Stereo Gema, Inc. v. Magnadyne Corp.

941 F. Supp. 271, 1996 U.S. Dist. LEXIS 14444, 1996 WL 554259
CourtDistrict Court, D. Puerto Rico
DecidedSeptember 23, 1996
DocketCivil 95-1484(HL)
StatusPublished
Cited by20 cases

This text of 941 F. Supp. 271 (Stereo Gema, Inc. v. Magnadyne Corp.) 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
Stereo Gema, Inc. v. Magnadyne Corp., 941 F. Supp. 271, 1996 U.S. Dist. LEXIS 14444, 1996 WL 554259 (prd 1996).

Opinion

OPINION AND ORDER

LAFFITTE, District Judge.

Before the Court is Defendant Magnadyne Corporation’s motion to dismiss pursuant to Federal Rule 12(b)(3). Magnadyne is a California corporation that imports and distributes car alarms. Plaintiff Stereo Gema (“Gema”) is a Puerto Rico corporation that bought and distributed Magnadyne’s products in Puerto Rico. Gema brings this action for damages under the Sherman Anti-Trust Act, 1 Puerto Rico’s anti-monopoly laws, 2 breach of contract, and the Puerto Rico Dealers’ Act, 3 commonly known as “Law 75.” Gema alleges jurisdiction both on the basis of a federal question 4 and on the basis of diversity of the parties. 5

In its complaint Gema alleges that it was the exclusive distributor of Magnadyne products in Puerto Rico; that Gema developed the Puerto Rico market for Magnadyne’s products; that Magnadyne terminated the parties’ relationship without just cause; that this termination constituted a breach of eon- *273 tract; and that Magnadyne’s pricing structure with its current distributor violates both federal anti-trust and Puerto Rico anti-monopoly laws. In its motion to dismiss, Magnadyne invokes the forum selection clause in an “Agreement for Purchase of Goods on Open Book Account”, that was signed by Carlos Arbucia Yero, Gema’s president, Paragraph twelve of the agreement reads as follows:

In the event that suit is instituted to enforce collection of any obligation of the Buyer to the Seller then the laws of the State of California shall be exclusively applicable with respect to such dispute. Further, all disputes between the Buyer and Seller arising out of their relationship and arising out of the terms of this Agreement or any purchase of goods from the Seller subsequent to the execution date of this Agreement, shall be submitted to a court of original jurisdiction which jurisdiction shall be the County of Los Angeles, State of California. In this regard, the parties acknowledge that Los Angeles County not only represents the principal place of business of the Seller but also the place of consummation of this Agreement; final negotiations of such terms and full performance of the Seller and delivery of said goods to Buyer’s risk.

Docket no. 14. The agreement identifies Gema as Buyer and Magnadyne as Seller. In its motion to dismiss, Magnadyne argues that the agreement’s forum selection clause should be enforced and the complaint should be dismissed. Gema opposes the motion and argues that enforcement of the clause would inconvenience Plaintiff and deprive it of its day in court. For the reasons set forth below, the Court grants the motion to dismiss.

DISCUSSION

1. The Erie issue

At the outset, the Court must first determine what law to apply in reviewing the forum selection clause. One of Gema’s claims is based on the Sherman Anti-Trust Act. To the extent that this Court’s jurisdiction is based on a federal question, federal law applies. See Bense v. Interstate Battery System of America, Inc., 683 F.2d 718, 720-22 (2nd Cir.1982) (applying federal common law on forum selection clauses to an antitrust claim); see also Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 26 n. 3, 108 S.Ct. 2239, 2242 n. 3, 101 L.Ed.2d 22 (1988) (In a case where jurisdiction was based both on diversity and a federal question, the presence of a federal question would “cut only in-favor of the application of federal law.”).

However, Gema also alleges jurisdiction based on diversity of the parties. In this context, the determination of what law to apply is not. quite so straightforward, although the Court ultimately reaches the same conclusion. A federal court sitting in diversity .must determine, pursuant to the holdings of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) and its progeny, whether federal or state law is controlling. Under, the Erie doctrine, a federal court with diversity jurisdiction applies state substantive law and federal procedural law. Gasperini v. Ctr. for Humanities, Inc., — U.S. -, -, 116 S.Ct. 2211, 2219, 135 L.Ed.2d 659 (1996). In this case, the Court must determine whether federal or Puerto Rico law on forum selection clauses is applicable.

In cases where federal law and state law coincide on the issue in question, it is unnecessary for the court to make a full Erie analysis. See Lambert v. Kysar, 983 F.2d 1110, 1116-17 (1st Cir.1993); Instrumentation Assoc. v. Madsen Elec. (Canada) Ltd., 859 F.2d 4, 6-8 (3rd Cir.1988); Coastal Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 201-02 (3rd Cir.1983). With regard to forum selection clauses, federal courts enforce them as a matter of federal common law. See M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 8-18, 92 S.Ct. 1907, 1912-17, 32 L.Ed.2d 513 (1972); Lambert, 983 F.2d at 1116. The Puerto Rico Supreme Court has adopted the federal jurisprudence on this issue. See Unisys Puerto Rico, Inc. v. Ramallo Brothers Printing, Inc., 91 J.T.S. 69, 8855-56 (1991); Banco Popular de Puerto Rico v. Airborne Group PLC, 882 F.Supp. 1212, 1215 (D.P.R.1995). California courts also favor the enforcement *274 of forum selection clauses. See Smith, Valentino & Smith, Inc. v. Superior Court of Los Angeles County, 17 Cal.3d 491, 495-96, 551 P.2d 1206, 131 Cal.Rptr. 374 (1976); Bancomer, S.A. v. Superior Court, 44 Cal.App.4th 1450, 1457, 52 Cal.Rptr.2d 435 (Cal.App. 2nd Dist.1996). Because federal courts, California state courts, and the Puerto Rico Supreme Court all favor forum selection clauses, it would appear that this Court need not resolve an Erie issue in this case. This is true with regard to Gema’s claims for breach of contract and for violations of Puerto Rico’s anti-monopoly laws.

The Erie issue arises, however, with regard to Gema’s Law 75 claim. Law 75 contains a provision dealing with forum selection clauses. It reads in pertinent part as follows:

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Vitalife, Inc. v. Omniguide, Inc.
353 F. Supp. 3d 150 (U.S. District Court, 2018)
MD Distribs., Corp. v. Dutch Ophthalmic Research Ctr. Int'l B.V.
322 F. Supp. 3d 272 (U.S. District Court, 2018)
Gonzalez-Morales v. UBS Bank USA
63 F. Supp. 3d 191 (D. Puerto Rico, 2014)
Soto v. STATE INDUSTRIAL PRODUCTS, INC.
642 F.3d 67 (First Circuit, 2011)
Renaissance Marketing, Inc. v. Monitronics International, Inc.
606 F. Supp. 2d 201 (D. Puerto Rico, 2009)
D.I.P.R. Mfg., Inc. v. Perry Ellis International, Inc.
472 F. Supp. 2d 151 (D. Puerto Rico, 2007)
Outek Caribbean Distributors, Inc. v. Echo, Inc.
206 F. Supp. 2d 263 (D. Puerto Rico, 2002)
Miro Gonzalez v. Avatar Realty, Inc.
177 F. Supp. 2d 101 (D. Puerto Rico, 2001)
Silva v. Encyclopedia Britannica Inc.
239 F.3d 385 (First Circuit, 2001)
Herman v. Hogar Praderas De Amor, Inc.
130 F. Supp. 2d 257 (D. Puerto Rico, 2001)
Arguss v. Teletron, Inc.
D. New Hampshire, 1999
Microfibres, Inc. v. McDevitt-Askew
20 F. Supp. 2d 316 (D. Rhode Island, 1998)
Perez v. Carnival Cruise Lines
993 F. Supp. 39 (D. Puerto Rico, 1998)
Gilman v. Wheat, First Securities, Inc.
692 A.2d 454 (Court of Appeals of Maryland, 1997)
Triangle Trading Co., Inc. v. Robroy Industries, Inc.
952 F. Supp. 75 (D. Puerto Rico, 1997)

Cite This Page — Counsel Stack

Bluebook (online)
941 F. Supp. 271, 1996 U.S. Dist. LEXIS 14444, 1996 WL 554259, Counsel Stack Legal Research, https://law.counselstack.com/opinion/stereo-gema-inc-v-magnadyne-corp-prd-1996.