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According to a report by the National Law Review (NLR), plaintiffs alleging tortious interference with contracts that are safeguarded by Puerto Rico’s Dealer’s Contracts Act, or Law 75, possess an advantage in proving their case.
Law 75 governs the interactions between distributors and manufacturers in Puerto Rico.
In a recent legal action, Ballester Hermanos Inc. (Ballester) filed a lawsuit against Edrington Group USA LLC (Edrington) for tortious interference regarding its exclusive distribution contract with Brugal & Co. SA (Brugal), which was never formally documented but was covered under Law 75 due to the enduring relationship between the parties.
In this instance, Ballester had been the exclusive distributor of Brugal rum in Puerto Rico since 1990. Edrington obtained a majority stake in Brugal in 2008 and subsequently terminated Ballester’s distribution contract in favor of CC1 Beer Distributors Inc. (CC1). Ballester claimed that Edrington tortiously interfered with its distribution agreement. Edrington sought to dismiss the case, contending that Ballester had not included CC1 as an essential party and that the claim lacked plausibility.
The court dismissed Edrington’s assertion that CC1 was an indispensable party, ruling that CC1 was merely a potential joint tortfeasor. The court then examined the tortious interference claim in relation to Law 75. Tortious interference necessitates a third party’s intrusion into a protected relationship, which Edrington countered, claiming it had supplanted Brugal through novation and exerted control through majority ownership. The court countered this assertion, stating that Edrington had not adequately disproven the presumption against novation and the premise that a parent and subsidiary are distinct entities. Thus, Ballester effectively demonstrated that Edrington qualified as a third party concerning the agreement.
Another vital aspect of tortious interference is the presence of a valid contract. Contracts with no explicit term or those terminable at will are not eligible for tortious interference claims in Puerto Rico. However, the court determined that, since Law 75 was applicable, the oral dealer contract could only be terminated for just cause, not at will, despite lacking a fixed term. Therefore, Ballester was permitted to pursue a claim for tortious interference.
In Puerto Rico, claims of tortious interference necessitate awareness of an existing contract, irrespective of intent. Thus, Edrington’s argument that it did not aim to interfere was deemed irrelevant.
The case underscores the significance of considering Law 75 when engaging with distributors in Puerto Rico, as noted in the NLR report. Since unwritten agreements may also be shielded by Law 75, suppliers and controlling parties must exercise caution and be cognizant of their responsibilities to prevent potential tortious interference lawsuits.
