J.R. Insulation Sales & Services, Inc. v. Puerto Rico Electric Power Authority

482 B.R. 47, 2012 U.S. Dist. LEXIS 130965, 2012 WL 4018573
CourtDistrict Court, D. Puerto Rico
DecidedSeptember 13, 2012
DocketCivil No. 11-1779 (SEC)
StatusPublished
Cited by2 cases

This text of 482 B.R. 47 (J.R. Insulation Sales & Services, Inc. v. Puerto Rico Electric Power Authority) is published on Counsel Stack Legal Research, covering District Court, D. Puerto Rico primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
J.R. Insulation Sales & Services, Inc. v. Puerto Rico Electric Power Authority, 482 B.R. 47, 2012 U.S. Dist. LEXIS 130965, 2012 WL 4018573 (prd 2012).

Opinion

OPINION AND ORDER

SALVADOR E. CASELLAS, Senior District Judge.

The appellant, J.R. Insulation Sales & Services, Inc. (“JR”), appeals from the bankruptcy court’s dismissal of its complaint against the appellee, Puerto Rico Electric Power Authority (“PREPA”). On appeal, JR assails that court’s grant of dismissal to enforce a mandatory forum selection clause. Because the bankruptcy court’s decision to that effect is supported by the record and the applicable law, and because JR failed to properly present to that court the arguments now raised here, this court need not reach the appellate challenges on the merits. JR’s challenges are thus summarily rejected, and the bankruptcy court’s decision is AFFIRMED.

Factual and Procedural Background

The Underlying Facts

On October 22, 1999, PREPA and JR entered into a series of contracts regarding maintenance, cleanup, and removal of environmental contaminants (the “Contracts”). The Contracts contained in pertinent part the following mandatory forum selection clause:

This contract shall be subject to, and interpreted by the state laws of Puerto Rico. Additionally, the contracting parties expressly agree that the state courts of Puerto Rico, only, shall be courts with competent and exclusive jurisdiction to resolve the controversies which arise between them in relation to this Contract and which require for its elucidation the intervention of the judicial authority.

JR then leased from one of its suppliers, Brand Scaffold Builders, Inc. (“Brand”), equipment for use in the performance of the Contracts. Some time later, however, JR defaulted on its obligations, resulting in its filing of Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Puerto Rico on February 28, 2003. See In re J.R. Insulation Sales & Services, Inc., Ch. 11 Case No. 03-2050.

On September 25, 2007, JR began an adversary proceeding against PREPA to collect $925,325.01 under the Contracts for alleged unpaid invoices. See J.R. Insulation Sales & Services, Inc. v. Puerto Rico [51]*51Electric Power Authority (In re J.R. Insulation Sales & Services, Inc.), Adv. No. 07-0294. In May 2008, PREPA answered the adversary proceeding complaint, raising as an affirmative defense that JR’s complaint had failed to state a claim upon which relief could be granted. PREPA also moved for summary judgment in September 2008. Contending that Brand’s recovery should have been limited to the amounts owed under the contract under which Brand provided services to JR, PREPA also filed a third party complaint against Brand.

The bankruptcy court then held a status conference on October 7, 2008, where it gave the parties until December 3, 2008 to conclude discovery, and until January 15, 2009 to file dispositive motions. The court scheduled a pretrial hearing for February 27, 2009, setting trial for March 17 and 18, 2009. That same day, PREPA consigned with the bankruptcy court the amount of $119,705.28, and requested that JR’s claims against it be dismissed with prejudice, because that was the “final amount owed” by PREPA to JR.

In December 2008, JR filed an amended complaint including Brand as a defendant. With discovery still incomplete, PREPA requested an extension of time to the fast-approaching discovery cut-off date, which the court granted. At the scheduled pretrial hearing, which was converted into another status conference at the behest of the parties, the parties argued the pending dispositive motions. On October 13, 2009, the bankruptcy court denied PREPA’s dis-positive motion, and gave the parties until February 19, 2010 to file a Joint Pretrial Report.

As particularly relevant here, on February 18, 2010, PREPA filed a motion to dismiss under Fed.R.Civ.P. 12(b)(6), seeking to dismiss JR’s complaint pursuant to the mandatory forum selection clause contained in the Contracts. The next day, the parties filed the Joint Pretrial Report. JR timely opposed the motion to dismiss in a three-and-a-half-page motion, maintaining that PREPA should be barred from asserting the forum selection clause, because it purposely availed itself of the bankruptcy court’s jurisdiction throughout the proceedings. “It would be unreasonable for [the bankruptcy court] to enforce the forum selection clause” at this late stage of the proceedings, JR argued, without citing any supporting authorities to that effect. “Simply waiting until the very last minute to raise this threshold defense on the footsteps of trial,” JR reasoned, “should be sufficient to bar the request.” JR concluded by arguing that PREPA “waived this defense by purposely availing itself of the [bankruptcy court’s] jurisdiction.” (Emphasis added.)

Arguing that the First Circuit treats a motion to dismiss based on a mandatory forum selection clause as the functionally equivalent of a Fed.R.Civ.P. 12(b)(6) motion, PREPA contended that it never waived such a defense, and, therefore, the bankruptcy court had jurisdiction to entertain its motion. In the interim, the bankruptcy court continued sine die the trial scheduled for May 25-28, 2010, pending resolution of PREPA’s motion to dismiss.

On May 5, 2010, without requesting leave of court, JR filed a supplemental motion to its opposition to PREPA’s motion to include case law supporting its argument that PREPA had waived that defense, and that, in the alternative, the enforcement of the mandatory selection clause would be unreasonable and unjust. Specifically, JR contended that, because the state courts lacked jurisdiction to decide the questions presented in the adversary proceeding, enforcing the forum selection clause would deprive it of its day in court. JR devoted a sizable [52]*52portion of its motion to an argument it never raised in its original opposition, namely that “as a matter of public policy the claims made in the adversary proceeding involved quintessential core [proceedings],” and the bankruptcy court “should promote the well-defined policy goals of centralizing all bankruptcy matters in a specialized forum.”1

The Bankruptcy Court’s Rulings

The bankruptcy court issued its ruling on December 10, 2010. The court framed JR’s opposition as follows: “1) PREPA should be barred from asserting this defense at this stage of the proceedings; 2) the Court should decline to enforce the clause, because enforcing it will impact the strong policy of centralizing all core [proceedings] in the bankruptcy court.” J.R. Insulation Sales & Services, Inc. v. Puerto Rico Electric Power Authority (In re J.R. Insulation Sales & Services, Inc. v. Puerto Rico Electric Power Authority), Ch. 11 Case No. 03-2050, Adv. No. 07-0294, slip op. at 1 (D.P.R. Dec. 10, 2010).

The court quickly dispatched JR’s first argument. It first “sympathized” with JR’s position, given PREPA’s late assertion of the forum selection clause defense. Nevertheless, the court agreed with PREPA that a “motion to dismiss based on a forum-selection clause may be raised at any time in the proceedings before disposition on the merits.” Id. at 3 (quoting Silva v. Encyclopedia Britannica, Inc., 239 F.3d 385, 388 (1st Cir.2001)).

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482 B.R. 47, 2012 U.S. Dist. LEXIS 130965, 2012 WL 4018573, Counsel Stack Legal Research, https://law.counselstack.com/opinion/jr-insulation-sales-services-inc-v-puerto-rico-electric-power-prd-2012.