IOM CORP. v. Brown Forman Corp.

United States Court of Appeals
For the First Circuit

No. 09-1672

IOM CORPORATION, D/B/A CARIBBEAN WINE SPIRITS BROKERS,

Plaintiff, Appellant,

v.

BROWN FORMAN CORPORATION,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

[Hon. Francisco A. Besosa, U.S. District Judge]

Before

Torruella, Lipez, and Howard,
Circuit Judges.

Rubén T. Nigaglioni, with whom Nigaglioni & Ferraiuoli Law
Offices, was on brief for appellant.
Rafael Escalera-Rodríguez, with whom Amelia Caicedo-Santiago
and Reichard & Escalera, were on brief for appellee.

December 2, 2010
 TORRUELLA, Circuit Judge. In this diversity action,

Plaintiff-Appellant IOM Corporation, d/b/a Caribbean Wine Spirits

Brokers ("Caribbean") appeals the dismissal of its claim under

Puerto Rico's Sales Representative Act, commonly known as Law 21,

P.R. Laws Ann. tit. 10, §§ 279-279h. Caribbean also appeals the

district court's order finding that its cause of action for breach

of contract and breach of the implied covenant of good faith and

fair dealing was covered under the terms of an arbitration clause

included in two written promotional agreements executed by the

parties. Finally, Caribbean challenges the district court's award

of attorneys' fees for Defendant-Appellee, Brown Forman

Corporation.

For the reasons stated below, we find that the district

court properly dismissed Caribbean's Law 21 claim for failure to

state a claim. We also affirm the district court's order directing

the parties to submit the breach of contract claim to arbitration.

Finding that the district court did not commit plain error in

granting attorneys' fees to Brown Forman, we affirm the fee award.

I. Facts and Procedural History

The district court dismissed Caribbean's Law 21 claim

pursuant to Federal Rule of Civil Procedure 12(b)(6). We therefore

view the well-pleaded facts in the light most favorable to

Caribbean, drawing all reasonable inferences in its favor. Gray v.

Evercore Restructuring L.L.C., 544 F.3d 320, 324 (1st Cir. 2008).

-2-
 Brown Forman is a corporation organized under the laws of

the State of Kentucky. Brown Forman markets and distributes

Finlandia vodka and Jack Daniel's whiskey in the United States and

Puerto Rico. Caribbean is a corporation organized under the laws

of the Commonwealth of Puerto Rico. As the complaint avers, in

1996, Caribbean entered into a series of oral agreements with

Primalco Ltd., Brown Forman's predecessor, by which Caribbean

agreed to promote Finlandia in Puerto Rico. In August 2002, Brown

Forman and Caribbean formalized this commercial relationship in a

written "promotion agreement," whereby Caribbean agreed to employ

its best efforts to promote Finlandia vodka in Puerto Rico on Brown

Forman's behalf. Under the terms of this agreement, Caribbean

received a commission of $5.50 per each nine-liter case of

Finlandia sold in Puerto Rico by the distributor, Ballester

Hermanos. This Agreement also contained an integration clause

which stated:

Th[e] Agreement covers all the terms and
conditions of [Brown Forman's] agreement with
Caribbean concerning the promotional services
that Caribbean will be rendering for
[Finlandia Vodka] and supersedes all other
agreements, whether written or oral,
previously entered into. This letter
agreement may be amended or changed only in
writing duly signed by Caribbean and [Brown
Forman].

On June 23, 2002, Brown Forman and Caribbean subscribed

a written "promotion agreement," by which "Caribbean agree[d] to

use its best efforts" to promote Jack Daniel's whiskey in Puerto

-3-
Rico. Per the terms of this agreement, Caribbean received a

commission of $5.00 per nine-liter case of Jack Daniel's sold in

Puerto Rico by the local distributor, V. Suárez. The Agreement

also included an integration clause which stated:

This Agreement covers all the terms and
conditions of [Brown Forman's] agreement with
Caribbean concerning the promotional services
that Caribbean will be rendering for [Jack
Daniel's]. This letter agreement may be
amended or changed only in writing duly signed
by Caribbean and [Brown Forman].

Pursuant to these written agreements, Caribbean was

required to (1) provide promotional merchandise; (2) create and set

up product displays in certain locations; (3) purchase materials

and products locally; (4) hire personnel for promotional

activities; and (5) issue invitations for special events. Both

contracts were set to expire on April 30, 2006.

In March 2006, Brown Forman renewed the promotional

agreements until April 30, 2007. In April 2007, Brown Forman

informed Caribbean that it was re-evaluating its operations in

Puerto Rico and that the company had decided to hire Caribbean on

a monthly basis. On April 30, 2007, Caribbean accepted Brown

Forman's proposal to renew their commercial relationship on a

monthly basis. The parties thereafter engaged in a series of

negotiations to restructure their commercial relationship. In the

course of these negotiations, Brown Forman explained that it was

planning to establish an office in San Juan that would undertake

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all promotional, sales, and merchandising activities in Puerto

Rico. As the complaint states, on September 10, 2007, Brown Forman

confirmed its decision to terminate its prior commercial

relationship with Caribbean and offered to hire Caribbean as "an

exclusive broker consultant for Brown Forman['s] brands." On

September 12, 2007, Caribbean filed a state-court complaint against

Brown Forman seeking equitable and legal relief for an alleged

unlawful termination of a sales representative contract in

violation of Law 21. The original complaint stated that the

parties had "a contractual relationship [whereby] IOM [Caribbean]

. . . [acted as a] sales representative for Finlandia vodka and

Jack Daniel's whiskey in Puerto Rico." Brown Forman removed the

case to federal court based on diversity jurisdiction.

Caribbean subsequently filed an amended complaint,

including both a cause of action under Law 21 for the unlawful

termination of its sales representation contract and an additional

cause of action for breach of contract and breach of the implied

covenant of good faith and fair dealing. Caribbean claimed that

although the written promotional agreements did not deal with its

duties as a sales representative, "Brown-Forman [had] also

entrusted Caribbean with the sale of its products as an additional

endeavor under the existing commercial relationship." Regarding

Finlandia vodka, the complaint averred that the parties

intentionally opted to exclude Caribbean's sales activities from

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the written promotional agreements. Finally, Caribbean claimed

that, pursuant to its commercial dealings with Brown Forman,

Caribbean sent purchase orders to the local distributors of

Finlandia and Jack Daniel's -- Ballester Hermanos and V. Suárez,

respectively -- who then supplied the products to the clients.

In October 2007, Caribbean filed a motion requesting a

temporary restraining order (TRO) and/or a preliminary injunction.

The district court denied the TRO and scheduled a hearing to

address Caribbean's request for preliminary injunctive relief.

Prior to the hearing, Brown Forman opposed Caribbean's request for

a preliminary injunction and requested the dismissal of Caribbean's

complaint for failure to state a claim under Law 21. Additionally,

Brown Forman petitioned the court to refer Caribbean's claims to

arbitration per the terms of certain arbitration clause included in

the promotional agreements.

The district court held a hearing on October 30, 2007 in

which the parties stated their positions regarding the nature of

their commercial relationship. At the conclusion of the hearing,

the district court judge informed the parties of his decision to

dismiss Caribbean's complaint for failure to state a claim. In an

opinion and order dated November 8, 2007, the district court

explained that dismissal of Caribbean's Law 21 claim was proper as

Caribbean had not shown that it was an exclusive sales

representative as required by Law 21. Furthermore, the district

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court dismissed Caribbean's claim for breach of contract and of the

implied covenant of good faith and fair dealing, finding that the

arbitration clauses included in the promotional agreements required

the parties to arbitrate that claim.

On April 8, 2009, the district court denied Caribbean's

motion for reconsideration. The district court later issued a

summary order granting Brown Forman's request for costs and

attorneys' fees in the amount of $24,424.51.1 Caribbean now

appeals.

II. Puerto Rico's Sales Representatives Act

In 1990, the Puerto Rico Legislature enacted Law 21 to

protect sales representatives from the unjust termination of their

contracts.2 P.R. Laws Ann. tit. 10, §§ 279-279h; see also Orba

Inc. v. MBR Industries, Inc., 49 F. Supp. 2d 67, 71 (D.P.R. 1999).

The statute provides that "no principal or grantor may terminate

[the principal-sales representative] relationship, or directly or

indirectly perform any act that may impair the established

1
The court granted Brown Forman $23,456.74 in attorneys' fees and
$967.77 in costs.
2
Law 21 "is modeled on the Puerto Rico Dealers Act of 1964, P.R.
Laws Ann. tit. 10, §§ 278-278e ("Law 75"), which provides similar
protections to distributors." Rafael Rodríguez Barril v. Conbraco
Indus., Inc., No. 09-2163, 2010 WL 3491168, at *3 (1st Cir.
September 8, 2010). In enacting Law 21, the Puerto Rico
legislature explained that the statute purported "to protect sales
representatives and other local agents who fell short of the
requirements for 'dealership' status under Law 75." Re-Ace, Inc.
v. Wheeled Coach Inds., Inc., 363 F.3d 51, 57 (1st Cir. 2004).

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relationship, or refuse to renew said contract . . . , except for

just cause."3 P.R. Laws Ann. tit. 10, § 279a. If the principal

terminates its commercial relationship with an exclusive sales

representative without just cause, it is liable for the damages

caused. Id. § 279c (stating the criteria courts should employ to

calculate damages due to an unlawful termination of a sales

representation contract).

Under Law 21, a sales representative is "[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." Id. § 279(a) (emphasis added). In turn, a sales

representation contract is

[an] 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

3
"Just cause" is defined as "[n]oncompliance of any of the
essential obligations of the sales representation contract by the
sales representative, or any act or omission on his/her part that
may adversely and substantially affect the interests of the
principal or grantor in the development of the market or the sale
of merchandise or services." P.R. Laws Ann. tit. 10, § 279(d).

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 coordination and to pay the previously-
accorded commission or remuneration.

Id. § 279(c).

The recent Puerto Rico Supreme Court decision in

Cruz-Marcano v. Sánchez-Tarazona, 2007 TSPR 198, 2007 PR Sup. LEXIS

190 (certified translation provided by parties) outlines the

characteristics a sales representative should bear to enjoy

protection under Law 21.4 According to the Puerto Rico Supreme

Court, 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. See id. at *27.5

III. Standard of Review

We review de novo the "district court's allowance of a

motion to dismiss for failure to state a claim." TAG/ICIB Servs.,

4
This Puerto Rico Supreme Court decision was published on the
same day that the district court issued its opinion dismissing
Caribbean's complaint. Thus, the district court did not rely on
this decision in rendering its decision in the present case.
5
Because no official translation of this Puerto Rico Supreme
Court case is available, all pin-point citations refer to the
certified translation submitted by Appellee, Brown Forman. See
Appellee's Supplemental Appendix at 52-66.

-9-
Inc. v. Pan American Grain Co., Inc., 215 F.3d 172, 175 (1st Cir.

2000). We may "affirm [the] dismissal for failure to state a claim

only if it clearly appears, according to the facts alleged, that

the plaintiff cannot recover on any viable theory." Correa-Martínez

v. Arrillaga-Beléndez, 903 F.2d 49, 52 (1st Cir. 1990). To

overcome a motion to dismiss, plaintiff's complaint may not rely on

"labels and conclusions, and a formulaic recitation of the elements

of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550

U.S. 544, 555 (2007); see also Ashcroft v. Iqbal, 129 S. Ct. 1937,

1949 (2009) ("Threadbare recitals of the elements of a cause of

action, supported by mere conclusory statements, do not suffice.").

IV. Discussion

A. Law 21 Claim

The scope and nature of the promotional agreements bear

upon Caribbean's ability to show that it is plausibly entitled to

relief under Law 21. We thus begin by unpacking the parties'

arguments regarding these agreements.

It is undisputed that the parties executed two written

promotional agreements that do not include any terms or conditions

regarding Caribbean's alleged duties as a sales representative of

Finlandia and Jack Daniel's in Puerto Rico. Rather, the agreements

address Caribbean's duty to promote the products by engaging in

promotional and advertising efforts. Absent written provisions

regarding Caribbean's duties as a sales representative, Caribbean's

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claim revolves around its allegation that the parties intentionally

excluded the terms of its duties as a sales representative and that

this court should consider extrinsic evidence showing that "the

written contracts are incomplete" and do not rule the entire and

"true" commercial relationship between the parties.6

Article 1233 of the Puerto Rico Civil Code provides that

where "the terms of a contract are clear and leave no doubt as to

the intentions of the contracting parties, the literal sense of its

stipulations shall be observed." P.R. Laws Ann. tit. 31, § 3471.

The Article also states that "[i]f the words should appear contrary

to the evident intention of the contracting parties, the intention

shall prevail." Id. "In order to judge . . . the intention of the

contracting parties, attention must principally be paid to their

acts, contemporaneous and subsequent to the contract." P.R. Laws

Ann. tit. 31, § 3472.

Construing the substantive provisions of the Puerto Rico

Civil Code and Puerto Rico's former parol evidence rule, P.R. Laws

Ann. tit. 32, App. IV, R. 69(B) (repealed 2004),7 we have stated

6
Caribbean claims that two letters dated March 24, 2006 and April
5, 2007, reveal that Brown Forman treated the company's agreements
with Caribbean as "broker agreements," rather than "promotional
agreements."
7
Law 448 of September 23, 2004 repealed Puerto Rico's parol
evidence rule, which previously stated:

When in an oral or written agreement, either public or
private, all the terms and conditions constituting the
true and final intention of the parties have been

-11-
that courts may not "consider[] . . . extrinsic evidence to vary

the express, clear, and unambiguous terms of a contract." Borschow

Hosp. & Med. Supplies, Inc. v. César Castillo Inc., 96 F.3d 10, 15

(1st Cir. 1996); see also Vulcan Tools of Puerto Rico v. Makita

U.S.A., Inc., 23 F.3d 564 (1st Cir. 1994). Following this reading

of Puerto Rico's rules of contract interpretation, we have declined

to consider extrinsic evidence of the parties' intent when, for

example, the evidence is offered to show that the written agreement

was not the entire agreement between the parties. See Exec.

Leasing Corp. v. Banco Popular de Puerto Rico, 48 F.3d 66, 69 (1st

Cir. 1995); see also Borschow Hosp. & Med. Supplies, Inc., 96 F.3d

at 15.

Caribbean contends, however, that our decisions declining

to consider extrinsic evidence are no longer good law in as much as

included, such agreement shall be deemed as complete, and
therefore, there can be between the parties, or
successors in interest, no evidence extrinsic to the
contents of the same, except in the following cases:
(1) Where a mistake or imperfection of the agreement is
put in issue by the pleadings;
(2) Where the validity of the agreement is the fact in
dispute.
This rule does not exclude other evidence of the
circumstances under which the agreement was made or to
which it is related such as the situation of the subject
matter of the instrument or that of the parties, or to
establish illegality or fraud.

P.R. Laws Ann. tit. 32, App. IV, R. 69(B) (repealed 2004).

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the parol evidence rule of Puerto Rico was repealed in 2004.8

Although Caribbean claims that we should re-evaluate our prior

decisions concerning Puerto Rico's substantive rules of contract

interpretation, it has not pointed to any decisions from the Puerto

Rico Supreme Court showing that our interpretation of Article 1233

is erroneous, even in the face of the repeal of Puerto Rico's parol

evidence rule.9 However, we need not conclusively decide this

issue that involves Puerto Rico's rules of contract interpretation.

Even if we consider evidence tending to show that the parties

intended to omit Caribbean's sales duties from the promotional

agreements, the evidence is insufficient to establish that

Caribbean procured and closed sales on Brown Forman's behalf in an

exclusive manner as required by Law 21.

First, Caribbean's well-pleaded allegations regarding its

sales activities do not support the conclusion that Caribbean had

8
Caribbean relies on a 2008 Puerto Rico Supreme Court decision,
Suárez-Figueroa v. Sabanera Real, Inc., 2008 TSPR 71, 2008 WL
2604980, but an official English version of this case is
unavailable and Caribbean did not file an English-language
translation as required by our local rules. See 1st Cir. Loc. R.
(30)(d); see also Lupu v. Wyndham El Conquistador Resort & Golden
Door Spa, 524 F.3d 312, 314 n.3 (1st Cir. 2008).
9
We note that, in holding that extrinsic evidence was
inadmissible to vary the terms of an unambiguous contract, our
decisions did not rely exclusively on the parol evidence rule. To
the contrary, our decisions make it clear that Article 1233
precludes consideration of "extrinsic evidence to vary the express,
clear, and unambiguous terms of a contract." Borschow Hosp. & Med.
Supplies, Inc., 96 F.3d at 15; see also Exec. Leasing Corp., 48
F.3d at 69.

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the authority to procure and conclude sales on Brown Forman's

behalf. Per Caribbean's allegations and admissions, Caribbean

procured and sent purchase orders to the local distributors who

then processed and concluded the sales. Caribbean also admitted

that it did not place orders directly with Brown Forman. That is,

the complaint lacks any factual allegations that would tend to show

that Brown Forman was bound by the sales Caribbean claims that it

procured and closed. At most, the well-pleaded allegations show

that a principal-sales representative relationship existed between

Caribbean and the local distributors. However, in order to enjoy

protection under Law 21, a sales representative must have the

authority to procure and conclude orders that bind the principal.

P.R. Laws Ann. tit. 10, § 279(c) (stating that in a sales

representation agreement, the principal "is bound to comply with

the commitments that may result from the sales representative's

efforts and coordination"); see also Cruz-Marcano, 2007 TSPR 198 at

*23 (explaining that a Law 21 sales representative procures and

concludes orders on behalf of the principal).

Secondly, Caribbean's allegations reveal that it was not

compensated for its sales efforts. Rather than receiving

compensation for the sales that Caribbean claims it procured and

closed, Caribbean's commission was based on the terms of the

promotional agreements. Under the terms of these agreements,

Caribbean received a fixed percentage of overall product sales,

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regardless of whether it actually procured or concluded the sales.

Thus, per Caribbean's own allegations and admissions, there is no

indication that Brown Forman agreed to compensate Caribbean on the

basis of its purported sales representation efforts.

Finally, Caribbean's Law 21 claim fails on the pleadings

as it failed to put forth sufficient facts to show that it was

entrusted with exclusive sales responsibilities within a defined

territory. Exclusivity "is generally apparent either from the

contract or from the arrangements agreed upon between the parties."

Orba, Inc., 49 F. Supp. 2d at 71. The 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. Cruz-Marcano, 2007 TSPR

198 at *9.

Caribbean's amended complaint mentions the exclusivity

requirement in a conclusory and casual fashion. The amended

complaint merely avers that "Caribbean solicit[ed] and negotiate[d]

purchase orders of Finlandia vodka and Jack Daniel's whiskey with

its clients in an exclusive nature." Although Caribbean claims

that it was involved in the sale of more than 400,000 cases of

Finlandia and 4,500 cases of Jack Daniel's, its amended complaint

is devoid of any factual allegations regarding the scope of

Caribbean's alleged exclusive right to procure and execute purchase

orders on Brown Forman's behalf, and does not include any factual

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allegations regarding any assurances from Brown Forman that would

support the contention that no other sales representatives were

allowed to sell the products in Puerto Rico. Surprisingly, the

complaint nowhere explains the territorial scope of Caribbean's

duties, an explanation that would support the assertion that

Caribbean indeed was granted the right to sell the products in

Puerto Rico.

In conclusion, even if we take as true Caribbean's

factual allegations that the parties intended to exclude

Caribbean's sales duties from the written promotional agreements,

and even if we credit the allegations that Caribbean was involved

in the sale of more than 400,000 cases of Finlandia and 4,500 cases

of Jack Daniel's, we are bound by Caribbean's admissions that it

did not send purchase orders to Brown Forman, and that it was not

compensated on the basis of the sales that it allegedly made.

Because the well-pleaded facts in Caribbean's complaint do not

support the conclusion that Caribbean procured and closed sales on

Brown Forman's behalf, we find that the complaint fails to

establish that Caribbean is plausibly entitled to relief under Law

21. Additionally, the allegations fail to establish that Caribbean

enjoyed exclusivity in its sales endeavors. The district court

properly dismissed Caribbean's Law 21 claim for failure to state a

claim.

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B. Dismissal of Caribbean's Breach of Contract Claims

Caribbean's complaint included a separate cause of action

for breach of contract and breach of the implied covenant of good

faith and fair dealing. The district court dismissed this claim,

finding that the arbitration clauses included in each of the

promotional agreements required the parties to arbitrate the

claim.10 In relevant part, the arbitration clauses included in the

promotional agreements stated that "[a]ny controversy or claim

arising out of or relating to this Agreement or the breach thereof

shall be finally settled by arbitration in Louisville, Kentucky

administered by the American Arbitration Association . . . ."

On appeal, Caribbean claims that its breach of contract

claim is not subject to arbitration because it arises out of the

terms of the oral sales representation agreements. Viewing the

oral sales representation contracts as separate and independent

10
Because the district court issued an order directing the parties
to submit the breach of contract claim to arbitration and
dismissing Caribbean's underlying claims without prejudice, we have
been presented with a "final decision with respect to an
arbitration" that is immediately appealable under the Federal
Arbitration Act, 9 U.S.C. § 16(a)(3). Green Tree Fin. Corp.-Ala.
v. Randolph, 531 U.S. 79, 86-87 (2000); see also Municipality of
San Juan v. Corporación para el Fomento Económico de la Ciudad
Capital, 415 F.3d 145, 148 (1st Cir. 2005). In these
circumstances, we treat Brown Forman's request to dismiss the
breach of contract claim on the ground that the claim is subject to
arbitration as a request for an order compelling arbitration. See
Fit Tech, Inc. v. Bally Total Fitness Holding Corp., 374 F.3d 1, 6
(1st Cir. 2004) (treating a motion to dismiss based on an
arbitration clause as a request to compel arbitration where the
appellant had clearly invoked the arbitration clause contained in
the agreement between the parties).

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agreements, Caribbean contends that the arbitration clauses

included in the promotional agreements do not cover claims arising

out of the oral agreements.

Caribbean's claim requires us to examine the scope of the

arbitration clause. This is a legal issue that we review de novo.

See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 723

F.2d 155, 159 (1st Cir. 1983), rev'd in part on other grounds, 473

U.S. 614 (1985). In evaluating the scope of the arbitration

clauses, we are mindful that "all doubts are resolved in favor of

arbitration; arbitration will be ordered unless it may be said with

positive assurance that the arbitration clause is not susceptible

of an interpretation that covers the asserted dispute." Id.

(internal quotation marks omitted).

Although Caribbean argues that its breach of contract

claim arises out of separate and independent verbal sales

representation agreements, its complaint makes it clear that the

breach of contract claim arises out of Brown Forman's decision to

terminate the "commercial relationship" between the parties. The

complaint also shows that the commercial relationship between the

parties is governed by the promotional agreements that include a

mandatory arbitration clause. By Caribbean's own admissions, the

oral sales representation contracts depend on, and are closely

interrelated to, the promotional agreements regarding key

contractual terms. For example, Caribbean readily admits that the

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compensation it received for its alleged sales efforts was governed

by the terms of the promotional agreements. Consequently, even if

we draw the inference that the sales representation agreements are

independent agreements, they would still be part of the commercial

relationship and would therefore be covered under the arbitration

clause.

Under these circumstances, we find that the arbitration

clauses can be reasonably interpreted to cover Caribbean's claim

that Brown Forman breached the commercial relationship between the

parties in bad faith. The district court properly referred the

breach of contract claim to arbitration.11

C. Attorneys' Fees

At the conclusion of the hearing held by the court on

October 30, 2007, the court stated that it would entertain a motion

for attorneys' fees. Consequently, Brown Forman filed a motion

requesting attorneys' fees in the amount of $23,456.75. In an

11
In passing and without any developed argumentation, Caribbean
argues that the arbitration clauses included in the promotional
agreements contravene Law 21 in as much as they include a choice of
law provision stating that arbitration is ruled by "the internal
laws of the Commonwealth of Kentucky." See P.R. Laws Ann. tit. 10,
§ 279f ("The sales representation contracts . . . shall be
construed pursuant to, and shall be governed by the laws of the
Commonwealth of Puerto Rico, and any stipulation to the contrary
shall be null."). We need not address this issue as Caribbean did
not provide any developed argumentation regarding the validity of
the choice of law provision. See United States v. Zannino, 895
F.2d 1, 17 (1st Cir. 1990) ("[I]ssues adverted to in a perfunctory
manner, unaccompanied by some effort at developed argumentation,
are deemed waived."). In any event, the issue may be addressed in
arbitration.

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order dated November 9, 2007, the district court denied Brown

Forman's request, stating that Brown Forman had failed to file a

verified statement of fees and expenses. The order further

explained that the court had not yet granted attorneys' fees to

Brown Forman, but that it had only allowed the parties to file

motions regarding attorneys' fees. In compliance with the district

court's order, Brown Forman filed a supplemental motion renewing

its request for costs and attorneys' fees. It appended a verified

and itemized statement of attorneys' fees and costs, showing that

it had calculated the total amount requested by multiplying the

total hours each attorney expended in the litigation by each

attorney's respective hourly rate. Caribbean did not object to

Brown Forman's request for attorneys' fees and costs. Absent an

objection from Caribbean, the district court entered a summary

order awarding the total sum in attorneys' fees that Brown Forman

had requested.

We typically "review an award of fees and costs for abuse

of discretion." Wennik v. Polygram Grp. Distrib., Inc., 304 F.3d

123, 134 (1st Cir. 2002). However, because Caribbean failed to

oppose Brown Forman's request for attorneys' fees and did not

challenge the district court's award, we review for plain error.

United States v. Richard, 234 F.3d 763, 770 (1st Cir. 2000). Under

the plain error standard, we may reverse the district court's award

if the court engaged in "particularly egregious or obvious legal

-20-
error." Id. (internal quotation marks omitted). "Plain error

applies only where the error results in a clear miscarriage of

justice or seriously affects the fairness, integrity or public

reputation of judicial proceedings." Negrón v. Caleb Brett U.S.A.,

Inc., 212 F.3d 666, 672 (1st Cir. 2000) (internal quotation marks

omitted).

Caribbean's challenge to the district court's grant of

attorneys' fees is two-fold. First, Caribbean argues that it has

not acted obstinately or frivolously in litigating this case, as

required by Puerto Rico law to support an award of attorneys' fees,

see Fajardo Shopping Ctr., S.E. v. Sun Alliance Ins. Co. of Puerto

Rico, Inc., 167 F.3d 1, 14 (1st Cir. 1999), and, thus, that the

district court's grant of attorneys' fees constitutes reversible

plain error. Second, it contends that, even if it is assumed

arguendo that awarding attorneys' fees to Brown Forman is

appropriate in this case, the district court nonetheless plainly

erred in computing the amount of the award, which was reached by

multiplying the number of hours that Brown Forman's attorneys

expended in the litigation by their hourly rate. It is Caribbean's

contention that the district court in effect employed the lodestar

fee-shifting method that, per the Puerto Rico Supreme Court's

decision in Corpak, Art Printing v. Ramallo Brothers, 1990

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P.R.-Eng. 710,162, 125 D.P.R. 724 (1990), is not available under

Puerto Rico law.12

Where, as here, the court's jurisdiction is based on

diversity of the parties, a district court's award of attorneys'

fees is governed by relevant state law, in this case Rule 44.1(d)

of the Puerto Rico Rules of Civil Procedure.13 P.R. Laws Ann. tit.

32, App. III, Rule 44.1(d); see also B. Fernández & Hnos., Inc. v.

Kellogg USA, Inc., 516 F.3d 18, 28 (1st Cir. 2008) ("Attorneys'

fees are recoverable in diversity cases where a state law provides

the right to recover such fees.").

Under Puerto Rico Rule of Civil Procedure 44.1(d), "the

award of attorney[s'] fees to the prevailing party depends

exclusively on the decision of the presiding judge with regard to

whether or not the losing party, or his counsel, acted in a

'frivolous or obstinate manner.'" Corpak, Art Printing, 1990

P.R.-Eng. 710,162 (emphasis omitted). This rule "was not designed

as a premium to successful litigants, but rather as a penalty,"

Reyes v. Banco Santander de P.R., N.A., 583 F. Supp. 1444, 1446

12
"The lodestar is determined by multiplying the number of hours
productively spent by a reasonable hourly rate to calculate a base
figure." De Jesús Nazario v. Morris Rodríguez, 554 F.3d 196, 207
(1st Cir. 2009).
13
Rule 44.1(d) states that, "[i]n the event any party or its
lawyer has acted obstinately or frivolously, the court shall, in
its judgment, impose on such person the payment of a sum for
attorney's fees which the court decides corresponds to such
conduct."

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(1st Cir. 1984), to be imposed "only . . . in those cases where the

court believes that the losing party, or his counsel, has been

obstinate or frivolous." Corpak, Art Printing, 1990 P.R.-Eng.

710,162 (emphasis in the original). The general standard is that

"'attorney[s' ] fees should be imposed in actions which result in

a litigation that could have been avoided, which prolongs it

needlessly, or that obliges the other party to embark on needless

procedures.'" Grajales-Romero v. American Airlines, Inc., 194 F.3d

288, 301 n.16 (1st Cir. 1999) (quoting Fernández v. San Juan Cement

Co., Inc., 18 P.R. Offic. Trans. 823, 830, 118 D.P.R. 713 (1987)).

Once the court makes the threshold determination of

obstinacy or frivolousness, imposition of attorneys' fees is

mandatory. Correa v. Cruisers, a Div. of KCS Int'l, Inc., 298 F.3d

13, 30 (1st Cir. 2002). "The amount of the fees awarded, however,

is left to the discretion of the court." Id. "[T]he degree or

intensity of the obstinate or frivolous conduct is the test or

determining or critical factor to be considered by the court[] when

calculating the attorney[s'] fees that the obstinate or frivolous

losing party shall bear." Corpak, Art Printing, 1990 P.R.-Eng.

710,162 (emphasis omitted). In addition, the court may consider

"factors such as the nature of the action, the questions of law

involved, the amount at issue, the time spent, the efforts and

professional activity needed for the case, and the skills and

reputation of the lawyers involved." Id.

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 Under Puerto Rico law, attorneys' fees are not meant to

compensate a litigant for the total costs incurred in the law suit.

Corpak, Art Printing, 1990 P.R.-Eng. 710,162. Rather, fee awards

"must be commensurate to that amount which, in the opinion of the

court, reasonably represents the value of th[e] [legal] services,

considering the degree of obstinacy [or frivolousness] and other

circumstances of the case." Asociación de Condóminos v. Trelles

Reyes, 20 P.R. Offic. Trans 599, 605, 120 D.P.R. 574 (1988).

Furthermore, fee-shifting methodologies -- such as the "lodestar

method" -- that allow courts to determine the attorneys' fees award

by multiplying the number of hours reasonably expended in defending

a case by a reasonable hourly fee, regardless of the degree or

intensity of the losing party's obstinate or frivolous conduct, are

not available under Puerto Rico law. Corpak, Art Printing 1990

P.R.-Eng. 710,162.

The plain error standard of review imposes a high burden

on Caribbean. Díaz-Fonseca v. Puerto Rico, 451 F.3d 13, 36 (1st

Cir. 2006) ("[I]t is rare indeed for a panel to find plain error in

a civil case.") (internal citations and quotation marks omitted).

For the reasons stated below, we find that the district court did

not commit plain error in its award of attorneys' fees to Brown

Forman and, therefore, affirm on this issue.

First, although the district court failed to make an

express determination as to Caribbean's obstinance or

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frivolousness, we find that such determination is sufficiently

implicit and supportable on the record to withstand plain error

review. For example, in its opinion and order dated November 8,

2007, the district court correctly noted that Caribbean "[c]learly"

did not meet the exclusivity requirement of Law 21, and found

Caribbean's "assertion that the alleged sales representation

agreements provided for the same payment terms as the promotional

agreements to be preposterous." IOM Corp. v. Brown Forman Corp.,

553 F. Supp. 2d 58, 64-65 (D.P.R. 2007) (emphasis added). Also,

the record shows that Caribbean has put forth inconsistent

arguments regarding the scope of the agreements.14

Caribbean argues that its actions cannot be considered

obstinate or frivolous in light of the fact that, at the time it

filed the complaint, the Puerto Rico Supreme Court had yet to

interpret Law 21. This factor, however, is not sufficient to

conclude that the district court committed plain error. Pérez

Marrero v. Colegio de Cirujanos Dentistas de Puerto Rico, 1992

P.R.-Eng. 754,861, 131 D.P.R. 545 (1992) ("The fact that the issue

14
In its original complaint, Caribbean alleged that certain
agreements entered into with Brown Forman were sales-representation
agreements. IOM Corp., 553 F. Supp. 2d at 59. Caribbean later
filed a verified amended complaint in which it alleged that the two
written agreements were actually "promotional agreements," and that
a pre-existing oral sales-representation agreement existed. Id. at
59-60. Then, at a hearing, Caribbean asserted that the oral
sales-representation agreement in fact post-dated the written
agreements. Id. at 62 n.6. The district court found these
arguments to be inconsistent and contradictory. Id.

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is 'new,' . . . does not give a party a 'carte blanche' to act in

an obstinate or frivolous manner." (emphasis omitted)). As

previously explained, Caribbean presented various inconsistent

arguments and its well-pleaded facts failed to establish a number

of the elements clearly required for a Law 21 claim.

In light of these considerations, we find that the record

supports -- under a plain error standard of review -- an implicit

determination that Caribbean's conduct was frivolous. Therefore,

the district court did not commit plain error in awarding

attorneys' fees to Brown Forman.

Second, for the reasons stated below, we find that the

amount of the attorneys' fees award granted by the district court

to Brown Forman also withstands plain error review.

The Puerto Rico Supreme Court has held, while

interpreting Rule 44.1(d), that the amount an obstinate or

frivolous party must bear does not necessarily have to match the

actual attorneys' fees paid by the prevailing party. Corpak, Art

Printing, 1990 P.R.-Eng. 710,162. This is due to the fact that

Rule 44.1(d) does not seek to compensate the prevailing party. Id.

Rather, its main purpose is to penalize or sanction a losing party

with an attorneys' fees award that is commensurate with the degree

or intensity of his obstinate or frivolous conduct. Id.

A court, however, is not precluded from deciding that --

pursuant to a proper analysis under Rule 44.1(d) -- the losing

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party must bear an attorneys' fees award that matches the

attorneys' fees requested by the winning party, even if such amount

coincides with what would otherwise be imposed if the court had

calculated the award by using the "lodestar method." In other

words, the fact that the attorneys' fees award granted by a court

under Rule 44.1(d) coincides with the reasonable attorneys' fees

expended by the winning party is not sufficient to find that the

court plainly erred, provided that the award is supportable based

on the losing party's obstinate or frivolous conduct and the other

circumstances of the case. Such a sanction may be appropriate, for

example, in a case where the court finds that the losing party's

conduct was particularly frivolous, since awarding the full amount

of the reasonable fees requested by the prevailing party sends a

message to the losing party that the action should never have been

brought.

In light of the purpose of Rule 44.1(d) and the finding

of frivolousness in this case, we find that the district court did

not commit plain error in determining the amount of the attorneys'

fees award.

In sum, we find that the district court's attorneys' fees

award to Brown Forman -- including the amount awarded -- withstands

plain error review. Accordingly, we affirm the district court's

order on this issue.

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 V. Conclusion

For the reasons stated, we affirm all of the challenged

district court orders.

Affirmed.

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