Citibank Global Markets, Inc. v. Rodriguez Santana

United States Court of Appeals
For the First Circuit

Nos. 08-1533, 08-1739

CITIBANK GLOBAL MARKETS, INC. d/b/a SMITH BARNEY,

Plaintiff, Appellee/Cross-Appellant,

v.

LUIS RODRÍGUEZ SANTANA, Executor of the Estate of Luis Fernández
Ramírez; ELI DÍAZ RODRÍGUEZ, Executor of the Estate of Luis
Fernández Ramírez; ALFER REALTY & DEVELOPMENT CORP.; CENTRAL
PLAZA CORP.; COMMONWEALTH PROMOTERS, INC.; OGIMA INVESTMENTS
CORP.,

Defendants/Third-Party Plaintiffs-Appellants/Cross-Appellees,

v.

JANE DOE-HERNANDEZ; CONJUGAL PARTNERSHIP
DOE-HERNANDEZ; JUAN CARLOS HERNANDEZ,

Third-Party Defendants-Appellees.

[Hon. José Antonio Fusté, U.S. District Judge]
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

Before

Lipez, Hansen,* and Howard,
Circuit Judges.

Rubén T. Nigaglioni, with whom Nigaglioni & Ferraiuoli Law
Offices, PSC, was on brief, for defendant, third-party plaintiffs
and appellants/cross-appellees.
Néstor M. Méndez Gómez, with whom Janitza M. García-Marrero
and Pietrantoni Mendez & Alvarez LLP, were on brief, for plaintiff-

*
Of the Eighth Circuit, sitting by designation.
appellee/cross-appellant.

July 17, 2009
 HOWARD, Circuit Judge. In this appeal from the dismissal

of a counterclaim, the appellants ask us to either set aside or

reform a settlement agreement between two sophisticated parties

because the circumstances of the negotiation carry a whiff of

unseemliness, and there has been a suggestion of fraud.

Considering all of the facts and circumstances surrounding the

negotiation, we conclude that the settlement agreement is binding

under Puerto Rico law, and we detect no fraud or absence of

disclosure that justify unraveling or disturbing the agreement.

For its part, the victor below -- Smith Barney -- sought

attorneys' fees under the Puerto Rico Rules of Civil Procedure and

requested, pursuant to federal securities laws, findings regarding

the parties' compliance with Rule 11. Concluding that it would be

inconsistent with Puerto Rico law to assess fees for pressing a

non-frivolous claim, and also that where the record is clear we

need not remand for Rule 11 findings, we deny Smith Barney's cross

appeal.

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 I. Facts

Sometime in early 2002,1 Luis Fernandez Ramirez, an

attorney, opened numerous brokerage accounts on behalf of himself

and several closely-held corporations (referred to herein

collectively as "Fernandez, et al.") with CitiBank Global Markets

d/b/a Smith Barney.2 Soon thereafter, Fernandez, et al. became

dissatisfied with the brokerage commissions levied on their

accounts, and as a result, threatened to move their considerable

portfolios elsewhere. Not wanting to lose this business, in June

2003 Smith Barney agreed to a lower commission rate and to credit

the difference between the higher commission rate charged to those

accounts and seven-eighths of that commission rate. Moreover,

Smith Barney proposed an even lower commission rate of ten cents

per share for all future transactions. An even lower rate of three

cents per share was proffered (and agreed upon) two months later,

in August 2003.

1
Because the district court dismissed the appellants'
counterclaim under Rule 12(b)(6), our review is de novo and we view
the well-pleaded facts in the light most favorable to the non-
moving party, drawing all reasonable inferences in its favor. Gray
v. Evercore Restructuring L.L.C., 544 F.3d 320, 324 (1st Cir.
2008)(citations omitted). Accordingly, our factual recitation is
drawn primarily from the amended counterclaim at issue in this
case. See id. at 323.
2
Appellants in this case are Luis Rodríguez Santana and Eli
Diaz Rodríguez, the executors of Fernandez's estate. Closely held
corporations owned or managed by Fernandez, viz., Alfer Realty &
Development Corp., Central Plaza Corp., Commonwealth Promoters,
Inc., and OGIMA Investments Corp., are also appellants in this
action.

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 It turned out that Smith Barney failed to honor any of

these commitments, and actually charged the accounts brokerage

commission charges in excess of its normal, published rates. In

late 2005 or early 2006, senior managers in Smith Barney's Puerto

Rico Office informed Fernandez of certain "irregularities" in the

accounts that, according to Smith Barney, resulted in approximately

$950,000 in commission overcharges across all of the accounts.

Smith Barney offered to pay this amount in order to settle

Fernandez's claims of commission overcharges and release it from

further liability. Not content to rely on the verbal

representations of senior officers at Smith Barney Puerto Rico,

Fernandez repeatedly requested the calculations supporting this

amount. Although Smith Barney initially resisted providing these

calculations, it eventually relented.

On the morning of Friday, February 17, 2006, Smith Barney

sent Fernandez the calculations supporting its proposed settlement

amount. These calculations involved all eight accounts at issue

and were voluminous, totaling forty-four legal-sized pages. Later

that day, after Fernandez received the calculations, a

representative of Smith Barney arrived with the settlement

documents and a notary public in the hope of consummating a

settlement with respect to the brokerage commissions.

Fernandez, who only hours earlier had received the

working papers from which the settlement figures were derived,

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requested several changes to the settlement agreement, and then

without reviewing the calculations he had so ardently requested,

signed the settlement agreement.3 Among other provisions,

Fernandez agreed

[to] release[], forever discharge[] . . . and
hold Smith Barney harmless . . . from any and
all actions, causes of action, complaints,
charges, claims, liabilities, demands,
damages, and costs of any kind . . . whether
matured or unmatured, fixed or contingent,
known or unknown . . . against Smith Barney
from the beginning of the world to the date of
this agreement by reason, including but not
limited to [the securities accounts of
Fernandez and the appellants].

In addition to this release, Fernandez further agreed that he

"determined that this settlement is fair and reasonable under all

the circumstances," that "this determination has been based solely

upon his independent judgment," and that in reaching this

conclusion he "had adequate opportunity to discuss and assess the

merits of all his claims or potential claims with an attorney of

his choice." In addition, Fernandez also agreed that he

3
Fernandez sought and received a representation that stated
"Smith Barney represents that the sum accurately reflects the
variance between standard commissions and the actual commissions
charged to releasor." This representation was added to the first
paragraph of the release. We are free to consider the settlement
agreement and the other documents referenced in the counter claim.
See Coyne v. Cronin, 386 F.3d 280, 283 (1st Cir. 2004) (considering
document expressly linked to complaint whose admissibility was not
challenged as effectively part of the complaint and available for
review on motion to dismiss).

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"cooperated in the drafting and preparation" of the settlement

agreement.

A Smith Barney representative executed the agreement on

the same day. Over the ensuing weekend, Fernandez reviewed the

calculations Smith Barney had provided and realized that the

settlement was not calculated on the basis of the lower commission

rates of ten cents and three cents per share that were agreed upon

in mid-2003. As a result of these and other alleged defects, on

Tuesday, February 21 (Monday was a holiday), Fernandez sought to

hold the settlement "in abeyance," in the hope of securing richer

terms or rescinding the whole agreement.

Smith Barney, however, took the position that the

settlement agreement was binding, and was unwilling to revisit the

amount of compensation paid to Fernandez.4 On April 12, 2006,

Smith Barney tendered checks to Fernandez totaling $947,128.71.

Approximately two weeks later, Smith Barney sent Fernandez an

executed copy of the settlement agreement that Fernandez had

previously requested.

4
During this time the parties exchanged several letters, and
according to the complaint, these letters demonstrate that Smith
Barney management was not aware of the advantageous commission
rates of ten cents and three cents per share that its predecessors
had promised Fernandez. Fernandez believes that this lack of
awareness demonstrates either a mutual mistake or consent to settle
only claims that Smith Barney charged commission rates in excess of
its standard commission rates, leaving for another day the
settlement of the dispute regarding the difference between standard
commission rates and those promised to Fernandez in mid-2003.

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 On June 27, 2006, Smith Barney filed a complaint in

federal district court seeking, inter alia, a declaration that the

settlement agreement was valid, an injunction prohibitng Fernandez,

et al. from seeking arbitration, an order for specific performance

of the agreement, and damages of $200,000 for appellants' alleged

breach of the settlement agreement.

For his part, Fernandez (and his companies) filed a

counterclaim asserting various theories under federal and Puerto

Rico law. Fernandez later sought leave to amend the counterclaim,

which was granted in April, 2007. The amended counterclaim alleged

mail and wire fraud, as well as illegal appropriation in violation

of the civil provisions of RICO, breach of fiduciary duty and

breach of contract in violation of Puerto Rico law, breach of

Puerto Rico's Act Against Organized Crime and Money Laundering,

P.R. Laws Ann. tit 25, §§ 971 et seq., and for the first time, a

claim of securities fraud, alleging violations of section 10b of

the Securities Exchange Act, 15 U.S.C. § 77j(b), and Rule 10b-5, 17

C.F.R. § 240.10b-5.

In October, 2007, the district court granted Smith

Barney's motion to dismiss the counterclaim. The district court

grounded its decision primarily on the basis that the settlement

agreement was valid and binding on the parties, and in the process,

rejected the counterclaim brought by Fernandez et al. challenging

the validity of the settlement agreement. Having found that the

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settlement agreement was valid and binding, see P.R. Laws Ann. tit.

31, § 4828, the district court concluded that with respect to these

parties, the agreement had the same effect as res judicata, and

therefore Fernandez, et al. could not pursue their counterclaim.

See P.R. Laws Ann. tit. 31, § 4827. As a result, the district

court did not consider Smith Barney's alternative defenses,

including inter alia, defenses based on limitations, failure to

plead scienter properly, and failure to meet the heightened

pleading requirements of Rule 9 of the Federal Rules of Civil

Procedure.

After the district court dismissed the counterclaim,

Smith Barney sought attorneys' fees on an equitable theory, which

the district court apparently interpreted to be a request for fees

pursuant to the Puerto Rico Rules of Civil Procedure, based on

Fernandez's alleged obstinate and vexatious challenges to the

validity of the settlement agreement and because his pursuit of the

counterclaim obstinately and frivolously extended the proceedings.5

See P.R. R. Civ. P. 44.1(d); see also P.R. Tel. Co., Inc. v. U.S.

Phone Mfg Corp., 427 F.3d 21, 33 (1st Cir. 2005). In addition,

Smith Barney sought attorneys' fees as a sanction for the

defendants' alleged violation of Rule 11, pursuant to the standards

for such sanctions under the Private Securities Litigation Reform

5
On appeal, Smith Barney has not challenged the district
court's decision to treat its request for attorneys' fees as a
request under Rule 44 of the Puerto Rico Rules of Civil Procedure.

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Act (PSLRA), 15 U.S.C. § 78u-4(c), which requires district courts

to make specific findings regarding compliance with Rule 11(b),

mandates sanctions where a violation is found, and creates a

presumption in favor of awarding attorneys' fees and costs for

violations of Rule 11.

The district court denied Smith Barney's motion for

attorneys' fees and entered final judgment. The parties' appeal

and cross-appeal timely followed.

II. Fernandez's Appeal

We review the district court's decision to grant the

motion to dismiss de novo, Gray, 544 F.3d at 324, and like the

district court, we accept as true all of the appellants' well-

pleaded facts and draw all reasonable inferences in the light most

favorable to the non-moving party. Id. But to survive a motion to

dismiss (or a motion for judgment on the pleadings), the complaint

must plead facts that raise a right to relief above the speculative

level, Dixon v. Shamrock Fin. Corp., 522 F.3d 76, 79 (1st Cir.

2008), such that the entitlement to relief is plausible, Cook v.

Gates, 528 F.3d 42, 48 (1st Cir. 2008). Release is an affirmative

defense, see Fed. R. Civ. P. 8(c), and such a defense will support

a motion to dismiss only where it is (1) definitively ascertainable

from the complaint and other sources of information that are

reviewable at this stage, and (2) the facts establish the

affirmative defense with certitude, Gray, 544 F.3d at 324.

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 We begin with a brief reconnaissance of applicable Puerto

Rico substantive law, which we apply in this diversity dispute.6

See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938); Essex Ins.

Co. v. BloomSouth Flooring Corp., 562 F.3d 399, 403 (1st Cir.

2009). In Puerto Rico, a "compromise" is a particular species of

contract used to resolve disputes involving litigation or the

potential for litigation. P.R. Laws Ann. tit. 31, § 4821 ("A

compromise is a contract by which each of the parties in interest,

by giving, promising, or retaining something, avoids the

provocation of a suit, or terminates one that has already been

instituted."). Where compromises are validly consummated, they

bind the parties to the compromise in the same manner as the

doctrine of res judicata. P.R. Laws Ann. tit. 31, § 4827.

However, compromises procured as the result of error, deceit,

violence, or forgery are void. P.R. Laws Ann. tit. 31, §§ 4828,

3404.

With this background, we examine Fernandez's contentions.

Though packaged in several legal theories, the primary thrust of

Fernandez's complaint is that Smith Barney did not clearly and

unambiguously clarify that the approximately $950,000 settlement

6
When a release involves a party's rights under federal law,
we employ a totality of the circumstances approach in which we
evaluate the knowing and voluntary character of the asserted
release. See Cabán Hernández v. Phililp Morris USA, Inc., 486 F.3d
1, 8 (1st Cir. 2007). But because Puerto Rico law applies to this
release, we apply state law principles to determine the adequacy of
the waiver.

-11-
was not calculated on the basis of the lower commission rates of

ten and three cents per share on which he and Smith Barney agreed

in mid-2003. According to Fernandez, this lack of clarity was

further compounded by the circumstances surrounding his receipt of

the working papers and the execution of the settlement agreement.

In particular, Fernandez objects that Smith Barney -- only hours

after providing the working papers -- sent to his office not only

a draft of the settlement agreement, but also an attorney and a

notary public with the expectation of executing the settlement that

very day.

Under these circumstances, Fernandez contends that Smith

Barney's failure to articulate with particularity the scope of the

settlement has the effect of invalidating the settlement under

Puerto Rico law, or requires a reformation of the settlement such

that it excludes his contract-based commission claims.

Alternatively, Fernandez argues that the compromise is void because

it was procured as the result of "dolo," a form of contractual

deceit that may arise from concealment. See Prado Alvarez v. R.J.

Reynolds Tobacco Co., Inc., 405 F.3d 36, 44 (1st Cir. 2005).

A. Validity of the Contract

Under Puerto Rico law, a contract has three elements:

consent, a definitive (and legal) object, and consideration. See

P.R. Laws Ann. tit. 31, § 3391; Quiñones López v. Manzano Pozas,

141 P.R. Dec. 139, 1996 P.R. Eng. 499,244 (1996) (stating that

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three essential conditions of contract validity are consent, a

definite object that may be the subject matter of a contract, and

consideration).7 Fernandez believed that the settlement agreement

did not include all of Smith Barney's commission overcharges, in

excess of contractually promised rates, and he argues that this

mistaken belief is the sort of error that would void his consent.

See P.R. Laws Ann. tit. 31, § 3404 (erroneous consent is void).

Under Puerto Rico law, however, not all errors entitle one party to

invalidate his consent (i.e. make a contract voidable); in order to

invalidate consent, an error must "refer to the substance" or the

"object of" the contract. P.R. Laws Ann. tit. 31, § 3405.

Moreover, the Puerto Rico Supreme Court has noted the

important social interest in holding parties to their contracts,

and therefore the "validity of [a] contract and of the consent is

presumed," and in order for an error to annul consent, such error

must be "excusable." Capó Caballero v. Ramos, 83 P.R. Dec. 650, 83

P.R.R. 625, 648-49 (1961) (emphasis in original). An error is not

excusable "when the ignorance of the true state of things is due to

negligence or fault of the one who invokes it." Id. at 649. In

Capó Caballero, the Puerto Rico Supreme Court applied the

"excusable" requirement to find that the defendant Ramos could not

7
The official translations of many Puerto Rico cases cited
herein do not contain internal page numbers. Accordingly, we
cannot include pin-point citation references for those cases. See
Otero-Burgos v. Inter Am. Univ., 558 F.3d 1, 8 n.18 (1st Cir.
2009).

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invalidate his consent to a contract to purchase land from Capó

Caballero. Id. at 653. Ramos intended to construct a T.V. antenna

on a plateau at the top of a hill, which Ramos believed was owned

by Capó Caballero. Ramos sent an attorney and an engineer to

confirm that the desired location, which had already been

identified, was indeed owned by Capó Caballero. Id. at 639.

Because it was raining, the engineer did not complete the arduous

climb to the top of the hill, but nevertheless informed Ramos that

the desired location for the antenna was within Capó Caballero's

fenced land. Id. at 639-40. On further review, it became clear

that although Capó Caballero's land was high enough to permit

construction of an antenna, the steep slope involved would make

construction economically prohibitive and that the desired land was

actually owned by another. Id. at 651-52. Nevertheless, the

Puerto Rico Supreme Court held that any error on the part of Ramos

"did not refer to [] facts unknown to the defendant or which he

could have found out by exercising some care; it was due to

[Ramos's] negligence or fault and was not an excusable error." Id.

at 652 (citing Miro v. Industrial Commission, 57 P.R.R. 27, 33

(1940)).8

8
Citing to prior decisions from the Spanish Supreme Court,
which it treated as persuasive authority, the Puerto Rico Supreme
Court also noted that reliance on error to avoid consent is "much
less admissible 'whenever those who contract are experts or
connoisseurs of the respective business . . . .'" Capó Caballero,
83 P.R.R. at 652 (emphasis in original). Smith Barney notes that
Fernandez, and the accounts he controlled, generated "more than

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 From this authority Smith Barney argues that if there was

any error in Fernandez's consent, it was not excusable and

therefore cannot be used to invalidate Fernandez's consent and

rescind the settlement, nor can the error support reformation of

the settlement to exclude claims based on the contractual ten and

three cent per share commission rates. The essence of Smith

Barney's argument is that, as Fernandez concedes, he was in

possession of the calculations used to derive the settlement amount

before he assented to the settlement, and consequently, Fernandez

was capable of determining precisely what commission rates were

used to calculate the settlement. Thus, Fernandez's failure to

discover that the contractual rates of three and ten cents per

share were not used to calculate the settlement was not an

excusable error that would serve to invalidate Fernandez's consent.

Fernandez does not directly grapple with this authority,

and instead relies on another case, Producciones Tommy Muñiz, Inc.

v. C.O.P.A.N., 113 P.R. Dec. 517, 13 P.R. Offic. Trans. 664 (1982),

to suggest that no contract was formed between himself and Smith

Barney. In C.O.P.A.N., the Puerto Rico Supreme Court held that the

acceptance of a winning bid did not constitute a valid offer and

acceptance (i.e. a contract) because a significant term -- the size

2,000" trades over the course of four years. On that basis, Smith
Barney urges that Fernandez was an "expert" in the business of
securities trading and that we should examine any "error" on
Fernandez's part with a particularly searching eye. There is some
force to this reasoning.

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and complexity of the "television center" to be furnished in

exchange for the exclusive right to broadcast the Pan-American

Games -- was indefinite, and course of dealing evidence revealed

that the parties subsequently traded seven drafts of a proposed

contract. Fernandez argues that the inclusion of contractual

commission overcharges in the settlement agreement amounted to

essentially a latent ambiguity in a key term, as in C.O.P.A.N., and

therefore his acceptance of the settlement agreement should not

have created a legally binding contract.

We disagree. Unlike the construction of a television

center, which can involve many permutations of equipment quality

and quantity, the settlement agreement did not fail for

indefiniteness or contain the same level of ambiguity in a key

term. The total amount of the settlement was precisely delineated,

as were the calculations supporting the settlement. As the court

made clear in C.O.P.A.N., it is not necessary for an offer to

specify every detail, if such details can be ascertained from other

sources, and the parties were clear about them. In the present

case, the calculations, whose accuracy is not challenged, were

supplied before the settlement was agreed upon, and they served the

purpose of ensuring that the offer was definite. Moreover, in view

of the Puerto Rico Supreme Court's insistence that errors vitiating

consent must be excusable, it would be unfair and inappropriate to

permit Fernandez to withdraw his consent from this contract,

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because all of the information necessary to ferret out any

erroneous conception or misimpression under which he was operating

with respect to the scope of the settlement was already in his

possession.

B. Compromise

Although the settlement agreement was a valid contract

between the parties, there exists a further question whether it was

a compromise under Puerto Rico law. The Supreme Court of Puerto

Rico has identified three elements of a compromise: (i) an

uncertain legal relationship, or "conflicting intentions born out

of a legally dubious question"; (ii) an intent to eliminate the

uncertainty, that is, the parties must intend to substitute "the

uncertain relationship for one that is for them certain and

uncontrovertable"; and (iii) the parties must make reciprocal

concessions. Citibank, N.A. v. Dependable Ins. Co., 121 P.R. Dec.

503, 21 P.R. Offic. Trans. 496, 506 (1988); accord Cabán

Hernández,486 F.3d at 12. See also P.R. Laws Ann. tit. 31, § 4821.

Fernandez does not contest this well-settled proposition.

Rather, he asserts that the civil law principle of narrowly

construing compromises and waivers of rights precludes the

conclusion that, despite its plain terms, the settlement agreement

compromised all commission-related disputes between the parties.

Thus, he argues that the settlement compromised only the dispute

over commission charges in excess of Smith Barney's standard

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charges,9 leaving open any dispute over the difference between

Smith Barney's actual charges and the lower commission rates that

Smith Barney promised Fernandez.

This contention is misplaced. We are aware of nothing in

Puerto Rico law that hinders the most natural reading of the

settlement agreement as settling all commission-related disputes

between the parties as of the date of the agreement. As we read

the authority Fernandez cites, it is in pitch-perfect harmony with

our conclusion on this score. It is true that the civil law limits

the scope of any compromise to "objects specifically determined

therein or which from a necessary inference from its words must be

considered as included therein," P.R. Laws Ann. tit. 31, § 4826;

see also Succession of Román Febres v. Shelga Corp., 111 P.R. Dec.

782, 11 P.R. Offic. Trans. 988 (1982), and the civil law further

cabins a renunciation of rights to "only those [rights] relating

to the question with regard to which compromise has been made."

Id. Citing to this authority, Fernandez argues that the expansive

language of the settlement should be limited to claims for only

overcharges over Smith Barney's published rates. Although the

9
We need not dwell on Fernandez's related claim that the
settlement agreement lists only him as a "releasor," and
consequently, the release should not apply to the corporate
appellants. Although it is true that Fernandez is the only
"releasor" named in the agreement, the account numbers of the
corporate appellants are specifically included in the settlement
agreement. Reading those accounts out of the settlement agreement
would not be a tenable interpretation of the agreement, under any
principle of construction.

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civil law would almost certainly restrict the scope of the

settlement agreement, Fernandez's proposed interpretation strikes

us as dissonant with the general rules of contract construction in

Puerto Rico, which remain applicable to compromises. See Román

Febres, 11 P.R. Offic. Trans. 988 ("Of course, as far as they are

not incompatible with this particular rule of construction, the

general rules of interpretation of contracts are applicable . . .

.").

Applying Puerto Rico's general rules of contract

construction, we conclude, while keeping in mind the policy of

construing renunciations of rights narrowly, that the best reading

of the settlement agreement is that it settles all of the parties'

commission-related disputes. The Puerto Rico Supreme Court has

made clear that contracts are "to be construed in good faith," and

that contracts should be construed assuming that they were "drawn

faithfully and correctly, that is in the understanding that when

they were drawn[,] the parties wished to express themselves as

normally honest people do, not seeking circumlocutions, deliberate

obfuscations or obscurity . . . ." Citibank, 21 P.R. Offic.

Trans. at 508 (citing Ex Parte Negron Rivera y Bonilla, 120 P.R.

Dec. 61, 20 P.R. Offic. Trans. 63, 77-78 (1987)). Under this

standard, in Citibank the Puerto Rico Supreme Court turned aside

Citibank's claim that, despite plain language in a stipulation and

settlement, certain insurance claims should not have been dismissed

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with prejudice because they were not discussed during negotiations

and Citibank was under the (mistaken) impression that such claims

had been paid or were in the process of being paid. See id. at

503-04. The court found persuasive (and not contrary to the civil

law) the settlement's plain language that the parties agreed to

"settle all the claims accrued or which may accrue from the

Policy." Id. at 508.

Fernandez nevertheless argues that the case sub judice

more closely resembles another case, Román Febres, in which the

Puerto Rico Supreme Court made clear that a settlement with respect

to one case would not be made applicable to other cases that were

pending between the same parties, despite potentially broad

language in the agreement. In that case, Román Febres agreed to

settle a dispute with Hampton Development Corporation involving the

sale of property for development purposes. The settlement

agreement included a term by which Román Febres agreed to

fully and completely release Hampton
[Development Corporation] and its affiliates
from any claims or causes of action that could
have accrued or may accrue in the future in
behalf of the former and against Hampton and
its affiliates as a result of relations
existing between the parties mentioned up to
this day.

Román Febres, 11 P.R. Offic. Trans. 988. Relying on this language,

Hampton argued that the settlement agreement encompassed three

suits filed by Román Febres seeking damages arising from three

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separate and unrelated construction contracts. The Puerto Rico

Supreme Court began its analysis by noting that nothing in P.R.

Laws Ann. tit. 31, § 4827 constrains the court's ability to

interpret the scope and application of a compromise. Id. The

court went on to conclude that the settlement agreement, despite

the broad language cited above, should not be read to include the

three suits at issue, which sought recovery for materials supplied

and work previously performed in unrelated contracts. Id. The

court grounded its decision on three related bases: first, the

court noted that the broadly drafted settlement was ambiguous,

particularly with respect to the phrase "mentioned." Next, the

court noted that if the parties to the release wished to extinguish

then-filed and pending suits, "it would be logical to think that

they would have said so specifically and not as part of a general

and indeterminate release," which the court concluded was an

"accessory" to the main compromise settling the real estate

dispute. Id. Finally, the court relied on the civil law notion

that compromises should be narrowly construed to reinforce its

independent reading of the settlement agreement as not reaching the

other suits. Id.

Fernandez argues that the dispute regarding his

contractually-based fee claims are like the unrelated suits that

the court found in Román Febres were not included in the parties'

broadly worded settlement agreement. In support of his contention,

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Fernandez argues that, at the time Smith Barney drafted the

settlement agreement, it was not aware of the contractual

commission fees of ten and three cents per share that it had

(allegedly) agreed to in mid-2003. Further, Fernandez argues that

the settlement agreement makes clear that by the settlement

agreement's plain terms, the approximately $950,000 provided for in

the agreement only "reflects the variance between standard

commissions and the actual commissions charged."

Recognizing that this case does not fit comfortably

within the paradigm of either Citibank or Román Febres, we conclude

that Smith Barney's proposed reading of the settlement agreement is

the better one. Smith Barney argues that the parties wished to

settle at a minimum all of their commission-related disputes, and

that the settlement agreement should be read to effectuate its

purpose of "resolv[ing] all pending claims and differences [between

Smith Barney and Fernandez]."

It is true that the release was not arrived at with the

lengthy drafting history or the specific terms described in

Citibank, see 21 P.R. Offic. Trans. at 502-03, (describing

settlement and its terms with respect to several causes of action);

see also id. at 506-07 (stating that Citbibank negotiated

settlement of ongoing controversy and that Citibank's counsel

signed settlement after review to resolve "all doubts surrounding

the items and sums involved"). Nevertheless, Smith Barney

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furnished Fernandez with all calculations necessary to determine an

acceptable settlement of the commission-related disputes, and after

an opportunity to review these calculations and the agreement

itself, Fernandez agreed to the proposed settlement. And unlike

Román Febres, the claim that Fernandez wishes to exclude from the

settlement arises from the same common nucleus of operative fact:

Smith Barney's levying of excessive commissions charges, which were

the impetus for the compromise at issue. Accordingly, we see no

reason to refrain from enforcing the plain, if broad, terms of the

agreement. This case just does not encompass the same level of

ambiguity present in Román Febres, and the compromise should be

enforced.10 Accord Cabán Hernández, 486 F.3d at 12 (noting that

release was intended to eliminate all uncertainty surrounding

plaintiffs' termination).

10
Fernandez presses another related reason for finding that the
settlement agreement should not reach his contractual commission
claims: the consideration of roughly $950,000 was so lacking as to
provide another interpretive thumb on the scale in favor of his
construction of the settlement agreement. See Román Febres, 11
P.R. Offic. Trans. at n.6 (noting that commentators suggest "in
cases of onerous contracts, doubts should be decided in favor of
the greater reciprocity of interests"). The Puerto Rico Supreme
Court has made clear that reciprocal concessions involved in a
compromise do not have to be equivalent. Citibank, 21 P.R. Offic.
Trans. at 507. Here, Smith Barney abandoned several potential
defenses to liability, including ratification and limitations-based
defenses, and agreed to pay a significant sum to settle the matter.
Although Fernandez may have been entitled to more, perhaps even
several hundred percent more had he chosen to litigate and then
secured a favorable verdict, given the implausibility of his
reading of the settlement agreement, the substantial consideration
principle, if it is even applicable, does not alter our reading of
the compromise.

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 C. Dolus/Dolo

Notwithstanding our conclusion that the compromise

between Fernandez and Smith Barney was valid and reaches all

commission-related disputes, Fernandez argues that the presence of

contractual deceit (dolus or dolo) nevertheless requires

invalidation of the contract. Dolus or dolo is a form of

contractual deceit that can serve to invalidate consent to an

otherwise valid contract or compromise. See P.R. Laws Ann. tit.

31, § 4828 (providing that a compromise in which "error, deceit,

violence or forgery of documents is involved, shall be subject to

section 3404 of this title"). In turn, section 3404 provides that

"consent given by error, under violence, by intimidation or deceit

shall be void." P.R. Laws Ann. tit. 31, § 3404. Nevertheless, the

Puerto Rico Supreme Court has made clear that good faith on the

part of contracting parties is "always presumed," and one seeking

to rely on dolo to invalidate a contract must rebut the presumption

of good faith with evidence of intentional fault or bad faith.

Citibank, 21 P.R. Offic. Trans. at 512 (citing Canales v. Pan Am.,

112 P.R. Dec. 329, 12 P.R. Offic. Trans. 411 (1982)); accord Cabán

Hernández, 486 F.3d at 12. Moreover, in determining whether to

permit invalidation of a contract on the basis of dolo, Puerto Rico

courts place considerable weight on the education, social

background, economic status, and business experience of the party

seeking to avoid the contract. Cabán Hernández, 486 F.3d at 12

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(citing Miranda Soto v. Mena Ero, 109 P.R. Dec. 473, 9 P.R. Offic.

Trans. 628, 634 (1980)). Applying these factors, we have declined

to invalidate English-language releases signed by individuals, two

of whom lacked fluency in English, and all of whom were educated at

slightly beyond the high school level. Cabán Hernández, 486 F.3d

at 9, 12. In the present case, of course, the party seeking to

invalidate the contract was a wealthy and accomplished attorney

experienced enough to have a portfolio that generated in excess of

a million dollars in brokerage commissions. Fernandez's

sophistication, coupled with his failure to allege sufficient,

colorable bad faith on the part of Smith Barney, defeats any

claimed dolo in this case.

Recognizing this possibility, Fernandez maintains that

the Puerto Rico Supreme Court has been expanding the law of dolo,

and that it is increasingly viewing failures to speak during

contract negotiations with a jaundiced eye, even when the party

seeking to avoid a contract is sophisticated. In support of this

proposition, Fernandez cites Ortiz Burnett v. El Mundo Broad.

Corp., in which an equally divided Puerto Rico Supreme Court upheld

a lower court's decision permitting a trial on the question of

whether a party to lease negotiations had a duty to disclose to his

commercially sophisticated counterparty a pre-existing agreement to

sub-lease his space to third parties at a (possibly substantial)

profit. 2006 T.S.P.R. 154, 2006 WL 3055516 (P.R. Oct. 18, 2006).

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It is not clear to us that either this case or Banco Popular v.

Succession Talavera, 2008 T.S.P.R. 132, 2008 WL 3834118 (P.R. July

31, 2008), another case cited by Fernandez in support of his dolo

argument, suggest a contrary outcome. In any event, English

translations of these cases are not available in the bound volumes

of the court's reporter, and Fernandez has not provided us with

certified translations of these cases, as required our rules. See

1st Cir. Loc. R. 30(d). Consequently, these cases may not be used

to support Fernandez's argument with respect to dolo. Lopez-

Gonzalez v. Municipality of Comerio, 404 F.3d 548, 553 n.4 (1st

Cir. 2005).

Having determined that the counterclaim does not

adequately raise a claim that the settlement was infected with

dolo, we need not consider whether Article 1055 of the Puerto Rico

Civil Code requires that the settlement agreement be set aside.

Similarly, because we conclude that the district court correctly

determined that the settlement agreement was a valid compromise

reaching all commission-related claims between the parties we need

not reach the question of whether the settlement agreement was a

novation.

Finally, we turn to Fernandez's argument based on agency

law (mandato) principles. Fernandez argues that under general

principles of agency law, Smith Barney was required to provide an

accounting of its commission overcharges in order for any release

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to be valid. He further argues that the accounting of overcharges

that Smith Barney prepared for his review was insufficient to

satisfy its obligations under agency principles and their attendant

fiduciary duties. Assuming arguendo that Smith Barney was required

to render an accounting,11 the detailed forty-plus page analysis of

the overcharges satisfied Smith Barney's obligations on that score.

Smith Barney's accounting detailed all transactions, commissions

charged, and the amount of commission that Smith Barney believed

should have been charged. We discern nothing in Puerto Rico agency

law requiring anything more; if Fernandez believed he should have

been charged a different commission, it was incumbent on him to

engage in further negotiations.

We have reviewed the remainder of Fernandez's contentions

and find them without merit, and therefore affirm the district

court's dismissal of Fernandez's counterclaim on the basis of

release.

III. Smith Barney's Cross-Appeal

In its cross-appeal, Smith Barney seeks attorneys' fees

under the Puerto Rico Rules of Civil Procedure, as well as a remand

to the district court for specific findings regarding compliance

11
Since the agency relationship was predicated on the purchase
and sale of securities, Smith Barney argues that the Uniform
Securities Act, and not the general agency principles of the Puerto
Rico Civil Code, governs this relationship. In view of our
conclusion regarding the disclosure, however, we need not reach
this issue.

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with Rule 11 of the Federal Rules of Civil Procedure, as required

by the PSLRA, 15 U.S.C. § 78u-4(c).

A. Attorneys' Fees Under Puerto Rico Law

Puerto Rico law governs the state law claim for

attorneys' fees in this diversity action. See Mass. Eye & Ear

Infirmary v. QLT Phototherapuetics, Inc., 552 F.3d 47, 74 (1st Cir.

2009); Newell P.R. Ltd. v. Rubbermaid Inc., 20 F.3d 15, 24 (1st

Cir. 1994). Puerto Rico law provides that in the event that any

party or its lawyer acted obstinately or frivolously, the court

shall impose on such person the payment of a sum of attorneys'

fees, which, in its judgment the court corresponds to such conduct.

P.R. Tel. Co., 427 F.3d at 33 (quoting P.R. R. Civ. P. 44.1(d)).

It has long been understood that "a finding of obstinacy requires

that the court determine a litigant to have been unreasonably

adamant or stubbornly litigious, beyond the acceptable demands of

litigation, thereby wasting time and causing the court and the

other litigants unnecessary expense and delay." P.R. Tel. Co., 427

F.3d at 33 (quoting De Leon Lopez v. Corp. Insular de Seguros, 931

F.2d 116, 126 (1st Cir. 1991)).

Reviewing Smith Barney's claims of obstinance and

frivolousness, the district court found none.12 This finding is due

12
In its filing requesting fees in the district court, Smith
Barney argued that Fernandez's failure to accept the terms of a
settlement that he felt was invalid and contrary to Puerto Rico law
was vexatious, as was Fernandez's attempt to obtain an adjudication
of his counterclaim, in which he raised these challenges. Smith

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significant deference. Mass. Eye & Ear Infirmary, 552 F.3d at 74

(citing French v. Corporate Receivables, Inc., 489 F.3d 402, 403

(1st Cir. 2007)); see also De Jesus Nazario v. Morris Rodriguez,

554 F.3d 196, 199 (1st Cir. 2009); B. Fernandez & HNOS v. Kellogg

USA, Inc., 516 F.3d 18, 28 (1st Cir. 2008). It is true that the

district court did not delve deeply into the reasons why it

concluded that Fernandez's prosecution of his suit was neither

obstinate nor frivolous, but our precedents do not always require

an exacting level of detail. See Mass. Eye & Ear Infirmary, 552

F.3d at 74 (explaining in context of federal fee shifting statute

that district court's attorneys' fees finding need not be "precise

to the point of pedantry," "infinitely precise," "deluged with

details, or even fully articulated")(citing United States v. One

Star Class Sloop Sailboat, 546 F.3d 26, 42 (1st Cir. 2008)))

(emphasis added). Here, although further explanation by the

Barney adds that Fernandez's motion for limited discovery,
including a request to perpetuate testimony in view of his ailing
health -- motions that the district court largely granted -- were
also vexatious and/or obstinate. In short, Smith Barney argues
that Fernandez's challenge to the settlement agreement, rather than
his almost certainly overreaching counterclaim, is the source of
the vexatiousness. Crediting this argument would have the effect
of penalizing Fernandez for losing a case that was not obviously
frivolous, and applying Puerto Rico law, we have long declined to
do so. E.g., Dopp v. Pritzker, 38 F.3d 1239, 1254 (1st Cir. 1994)
("Indeed, even if a party's claim ultimately fails, it cannot be
deemed frivolous or obstinate for that reason alone.") (quoting
Navarro de Cosme v. Hosp. Paria, 922 F.2d 926, 934 (1st Cir.
1991)).

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district court would have been preferable, we cannot conclude that

the district court's denial of fees was an abuse of discretion.13

B. Findings Under the PSLRA

The final question we must resolve is one of first

impression in this circuit: whether the district court is required

to make findings regarding compliance with Rule 11(b) of the

Federal Rules of Civil Procedure, in a case in which a claim was

made under the securities laws but where all claims were dismissed

on state law grounds. The statute requiring such findings does not

appear to brook any exceptions, see 15 U.S.C. § 78u-4(c)(1)

(requiring such findings as to any complaint, responsive pleading

or, dispositive motion in any "private action" raising a claim

under the securities laws), and at least one other circuit has

reached that conclusion. See Morris v. Wachovia Sec., Inc., 448

F.3d 268, 276 (4th Cir. 2006) ("[T]he Rule 11(b) inquiry is

mandatory even if other claims in the action arise under other

laws."). Moreover, the purpose of the PSLRA similarly supports

requiring district courts to undertake a Rule 11 inquiry at the

conclusion of any private securities fraud action. See Merrill

Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 547 U.S. 71, 81-82

13
In view of the complexity of Puerto Rico law with respect to
compromises, and the apparently evolving nature of dolo, from our
own review of the record we would be hesitant to conclude that
appellants' actions in prosecuting this suit, even in view of their
lack of success, were obstinate or frivolous enough to warrant the
award of fees. See supra note 13.

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(noting that Title I of the PSLRA represents "Congress' effort to

curb . . . perceived abuses," by "mandat[ing] imposition of

sanctions for frivolous litigation").

Whether or not a Rule 11(b) inquiry must be made into

Fernandez's counterclaim, we needn't remand this case to the

district court for that purpose. As noted, the PSLRA requires

courts, upon final adjudication of an action, to make findings

regarding parties' compliance with Rule 11(b) in private securities

matters, and although it does not alter the standards used to judge

compliance with Rule 11, see Dellastatious v. Williams, 242 F.3d

191, 197 n.5 (4th Cir. 2001); Simon DeBartolo Group, L.P. v.

Richard E. Jones Group, Inc., 186 F.3d 157, 167 (2d Cir. 1999), the

PSLRA does change the consequences for a Rule 11 violation.

Specifically, if a court concludes that Rule 11 has been violated,

the PSLRA provides that "the court shall impose sanctions" on the

offender. 15 U.S.C. §78u-4(c)(2); Morris, 448 F.3d at 276 (noting

that statute's use of the word "shall" creates an obligation

"impervious to judicial discretion," and requires the district

court to impose sanctions for every violation).

Rule 11(b) proscribes not only written arguments made

with "any improper purpose," but also advancing "frivolous"

arguments, as well as the assertion of factual allegations without

"evidentiary support" or the "likely" prospect of such support.

Fed. R. Civ. P. 11(b); Young v. City of Providence ex rel.

-31-
Napolitano, 404 F.3d 33, 39 (1st Cir. 2005). We have said,

however, that Rule 11(b) is not a strict liability provision,

Young, 404 F.3d at 39, and a showing of at least "culpable

careless[ness]" is required before a violation of the Rule can be

found, Roger Edwards LLC v. Fiddes & Son, Ltd., 437 F.3d 140, 142

(1st Cir. 2006). We have also been careful to make clear that

"[t]he mere fact that a claim ultimately proves unavailing, without

more, cannot support the imposition or Rule 11 sanctions."

Protective Life Ins. Co. v. Dignity Viatical Settlement Partners,

L.P., 171 F.3d 52, 58 (1st Cir. 1999).14

With these standards in mind, we conclude that no purpose

would be served by remanding this case to the district court for

Rule 11 findings. Although some courts have remanded cases in

which the district court failed to make Rule 11 findings, see

Rombach v. Chang, 355 F.3d 164, 178 (2d Cir. 2004), in this case we

see no reason to do so. The district court has already denied

Smith Barney any attorneys' fees under a standard similar to Rule

11(b), and our review of the record does not suggest that

Fernandez's claims were brought for an improper purpose, rose to

14
Another circuit has said in evaluating writings for
compliance with Rule 11: in order to violate Rule 11, a legal
argument must "'have absolutely no chance of success under the
existing precedent' to contravene the Rule." Morris, 448 F.3d at
277 (citing Hunter v. Earthgrains Co. Bakery, 281 F.3d 144, 153
(4th Cir. 2002). Similarly factual allegations will run afoul of
Rule 11 when they are "unsupported by any information obtained
prior to filing." Morris, 448 F.3d at 277 (citing Brubaker v. City
of Richmond, 943 F.2d 1363, 1373 (4th Cir. 1991)).

-32-
the level of being frivolous, or made unsupportable factual

allegations. Other circuits have noted that a remand for a Rule 11

determination is not necessary if the record provides no basis for

awarding sanctions. See Dellastatious, 242 F.3d at 197 n.5.

Because our review of the record reveals no basis for finding a

Rule 11 violation, we decline to remand this case to the district

court.

IV. Conclusion

For the reasons stated above, the district court's

dismissal of Fernandez's counterclaim is affirmed, and the district

court's decision to deny attorneys' fees under the Puerto Rico

Rules of Civil Procedure is also affirmed. In addition, we decline

to remand this case for further proceedings to determine whether

any Rule 11 violation occurred in this case because we are

satisfied that no such transgression has occurred. Each side shall

bear its own costs.

It is so ordered.

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