USCA1 Opinion
January 3, 1995 UNITED STATES COURT OF APPEALS UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT FOR THE FIRST CIRCUIT
_________________________
Nos. 93-2374
94-1128
94-1129
JAY A. PRITZKER,
Plaintiff, Appellee,
v.
BOB YARI, ET AL.,
Defendants, Appellants.
_________________________
ERRATA SHEET ERRATA SHEET
The opinion of the court issued on December 13, 1994, is
corrected as follows:
On page 38, line 11, change "Words of Days" to "Works and ______________ _________
Days". ____
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
_________________________
Nos. 93-2374
94-1128
94-1129
JAY A. PRITZKER,
Plaintiff, Appellee,
v.
BOB YARI, ET AL.,
Defendants, Appellants.
_________________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Jaime Pieras, Jr., U.S. District Judge] ___________________
_________________________
Before
Selya and Cyr, Circuit Judges, ______________
and Zobel,* District Judge. ______________
_________________________
Roger R. Crane, with whom Bachner, Tally, Polevoy & Misher, ______________ _________________________________
Roberto Boneta, Munoz Boneta Gonzalez Arbona Benitez & Peral, _______________ _______________________________________________
Jose Trias-Monge, and Trias & Melendez were on brief, for ________________ __________________
defendant Bob Yari.
Martin I. Kaminsky, with whom W. Hans Kobelt and Pollack & __________________ ______________ _________
Kaminsky were on brief, for defendant Baird, Patrick & Co. ________
Benjamin Rodriguez-Ramon, Rodriguez-Ramon & Rodriguez- __________________________ _______________________________
Hernandez, and Emigdio R. Seles on brief for defendant Lincoln _________ ________________
Realty, Inc.
Ruben T. Nigaglioni, with whom Diana Mendez-Ondina and _____________________ ____________________
Ledesma, Palcu & Miranda were on brief, for defendant Paul S. _________________________
Dopp.
Gael Mahony, with whom Frances S. Cohen, David A. Hoffman, ____________ _________________ ________________
Joshua M. Davis, Hill & Barlow, Salvador Antonetti-Zequeira, ________________ ______________ ____________________________
Ricardo Ortiz-Colon, and Fiddler, Gonzalez & Rodriguez were on ___________________ ______________________________
brief, for plaintiff Jay A. Pritzker.
_________________________
December 13, 1994
_________________________
_______________
*Of the District of Massachusetts, sitting by designation.
SELYA, Circuit Judge. In this troika of appeals, we SELYA, Circuit Judge. _____________
address several questions arising collaterally from a bitterly
fought breach-of-contract suit between Paul S. Dopp and Jay A.
Pritzker (the D/P Litigation) concerning the ownership of two
hotels, situated on approximately 1,000 beachfront acres, in the
Commonwealth of Puerto Rico. The engine of high-stakes
litigation runs on money, and at various times during the course
of the D/P Litigation Dopp forged financing agreements with three
different financiers, namely, Bob Yari, Lincoln Realty, Inc.
(Lincoln), and Baird, Patrick & Co. (BPC), for the apparent
purpose of fueling his prosecution of the suit.
Although we first must address BPC's jurisdictional
challenge, our principal task today is to resolve the contested
legal status of these financing agreements. Having carefully
examined the relevant law and the facts of the case, we hold that
all three financing agreements involve "litigated credits" within
the meaning of article 1425 of the Civil Code of Puerto Rico,
P.R. Laws Ann. tit. 31, 3950 (1991); that all are, therefore,
subject to redemption by Pritzker under Puerto Rico law; and that
Pritzker properly perfected his rights to redemption. We also
hold that the lower court's trimming of Pritzker's right to
redeem Yari's litigated credit lacked any legal basis.
Consequently, we affirm in part and reverse in part.
I. BACKGROUND I. BACKGROUND
The facts relating to the underlying breach of contract
and the protracted litigation emanating from it are chronicled in
3
a series of opinions, see Dopp v. Pritzker, ___ F.3d ___, ___ ___ ____ ________
(1st Cir. 1994) [Nos. 93-2373, 94-1130, & 94-1131, slip op. at 3-
6]; (Dopp IV); Dopp v. HTP Corp., 947 F.2d 506, 508-09 (1st Cir. _______ ____ __________
1991) (Dopp II); Dopp v. HTP Corp., 831 F. Supp. 939, 941-92 _______ ____ _________
(D.P.R. 1993) (Dopp III); Dopp v. HTP Corp., 755 F. Supp. 491, ________ ____ _________
492-94 (D.P.R. 1991) (Dopp I), and need not be rehearsed. Hence, ______
we confine our account to the facts that are needed to place the
instant appeals into workable perspective.1
A. The Financing Agreements. A. The Financing Agreements. ________________________
In March 1990, a jury sitting in the United States
District Court for the District of Puerto Rico found Pritzker
liable to Dopp in the sum of $2,000,000 for breach of an oral
contract concerning the purchase of the Dorado Beach Hotel
Corporation (DBHC). The district court entered judgment in the
D/P Litigation, see Dopp I, 755 F. Supp. at 504, and a firestorm ___ ______
of appeals ensued. We eventually upheld the liability finding
but vacated the damage award and ordered a new trial limited to
questions of remediation. See Dopp II, 947 F.2d at 520. ___ _______
As these events were unfolding, Dopp launched a
collateral enterprise, assigning various portions of the
anticipated proceeds of the D/P Litigation to third parties. He
____________________
1For purposes of oral argument, we consolidated the
financiers' appeals with three other appeals two taken by
Pritzker and one by Dopp involving the remedial phase of the
main litigation. We resolved most of the points raised in
Pritzker's and Dopp's appeals by means of a separate opinion
issued on October 28, 1994. See Dopp IV, supra. In this ___ ________ _____
opinion, we deal with not only the financiers' appeals but also
the complaints voiced by Pritzker and Dopp concerning the
district court's rulings anent the financing agreements.
4
undertook this effort, in his words, "to meet some of the
litigation and personal expenses . . . incurred during the years
of this intense litigation and in connection therewith." All
told, Dopp entered into three separate nonuniform financing
agreements with three distinct financiers.
Dopp signed the first financing agreement, styled as a
"Judgment or Settlement Purchase Agreement," on June 26, 1990.
In this transaction, Lincoln agreed to provide $50,000 in
exchange for an 8% interest in the proceeds of the D/P Litigation
above a stipulated floor. The agreement obliged Dopp to apprise
Lincoln of developments in the litigation on a current basis.
Dopp entered into the second financing agreement on
October 16, 1991. In it, BPC agreed to provide $100,000 in
exchange for a 5% interest in the proceeds of the D/P Litigation
over a floor different from that negotiated between Dopp and
Lincoln. Moreover, the BPC agreement mandated certain minimum
repayments to the financier. These minima varied depending upon
the date on which, in the words of the contracting parties, the
D/P Litigation might eventually be "settled or otherwise
decided." Like the Lincoln agreement, the BPC agreement obliged
Dopp to keep the financier seasonably informed of litigatory
developments.
Dopp entered into the third and last financing
agreement on July 23, 1992. In consideration of $250,000 in cash
and a promise to obtain, or at least to assist in obtaining, a
$2,500,000 to $3,000,000 line of credit for one year, Dopp agreed
5
to allocate the remainder of the proceeds of the D/P Litigation
according to a preset formula: "(i) first, to repayment of all
indebtedness in relation to the line of credit to have been
obtained in Dopp's name; (ii) second, $2,500,000 to Yari; (iii)
third, $12,000,000 to Dopp; (iv) fourth, $7,000,000 to Yari; and
(v) fifth, the remaining amount, if any, to be divided equally
between Dopp and Yari." Dopp III, 831 F. Supp. at 954.2 The ________
Yari agreement also set in place virtual joint control of the
litigation. Although Yari ultimately provided less funding
(somewhere between $500,000 and $625,000) than Dopp claims was
due, the district court found that Yari "complied with all of his
obligations under his agreements . . . ." Id. at 956. ___
B. Pertinent Proceedings Below. B. Pertinent Proceedings Below. ___________________________
On October 9, 1992, Dopp disclosed the existence of the
financing agreements in the midst of a new discovery round.
Exactly one week later, Pritzker wrote to Lincoln, offering to
tender the amount paid to Dopp in exchange for Lincoln's rights
and beneficial interests under its financing agreement. On the
same date, Pritzker sent substantially identical missives to BPC
andYari,3and notifiedthe districtcourtof hisletter-writing spree.
____________________
2On September 24, 1992, Dopp and Yari entered into a written
modification of their agreement. The amendment is only
peripherally related to the issues we must decide today. To the
extent it is relevant, we discuss it in Part III(D), infra. _____
3Pritzker made the three tenders pursuant to article 1425 of
the Civil Code of Puerto Rico, which provides in its entirety:
When a litigated credit is sold, the
debtor shall have the right to extinguish the
same by reimbursing the assignee for the
6
When his communiques drew no meaningful response,
Pritzker promptly filed a complaint in the district court. He
named Dopp and the three financiers as defendants, along with an
ostensible partnership between Dopp and Yari. Pritzker averred
that each of the financing agreements involved the sale of a
litigated credit within the meaning of article 1425 and, hence,
was subject to extinguishment. Between December 18, 1992, and
June 1, 1993, Pritzker, through a series of motions, deposited
with the district court the funds that he believed were necessary
to redeem the financiers' interests in the proceeds of the D/P
Litigation.
BPC moved to dismiss Pritzker's complaint against it
for want of in personam jurisdiction, but the district court __ ________
demurred.4 After all defendants had answered the complaint, the
____________________
price the later [sic] paid for it, the
judicial costs incurred by him, and the
interest on the price from the day on which
the same was paid.
A credit shall be considered as
litigated from the day the suit relating to
the same has been answered.
The debtor may make use of his right
within nine (9) days, counted from the day
the assignee should demand payment of him.
P.R. Laws Ann. tit. 31, 3950 (1991).
4BPC's motion stressed that it is a New York corporation
transacting no routine business in Puerto Rico; that it has never
had an office or agent in Puerto Rico; that Dopp and BPC signed
the financing agreement in New York; that Dopp is a citizen and
resident of New Jersey; and that Pritzker is a citizen and
resident of Illinois. The district court found these facts, by
and large, to be accurately stated. See Pritzker v. Yari, Civ. ___ ________ ____
No. 92-2825, 1993 WL 71760, at *3, slip op. at 6 (D.P.R. Mar. 5,
7
court consolidated Pritzker's suit with Dopp's suit against
Pritzker. See id. at 942-43. In an opinion dated March 5, 1993, ___ ___
the court held that all three financing agreements involved
litigated credits within the reach of article 1425, and that
Pritzker was entitled, pursuant to that statute, to extinguish
such credits through full reimbursement of the amounts advanced
(together with interest and costs). See Pritzker v. Yari, Civ. ___ ________ ____
No. 92-2825, 1993 WL 71760, at *5-7, slip op. at 11-17 (D.P.R.
Mar. 5, 1993). In a later, end-of-case opinion, the court
reaffirmed this holding, see Dopp III, 831 F. Supp. at 952, ___ ________
carved out a partial exception applicable to Yari, see id. at ___ ___
957-58, and determined the monetary amounts each party stood to
lose or gain, see id. at 958-59. ___ ___
Following the entry of final judgment, the three
financiers filed notices of appeal. Lincoln and Yari contested
the application of article 1425 to their agreements. BPC
piggybacked on this argument, but focused its appeal mainly on
jurisdictional questions. Dopp joined the chorus, but, as he
contributed no arguments that were both novel and substantial, we
subsume his views in our ensuing discussion of the financiers'
points on appeal. Pritzker cross-appealed, excoriating the
district court's determination that he could redeem only one-half
of Yari's litigated credit.
____________________
1993). The court added, however, "that the agreement [BPC]
entered into with Dopp involved the purchasing of an interest in
a case being tried in the District of Puerto Rico and that BPC
has manifested a continuing interest in the conduct of the
litigation." Id. ___
8
II. PERSONAL JURISDICTION II. PERSONAL JURISDICTION
Before proceeding to the main event, we must first jump
through a jurisdictional hoop and determine whether the district
court properly exercised in personam jurisdiction over BPC. The __ ________
hoop does not present an impenetrable obstacle.
A. Charting a Course. A. Charting a Course. _________________
In its simplest formulation, in personam jurisdiction __ ________
relates to the power of a court over a defendant. It is of two
varieties, general and specific. General personal jurisdiction,
as its name implies, is broad in its ambit: it is the power of a
forum-based court, whether state or federal, over a defendant
"which may be asserted in connection with suits not directly
founded on [that defendant's] forum-based conduct . . . ."
Donatelli v. National Hockey League, 893 F.2d 459, 462-63 (1st _________ _______________________
Cir. 1990). Put another way, "[g]eneral jurisdiction exists when
the litigation is not directly founded on the defendant's forum-
based contacts, but the defendant has nevertheless engaged in
continuous and systematic activity, unrelated to the suit, in the
forum state." United Elec. Workers v. 163 Pleasant St. Corp., _____________________ _______________________
960 F.2d 1080, 1088 (1st Cir. 1992) (Pleasant St. I). Specific ______________
personal jurisdiction, by contrast, is narrower in scope and may
only be relied upon "where the cause of action arises directly
out of, or relates to, the defendant's forum-based contacts."
Id. at 1088-89. ___
Nothing in the record before us suggests that BPC
engaged within Puerto Rico in continuous and systematic activity.
9
Since it is the plaintiff's burden to establish facts sufficient
to sustain general in personam jurisdiction, see Ticketmaster-New __ ________ ___ ________________
York, Inc. v. Alioto, 26 F.3d 201, 207 n.9 (1st Cir. 1994); __________ ______
Dalmau Rodriguez v. Hughes Aircraft Co., 781 F.2d 9, 10 (1st Cir. ________________ ___________________
1986), and since Pritzker failed to carry that burden here, we
may assume that general jurisdiction is lacking. Our analysis,
therefore, focuses exclusively on specific jurisdiction.
The proper exercise of specific in personam __ ________
jurisdiction hinges on satisfaction of two requirements: first,
that the forum in which the federal district court sits has a
long-arm statute that purports to grant jurisdiction over the
defendant; and second, that the exercise of jurisdiction pursuant
to that statute comports with the strictures of the Constitution.
See Ticketmaster, 26 F.3d at 204; Pleasant St. I, 960 F.2d at ___ ____________ _______________
1086; Hahn v. Vermont Law Sch., 698 F.2d 48, 51 (1st Cir. 1983). ____ ________________
We analyze these requirements separately, mindful that, in the
circumstances of this case, the second prong of the inquiry
necessitates an examination into the sufficiency of the
relationship between BPC's contract to finance Dopp's Puerto
Rico-based litigation and the exercise of jurisdiction over BPC
by the Puerto Rico-based federal district court.
B. The Long-Arm Statute. B. The Long-Arm Statute. ____________________
The requirement that the forum have a long-arm law of
appropriate reach is easily satisfied here. A Puerto Rico
statute provides in pertinent part that a Puerto Rico-based court
may take jurisdiction over a person not domiciled in Puerto Rico
10
"if the action or claim arises because said person . . .
transacted business in Puerto Rico personally or through an agent
. . . ." P.R. Laws Ann. tit. 32, app. III, R.4.7(a)(1) (1984 &
Supp. 1989). We have concluded before, and today reaffirm, that
this statute extends personal jurisdiction as far as the Federal
Constitution permits. See Dalmau Rodriguez, 781 F.2d at 12 ___ ________________
(citing A.H. Thomas Co. v. Superior Court, 98 P.R.R. 864, 870 n.5 _______________ ______________
(1970)); Mangual v. General Battery Corp., 710 F.2d 15, 19 (1st _______ ______________________
Cir. 1983).
C. Due Process. C. Due Process. ___________
The second requirement that the exercise of
jurisdiction fall within constitutional bounds presents a more
intricate puzzle. Whether or not BPC "transacted business"
within the meaning of the long-arm statute depends on whether the
requisite minimum contacts can be attributed to it. By its very
nature, the inquiry into minimum contacts is far from exact: "the
criteria by which we mark the boundary line between those
activities which justify the subjection of a corporation to suit,
and those which do not, cannot be simply mechanical or
quantitative." International Shoe Co. v. State of Washington, _______________________ ____________________
326 U.S. 310, 319 (1945). The inquiry into minimum contacts is
also highly idiosyncratic, involving an individualized assessment
and factual analysis of the precise mix of contacts that
characterize each case. See Pleasant St. I, 960 F.2d at 1088; ___ ______________
Hahn, 698 F.2d at 51. ____
To sharpen the logic of the personal jurisdiction
11
inquiry, we have developed a tripartite analysis:
First, the claim underlying the litigation
must directly arise out of, or relate to, the
defendant's forum-state activities. Second,
the defendant's in-state contacts must
represent a purposeful availment of the
privilege of conducting activities in the
forum state, thereby invoking the benefits
and protections of that state's laws and
making the defendant's involuntary presence
before the state's court foreseeable. Third,
the exercise of jurisdiction must, in light
of the Gestalt factors, be reasonable.
Pleasant St. I, 960 F.2d at 1089; see also Ticketmaster, 26 F.3d ______________ ___ ____ ____________
at 206; Pizarro v. Hoteles Concorde Int'l, C.A., 907 F.2d 1256, _______ ____________________________
1258 (1st Cir. 1990). A careful application of these three
elements to the facts at hand demonstrates that the exercise of
in personam jurisdiction over BPC, for the specific purpose of __ ________
determining the legal status of its agreement with Dopp, does not
offend constitutional principles.
1. Relatedness. The element of relatedness is not 1. Relatedness. ___________
difficult to satisfy here. For one thing, the relatedness test
is, relatively speaking, a flexible, relaxed standard. See ___
Ticketmaster, 26 F.3d at 207. For another thing, it is self- ____________
evident that the dispute between Pritzker and BPC over the legal
status of BPC's contract with Dopp would not have arisen but for
that contract. Because the very document that represents BPC's
forum-related activity is itself the cause and object of the
lawsuit, this activity comprises the source and substance of, and
is thus related to, Pritzker's squabble with BPC. See Pleasant ___ ________
St. I, 960 F.2d at 1089. _____
2. Purposeful Availment. We must next determine 2. Purposeful Availment. ____________________
12
whether BPC's Puerto Rico-based contacts "represent a purposeful
availment of the privilege of conducting activities in [Puerto
Rico], thereby invoking the benefits and protections of [its]
laws and making the defendant's involuntary presence before [the
Puerto Rico-based] court foreseeable." Id. ___
The path of inquiry is neither long nor winding. It
necessarily begins with McGee v. International Life Ins. Co., 355 _____ ___________________________
U.S. 220 (1957). There, the Court ruled that a California court
could properly exercise jurisdiction over an out-of-state insurer
in a suit brought by a beneficiary of a policy written by the
insurer at the behest of a California resident, even though the
insurer had no office or agent in California and had never
performed any other business in that state. The McGee Court _____
articulated a principle of marked importance for our purposes:
in order to be subject to the jurisdiction of the forum state, a
nonresident need have only one contact with the forum, so long as
the contact is meaningful. See id. at 223 ("It is sufficient ___ ___
for purposes of due process that the suit was based on a contract
which had substantial connection with that State.").
Accordingly, McGee stands for the proposition that "minimum _____
contacts" is not necessarily a numbers game; a single contract
can fill the bill.
For our purposes, McGee remains good law.5 In Burger _____ ______
____________________
5The court below expressed some hesitation about relying on
McGee, fearing that "the broad view of personal jurisdiction _____
articulated in McGee was curtailed in the next major Supreme _____
Court case dealing with the issue, Hanson v. Denckla, 357 U.S. ______ _______
235 (1958)." Pritzker v. Yari, supra, at *4, slip op. at 9. ________ ____ _____
13
King Corp. v. Rudzewicz, 471 U.S. 462 (1984), the Court, citing __________ _________
McGee, affirmed the principle that "even a single act can support _____
jurisdiction." Id. at 475 n.18. In that case, the Justices held ___
that a court sitting in Florida properly could exercise
jurisdiction over a Michigan resident in a suit brought by a
Florida corporation for breach of a franchise agreement, even
though the defendant's only relationship to the forum state was
of a contractual nature. Explaining that "[j]urisdiction in
these circumstances may not be avoided merely because the
defendant did not physically enter the forum State," id. at 476, ___
the Supreme Court observed that "where individuals `purposefully
derive benefit' from their interstate activities, it may well be
unfair to allow them to escape having to account in other States
for consequences that arise proximately from such activities; the
Due Process Clause may not readily be wielded as a territorial
shield to avoid interstate obligations that have been voluntarily
assumed." Id. at 474-75 (quoting Kulko v. California Superior ___ _____ ___________________
Court, 436 U.S. 84, 96 (1978)). _____
These opinions demonstrate that the jurisprudence of
____________________
This observation is true but beside any relevant point. The
Hanson Court placed its principal emphasis on the requirement ______
that there be a purposeful act by the defendant, and that this ________________
requirement may not be satisfied merely by the unilateral act of
another. See Hanson, 357 U.S. at 253-54. The Court ___ ______
distinguished McGee on this basis, and on the ground that Hanson, _____ ______
unlike McGee, "involve[d] the validity of an agreement that was _____
entered without any connection with the forum State." Id. at ___
252. In the instant case, neither of these problems looms.
BPC's decision to enter into the financing agreement was clearly
its own, and that agreement, which entitled it to share the
proceeds of Puerto Rico-based litigation, bears close ties to the
forum.
14
minimum contacts casts a wide net, and a nonresident defendant
may not always be able to elude the net by such simple expedients
as remaining physically outside the forum or limiting contact
with the forum to a single commercial transaction. Rather,
courts must look beyond these formalistic measures and evaluate
the nature of the contacts and, relatedly, the degree to which
they represent a purposeful availment of the forum's protections
and benefits.
In the instant case, we conclude that BPC, by knowingly
acquiring an economically beneficial interest in the outcome of a
Puerto Rico-based lawsuit that involved control over property
located in Puerto Rico, necessarily exhibited sufficient minimum
contacts to subject it to the district court's exercise of
specific in personam jurisdiction. Two considerations in __ ________
particular lead us to this conclusion.
First, the subject matter of BPC's contact or
relationship with Puerto Rico the consummation of the financing
agreement is such that it can only be characterized as an act
of purposeful availment. We think it is doubly significant that
the financing agreement directly concerned forum-based
litigation, and, in turn, that the litigation directly concerned
forum-based real estate. Other than physical presence, we can
imagine few contacts that are more integral to a forum than
acquiring a financial stake in forum-based litigation concerning
15
forum-based property.6 The significance that Puerto Rico
attaches to such an interest is reflected elsewhere in its long-
arm statute, in which land ownership is deemed an independently
sufficient basis for exercising personal jurisdiction. See P.R. ___
Laws Ann. tit. 32, app. III, R.4.7(a)(5) (extending jurisdiction
of Puerto Rico courts over a person who "[o]wns, uses or
possesses, personally or through his agent, real property in
Puerto Rico").
Second, the specific nature of a contact is also
important in discerning the elements of purposeful availment and
foreseeability. BPC entered into its financing agreement
precisely because it stood to benefit commercially from the
eventual outcome of the Puerto Rico-based D/P Litigation.
Furthermore, given the location of DBHC's assets and the nature
of the remedies potentially available to Dopp, see Dopp II, 947 ___ ________
F.2d at 519 (listing alternative remedies), both the extent of
BPC's profits and the value of its agreement were closely tied to
the integrity and stability of Puerto Rico's economy. This means
that the practical importance of BPC's relationship with Puerto
Rico was far greater than the importance that could be attached
to the random, fortuitous, or attenuated relationships about
which the Court has previously voiced concern. See, e.g., Burger ___ ____ ______
King, 471 U.S. at 475; Keeton v. Hustler Magazine, Inc., 465 U.S. ____ ______ ______________________
____________________
6Indeed, had Dopp succeeded in obtaining resolution (his
preferred remedy in the D/P Litigation, see Dopp IV, ___ F.3d at ___ ________
___ [slip op. at 7-17]), he might have wound up with the hotels
and the land, and, if so, BPC would presumably have been the
equitable owner of a measurable interest in those properties.
16
770, 774 (1984); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. ___________________________ _______
286, 299 (1980). Consequently, we believe that BPC's venture
represented nothing less than a purposeful availment of the
privilege of conducting activities in Puerto Rico.7
BPC disagrees with this conclusion. It argues that the
singularity of its contact renders the financing agreement
quantitatively insufficient as a predicate for the exercise of
jurisdiction. This argument fails for two reasons.
In the first place, we do not view BPC's financing
agreement as merely a one-time rendezvous with the forum. BPC
cannot retract the fact that it backed Dopp's forum-based suit,
so that its pact can hardly be cracked up to be an act that
lacked incessant impact, but, rather, smacked of the exact sort
of contact through which jurisdiction, if attacked, might be
tracked and should remain intact. A contract conferring an
interest in ongoing litigation that touches upon the legal status
____________________
7Although we have been unable to find any judicial decision
squarely on point, we are reinforced in our conclusion by the
results reached in analogous cases. See, e.g., Grimes v. ___ ____ ______
Vitalink Communications Corp., 17 F.3d 1553, 1559-60 (3d Cir.) ______________________________
(finding specific personal jurisdiction over a nonresident who
owned stock in a forum-based corporation and who tendered it in
accordance with a tender offer, on the ground that the defendant
purposefully availed himself of the privilege of having a forum-
based court determine his rights and thus invoked the benefits
and protections of the forum), cert. denied, 115 S. Ct. ___ _____ ______
(1994); Manley v. Fong, 734 F.2d 1415, 1419-20 (10th Cir. 1984) ______ ____
(finding personal jurisdiction over a nonresident in regard to
litigation arising out of a contract between the nonresident and
a resident, executed out-of-state, for the purchase of an
interest in a forum-state oil-and-gas lease); Quasha v. Shale ______ _____
Dev. Corp., 667 F.2d 483, 486-89 (5th Cir. 1982) (finding ___________
personal jurisdiction over nonresidents in a suit concerning the
existence, enforceability, and performance of a contract to
purchase mineral interests located in the forum state).
17
of real property situated in the forum establishes, by its very
nature, a significant relationship with the forum and its legal
system. Thus, it is easy to see how such a contact can become a
hook on which in personam jurisdiction can be hung. See Burger __ ________ ___ ______
King, 471 U.S. at 475 n.18 (noting that "[s]o long as it creates ____
a `substantial connection' with the forum, even a single act can
support jurisdiction," and distinguishing this from an "isolated"
act in respect to which "the reasonable foreseeability of
litigation in the forum is substantially diminished") (quoting
McGee, 355 U.S. at 223). _____
In the second place, BPC's emphasis on the quantitative ____________
aspects of its contact ignores both the contact's qualitative ___________
aspects and the role of substance, as opposed to mere frequency,
in the minimum contacts calculus. So one-sided a view distorts
reality. See International Shoe, 326 U.S. at 318 (assessing a ___ __________________
defendant's acts by "their nature and quality and the
circumstances of their commission").
BPC also contends that the exercise of jurisdiction
here would be inconsistent with circuit precedent. In this vein,
BPC directs our attention to Pizarro, a case in which we held _______
that a corporation's placement of nine advertisements in a Puerto
Rico newspaper did not create in personam jurisdiction for __ ________
purposes of a tort suit brought by a person who responded to an
advertisement, took a trip to the advertised resort, and
18
sustained personal injuries outside of Puerto Rico.8 See ___
Pizarro, 907 F.2d at 1260. _______
We do not think that Pizzaro is in any way antithetical _______
to the result we reach today. We decided Pizarro based on a lack _______
of relatedness, specifically finding that the advertisements had
"no connection with the negligent act . . . that allegedly caused
the injury," and that, therefore, it could not "be said that the
negligent act `arose out of' [the defendant's] placing of the
advertisements . . . ." Id. at 1259. Since relatedness is ___
beyond question in the present case, see supra Part II(C)(1), ___ _____
Pizarro is not on point and BPC's reliance on it is mislaid. _______
3. The Gestalt Factors. Having determined that BPC's 3. The Gestalt Factors. ___________________
financing agreement falls within the ambit of sufficient minimum
contacts, we proceed to the third and final element of our
analysis and inquire whether the exercise of jurisdiction over
BPC in the circumstances of this case would, holistically viewed,
offend traditional notions of "fair play and substantial
justice." Burger King, 471 U.S. at 476 (quoting International ___________ _____________
Shoe, 326 U.S. at 320). ____
Admittedly, "fair play" and "substantial justice" are
not the most self-defining of legal formulations. For that
reason, we have added the flesh of a five-factor gestalt analysis
to these skeletal due process concepts. The factors include:
____________________
8Pizarro typifies a line of cases to like effect. See, _______ ___
e.g., Fournier v. Best W. Treasure Island Resort, 962 F.2d 126 ____ ________ _______________________________
(1st Cir. 1992); Marino v. Hyatt Corp., 793 F.2d 427 (1st Cir. ______ ___________
1986).
19
(1) the defendant's burden of appearing, (2)
the forum state's interest in adjudicating
the dispute, (3) the plaintiff's interest in
obtaining convenient and effective relief,
(4) the judicial system's interest in
obtaining the most effective resolution of
the controversy, and (5) the common interests
of all sovereigns in promoting substantive
social policies.
Pleasant St. I, 960 F.2d at 1088. These gestalt factors are _______________
designed to put into sharper perspective the reasonableness and
fundamental fairness of exercising jurisdiction in particular
situations. See Ticketmaster, 26 F.3d at 210. They "are not ___ ____________
ends in themselves, but they are, collectively, a means of
assisting courts in achieving substantial justice. In very close
cases, they may tip the constitutional balance." Id. at 209. ___
When applied to the case sub judice, the gestalt factors point ___ ______
unerringly toward the exercise, and away from the declination, of
jurisdiction over BPC.
As to the first factor, we may fairly assume that the
defendant's appearance in Puerto Rico is to some extent
burdensome. But the concept of burden is inherently relative,
and, insofar as staging a defense in a foreign jurisdiction is
almost always inconvenient and/or costly, we think this factor is
only meaningful where a party can demonstrate some kind of
special or unusual burden. See, e.g., id. at 210 (noting that ___ ____ ___
"most of the cases that have been dismissed on grounds of
unreasonableness [of the burden of appearing] are cases in which
the defendant's center of gravity, be it place of residence or
place of business, was located at an appreciable distance from
20
the forum"); see also Burger King, 471 U.S. at 474 (explaining ___ ____ ____________
that "it usually will not be unfair to subject [a nonresident
defendant] to the burdens of litigating in another forum for
disputes relating to [in-forum economic] activity"). In the
modern era, the need to travel between New York and Puerto Rico
creates no especially ponderous burden for business travelers.
Thus, BPC has not adequately demonstrated that an exercise of
jurisdiction in the present circumstances is onerous in a
special, unusual, or other constitutionally significant way.
The second factor the interest of Puerto Rico in
having a Puerto Rico-based court adjudicate the dispute weighs
heavily in favor of an exercise of jurisdiction. Sovereigns have
few interests greater than those in the conduct of forum-based
litigation and the disposition of forum-based real estate. Here,
these interests are not only present; they constitute the essence
of the suit which the nonresident defendant, BPC, seeks to
avoid.9
The third factor is the plaintiff's interest in
obtaining convenient and effective relief. This consideration
likewise cuts in favor of jurisdiction. Not only must we "accord
plaintiff's choice of forum a degree of deference in respect to
the issue of its own convenience," Ticketmaster, 26 F.3d at 211, ____________
but also we must take note of the enormous inconvenience that
____________________
9At the expense of carting coal to Newcastle, we think that
the Commonwealth also possesses an atypically strong interest in
having Puerto Rico-based courts hear and resolve controversies
involving its litigated credit statute.
21
might result from forcing Pritzker to sue elsewhere
theoretically, in every jurisdiction in which a financier is
located despite ongoing litigation in a forum-based court.
The fourth factor the judicial system's interest in
obtaining the most efficacious resolution of the controversy
similarly counsels against furcation of the dispute among several
different jurisdictions. Such a result would both contravene the
goal of judicial economy and conjure up the chimera of
inconsistent outcomes.
The fifth and last of the gestalt factors implicates
the interests of the affected governments in substantive social
policies. Here, the most salient such policy is that embodied in
article 1425 itself: the discouragement of speculation in
litigation. All sovereigns share both a general interest in
preventing such speculation and a specific interest in respecting
Puerto Rico's decision to control this activity through
regulation. For obvious reasons, a failure to find jurisdiction
in this case would necessarily subvert these interests.
D. Recapitulation. D. Recapitulation. ______________
In sum, by deliberately contracting for a portion of
the proceeds of litigation, the subject of which concerned Puerto
Rico property and the situs of which was a Puerto Rico-based
court, BPC deliberately sought to procure the commercial
advantages of transacting business in Puerto Rico. Having called
the tune, it now must pay the piper. Hence, we conclude that the
instant litigation arises out of, and thus directly relates to,
22
the financing agreement that BPC consummated with Dopp. Because
that agreement has a distinctive relationship to Puerto Rico as
we have said, its subject matter and specific nature betoken that
BPC purposefully availed itself of the benefits and protections
of Puerto Rico and its legal apparatus and because BPC's
subsequent (involuntary) presence before the district court was
entirely foreseeable, bringing BPC before the bar of a Puerto
Rico-based court in respect to litigation arising out of the
financing agreement is neither unreasonable nor fundamentally
unfair. It follows, therefore, as night follows day, that Puerto
Rico's long-arm statute reaches this dispute, and the lower
court's exercise of in personam jurisdiction over BPC is both __ ________
legally and constitutionally supportable.
III. THE FINANCING AGREEMENTS III. THE FINANCING AGREEMENTS
We turn now to the main event a series of questions
involving the enforceability and interpretation of the financing
agreements. In answering these questions, we look to the law of
Puerto Rico for the rule of decision.10 See Erie R.R. Co. v. ___ ______________
____________________
10BPC and Yari halfheartedly attempt to challenge the
district court's choice of Puerto Rico law to govern their
respective contracts with Dopp. Neither entry makes it to the
starting gate. Yari merely proposes how his contract with Dopp
might be construed under California law, without pausing to
explain why California law is relevant. Our corpus of cases,
cumulatively considered, clearly commands that contentions which
are not carefully composed and candidly constructed customarily
careen beyond the cognizance of this court. See, e.g., Ryan v. ___ ____ ____
Royal Ins. Co., 916 F.2d 731, 734 (1st Cir. 1990) ("It is settled ______________
in this circuit that issues adverted to on appeal in a
perfunctory manner, unaccompanied by some developed
argumentation, are deemed to have been abandoned."). BPC's claim
fails for several reasons, the first of which is that the record
contains no indication that BPC developed it below. "It is a
23
Tompkins, 304 U.S. 64, 78 (1938). ________
Article 1425 of the Civil Code confers on a defendant a
right to redeem a "litigated credit" or "litigious credit," that
is, the interest of a third party who has purchased a stake in
the outcome of civil litigation. Evaluating this statute is a
daunting task, made all the more complicated in this case as the
parties have raised a myriad of issues ranging from the legal
status of the financing agreements to the propriety of Pritzker's
efforts to prime the article 1425 pump. We address these issues
sequentially, for the most part subjecting the district court's
determinations to plenary review. See United States v. Gifford, ___ _____________ _______
17 F.3d 462, 472 (1st Cir. 1994) (holding that questions of
statutory interpretation are purely legal in nature, and, thus,
engender de novo review); Liberty Mut. Ins. Co. v. Commercial __ ____ ______________________ __________
Union Ins. Co., 978 F.2d 750, 757 (1st Cir. 1992) (same); see _______________ ___
also Salve Regina Coll. v. Russell, 499 U.S. 225, 239-40 (1991) ____ __________________ _______
(holding that "courts of appeals [must] review the state-law
determinations of district courts de novo"). __ ____
A. Article 1425. A. Article 1425. ____________
We begin our expedition by clarifying certain matters
relating to article 1425 (the text of which is reproduced in its
entirety in note 3, supra). The undue hullabaloo in this case _____
stems from the fact that article 1425 is a very unusual animal.
____________________
bedrock rule that when a party has not presented an argument to
the district court, he may not unveil it in the court of
appeals." United States v. Slade, 980 F.2d 27, 30 (1st Cir. ______________ _____
1992).
24
Several aspects of the statute deserve emphasis or elaboration.
First, the purpose of article 1425, as recently
restated by the Puerto Rico Supreme Court, is to prevent "`the
illegal trade of litigious credits which were purchased for a
price below their actual value, and then the actual price was
recovered from the debtor and big profits reaped.'" Consejo de __________
Titulares v. Urban Renewal & Hous. Corp., 93 J.T.S. 25 (1993) _________ _____________________________
(Official English Translation: No. RE-87-297, slip op. at 14)
(quoting 3 D. Espin Canovas, Manual de Derecho Civil Espanol 240 _______________________________
(1983)); Mervin H. Riseman, The Sale of a Litigious Right, 13 _______________________________
Tul. L. Rev. 448, 448 (1939) ("A desire to put an end to
litigation and to prevent speculation in lawsuits has resulted in
the disapproval by the civil law of the sale of litigious
rights."). To this extent, then, the district court hit the
bull's-eye when it declared that the "single, serious purpose" of
article 1425 is "to discourage financial speculation in
litigation." Pritzker v. Yari, supra, at *5, slip op. at 11-12. ________ ____ _____
Second, the Puerto Rico Supreme Court has recognized,
in fidelity to the statutory text, that "[a] credit is deemed
litigious from the moment the lawsuit claiming the same is
answered." Consejo de Titulares, supra, slip op. at 13. The _____________________ _____
court added:
[A] credit is regarded as litigious when,
upon being litigated, a final judgment is
required to ascertain its existence, "that
is, it is one which is in doubt and one in
which the rights are uncertain. For a credit
to be considered litigious it is essential
that the litigation pending at the time of
sale or assignment of credit concern the
25
existence of the credit itself and not merely
the consequences of its existence once final
judgment is rendered."
Id. at 13-14 (quoting Martinez v. District Court, 72 P.R.R. 197, ___ ________ ______________
199 (1951)). Here, there is no doubt that the financing
agreements involve interests that fall within the contemplated
chronological span.
Third, article 1425 identifies the parties in interest
in terms that are somewhat different than those used in
conventional litigation. We consider the "debtor" to be the
original defendant (Pritzker), and the "assignee" to be the
third-party investor (Yari, Lincoln, or BPC, depending on the
financing agreement in question). To carry out this theme, the
original plaintiff (here, Dopp) would be the "assignor."
Having thus introduced the generalities and
particularities of article 1425, we proceed to consider its
application.
B. The Legal Status of the Financing Agreements. B. The Legal Status of the Financing Agreements. ____________________________________________
The financiers contend that none of their agreements
with Dopp involved litigated credits subject to the strictures of
article 1425. We reject this contention and hold that the
financing agreements fall squarely within the purview of article
1425. Accordingly, the statute governs their legal disposition.
1. The Transfer-of-Title Theory. The financiers' 1. The Transfer-of-Title Theory. ______________________________
principal argument is that article 1425 should not be applied to
the financing agreements because the statute contemplates that an
assignee will actually replace, not merely bankroll, the assignor
26
in the prosecution of the latter's claim against the debtor, and
that no such substitution transpired here. This amounts to a
claim that article 1425 is only effective when the assignee steps
into the shoes of the assignor, or, put another way, when there
has been the functional equivalent of a transfer of title to all
or part of the assignor's lawsuit.11
In advancing this argument, the financiers rely heavily
on the historical origins of article 1425 as found chiefly in the
law of Spain and France. Citing numerous treatises and tracts,
they strive to persuade us that the statute, when viewed in terms
of its apparent original purpose, simply does not encompass the
conduct at issue here. In particular, they suggest that laws
like article 1425 were designed to prevent professional
litigators from stepping into a plaintiff's shoes for the
specific purpose of harassing a defendant. Because that is not
what happened here, thefinanciers claim the statuteis inapposite.
This is all well and good, but the text of article 1425
belies the financiers' claim. The statute is drafted in terms of
general applicability and its language is bereft of the slightest
ambiguity. No mention is made of a transfer-of-title
requirement, and, moreover, the plain language of article 1425
seems naturally suited to the scenario presented in this case.
In brief, we have no reason to doubt the applicability
____________________
11Although we assume arguendo that all three agreements ________
created interests exclusively in the proceeds, and not the
conduct, of the D/P Litigation, we note that at least one of the
financing agreements Yari's could be construed as empowering
the assignee to exercise substantial control over Dopp's lawsuit.
27
of article 1425 to the financing agreements, and thus to
Pritzker's efforts to redeem the interests they created, unless
we are prepared to wander beyond the four corners of the statute
in search of some ancient legislative intent. We cannot justify
undertaking such extra-textual measures in this case, especially
given the interpretive command of the Puerto Rico legislature:
"When a law is clear and free from all ambiguity, the letter of
the same shall not be disregarded, under the pretext of
fulfilling the spirit thereof." P.R. Laws Ann. tit. 31, 14
(1967 & Supp. 1989). Therefore, we reject the financiers'
argument that article 1425 should be read to impose a transfer-
of-title requirement.12 Compare Riseman, supra, at 460 _______ _____
(construing Louisiana's litigated credit statute, which, like the
Spanish and Puerto Rico statutes, had its immediate origin in the
French Civil Code and its ultimate origin in the Roman Lex ___
Anastasiana or Lex Per diversas et Ab Anastasio, and explaining ___________ _________________________________
that it "merely provides for the nullity of the purchase of
____________________
12Yari tries to justify a transfer-of-title construction by
asserting that the district court's application of article 1425
to his agreement with Dopp renders meaningless the statute's
third sentence, which authorizes the debtor to extinguish a
litigated credit "within nine (9) days, counted from the day the ___
assignee should demand payment of him." P.R. Laws Ann. tit. 31, ______________________________________
3950 (1991) (emphasis supplied). In Yari's view, this language
requires that there have been a transfer of title from the
assignor to the assignee, including a transfer of the right to
proceed against the debtor. We decline to read the statute in so
crabbed a manner. While this language unquestionably provides
debtors in transfer-of-title situations with a temporal guidepost
for effectuating a redemption (at least in certain situations,
see infra Part III(C)), it does not thereby restrict the ___ _____
statute's overall scope. At best, the phrase to which Yari
clings is designed to address a particular subset of litigated
credits, not the mine-run.
28
litigious rights, and the litigious right itself is not
annihilated. Thus title to the litigious right remains in the
original owner, and he still has the right to proceed against his
debtor for the amount owed to him.").
In following this course, we are not suggesting that
historical analyses or foreign legal sources are intrinsically
irrelevant in parsing the laws of Puerto Rico. We recognize that
the Spanish Civil Code, in particular, may sometimes constitute
significant authority in the interpretation of the Puerto Rico
Civil Code. See Republic Sec. Corp. v. Puerto Rico Aqued. & ___ ____________________ _____________________
Sewer Auth., 674 F.2d 952, 958 (1st Cir. 1982); see also ____________ ___ ____
Bonillerse v. Gonzalez, 17 P.R.R. 1084, 1090 (1911) (explaining __________ ________
that Puerto Rico courts sometimes "can look to eminent Spanish
authors for the proper interpretation of such portions of our
Civil Code as are copied literally from the Civil Code of
Spain"). But recourse to these extrinsic sources is neither
necessary nor appropriate when, as now, the text of a particular
Code provision is unambiguous.13
____________________
13Our unwillingness to rely upon extra-textual sources in
this instance is reinforced by our reservations about the
historical-exegetical enterprise advocated by the financiers.
From a practical standpoint, we question the wisdom and utility
of invoking ancient doctrines, gleaned from the writings of long-
deceased expositors, as a means of interpreting statutes to
govern the present day and age. Nor is this concern original
with us. See, e.g., Diaz Irizarry v. Ennia, N.V., 678 F. Supp. ___ ____ _____________ ___________
957, 962 n.5 (D.P.R. 1988) ("Romantic as working with the Civil
Code may be, the clock cannot be turned back. It must be kept in
mind that the application of Spanish law to problems arising from
basic socioeconomic structures . . . which operate under
standards stemming from federal or American law is consistent
with neither practical reality and efficiency nor the sources of
law actually being applied in Puerto Rico today."); see also ___ ____
29
2. The "Legitimate Purpose" Theory. Yari proposes 2. The "Legitimate Purpose" Theory. _________________________________
that article 1425 is inapplicable to these financing agreements
since the right of redemption does not attach when the assignment
is made for a legitimate purpose, and that obtaining financing to
carry on pending litigation, as Dopp purportedly set out to do,
is such a purpose.
This argument founders for the most abecedarian of
reasons: the statute itself contains no such exception, and the
statutory text is not sufficiently problematic to invite judicial
editing that might lead to the possible recognition of such an
exception. As a fundamental principle of statutory construction,
we will not depart from, or otherwise embellish, the language of
a statute absent either undeniable textual ambiguity, see United ___ ______
States v. Charles George Trucking Co., 823 F.2d 685, 688 (1st ______ _____________________________
Cir. 1987) (expounding the primacy of plain meaning), or some
other extraordinary consideration, such as the prospect of
yielding a patently absurd result, see Sullivan v. CIA, 992 F.2d ___ ________ ___
1249, 1252 (1st Cir. 1993) ("Courts will only look behind
statutory language in the rare case where a literal reading must
be shunned because it would produce an absurd outcome, or when
the legislature has blown an uncertain trumpet.") (citations
omitted); see also Colonos de Santa Juana v. Sugar Bd., 77 P.R.R. ___ ____ ______________________ _________
371, 374 (1954) (stressing the need, "wherever possible, [to]
____________________
Oliver Wendell Holmes, Jr., The Path of the Law, 10 Harv. L. Rev. ___________________
457, 469 (1897) ("It is revolting to have no better reason for a
rule of law than that so it was laid down in the time of Henry
IV.").
30
avoid an interpretation of a statute which would lead to an
unreasonable result"), aff'd, 235 F.2d 347 (1st Cir.), cert. _____ _____
denied, 352 U.S. 928 (1956). ______
When interpreting a Puerto Rico statute, we must be
faithful not only to conventional rules of construction, but also
to the legislature's specific directives. One such directive is
the edict that unambiguous statutes must be construed according
to their letter. See P.R. Laws Ann. tit. 31, 14; see also ___ ___ ____
Roman v. Superintendent of Police, 98 P.R.R. 667, 671 (1966) _____ _________________________
(adverting to 14 and admonishing that, when a statute is clear
and explicit, courts have no authority to add limitations or
restrictions that do not appear on its face).
This command carries unusual import in this situation,
since the legislature has expressly carved out three distinct
exceptions to the textual scope of article 1425. See P.R. Laws ___
Ann. tit. 31, 3951 (1991) (excluding "assignments or sales
made: (1) To a coheir or co-owner of the right assigned[;] (2)
To a creditor in payment of his credit[; or] (3) To the possessor
of an estate, subject to the right in litigation which has been
assigned"). The financiers' proposed exception is not to be
found in this compendium. As the maxim teaches, "expressio unius _______________
est exclusio alterius." So it is here. Consequently, Yari's _____________________
"legitimate purpose" argument must fail, as it asks us to engraft
an exception beyond those enumerated, and does so in the face of
31
unambiguous statutory text.14
3. The "Fixed Price" Theory. Next, Yari maintains 3. The "Fixed Price" Theory. _________________________
that article 1425 applies only to contracts involving a fixed
purchase price, and that his agreement with Dopp does not qualify
in view of its somewhat novel line-of-credit feature. Because
article 1425 itself has nothing to say about whether or when a
price is fixed, we think this argument collapses by virtue of the
same legal principle previously discussed: a fixed price
requirement does not appear on the face of the statute and can
have no bearing on the interpretation of it.
In a transparent attempt to elude the force of plain
meaning, Yari hawks an alternative construction of article 1425.
He asserts that because the statute speaks in the past tense, it
only relates to assignments that constitute, or have constituted,
fully closed transactions. We think that this is anfractuous
reasoning, yielding an undesirable, overly cramped construction
of the statute. What is more, to the extent that this
construction can be regarded as importing uncertainty into
article 1425, the proper interpretive course would not be to
retreat into formalism, as Yari suggests, but, rather, to distill
and advance the "reason and spirit" of the statute. See P.R. ___
Laws Ann. tit. 31, 19 (1967 & Supp. 1989) ("The most effectual
and universal manner of discovering the true meaning of a law,
____________________
14We do not intend to imply that the legitimacy of Dopp's
purpose in forging these financing agreements is altogether
evident from the record. Rather, our disposition of Yari's
argument renders further exploration of this point unnecessary.
32
when its expressions are dubious, is by considering the reason _________________________________
and spirit thereof; or the cause or motives which induced its
enactment.") (emphasis
supplied).
Here, the policy behind the statute to discourage
litigious profiteering would be disserved by allowing an
assignee to avoid redemption merely by using something other than
a fixed price as the consideration for his purchase. Thus, even
if there is ambiguity within the text of article 1425 a
proposition to which we do not subscribe Yari's proposed
construction is so isthmian as to offend the reason and spirit of
the statute.
Because the text of article 1425 plainly covers the
financing agreements, the district court correctly ruled that the
statute governed their disposition.
C. The Timing of the Tender. C. The Timing of the Tender. ________________________
The next snare set by the financiers is contrived from
a number of alleged improprieties which, they claim, render
Pritzker's efforts to extinguish the credits invalid. Most of
these assertions rest on the financiers' particular construction
of article 1425, and, therefore, have no continuing legal
relevance in light of our understanding of that statute. See ___
supra Part III(A)-(B). Withal, the financiers raise a colorable _____
question as to the positioning and shape of the nine-day window,
established in the third sentence of article 1425. We address
this question.
33
The district court determined that the period in which
Pritzker's article 1425 rights became operative "commenced on the
date Pritzker knew officially that the assignments had been
made." Pritzker v. Yari, supra, at *7, slip op. at 17. Since ________ ____ _____
Pritzker acquired the requisite knowledge on October 9, 1992, and
notified the parties of his intentions exactly one week later,
"Pritzker therefore duly exercised his rights within the time
provided by the statute." Id. ___
The district court's finding that Pritzker first
learned of the litigated credits on October 9 is not open to
attack.15 This finding does not fully answer the question
raised, because the financiers maintain that, even so, the
statute obligated Pritzker not simply to offer to tender the _____
funds necessary for redemption within the nine-day period, but
also actually to tender those funds or, at the very least,
deposit them with the court. Judge Pieras rejected this
analysis, ruling that the law required Pritzker, during the nine-
day interval, merely to offer to tender the amounts necessary to
acquire the interests then held by the assignees. See id. We ___ ___
think that the rejection of the financiers' temporal challenge is
supportable, but we anchor it in a somewhat different, less
confining rationale.
The parties and the district court saw the question as
____________________
15If anything, this finding may not give sufficient range to
Pritzker's rights; while Dopp disclosed the existence of the _________
financing agreements on October 9, Pritzker probably did not
receive actual notice until October 12 or thereabouts.
34
a matter of what actions had to be taken within the nine-day
period. The financiers claimed that a debtor must actually
tender the funds, or deposit them in the registry of the court,
whereas the court, adopting a thesis urged by Pritzker, concluded
that a debtor need only offer a tender or deposit of the funds.
Both of these positions assume that the nine-day period is
applicable to the litigated credits at issue here. We question
this threshold assumption. On reflection, a third construction
of this portion of article 1425 presents itself: the nine-day
period enumerated in the third sentence speaks only of situations
in which, to use the statute's words, "the assignee should demand
payment of [the debtor]." Under this third construction, the
sentence in question does not govern the general operation of
article 1425, but, rather, only governs its operation within one
particular situation.16
We think that this construction is completely plausible
in light of the unqualified declaration in article 1425's first
sentence to the effect that "[w]hen a litigated credit is sold,
the debtor shall have the right to extinguish the same . . . ."
Moreover, if this interpretation prevails, it has obvious
consequences for these appeals: although it is true that, where
the nine-day period applies, it applies strictly, see Consejo de ___ __________
Titulares, 93 J.T.S. 25 (slip op. at 14) ("The legal term for the _________
assigned debtor to exercise this litigious redemption is nine (9)
days from the date the assignee claims payment. This term which
____________________
16This is not such a situation. See supra note 12. ___ _____
35
is extinguished with the lapse of time is final, unextendable and
cannot be tolled."), such rigidity is immaterial if the third
sentence does not encompass the litigated credit in question.17
We are left, then, with three competing interpretations
of this portion of article 1425. Yet, the task of choosing among
them is less formidable than it may first appear; for purposes of
this case, it suffices merely to narrow the field. Once that is
done, it becomes plain that, whether or not the third sentence
applies in this instance, the assigned error lacks force.
If and to the extent that the third sentence of article
1425 has pertinence here, we agree with the lower court that it
requires only an offer of redemption, not a full tender of funds,
within the nine-day period. Any other interpretation would
significantly undermine the efficacy of the statute, since it
would force debtors to marshall the funds immediately on receipt
____________________
17Of course, even if this third construction is accepted, it
does not answer the attendant question of whether the debtor's
redemption efforts, once he has notice of a litigated credit, can
ever be tardy. Both the spirit of the statute and common sense
dictate that some temporal limit should obtain, and that a
debtor's rights may, if not seasonably exercised, become stale
and expire. See Pritzker v. Yari, supra, at *7, slip op. at 15- ___ ________ ____ _____
16 (hypothesizing that the purpose behind the nine-day window "is
to prevent the unfair situation of a debtor litigating at length
with an assignee and then, when the assignee has prevailed,
exercising the right of redemption"); Riseman, supra, at 453 _____
(discussing Louisiana's analogous statute and concluding that
"[i]f, on learning of the transfer, [the debtor] continues to
contest the suit, he may not, when he realizes that the judgment
is about to become final or that he is going to lose the suit,
avail himself of the provisions which the law has established in
his favor for the purpose of terminating litigation"). Be that
as it may, these appeals do not warrant a full-dress inquiry into
timeliness, for Pritzker's offers plainly satisfy any timeliness
rule that might apply.
36
of notice, or else forfeit their rights. Because assignees could
more often than not time disclosure of their acquired interests
to minimize redemption opportunities, the notice provision would
become a trick box. We do not believe that the Puerto Rico
legislature intended to place assignees in so advantageous a
position.
In our estimation, the district court's shaping of the
nine-day window produces a more realistic and balanced
interpretation. Faithful to the overarching statutory purpose,
this reading allows the debtor merely to offer to redeem the
litigated credits within the nine-day period, thus placing the
assignees on notice of probable redemption, but without backing
the debtor into a cash-flow corner. This is the interpretation
of the third sentence of article 1425 that we believe the Puerto
Rico legislature intended and that we believe the Puerto Rico
courts will adopt.
In an effort to salvage their competing construction
through extra-textual assistance, the financiers dredge up an
assortment of other provisions of the Puerto Rico Civil Code
containing time restrictions, which, they suggest, ought to
inform our interpretation of article 1425. Although such extra-
textualism is not improper here the statute is, after all,
opaque on this particular point the financiers' efforts are
unavailing. For one thing, we remain unconvinced that randomly
culled provisions, entirely unrelated to litigated credits, have
anything worthwhile to say about the construction of article
37
1425. Cf. P.R. Laws Ann. tit. 31, 18 (1967 & Supp. 1989) ___
("Laws which refer to the same matter, or whose object is the
same, shall be interpreted with reference to each other, in order
that what is clear in one may be employed for the purpose of
explaining what is doubtful in another."). For another thing, to
the extent that other, unrelated provisions are relevant, they
seem to militate against, not in favor of, the financiers'
interpretive stance. In this regard, the district court
specifically noted that the legislature's use of more restrictive
phrasing in article 1414, P.R. Laws Ann. tit. 31, 3924 (1991)
(stipulating that "[t]he right of legal redemption cannot be
exercised except within nine (9) days"), indicates that article
1425's nine-day window should be construed in a relatively
liberal manner. "Had the legislature desired to place a similar
restriction on the commencement of the right to redeem litigious
credits, it would have used the limiting language of Article
1414, rather than the more flexible wording of Article 1425."
Pritzker v. Yari, supra, at *7, slip op. at 16. In the end, all ________ ____ _____
roads lead to Rome: the financiers' interpretation stalls no
matter which interpretive path one decides to follow.
Having rejected the first of the three alternative
constructions in favor of the second, we need not continue to
pursue the selection process. If, on the one hand, the nine-day
window applies that is, if the second construction prevails
nothing beyond an offer to redeem is exigible at that point, and
Pritzker's offer, made on day seven, undeniably meets the
38
statutory standard. If, on the other hand, the nine-day window
does not serve as a generic limitation on a debtor's ability to
proceed under the statute that is, if the third construction
prevails it follows a fortiori that Pritzker's failure to _ ________
tender the necessary funds within nine days of receiving official
notice is irrelevant, especially given his subsequent deposit of
funds with the court.
For the foregoing reasons, we hold that Pritzker's
efforts to redeem the financiers' interests fall within the
temporal compass of article 1425.
D. The Redemption of the Litigated Credits. D. The Redemption of the Litigated Credits. _______________________________________
Hesiod, reputed to be a shepherd and part-time poet,
wrote in Works and Days, roughly 2700 years ago, that "right _______________
timing is in all things the most important factor." But timing
is not the only salient factor under article 1425: the statute
mandates that the debtor "reimburs[e] the assignee for the price
the [assignee] paid for [the litigated credit], the judicial
costs incurred by him, and the interest on the price from the day
on which the same was paid." Thus, article 1425 requires not
only the correct chronology, but also the proper price.
In most situations, ascertaining the proper price poses
no particular problem. For instance, BPC's and Lincoln's
litigated credits each involved a discrete sum that had already
been transferred to Dopp at the time Pritzker first exercised his
statutory rights. The add-ons "judicial costs" and "interest"
are subject to easy, mathematically precise computation.
39
Neither BPC nor Lincoln disputes that, ultimately, Pritzker
consigned the statutorily required amounts to the district court
in respect to their assignments. Consequently, the sufficiency
of Pritzker's payment to acquire the interests of these two
financiers is not before us.
Yari's agreement is a horse of a slightly different
hue.18 It never involved a simple one-time transfer of funds.
Instead, it originally involved two things a sum of money, and
assistance in establishing a line of credit in exchange for a
portion of the litigation proceeds. Later on, when Yari and Dopp
amended their agreement, see supra note 2, the modification ___ _____
confirmed "that the parties `fully intend to move forward with
the present [July 23] Agreement despite the fact that a line of
credit may not be obtainable.'" Dopp III, 831 F. Supp. at 954 ________
(quoting amendment). It also suggested that, perhaps, Yari might
become more personally involved in funding the D/P Litigation.
See id. (describing the modification as "call[ing] for Yari to ___ ___
advance to Dopp, in an amount to be determined and to be
negotiated by the parties in good faith, funds necessary to allow
Dopp's prosecution of the [D/P Litigation] to proceed
diligently"). Yari thereafter complied with all specific funding
requests made by Dopp.19 All in all, Yari invested a total of
____________________
18Even so, Yari does not raise any cognizable questions
concerning the computation of "judicial costs" and "interest."
19Dopp waived the contention, belatedly raised in his reply
brief, that the question of Yari's compliance vel non should have ___ ___
been submitted to the jury. See Sandstrom v. Chemlawn Corp., 904 ___ _________ ______________
F.2d 83, 86 (1st Cir. 1990). More generally, we have no reason
40
$500,000, according to the district court, see Dopp III, 831 F. ___ ________
Supp. at 954, consisting of the following advances: $250,000
under the original financing agreement; $50,000 contemporaneous
with the execution of the modification to the financing
agreement; $100,000 on November 5, 1992; $50,000 in early
December of the same year; and, finally, $50,000 in March of
1993.
We need not delve too deeply into details at this time;
no matter what the fine print, it is perfectly clear that Yari's
obligations under his agreement with Dopp involved both cash and
non-cash components. Consequently, gauging the utility of
Pritzker's redemption efforts prompts us to examine the meaning
and scope of article 1425's reference to "the price . . . paid"
for a litigated credit.
In certain respects, this is a choice between the devil
and the deep blue sea. If the statute is interpreted to include
only the cash component of a hybrid offer, then it may run afoul
of the economic reality of the agreement. If, however, the
statute extends to the non-cash component, then the twin risks of
quantitative uncertainty and undesirable consequences loom, if
for no other reason than that such a rule might induce
contracting parties to structure financing agreements partly in
kind so as to make redemption more arduous.
____________________
to disturb the district court's finding that, despite having
failed to establish a line of credit, "Yari complied with his
obligations under the agreements and would be entitled to those
proceeds promised him under the terms of the Agreement and
qualified thereafter." Dopp III, 831 F. Supp. at 956. ________
41
The district court opted for the former interpretation,
specifically holding that "Pritzker does not assume Yari's
obligations and is required to do no more to redeem the credit
than to reimburse the price actually paid, plus interest and
expenses." Dopp III, 831 F. Supp. at 956. To bulwark its ________
position, the court noted that "[t]he courts of Louisiana, in
applying the provision of the Louisiana Civil Code which is
analogous to Article 1425, have reached the same result." Id. at ___
956 n.23 (citing Louisiana cases).
Though we do not go the whole hog, we agree up to a
point. We hold, as did the district court, that compliance with
article 1425 did not entail Pritzker's assumption of Yari's
responsibility to fund Dopp's suit against him. In respect to
damages arising out of a breach of contract, it is a basic tenet
of contract law that a legal remedy (e.g., a sum of money) is ____
presumptively preferable to an equitable remedy (e.g., specific ____
performance), so long as the former is adequate and
ascertainable. See 3 Farnsworth on Contracts, supra, 12.4. ___ ________________________ _____
Moreover, we echo the district court's sage observation that
granting specific performance would be "flatly inconsistent with
the purposes of Article 1425." Dopp III, 831 F. Supp. at 955 ________
n.21. Endorsing such a remedy would force a debtor either to
forgo redemption indefinitely (thus running the risk of losing
his rights under article 1425) or to fund the assignor's case
against him.
Thus, when an article 1425 assignee, in exchange for a
42
stake in the outcome of litigation, transfers to the assignor
both cash and non-cash consideration, the debtor must tender to
the assignee the cash equivalent.20 Cf. Riseman, supra, at 452 ___ _____
(suggesting that if the price actually paid is lower than the
price stipulated in the financing agreement, "the `redeemer' need
pay only the `real' price").
It remains for us now to apply these principles to the
case at hand. On this record, there is no evidence that Yari's
promise to use best efforts to seek a line of credit sufficient
to fund Dopp's efforts in the D/P Litigation has any demonstrable
monetary value. See supra note 20. Given this void, we agree ___ _____
with the court below that Pritzker should be permitted to redeem
Yari's litigated credit despite having tendered only an amount
corresponding to the funds actually transferred from Yari to Dopp
prior to the time Pritzker sued to enforce his asserted right of
redemption.21
E. The Equitable Reduction of Yari's Litigated Credit. E. The Equitable Reduction of Yari's Litigated Credit. __________________________________________________
The district court, having determined that all three
____________________
20At the very least, the cash equivalent must correspond to
the cash component of a hybrid offer. We take no view of whether
there may be circumstances in which a debtor would have to
augment the cash component by adding to it the cash equivalent of
a non-cash component that has a demonstrable cash value. In this
case, Yari introduced no evidence to show the value of the non-
cash component; and, moreover, he never contended that Pritzker's
tender must be augmented in this manner. Any possible argument
in this regard is, therefore, waived. See, e.g., United States ___ ____ _____________
v. Slade, 980 F.2d 27, 30 & n.3 (1st Cir. 1992). _____
21Neither Pritzker nor Yari contests the trial court's use
of the date Pritzker filed suit as the cutoff date for purposes
of redemption. We, therefore, accept Judge Pieras' selection of
that date uncritically, expressing no opinion on its propriety.
43
financing agreements came within the ambit of article 1425, ruled
that the arrangement between Dopp and Yari required special
treatment because their pact, as structured, concerned a "rare
situation[]" involving "peculiar facts." Dopp III, 831 F. Supp. ________
at 958-59. The court identified two particular concerns. First,
it expressed a sensitivity "to Dopp's need to obtain funds to
maintain his action against Pritzker," id. at 957, bearing in ___
mind that "Pritzker is a billionaire who could never be forced to
relent in his defense," id. at 957 n.25. Second, the court ___
reflected that, "although Yari technically complied with the
terms of his agreement with Dopp, he did not succeed in providing
what he originally intended. As a result, Dopp never received
what he hoped he had bargained for under the agreement." Id. at ___
957.
Based on these two concerns, and mindful that Pritzker
stood to receive a windfall on redemption of Yari's litigated
credit, the court concluded as a matter of statutory construction _____________________________________
that it "could not have been the intention" of the legislature to
allow full redemption in such a situation.22 Id. at 958. The ___
court wrote:
The Dopp/Yari agreement is far outside the
heartland of agreements contemplated by the
legislature when it enacted Article 1425. It
is likely that the lawmakers did not envision
the possibility of a case like this.
____________________
22At certain points in his appellate briefs, Dopp intimates
that the district court in effect reformed the Dopp/Yari
financing agreement. We do not read the court's opinion in that
way; and, moreover, the record on appeal evinces no basis for an
order tantamount to an order of reformation.
44
Property and assets have traditionally been
mortgageable to protect and preserve their
value. In this case, the lawsuit's worth is
an asset which requires expenditures for the
services of attorneys and experts, as well as
for other general costs of litigation to
preserve its value. To apply Article 1425
without allowing for adjustments to reflect
expenditures that have permitted the lawsuit
to survive would be to deplete and maybe
extinguish altogether the value of the
lawsuit . . . .
Id. To ameliorate this perceived inequity, the court limited ___
Pritzker's redemptive right to one-half the credit held by Yari.
See id. ___ ___
Pritzker contends that the lower court's ruling
collides with the plain language and undeniable purpose of
article 1425. This contention raises a question of statutory
interpretation that sparks de novo review. See Gifford, 17 F.3d __ ____ ___ _______
at 472; Liberty Mut., 978 F.2d at 757.23 ____________
Exercising plenary review, we agree with Pritzker that,
as a matter of law, the district court's ruling cannot stand. As
with Yari's efforts to read certain unenumerated exceptions into
the statute, see supra Part III(B), the district court's ___ _____
limitation on Pritzker's redemptive rights finds no purchase in
____________________
23Of course, a district court's equity power is relatively
broad and is typically subject to deferential review when the
exercise of that power is genuinely a function of the court's
discretion. See 1 Steven A. Childress & Martha S. Davis, Federal ___ _______
Standards of Review 4.16, at 4-125 to 4-126 (2d ed. 1986 & ____________________
Supp. 1993). Nevertheless, such deference does not extend to
whatever errors of law may underlie a district court's remedial
or equitable determinations. See id. at 4-127 & n.4; see also ___ ___ ___ ____
Narragansett Indian Tribe v. Guilbert, 934 F.2d 4, 5 (1st Cir. __________________________ ________
1991) (exempting mistakes of law from usual deferential review
accompanying district court's grant or denial of injunctive
relief).
45
the text of article 1425. The very existence of the litigated
credit statute evinces the legislature's likely knowledge that
windfalls can result when litigants barter future interests in
litigation proceeds. It is thus telling that the statute's
language neither suggests nor permits variable application
depending upon the extent of a particular windfall, the size of a
particular recovery, or the relative financial condition of
particular litigants. This can only signify that, as between
debtors and assignees, the legislature determined that the
former, rather than the latter, more properly deserved the
benefit of any trouvaille.
To be sure, it is always possible that legislators, in
drafting a statute, may not have considered the entire gamut of
possibilities that might come within the statute's sweep.
Nevertheless, "[w]hen a law is clear and free from all ambiguity,
the letter of the same shall not be disregarded, under the
pretext of fulfilling the spirit thereof." P.R. Laws Ann. tit.
31, 14 (1967 & Supp. 1989). In other words, courts, in Puerto
Rico as elsewhere, are simply not free to disregard the
unambiguous language of a law because the facts of a given case
to which the law applies evoke a sympathetic reaction. See, ___
e.g., Mansell v. Mansell, 490 U.S. 581, 594 (1989) (declining "to ____ _______ _______
misread [a] statute in order to reach a sympathetic result when
such a reading requires us to do violence to the plain language
of the statute"); cf. East India Co. v. Paul, 7 Moo. 85, 111 ___ _______________ ____
(P.C. 1849) (admonishing that "courts of justice [must] take care
46
. . . that hard cases do not make bad law").
Nor can the court's decision be justified simply
because the district judge rendered it under the rubric of equity
and in "[t]he interests of justice." Dopp III, 831 F. Supp. at ________
958. While it is true that equity occupies an honored place in
the jurisprudence of Puerto Rico, judges may assume the role of
chancellors only in the absence of a governing rule of positive
law. See P.R. Laws Ann. tit. 31, 7 (1967 & Supp. 1989) ___
(ordaining that "[w]hen there is no statute applicable to the
case at issue, the court shall decide in accordance with
equity"). Here, there is an apposite statute, and, therefore,
the district court's use of equitable principles to trump that
statute is legally indefensible.
We need go no further.24 Because the rights and
obligations of Pritzker and Yari, inter sese, must be determined _____ ____
in accordance with the provisions of article 1425, unembellished
by freeform concepts of equity, the halving of Pritzker's
redemptive rights must be reversed.
IV. CONCLUSION IV. CONCLUSION
We succinctly summarize our conclusions. First, the
district court appropriately exercised in personam jurisdiction __ ________
over BPC. Second, the court correctly ruled that the three
____________________
24Because Pritzker is entitled to redeem Yari's entire
interest in the proceeds of the D/P Litigation (whatever that
interest may be), there is no need to inquire into the district
court's disposition of Yari's cross-claim against Dopp seeking a
declaration, inter alia, that Yari is entitled to "[all] the _____ ____
rights created in his favor under the [financing] Agreement."
47
financing agreements involved litigated credits within the
meaning of article 1425. Third, we hold that Pritzker's
redemption efforts were both timeous and methodologically proper.
Fourth, we hold that the district court lacked the authority to
limit Pritzker's redemptive right to one-half of Yari's litigated
credit.
The district court's judgment in respect to Pritzker's _______________________________________________________
civil action is affirmed in part and reversed in part. The __________________________________________________________ ___
district court is directed to enter an amended judgment _________________________________________________________________
accordingly, when and as appropriate. Costs shall be taxed in _____________________________________ ________________________
favor of Pritzker. _________________
48