United States Court of Appeals For the First Circuit
Nos. 24-1328 24-1335 COCO RICO, LLC,
Plaintiff, Appellant/Cross-Appellee,
v.
UNIVERSAL INSURANCE COMPANY,
Defendant, Appellee/Cross-Appellant.
APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO
[Hon. Marcos E. López, U.S. Magistrate Judge]
Before
Gelpí, Lipez, and Rikelman, Circuit Judges.
Julián R. Rivera-Aspinall, with whom Eduardo R. Jenks Carballeira and Rivera-Aspinall, Garriga & Fernandini P.S.C. were on brief, for appellant.
Victor O. Acevedo-Hernández, with whom Juan Rafael González Muñoz, Gonzalez Muñoz Law Offices P.S.C., Luis R. Ramos Cartagena, Israel Fernández Rodríguez, and Casillas, Santiago & Torres LLC were on brief, for appellee.
June 20, 2025 RIKELMAN, Circuit Judge. After Hurricane Maria damaged
its business, Coco Rico, LLC sued its insurer, Universal Insurance
Company, for failing to pay its insurance claim and won. The jury
awarded Coco Rico higher damages for its business interruption
loss claim than it had requested, plus extra, consequential
damages.
This appeal centers on the district court's rulings on
several post-verdict motions: Universal sought to eliminate or
reduce the jury's damages awards, while Coco Rico sought attorneys'
fees and prejudgment interest from Universal. After the district
court denied the motions, both parties appealed.
We agree with Universal that there was no evidentiary
basis for the jury to award consequential damages or higher
business interruption loss damages than Coco Rico had established
at trial. But we see no abuse of discretion in the district
court's decision to deny Coco Rico's request for fees and
prejudgment interest, which the court could award only if it had
concluded that Universal's conduct during the litigation had been
"obstinate." Thus, we reverse the district court's ruling denying
Universal's motions regarding the damages awards and affirm its
ruling denying Coco Rico's motion for attorneys' fees and
prejudgment interest.
- 2 - I. BACKGROUND
A. Relevant Facts
For many years, Coco Rico manufactured beverage
concentrate in Puerto Rico. In September 2017, Hurricane Maria
caused widespread damage throughout Puerto Rico, including to Coco
Rico's manufacturing facility. Soon after, Coco Rico contacted
its insurer, Universal, to submit an insurance claim.
The insurance policy between Universal and Coco Rico
included "Business Income" and "Extra Expense" coverage ("BI & EE"
insurance, sometimes referred to as "business interruption loss"
insurance). Generally, BI & EE insurance covers expenses that a
business incurs while it is temporarily unable to operate due to
a covered reason, such as a natural disaster. Business Income
insurance can make up for income that the business would have
earned if it had not needed to suspend its operations. It can
also cover ongoing operating expenses, like payroll. Extra Expense
insurance covers the extra costs that arise as the business
restores its operations. For example, an Extra Expense might
include the cost of relocating to a temporary manufacturing
facility and equipping that facility.
Insurance policies usually do not cover business
interruption loss indefinitely; instead, they cover loss during a
prescribed period while the business attempts to restore its
operations. Coco Rico's insurance policy provided that business
- 3 - interruption loss would be calculated over the course of the
"period of restoration." In turn, the policy defined the
restoration period as the interval between the date of the damage
(approximately) and the date when the damaged property "should
[have been] repaired, rebuilt[,] or replaced with reasonable speed
and similar quality" or when "business [was] resumed at a new
permanent location." The policy also capped BI & EE coverage at
$750,000.
B. Procedural History
When Coco Rico and Universal were unable to agree on the
amount owed to Coco Rico for its BI & EE loss covered under the
policy, Coco Rico sued Universal in the United States District
Court for the District of Puerto Rico. Asserting diversity
jurisdiction under 28 U.S.C. § 1332, Coco Rico alleged that
Universal had violated Puerto Rico law. In particular, Coco Rico
alleged a breach of contract based on Universal's purported failure
to pay its claim under its insurance policy. Coco Rico sought
payment for its business interruption loss covered by the policy,
as well as compensatory and consequential damages under Puerto
Rico law. See P.R. Laws Ann. tit. 31, §§ 3018, 3023. Coco Rico
also sought attorneys' fees and prejudgment interest.
The case proceeded to a jury trial. At trial, Coco Rico
presented several witnesses. Richard Hahn, Coco Rico's owner,
testified about Coco Rico's insurance policy; damage to Coco Rico's
- 4 - facility; its attempts to restore operations, including its use of
a manufacturing facility in New Jersey; and costs it incurred.
Roberto Villafañe Gomez Jr., a Coco Rico employee, testified about
damage to the facility and explained that Coco Rico had continued
to pay his salary. Coco Rico also introduced the testimony of
Rafael Lebrón Román, a consultant who handled Coco Rico's property
claim (i.e., its insurance claim related to damage to its
manufacturing facility, which is not covered by BI & EE insurance).
Finally, an expert "in the field of business income loss
calculation," Carlos Juan Iglesias Colon, testified on Coco Rico's
behalf. Iglesias described the concept of business interruption
loss and his process for calculating it. He explained that the
calculation involved projecting, based on past financial
statements, what sales would have been had the hurricane not
occurred. This "but-for" approach, he opined, determined "what
[the insurer] need[ed] to pay to put [the insured] in the same
position" it would have been in but for the covered event.
Iglesias calculated that the total BI & EE loss for the restoration
period was $686,098.
After the close of evidence, Universal moved for
judgment as a matter of law on Coco Rico's request for
consequential damages. It argued that Coco Rico had provided no
proof of additional, consequential damages resulting from
Universal's purported breach of the insurance policy. The court
- 5 - denied Universal's motion, noting "portions of the testimony of
Mr. Hahn regarding additional damages."
The jury ultimately found that Universal breached its
insurance policy with Coco Rico, and that Universal owed Coco Rico
$873,000 to cover Coco Rico's BI & EE loss. The jury also found
that Universal "acted in bad faith by delaying the fulfillment of
its contractual obligation[s] with [Coco Rico]," and that Coco
Rico suffered $250,000 in "consequential damages . . . that were
caused by [Universal's] bad faith" actions.
A flurry of motions followed. Universal filed a renewed
motion for judgment as a matter of law under Federal Rule of Civil
Procedure 50(b). In that motion, Universal argued again that Coco
Rico had presented no evidence of consequential damages. It also
filed a motion for a new trial and/or for a reduction of the
contractual damages award. Universal contended that the $873,000
BI & EE award was unsupported by the evidence and exceeded the
extent of BI & EE loss proven by Coco Rico, which was $686,098.
Coco Rico filed its own motion, requesting that the court amend
the judgment to award it prejudgment interest, post-judgment
interest, expenses, and reasonable attorneys' fees. It argued
that under Puerto Rico Rules of Civil Procedure 44.1(d) and
44.3(b), Universal was liable for interest, expenses, and
attorneys' fees because it had behaved "obstinately."
- 6 - The district court denied both parties' motions. It
rejected Universal's renewed motion for judgment as a matter of
law on the consequential damages claim without further elaboration
beyond what it had stated on the record earlier at trial. When it
came to the motion for a reduction of the contractual damages award
and/or a new trial, the district court reduced the jury's BI & EE
award from $873,000 to $750,000, in line with the insurance policy
maximum. But it rejected Universal's argument that the BI & EE
award should be further reduced to $686,098. It found that,
although Coco Rico's own expert calculated a loss of about
$686,000, "the jury may have also taken into account" two trial
exhibits that "exceed the sum of $686,000." And as to Coco Rico's
motion to amend the judgment to add attorneys' fees and prejudgment
interest, the district court denied the motion without providing
its reasoning.1
Both parties appealed.
II. DISCUSSION
Universal argues that the district court should have
(1) reduced the jury's business interruption loss award from
$873,000 to $686,098 or ordered a new trial on damages, and (2)
entered judgment as a matter of law on consequential damages,
1 The district court granted costs and post-judgment interest to Coco Rico, which Universal does not challenge.
- 7 - setting aside the jury's additional $250,000 verdict. Coco Rico,
for its part, argues that the district court should have amended
the judgment to award it attorneys' fees and prejudgment interest
pursuant to the Puerto Rico Rules of Civil Procedure.2 We agree
with Universal.
A. Business Interruption Loss
We begin with Universal's challenge to the jury's award
of $873,000 for Coco Rico's BI & EE loss. We review a district
court's decision not to reduce a jury's damages award for abuse of
discretion. See Koster v. Trans World Airlines, Inc., 181 F.3d
24, 34 (1st Cir. 1999). "This deferential standard imposes a
correspondingly heavy burden on parties who challenge the amount
of damages awarded by allegedly overgenerous juries." Dopp v.
Pritzker, 38 F.3d 1239, 1249 (1st Cir. 1994). And when "the trial
judge has reviewed the jury's handiwork and has ratified its
judgment," this burden "grows heavier." Id. Nevertheless, we
have concluded that this heavy burden is met when the verdict
2 Coco Rico also challenges the district court's ruling on the BI & EE damages award -- specifically, the court's decision to reduce these damages to the policy limit of $750,000. It argues that the jury's finding of bad faith "voids the policy limits" and thus the court should not have reduced the award at all. But Coco Rico makes this argument for the first time in its reply brief, and thus we deem it waived. See Allstate Interiors & Exteriors, Inc. v. Stonestreet Constr., LLC, 730 F.3d 67, 74 n.4 (1st Cir. 2013).
- 8 - "fall[s] outside the broad universe of theoretically possible
awards that can be said to be supported by the evidence." Id.
The district court found that two trial
exhibits -- Exhibits U and Y -- supported a verdict of $750,000 in
damages. Universal contends, however, that Exhibits U and Y on
their own are insufficient to support a BI & EE finding in excess
of $686,098.
A jury "is free to select the highest figure for which
there is adequate evidentiary support." Id. (quoting Kolb v.
Goldring, Inc., 694 F.2d 869, 872 (1st Cir. 1982)).3 When a jury
awards purely economic damages -- rather than damages for pain and
suffering, for example -- "the jury's award must be rooted in an
adequate evidentiary predicate." Dopp, 38 F.3d at 1250; see also
Air Safety, Inc. v. Roman Cath. Archbishop of Bos., 94 F.3d 1, 5
n.9 (1st Cir. 1996) ("Although we do not lightly reverse an award
for economic loss, the inquiry in such a case is much more closely
focused on whether there is adequate evidentiary support for the
amount awarded."). As a result, a verdict based on economic
damages "will be reduced or set aside only if it is shown to exceed
3 We have held that state (or here, Puerto Rico) law governs the question of whether a jury's award is excessive in a diversity case. See Suero-Algarín v. CMT Hosp. Hima San Pablo Caguas, 957 F.3d 30, 40 (1st Cir. 2020). However, the parties have not cited to any Commonwealth law on this point or suggested that Commonwealth law would supply a different standard than federal law for evaluating this issue.
- 9 - any rational appraisal or estimate of the damages that could be
based upon the evidence before the jury." Dopp, 38 F.3d at 1249
(quoting Segal v. Gilbert Color Sys., Inc., 746 F.2d 78, 81 (1st
Cir. 1984)).
We agree with Universal that the award of $750,000 in
economic damages here exceeds any rational appraisal of the
evidence based on Exhibits U and Y. Both exhibits involve Lebrón,
who, as mentioned, represented Coco Rico in its property insurance
claim only. Exhibit U, sent two years after the hurricane, is an
email chain between Lebrón and a Universal executive. In it,
Lebrón stated that "Universal withheld money that clearly should
have been in the insured's hands . . . which now amounts to over
$900,000.00." Exhibit Y is an email dated one month later, sent
by Universal's insurance adjuster to Lebrón and others
representing Coco Rico. It explained that, although Coco Rico
filed a BI & EE claim for $901,976 -- divided into "Business
Interruption," "Expenses," and "Transition Expenses" -- Universal
offered $203,338.59.
We do not see how these documents provide any evidentiary
basis for a business interruption loss award above $686,098,
especially in light of the trial evidence as a whole. The
documents show that in November and December 2019, Coco Rico
claimed approximately $900,000 in business interruption loss. But
they contain no facts substantiating that Coco Rico suffered this
- 10 - loss. For example, they lack information about Coco Rico's sales,
projected earnings, or attempts to restore operations. Nor do
they show how Coco Rico calculated the $900,000 figure. Lebrón,
who was a fact witness, did not testify to any such calculations.
Indeed, according to his testimony, he did not handle the business
interruption loss claim and did not perform any BI & EE
calculations.4 The bare fact that Coco Rico initially claimed a
$900,000 business interruption loss falls short of showing that
Coco Rico actually experienced a $900,000 loss. Thus, these emails
do not provide adequate evidentiary support for the jury's
calculation, even under our highly deferential standard.
What is more, at trial, Coco Rico expressly and
repeatedly described its BI & EE damages as no more than $686,098.5
First, Coco Rico asked Hahn during his testimony whether he knew
"the amount of money that is owed to Coco Rico LLC due to [BI &
4Instead, as mentioned, Lebrón focused on Coco Rico's property insurance claim, which is not at issue. 5As Universal points out, Coco Rico also quantified its BI & EE damages as $686,098 before trial. In the parties' joint proposed pretrial order, a table outlining the alleged damages indicated that Coco Rico's business interruption loss was $686,098. And in Coco Rico's proposed uncontested material facts included in that same filing, Coco Rico stated that its "business income loss due to the effects of Hurricane Maria for the period of September 21, 2017, through November 8, 2019, is estimated at $686,098.00." We do not understand Coco Rico to have stipulated to a damages amount, however, as the district court did not submit any such stipulation to the jury and Universal does not argue that it should have done so.
- 11 - EE] loss." Hahn replied that the amount was $686,000. Second,
Coco Rico's BI & EE expert, Iglesias, testified that the BI & EE
loss was $686,098. Third, in closing arguments, Coco Rico argued
that the BI & EE loss was $686,098. These statements reaffirm
that Coco Rico did not present evidence of more than $686,098 in
BI & EE loss, and in fact it was "quite specific" in quantifying
its BI & EE damages at this number. Koster, 181 F.3d at 34 & n.4.
"In the face of such firm evidence of economic damage, we cannot
say that the jury could reasonably conclude" that Coco Rico "was
damaged above and beyond what [it] said [its] damages were." Id.;
see also Havinga v. Crowley Towing & Transp. Co., 24 F.3d 1480,
1489 (1st Cir. 1994). Thus, we reverse the district court's ruling
denying Universal's motion to reduce the jury's business
interruption loss award from $873,000 to $686,098.
B. Consequential Damages
Universal next argues that the district court erred when
it denied its renewed motion for partial judgment as a matter of
law to set aside the jury's award of $250,000 in consequential
damages. See Fed. R. Civ. P. 50(b). Our review is de novo, and
we "may reverse the denial of the motion only if reasonable persons
could not have reached the conclusion that the jury embraced."
Negron-Rivera v. Rivera-Claudio, 204 F.3d 287, 289-90 (1st Cir.
2000).
- 12 - The crux of Universal's argument is that Coco Rico
presented no evidence of consequential damages. The district court
found, however, and Coco Rico reiterates, that "portions of the
testimony of Mr. Hahn regarding additional damages" permitted a
reasonable jury to find consequential damages.
To recap Coco Rico's theory at trial, it claimed that it
was entitled to consequential damages under a Puerto Rico statute
providing that "[t]hose who in fulfilling their obligations are
guilty of fraud, negligence, or delay . . . shall be subject to
indemnify for the losses and damages caused thereby." P.R. Laws
Ann. tit. 31, § 3018.6 The district court instructed the jury that
consequential damages are "additional damages" that could be
awarded only if the jury made a finding of bad faith.7 At trial,
Coco Rico's counsel relied on a consequential damages theory to
6 In ruling on Universal's motion for judgment as a matter of law on consequential damages, the district court explained its understanding that "the Puerto Rico Supreme Court has yet to clarify whether a claim for bad faith sounds in contract under [title 31, section 3018 of the Laws of Puerto Rico Annotated] or under" tort law. But Coco Rico's complaint references section 3018 only and does not reference any consequential damages claim under tort law. Further, although the jury instructions stated that "[t]he Civil Code of Puerto Rico distinguishes between damages resulting from the breach of contract and damages resulting from a breach of obligations and duties imposed by nature and by law that are necessary for social coexistence," the instructions only included the text of section 3018. 7 Although the insurance policy excludes consequential damages, neither party argues that the policy's text precluded the jury's consequential damages award.
- 13 - reach "losses and extra expenses . . . beyond the calculated
period of restoration." Thus, in seeking consequential damages,
Coco Rico claimed damages it allegedly suffered on top of its
business interruption loss, particularly after the restoration
period.
To support the jury's consequential damages award, Coco
Rico points us to alleged testimony by Hahn, but that testimony
appears nowhere in the record. According to Coco Rico, Hahn
testified that "as a result of not being paid by [Universal], [Coco
Rico] continued suffering from consequential damages in the form
of lost business income, which he estimated at $130,000.00 per
year." The record, however, contains no such testimony. The
$130,000 figure is not even mentioned until oral argument on
Universal's pre-verdict motion for judgment as a matter of law,
when Coco Rico's counsel claimed that Hahn testified to that
number. Later, the district court indicated -- and Coco Rico
conceded -- that the $130,000 figure was the only estimate offered
concerning consequential damages. The court asked: "And you would
agree that for [consequential damages] we don't have expert
testimony, right? All we have is the word of Mr. Hahn that it was
130 grand per year." Coco Rico's counsel answered, "I agree."
But as we just explained, counsel was incorrect that Hahn had ever
testified as to that figure. The $130,000 number is a statement
- 14 - by counsel, not a fact in the record that can form a legally valid
basis for the jury's consequential damages award.
Before us, Coco Rico tries to highlight portions of
Hahn's actual testimony that it contends support the consequential
damages award. For example, it points to Hahn's statements that
it was less expensive for Coco Rico to operate in Puerto Rico as
compared to elsewhere in the United States and that Coco Rico
preferred to operate in Puerto Rico because of the brand's history.
Hahn also testified that Coco Rico continued to pay the salaries
of Puerto Rico-based employees "to this day." And Hahn stated
that "[e]very year that we operate and don't operate in Puerto
Rico is . . . hundreds of thousands of dollars that it costs us
not to be down here."
But this testimony is far too general and conclusory to
provide an evidentiary basis for the jury's award. To show
business interruption loss under the contract, Coco Rico employed
Iglesias to undertake detailed calculations to compare projected
business outcomes to actual loss. By contrast, Hahn's general
claims about losing hundreds of thousands of dollars each year
gave the jury no foothold for determining a specific dollar amount
for consequential damages. And instead of explaining his method
for reaching this estimate, Hahn testified that he "computed [the
number] in [his] mind." Although neither expert testimony nor
precise calculations are always required to establish damages,
- 15 - "[a] jury should not be asked to decide an issue that relies solely
on conjecture and speculation." Achille Bayart & Cie v. Crowe,
238 F.3d 44, 48 (1st Cir. 2001) (holding that judgment as a matter
of law was proper where the jury "could only speculate" as to
amount of money owed); see also Cordeco Dev. Corp. v. Santiago
Vasquez, 539 F.2d 256, 262 (1st Cir. 1976) ("[W]hile a plaintiff
need not demonstrate the amount of damage with mathematical
precision, it must provide sufficient evidence to take the amount
of damages out of the realm of speculation and conjecture."
(citations omitted)).
What is more, Hahn's testimony at trial all but
forecloses a verdict awarding consequential damages. On direct
examination, Coco Rico's counsel asked Hahn whether the "[BI & EE]
losses were the only losses incurred by [his] business as a
consequence of not receiving payment," to which Hahn answered, "I
believe so, yes." That testimony entirely undermines the jury's
verdict.
Shifting gears, Coco Rico also argues that if it suffered
a BI & EE loss of $873,000 during the restoration period, a
$250,000 award for damages suffered after the restoration period
and until trial "is a more than reasonable inference." But absent
evidence permitting the jury to calculate those damages, its award
is still speculative.
- 16 - Finally, Coco Rico returns to Lebrón's testimony and
Exhibits U and Y, all of which demonstrated that Coco Rico
submitted a claim to Universal for about $900,000 of BI & EE in
late 2019. But this evidence pertains to Coco Rico's claim for BI
& EE payment under the insurance policy, not to any additional,
consequential damages that were meant to compensate Coco Rico for
any losses beyond the restoration period.
We thus agree with Universal that the record contains no
evidence supporting the jury's award of consequential damages.
Accordingly, we reverse the district court's ruling denying
Universal's motion to set aside the consequential damages award as
a matter of law.
C. Attorneys' Fees and Prejudgment Interest
At the close of trial, Coco Rico moved for an award of
attorneys' fees and prejudgment interest under Puerto Rico law.
The parties agree that the Puerto Rico Rules of Civil Procedure
supply the legal standard for determining whether Universal owes
Coco Rico attorneys' fees and prejudgment interest.8 Under Rule
44.1(d), "[w]here a party or party's counsel has acted obstinately
8 We have previously held that Puerto Rico's rules governing attorneys' fees and prejudgment interest are substantive under the Erie doctrine and apply in a diversity case. See Dopp, 38 F.3d at 1252 ("In a diversity case in which the substantive law of Puerto Rico supplies the basis of decision, a federal court must give effect to Rules 44.1(d) and 44.3(b) of the Puerto Rico Rules of Civil Procedure."); see also Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-79 (1938).
- 17 - or frivolously, the court, in its judgment, shall impose on such
person the payment of a sum in attorney's fees which the court may
deem to correspond to such conduct." P.R. Laws Ann. tit. 32, app.
V, R. 44.1(d). Under Rule 44.3(b), "the court will . . . impose
on obstinate parties the payment of interest . . . from the time
the cause of action arose." Id. R. 44.3(b).
As we mentioned, the district court denied Coco Rico's
motion in a summary order without explanation. Coco Rico contends
that (1) the district court legally erred in denying the motion,
or (2) at a minimum, we should vacate the district court's order
so that it can provide reasoning for its decision on remand.
Universal replies that the district court properly denied the
motion and was not required to explain its decision.
Although the district court did not provide its
reasoning for denying Coco Rico's motion for attorneys' fees and
prejudgment interest, the motion was fully briefed by both sides.
In such circumstances, we can proceed on the understanding that
the district court was persuaded by Universal's arguments. See
Lebrón v. Puerto Rico, 770 F.3d 25, 30 n.8 (1st Cir. 2014)
(interpreting district court decision "to adopt the rationale
pressed by [the prevailing party] on appeal"); T-Mobile Ne. LLC v.
Town of Barnstable, 969 F.3d 33, 38 (1st Cir. 2020) (considering
the "record as a whole" to determine whether district court abused
its discretion because the district court "[did] not state its
- 18 - reasons"). We proceed on that assumption here and review the
district court's decision for an abuse of discretion. See Correa
v. Cruisers, a Div. of KCS Int'l, Inc., 298 F.3d 13, 30 (1st Cir.
2002). In doing so, we note that a district court's denial of
attorneys' fees and prejudgment interest under the Puerto Rico
Rules of Civil Procedure "is rarely upset." Mejías-Quiros v.
Maxxam Prop. Corp., 108 F.3d 425, 429 (1st Cir. 1997).
The critical question under Rules 44.1(d) and 44.3(b) is
whether Universal behaved "obstina[tely]" during the litigation.
Dopp, 38 F.3d at 1252. To find that a party has acted obstinately,
a court must "determine a litigant to have been unreasonably
adamant or stubbornly litigious, beyond the acceptable demands of
the litigation, thereby wasting time and causing the court and the
other litigants unnecessary expense and delay." Correa, 298 F.3d
at 30 (citation omitted). "Examples of obstinate conduct include[]
denying all liability in answering a complaint, where the defendant
later admits liability; raising inapplicable defenses; denying all
liability when only the amount of damages sought is contested; and
denying a fact, knowing it is true." Id. at 31. Critically, "even
if a party's claim ultimately fails" at trial, "it cannot be deemed
frivolous or obstinate for that reason alone." Dopp, 38 F.3d at
1254.
In evaluating whether Universal behaved obstinately, we
cannot consider any conduct that preceded the litigation. See id.
- 19 - (holding that "events antecedent to the litigation" cannot trigger
a finding of obstinacy). Although Coco Rico identifies in its
appellate brief several instances of allegedly obstinate
pre-litigation conduct by Universal, at oral argument, it
acknowledged that this conduct is legally irrelevant under these
rules. Thus, we only consider Universal's conduct during
litigation.
We conclude that the district court did not abuse its
discretion when it held that Universal's litigation conduct was
not obstinate. Initially, we note that the district court made no
explicit factual finding of obstinacy, frivolity, or any
sanctionable conduct at any point during the litigation -- nor did
Coco Rico seek such a finding. See P.R. Tel. Co. v. U.S. Phone
Mfg. Corp., 427 F.3d 21, 33 (1st Cir. 2005) ("Factual findings of
specific instances of misconduct, taking into account the overall
character of the litigation, are required to support a finding of
obstinacy mandating the award of attorney fees under Puerto Ric[o]
law."), abrogated on other grounds by Hall St. Assocs., LLC v.
Mattel, Inc., 552 U.S. 576 (2008). Coco Rico contends that the
relevant factual determination of Universal's obstinacy was made
by the jury when it found that Universal acted in bad faith. But
the jury's determination of bad faith does not amount to an
obstinacy finding. The question posed to the jury was whether
Universal "acted in bad faith by delaying the fulfillment of its
- 20 - contractual obligation[s] with" Coco Rico. This question hinges
on pre-litigation conduct, and therefore the jury's verdict does
not show that Universal acted "obstinately" during litigation.
Coco Rico does point us to several instances of
purportedly obstinate litigation conduct. It argues that, at the
pleading stage, Universal "unreasonably denied most of [Coco
Rico's] allegations and raised numerous unsubstantiated defenses."
Universal responds, however, with reasoned explanations
for each of its denials and defenses. For instance, Coco Rico
objects to the fact that Universal "den[ied] and challeng[ed]
subject matter jurisdiction" in its answer to the complaint. But
Universal explains that it questioned diversity jurisdiction based
on court filings indicating that Hahn was not Coco Rico's sole
member, and that after reviewing the evidence Coco Rico produced
concerning Hahn's sole membership, Universal did not pursue that
challenge. Coco Rico also complains that Universal denied
allegations "that practically transcribe the insurance policy
terms and conditions." But Universal points out that it submitted
a copy of the insurance policy in its answer instead of acceding
to Coco Rico's summaries of the agreement. Coco Rico next contends
that Universal obstinately denied "that Hurricane María entered as
a Category 4 Hurricane and that it caused widespread damage to
Puerto Rico" on September 20, 2017. But Universal notes that it
only objected to the allegation as phrased, that it affirmatively
- 21 - averred that Hurricane Maria struck Puerto Rico on September 20,
2017, and that no evidence of Hurricane Maria's rating was
introduced or relevant at trial. Finally, Coco Rico argues that
Universal "rashly deni[ed]" various allegations to the effect that
Universal had underpaid Coco Rico and engaged in unfair practices,
despite contrary evidence at trial. But as Universal points out,
Coco Rico does not explain why denying these allegations was
obstinate at the time Universal answered the complaint. And as we
have explained, the mere fact that a claim fails at trial does not
render a party obstinate for raising it in the first place.
Similar problems confront Coco Rico's arguments about
Universal's affirmative defenses. Coco Rico notes that Universal
"raised 77 . . . affirmative defenses," but raising a litany of
defenses is not unusual in litigation. It also points out that
Universal alleged as an affirmative defense that Coco Rico resumed
business operations in Florida in 2018, a fact that Universal did
not prove at trial. But again, that this particular defense failed
at trial does not necessarily mean that Universal was obstinate in
asserting it. Further, Universal directs us to an email from its
adjuster to Coco Rico's representatives expressing Universal's
understanding that Coco Rico resumed operations in Florida in
2018 -- and highlights that Coco Rico never replied to that email.
Thus, Universal argues, and we agree, that it was not obstinate
for it to maintain this understanding of the facts.
- 22 - Coco Rico also contends that Universal behaved
obstinately at trial. In particular, Coco Rico focuses on
Universal's assertions in its opening statement and closing
argument that Coco Rico was entitled to "zero" payment under the
contract because it allegedly misrepresented facts during the
claims process.
But each of Coco Rico's arguments is either unsupported
by the record or waived. First, Coco Rico argues that Universal
"never presented evidence" concerning its misrepresentation
defense at trial. The trial record, however, proves otherwise.
For example, Universal presented the testimony of Margarita Rivera
Perez, a forensic accountant who worked on the adjustment of Coco
Rico's insurance claim. Rivera testified that Coco Rico's
representatives told her that Coco Rico had resumed operations
prior to March 31, 2018, which would undermine Coco Rico's
assertion that it continued to suffer business interruption loss
past that date. Further, Universal introduced Exhibit Y, which,
as we have explained, showed that Coco Rico initially claimed that
it suffered approximately $900,000 of business interruption loss.
Because Coco Rico's expert Iglesias ultimately calculated a
business interruption loss of less than $700,000, Universal argued
that this initial calculation was a misrepresentation.
Ultimately, the jury does not appear to have credited this view of
the evidence. But again, the fact that Universal's argument failed
- 23 - at trial does not, on its own, establish that it was "obstinate"
or frivolous.
Second, Coco Rico contends that Universal should not
have argued at trial that it owed Coco Rico "zero" because before
trial, Universal had offered Coco Rico a business interruption
loss payment of $203,000. But Coco Rico waived this argument
because it did not raise it before the district court.
Finally, Coco Rico has identified no authority, nor are
we aware of any, holding that a district court must provide its
reasoning when denying attorneys' fees and/or prejudgment interest
under Rules 44.1(d) or 44.3(b) of the Puerto Rico Rules of Civil
Procedure.9 Although such reasoning would aid our analysis, its
absence is not dispositive. And for the reasons we have explained,
Coco Rico has failed to identify any abuse of the court's
discretion. As a result, and given the deference we owe the
At oral argument before us, Coco Rico quoted language from 9
Dopp explaining that a court abuses its discretion in making an obstinacy determination "when a relevant factor deserving of significant weight is overlooked, or when an improper factor is accorded significant weight, or when the court considers the appropriate mix of factors, but commits a palpable error of judgment in calibrating the decisional scales." Dopp, 38 F.3d at 1253 (citation omitted). But this language merely sets out the standard for abuse of discretion review generally. We do not understand Coco Rico to be arguing, nor would we agree, that all district court decisions subject to abuse of discretion review must contain an explanation of the district court's rationale.
- 24 - district court on fact-intensive determinations like this one,
Coco Rico's argument fails.
III. CONCLUSION
For all these reasons, we reverse the district court's
orders (1) denying Universal's motion for a reduction of the
contractual damages award and (2) denying Universal's motion to
set aside the jury's consequential damages award; affirm the
district court's order denying Coco Rico's motion for attorneys'
fees and prejudgment interest; and remand for further proceedings
consistent with this opinion. Each party shall bear its own costs.
- 25 -