico Supplies
Group, Inc. (“PRSG”) entered into a Distribution Contract Purchase
Agreement (the “PRSG Agreement”). Id. ¶ 12. As the name suggests,
PRSG
purchased
Plaintiffs’
right
to
distribute
Defendant’s
products in Puerto Rico. Id. However, Plaintiffs retained their
sales responsibilities. Id. ¶ 15. Pursuant to the PRSG Agreement,
PRSG
coordinated,
processed,
and
submitted
product
orders
to
Plaintiffs. Id. Plaintiffs then coordinated the processing and
shipment of those products directly with Defendant, and Defendant
The Court’s factual recitation is taken from Plaintiffs’ allegations in the
Amended Complaint, the content of which must be accepted as true at this stage
of the proceedings. See Schatz v. Republican State Leadership Comm., 669 F.3d
50, 55 (1st Cir. 2012). Per an agreement between the parties, the Court did not
order the parties to resubmit their motions and briefs after the Amended
Complaint was filed. (Docket No. 32).
2
Case 3:22-cv-01247-RAM Document 33 Filed 01/18/23 Page 3 of 15
Civil No. 22-1247 (RAM)
3
paid Plaintiffs a commission for their services. Id.
Recently, Willert has engaged in a series of practices that
have impaired its business relationship with Plaintiffs, including
selling
products
in
Puerto
Rico
through
other
third-party
representatives and increasing the price of products without first
consulting
with
Plaintiffs.
Id.
¶ 16.
On
November
17,
2021,
Defendant officially notified Plaintiffs via email that their
sales relationship would conclude at the end of that year. Id.
¶ 17. According to the email, the change was part of a larger
business strategy shift for Defendant, in which it was hiring more
internal sales staff and ending relationships with third-party
sales representatives. Id. The parties attempted to salvage their
relationship over the ensuing months, to no avail. Id. ¶¶ 18-25.
Plaintiffs thus initiated the present action.
II.
APPLICABLE LAW
A. Motion to Dismiss Standard
When ruling on a Rule 12(b)(6) motion, “[t]he sole inquiry
. . .
is
whether,
construing
the
well-pleaded
facts
of
the
complaint in the light most favorable to the plaintiffs, the
complaint states a claim for which relief can be granted.” OcasioHernandez v. Fortuno-Burset, 640 F.3d 1, 7 (1st Cir. 2011). The
Court must first “isolate and ignore statements in the complaint
that simply offer legal labels and conclusions or merely rehash
cause-of-action elements.” Schatz v. Republican State Leadership
Case 3:22-cv-01247-RAM Document 33 Filed 01/18/23 Page 4 of 15
Civil No. 22-1247 (RAM)
4
Comm., 669 F.3d 50, 55 (1st Cir. 2012) (citations omitted). Then,
the Court takes “the complaint’s well-pled (i.e., non-conclusory,
non-speculative) facts as true, drawing all reasonable inferences
in the pleader’s favor,” to determine “if they plausibly narrate
a claim for relief.” Id. (citations omitted).
B. Law 21 – Puerto Rico Sales Representative Act
The Puerto Rico legislature enacted Law 21 in 1990 “to protect
sales
representatives
from
the
unjust
termination
of
their
contracts.” IOM Corp. v. Brown Forman Corp., 627 F.3d 440, 445
(1st Cir. 2010). The statute provides that “no principal or grantor
may terminate [their principal-sales representative] relationship,
or directly or indirectly perform any act that may impair the
established relationship, or refuse to renew [their] contract upon
its regular termination, except for just cause.” P.R. Laws Ann.
tit. 10, § 279a. If the principal terminates or impairs the sales
representation contract without just cause, it is liable for
damages pursuant to a set of criteria set forth in the statute.
Id. § 279c. Additionally, “Law 21 provides a sales representative
with a provisional remedy pending litigation to continue in all
its terms the relation established by the sales representative
agreement and/or to enjoin the principal from making any act or
omission in prejudice thereof.” Rotger v. Micro-Vu Corp., 2010 WL
11545644, at *5 (D.P.R. 2010) (citing, inter alia, P.R. Laws Ann.
tit. 10, § 279e).
Case 3:22-cv-01247-RAM Document 33 Filed 01/18/23 Page 5 of 15
Civil No. 22-1247 (RAM)
The
statute
5
defines
a
sales
representative
as
“[a]n
independent entrepreneur who establishes a sales representation
contract of an exclusive nature, with a principal or grantor, and
who
is
assigned
a
specific
territory
or
market,
within
the
Commonwealth of Puerto Rico.” P.R. Laws Ann. tit. 10, § 279(a).
The Supreme Court of Puerto Rico has further clarified that a sales
representative is:
[A] business intermediary who: (1) exclusively
promotes and processes contracts on behalf of
a principal in an ongoing, stable manner; (2)
operates in a defined territory or market; (3)
is responsible for creating or expanding the
market for the principal's products through
promotional efforts; (4) receives commissions
for his services or a pay previously agreed
upon by the parties; and (5) operates as an
independent merchant.
IOM
Corp.,
627
F.3d
at
446
(citing
Cruz-Marcano
v.
Sánchez-
Tarazona, 172 D.P.R. 526 (2007)). A sales representation contract
is defined as:
The agreement established between a sales
representative and a principal, through which,
and regardless of the way in which the parties
establish,
delineate
or
formalize
said
agreement, the party of the first part commits
himself to making a reasonable effort and due
diligence in the creation or expansion of a
market which is favorable for the products
that
the
principal
sells,
directed
at
capturing clientele to offer it a product or
service marketed by him in Puerto Rico, and
the party of the second part is bound to comply
with the commitments that may result from the
sales
representative's
efforts
and
coordination and to pay the previouslyaccorded commission or remuneration.
Case 3:22-cv-01247-RAM Document 33 Filed 01/18/23 Page 6 of 15
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6
P.R. Laws Ann. tit. 10, § 279(c). Further, while Law 21 does not
define exclusivity, the First Circuit has stated that “[t]he
exclusivity
requirement
is
met
where
neither
the
principal
merchant nor third parties are allowed to sell the product in the
same
territory
or
market
in
which
the
sales
representative
operates.” Id. at 448.
Importantly, Law 21 cannot be applied retroactively. Mueller
Streamline Co. v. Rafael Rodriguez Barril, Inc., 2014 WL 2946023,
at *3 (D.P.R. 2014). Therefore, “[a]n essential element of a Law
21 claim is the existence of a ‘sales representation contract’
that is formed after December 5, 1990.” Tavarez v. Champion Prod.,
Inc., 903 F. Supp. 268, 272 (D.P.R. 1995) (citation omitted)
(emphasis in original).
III.
DISCUSSION
A. Plaintiffs Fail to Adequately Plead a Law 21 Claim
Counts One, Two, Three, and Five of the Amended Complaint
seek relief pursuant to Law 21. (Docket No. 30 at 7-10). However,
for the reasons addressed below, the Amended Complaint does not
state a plausible Law 21 claim.
1. Law 21 Does Not Apply Extraterritorially
As a preliminary matter, it is unclear whether Plaintiffs
seek
relief
under
Law
21
for
Defendant’s
termination
of
the
parties’ business relationship in the Dominican Republic. To that
end, the Amended Complaint mentions on multiple occasions the
Case 3:22-cv-01247-RAM Document 33 Filed 01/18/23 Page 7 of 15
Civil No. 22-1247 (RAM)
parties’
dealings
in
7
the
Dominican
Republic
and
notes
that
Defendant terminated that relationship in its November 17, 2021
letter. Id. at 4-5. If Plaintiffs do seek such relief, their Law
21 claims for any business conducted outside of the Puerto Rico
market are DISMISSED. Law 21’s plain text limits its scope to the
Puerto Rico market, as it defines a “sales representation contract”
as an agreement “directed at capturing clientele to offer it a
product or service marketed by [the sales representative] in Puerto
Rico[.]” P.R. Laws Ann. tit. 10, § 279(c) (emphasis added). For
this reason, it is well established that Law 21’s “protection does
not extend beyond the island’s geographical boundaries.” Alina &
A Tours, Inc. v. Royal Caribbean Cruises, Ltd., 2006 WL 897975, at
*1 (D.P.R. 2006). Thus, any Law 21 claims based on conduct that
occurred in the Dominican Republic are not viable.
2. Plaintiffs Fail to Plead That They Were Defendant’s
Exclusive Sales Representatives
The remaining Law 21 claims concerning the termination of the
parties’
business
relationship
in
Puerto
Rico
must
also
be
dismissed because Plaintiffs fail to plead that they were Willert’s
exclusive sales representatives. As noted above, Law 21 only
protects sales representatives who exclusively promote and process
contracts on behalf of a principal. (See infra § II.B). Exclusivity
in this context means that “neither the principal merchant nor
third parties are allowed to sell the product in the same territory
Case 3:22-cv-01247-RAM Document 33 Filed 01/18/23 Page 8 of 15
Civil No. 22-1247 (RAM)
8
or market in which the sales representative operates.” IOM Corp.,
627 F.3d at 448 (citation omitted). As the First Circuit has noted,
“[e]xclusivity is generally apparent either from the contract or
from
the
arrangements
agreed
upon
between
the
parties.”
Id.
(internal quotation marks and citations omitted). A plaintiff
seeking relief pursuant to Law 21 must do more than merely mention
“the exclusivity requirement in a conclusory and casual fashion.”
Id. at 448-49. Here, Plaintiffs fail to provide any substantive
factual allegations to adequately plead exclusivity through their
contract or through a course of dealing with Willert.
i.
Exclusivity By Contract
First, Plaintiffs do not allege that any agreement they signed
with
Willert
expressly
made
them
the
exclusive
sales
representative for Willert’s products in the Puerto Rico market.
Instead, they assert that their relationship with Willert was
governed by an agreement arranged approximately forty years ago,
and then state in conclusory fashion that “[s]ince the beginning
of
that
agreement
until
2011,
plaintiff
was
the
exclusive
distributor for [Willert] in Puerto Rico.” (Docket No. 30 ¶ 8).
Plaintiffs did not attach this agreement to the Amended Complaint
or cite from any of its terms. The Court cannot infer from these
allegations that Plaintiffs contracted for the express right to be
Willert’s exclusive sales representative on the island. Therefore,
exclusivity is not apparent from the parties’ contract. See IOM
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9
Corp., 627 F.3d at 448.
ii.
Exclusivity By Course of Dealing
Second, the Amended Complaint does not adequately allege that
there
was
exclusivity
through
any
“arrangements
agreed
upon
between the parties.” Id. Instead, Plaintiffs merely allege that,
for approximately forty years, they were Defendant’s only sales
representative in Puerto Rico. This is an important distinction,
as
“there
is
representative
a
difference
selling
between
certain
being
products
in
the
one
only
sales
entire
market
without an intention for exclusivity, and being the exclusive sales
representative
of
those
same
products
in
that
same
market.”
Valentin v. White Rose, Inc., 993 F. Supp. 2d 77, 86 (D.P.R. 2014)
(emphasis added). To survive a motion to dismiss, a plaintiff must
do
more
than
allege
they
were
the
defendant’s
only
sales
representative over a period of time. A complaint must contain
factual
allegations
that
plausibly
assert
an
intentionally
exclusive course of dealing. See id. (“[T]he fact that Plaintiff
may have been Defendant’s only sales representative from 1998 to
2011 does not necessarily render him Defendant’s exclusive sales
representative without factual allegations that would meet the
plausibility requirement for the exclusivity element of a Law 21
cause of action.”). Here, the Amended Complaint does not mention
any
discussions
exclusivity
or
between
any
Plaintiffs
instances
and
where
Defendant
a
regarding
third-party
sales
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Civil No. 22-1247 (RAM)
10
representative attempted to enter the market and the parties
rebuffed them. Without such factual allegations, the Court cannot
infer exclusivity through a course of dealing.
Additionally, the nature of Plaintiffs’ relationship with
PRSG
undermines
any
inference
that
Plaintiffs
were
Willert’s
exclusive sales representatives after 2011. As noted above, Law 21
protects
sales
representatives
who
“exclusively
promote[]
and
process[] contracts on behalf of a principal in an ongoing, stable
manner[.]” IOM Corp., 627 F.3d at 446. According to the Amended
Complaint, after 2011, “Mr. Ramos [worked] with PRSG to create or
expand the market for [Willert] products in Puerto Rico, and engage
in promotion of the products.” (Docket No. 30 ¶ 15). The terms of
the
PRSG
Agreement
further
support
this
combined
promotional
effort, stating that the parties would work together “toward
achieving agreed sales volume of the Willert products.” (Docket
No. 14-1 at 2). 3 Additionally, the PRSG Agreement states that
Plaintiffs “may continue to act as representative for Willert in
Puerto Rico,” a far cry from evincing that Plaintiffs were the
sole
sales
representatives
in
the
territory
following
this
contract. (Docket No. 14-1 at 2) (emphasis added). Simply put, the
The Court can consider the PRSG Agreement without converting the Motion into
a motion for summary judgment, as the PRSG Agreement was sufficiently referred
to in the Amended Complaint. See In re Fid. Erisa Fee Litig., 990 F.3d 50, 5354 (1st Cir. 2021) (“When a complaint expressly cites and relies upon a written
contract in support of a claim, the drafter of the complaint cannot prevent the
court from considering the written contract in ruling on a motion under Rule
12(b)(6).”) (citing Beddall v. State St. Bank and Tr. Co., 137 F.3d 12, 17 (1st
Cir. 1998)).
3
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Civil No. 22-1247 (RAM)
11
relationship between Plaintiffs and PRSG further precludes the
Court from inferring from the conclusory allegations in the Amended
Complaint
that
Plaintiffs
were
Willert’s
exclusive
sales
representatives in Puerto Rico.
Finally, the Court cannot infer exclusivity simply from the
fact that Willert paid sales commissions to Plaintiffs. The First
Circuit has found that even the payment of an override commission
on all direct sales by a principal does not render an agreement
exclusive
absent
additional
factual
allegations
concerning
exclusivity. See Med. Books In Print, Inc. v. Harcourt, Inc., 93
F. App'x 240, 241 n.1 (1st Cir. 2004). “The essence of a nonexclusive agreement is that the [principal] retains the right to
sell its wares to others, including other [representatives], as it
sees fit.” Id. Allegations concerning commission payments do not,
on their own, help the Court discern whether Willert retained the
right to sell its wares to others in Puerto Rico.
In summary, the Amended Complaint cannot survive the pending
Motion because it does not adequately allege that Plaintiffs were
the exclusive sales representative for Willert in Puerto Rico,
either through the express terms of a contract or through an
arrangement
agreed
upon
between
the
parties.
Plaintiffs’
allegations that they were the only sales representative during
the relevant period or that they were paid sales commissions,
without more, are insufficient to state a plausible Law 21 claim.
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12
3. Law 21 Only Applies to Contracts Formed After December
5, 1990
In
addition
Plaintiffs
do
to
not
failing
plead
that
to
properly
they
plead
entered
exclusivity,
their
commercial
relationship with Defendant after the enactment of Law 21. As noted
above, it is well settled that Law 21 “cannot be retroactively
applied” to a commercial relationship that was entered into before
its enactment. Mueller Streamline Co., 2014 WL 2946023, at *3.
Therefore, “[a]n essential element of a Law 21 claim is the
existence of a ‘sales representation contract’ that is formed after
December 5, 1990” – the date Law 21 was enacted. Tavarez, 903 F.
Supp.
at
272
(citation
omitted)
(emphasis
in
original).
Consequently, to state a plausible Law 21 claim when the parties’
relationship began before December 5, 1990, a plaintiff must allege
that there was “an express novation, an incompatible change from
the old contract, or the existence of a new contract after”
December 5, 1990. Id. A Law 21 claim will be dismissed as a matter
of
law
if
the
parties
simply
“continued
the
same
commercial
relationship [predating December 5, 1990] without any significant
alteration in the terms of the agreement.” Id.
In the case at bar, Plaintiffs repeatedly emphasize that their
commercial relationship with Willert is governed by an agreement
the parties entered into “almost 40 years ago” – i.e., before 1990.
(Docket
No.
20
at
10)
(explaining
that
the
applicable
sales
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Civil No. 22-1247 (RAM)
13
representation contract between Ramos and Willert “took place
almost 40 years ago”); (Docket No. 26 at 3) (same); (Docket No. 30
¶ 8). Plaintiffs do not allege that this agreement changed in any
material way over the past forty years. They even underscore that
the PRSG Agreement did not change their relationship with Willert
because Willert was not a party to that agreement. (Docket No. 20
at 10) (stating that, “[a]lthough [Willert] approved the [PRSG
Agreement], it was not part of the PRSG Agreement” and referring
to the PRSG Agreement as “irrelevant” to this analysis); (Docket
No.
26
duration
at
3)
of
(same).
their
Plaintiffs’
relationship
allegations
with
concerning
Willert
are
the
simply
incompatible with one of the key elements of a Law 21 claim. This
is another reason that the Amended Complaint must be dismissed.
B. Plaintiffs’ Breach of Contract Claims Must Be Dismissed
Having determined that Plaintiffs’ Law 21 claims must be
dismissed, the Court turns to Plaintiffs’ alternative breach of
contract claims. Plaintiffs allege that they suffered damages
because of Willert’s “bad faith termination of [the parties’]
existing
commercial
relationship,”
and
thus
are
entitled
to
compensation “under the traditional contractual provision of the
Civil Code of Puerto Rico.” (Docket No. 30 ¶¶ 41-44). However,
these state law breach of contract claims – which are predicated
on Willert terminating the parties’ business agreement without
just cause – are insufficient for a simple reason. (Docket Nos. 20
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Civil No. 22-1247 (RAM)
14
at 18; 26 at 7). Under Puerto Rico law, in the absence of the
protection of a particular law such as Law 21, a contract without
a fixed term is terminable at will. See, e.g., Distribuidora VW,
Inc. v. Old Fashioned Foods, Inc., 84 F. Supp. 3d 82, 89-90 (D.P.R.
2014); Quality Const. Chemicals, Corp. v. Sika Corp., 389 F. Supp.
2d 246, 252 (D.P.R. 2005). Plaintiffs neither plead a fixed term
of duration in the Amended Complaint nor insinuate in their briefs
that their contract with Willert had a fixed term. (Docket Nos. 20
at 16-18; 26 at 7; 30). Additionally, they did not move to amend
the Complaint after Defendant raised this very point in its brief
in support of the Motion. (Docket No. 14 at 12). Therefore,
Plaintiffs have merely alleged that Willert terminated a contract
– that it could legally terminate at will – without just cause.
Thus, the breach of contract claims must be DISMISSED, as Willert
did not need just cause to terminate the contract under Puerto
Rico law.
IV.
CONCLUSION
For the foregoing reasons, the Motion is GRANTED, and the
Amended Complaint is DISMISSED WITH PREJUDICE in its entirety.
Plaintiffs fail to plead that they were Defendant’s exclusive sales
representatives or that their relationship with Defendant began or
was amended after Law 21 was enacted. Additionally, their claims
regarding activities that took place in the Dominican Republic
fall beyond the scope of Law 21. Finally, Plaintiffs’ breach of
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Civil No. 22-1247 (RAM)
15
contract claims, pled in the alternative to the Law 21 claims, are
insufficient for failure to plead a fixed contract term. Judgment
of dismissal shall be entered accordingly.
IT IS SO ORDERED.
In San Juan, Puerto Rico, this 18th day of January 2023.
S/RAÚL M. ARIAS-MARXUACH_________
UNITED STATES DISTRICT JUDGE
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