By The Star Staff
Plaintiffs claiming tortious interference with contracts protected by Puerto Rico’s Dealer’s Contracts Act, or Law 75, have an advantage in establishing their case, according to a National Law Review (NLR) report.
Law 75 regulates relationships between distributors and manufacturers in Puerto Rico.
In a recent lawsuit, Ballester Hermanos Inc. (Ballester) sued Edrington Group USA LLC (Edrington) for tortious interference with its exclusive distribution agreement with Brugal & Co. SA (Brugal), which was never documented in writing but fell under Law 75 due to the parties’ longstanding relationship.
In this case, Ballester had been Brugal’s exclusive rum distributor in Puerto Rico since 1990. Edrington acquired a majority interest in Brugal in 2008 and later terminated Ballester’s distribution agreement in favor of CC1 Beer Distributors Inc. (CC1). Ballester alleged that Edrington tortiously interfered with its distribution contract. Edrington moved to dismiss the case, arguing that Ballester failed to join CC1 as a necessary party and that the claim was not plausible.
The court rejected Edrington’s claim that CC1 was an indispensable party, stating that CC1 was only a potential joint tortfeasor. The court then addressed the tortious interference claim and its relation to Law 75. Tortious interference requires a third party’s interference with a protected relationship, which Edrington argued did not apply since it had replaced Brugal through novation and controlled Brugal through majority ownership. The court disagreed, stating that Edrington failed to rebut the presumption against novation and the assumption that a parent and subsidiary are separate entities. Consequently, Ballester adequately demonstrated that Edrington was a third party to the agreement.
Another critical element of tortious interference is the existence of a valid contract. Contracts with no fixed term or terminable at will are not subject to tortious interference in Puerto Rico. However, the court ruled that since Law 75 applied, the oral dealer contract was terminable only for just cause, not at will, even though it had no fixed term. As such, Ballester could sue for tortious interference.
In Puerto Rico, tortious interference claims require knowledge of an established contract, regardless of intent. Edrington’s claim that it did not intend to interfere was thus irrelevant.
The case highlights the importance of considering Law 75 when working with Puerto Rican distributors, the NLR report noted. As unwritten agreements may be protected by Law 75, suppliers and controlling entities must take precautions and be aware of their obligations to avoid potential tortious interference claims.
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