Puerto Rico Hospital v. Boston Scientific, 426 F.3d 503, 1st Cir. (2005)

426 F.
3d 503
PUERTO RICO HOSPITAL SUPPLY, INC., Plaintiff,

Appellee,
v.
BOSTON SCIENTIFIC CORP., Defendant, Appellant.
No. 05-1962.
United States Court of Appeals, First Circuit.

Heard August 4, 2005.
October 21, 2005.
Humberto Guzman-Rodriguez, with whom Edward W. Hill-Tolinche and

Jorge Soltero-Pales were on brief, for appellant.
Jesus E. Cuza, with whom John L. McManus and Linda M. Reck were on
brief, for appellee.
Before BOUDIN, Chief Judge, SILER,* Senior Circuit Judge, and
SARIS,** District Judge.
SILER, Senior Circuit Judge.
Plaintiff Puerto Rico Hospital Supply, Inc. ("PRHS") filed suit against Boston
Scientific Corporation ("BSC") in the United States District Court in Puerto
Rico for the purpose of obtaining a preliminary injunction pending arbitration
before the International Chamber of Commerce ("ICC"). PRHS appeals the
district court's denial of the injunction on the basis that the district court applied
the wrong legal standard. We AFFIRM the district court.
I. BACKGROUND
2
PRHS is a Puerto Rico company in the business of distributing medical

products. BSC is a manufacturer of medical products and is incorporated in
Delaware with a principal place of business in Massachusetts. In 1989, the two
businesses entered into a contract under which PRHS would become the
exclusive distributor of BSC products in Puerto Rico. The contract specified
that PRHS would use its "best efforts to develop and promote" BSC's products
and that PRHS would "maintain, at [PRHS's] own expense, an adequate

inventory" of BSC products. The term of the agreement was one year, but it
could be extended for additional one-year periods provided that both parties
agreed to the extension. The contract was extended for one-year periods
through the normal course of business until 2005. Under the contract, either
party could terminate or not renew the agreement for cause after giving the
breaching party sixty days to remedy the problem. Otherwise, any party could
terminate the agreement by giving the other twelve months notice. The choiceof-law provision states that the agreement "shall be governed by the laws of the
Commonwealth of Massachusetts and, to the extent applicable, the
Commonwealth of Puerto Rico and the United States of America." The
agreement specifies that all disputes, including those relating to the
construction of the contract, shall be arbitrated under the rules and the
governance of the ICC.
3
In a letter dated April 29, 2005, BSC sent PRHS notice that it did not intend to
renew the contract after it was set to expire on June 30, 2005. The letter cited
three reasons for not wishing to renew: 1) that PRHS "failed to use its best
efforts to develop and promote the use and sale" of BSC products such that
"BSC's goodwill has been negatively affected" causing a loss of "millions of
dollars in sales"; 2) that PRHS "failed to maintain an adequate inventory" of
BSC products; and 3) that PRHS failed to "timely pay the amounts owed" to
BSC. The letter stated that if PRHS began to meet its contractual obligations,
BSC would reconsider terminating their relationship.
PRHS filed a complaint with the ICC to arbitrate the merits of this case. It also
filed a complaint in district court for the sole purpose of obtaining a preliminary
injunction pending arbitration. The ICC rules provide that either an arbitrator or
a court can issue interim relief. The district court denied the motion for
injunctive relief by analyzing this case under the traditional test. PRHS appeals.
This court has jurisdiction under 28 U.S.C. 1292(a)(1).
II. STANDARD OF REVIEW

5
This court reviews the denial of the preliminary injunction for an abuse of
discretion. Charlesbank Equity Fund II v. Blinds To Go, Inc., 370 F.3d 151,
158 (1st Cir.2004). This court reviews abstract issues of law de novo,
recognizing that an error of law is always an abuse of discretion. Id. Factual
findings, however, are reviewed for clear error. New Comm Wireless Servs.,
Inc. v. SprintCom, Inc., 287 F.3d 1, 9 (1st Cir.2002).
III. DISCUSSION
A district court has jurisdiction to issue preliminary injunctions to preserve the

status quo pending arbitration. Bercovitch v. Baldwin Sch., Inc., 133 F.3d 141,
151 (1st Cir.1998) (citing Teradyne, Inc. v. Mostek Corp., 797 F.2d 43, 51 (1st
Cir.1986)). Additionally, the ICC rules, which were incorporated into the
contract, allow either the arbitrator or "any competent judicial authority" to
issue interim relief. Rules of Arbitration of the ICC, Article 23, available at
http://www.iccwbo.org/court/english/arbitration/rules.asp. Thus, the court did
not err in hearing the case and deciding the matter.
The essence of PRHS's argument is that the district court erred in not making a
"provisional choice of law," and that such a choice would have resulted in the
application of Puerto Rico's Law 75, 10 P.R. Laws Ann. 278 ("Law 75").3
Because this argument was not made below, it was waived. See Carcieri v.
Norton, 398 F.3d 22, 39 (1st Cir.2005) ("The general rule is that issues not
raised in district court cannot be raised for the first time on appeal as a matter of
right.").
Additionally, PRHS's actions below appear to have invited the very error it now
claims. See Austin v. Unarco Indus., Inc., 705 F.2d 1, 15 (1st Cir.1983) (citing
McPhail v. Mun. of Culebra, 598 F.2d 603, 607 (1st Cir.1979)). In general, "a
party may not appeal from an error to which he contributed, either by failing to
object or by affirmatively presenting to the court the wrong law." Id. The
district court repeatedly stated that it would not make a choice-of-law
determination, despite BSC's insistence that it must do so to properly rule on
the motion. Not only did PRHS not object to the court's intentions, but it also
stated that the determination would not turn on a choice-of-law interpretation.
Rather, PRHS stated, in relevant part: "My point and my client's point is that
this court should not go into either Puerto Rico law. . . or . . . Massachusetts law
to decide whether my client . . . is entitled to the injunction" and "[m]y only
request to this Court is [to] . . . retain the status quo, and let the arbitrator
decide, whether it is Massachusetts [or] Puerto Rico" law. In its opinion, the
district court followed federal law; and, as PRHS implored the court not to
determine applicable law, PRHS cannot now assert error for the choice.
Even if there is no invited error or waiver, the district court was faced with an
ambiguous choice-of-law provision. The parties' contract stated that "[t]his
Agreement . . . shall be governed by the laws of the Commonwealth of
Massachusetts and, to the extent applicable, the Commonwealth of Puerto Rico
and the United States of America." This provision is ambiguous because the
phrase "to the extent applicable" does not clearly dictate which law should
apply under what circumstances. PRHS's witness said that he wanted Puerto
Rico law to apply, and suggested that this was in order to gain the benefits of
Law 75. BSC, "of course, may not have shared this understanding." Because
neither the contract nor the evidence presented clarify the parties' intent, the
provision is ambiguous.
10
Ambiguous choice-of-law provisions should be determined by the arbitrator,

not the district court. Medika Int'l, Inc. v. Scanlan Int'l, Inc., 830 F.Supp. 81, 88
(D.P.R.1993). However, the fact that the choice-of-law determination is left to
the arbitrator should not prevent a district court from making a preliminary
judgment regarding which law to apply for the purposes of injunctive relief. In
the face of an ambiguous choice-of-law provision, the district judge made a
permissible choice to apply federal law as the default standard for preliminary
injunction purposes. In Medika Int'l, Inc. v. Scanlan Int'l Inc., the court
examined a contract involving a Minnesota choice-of-law provision which may
have contravened Law 75. Id. The court held that the arbitrator should decide
the applicability of Minnesota law, and it applied federal law when determining
the merits of the plaintiff's request for a preliminary injunction. Id. Because
preliminary relief is intended to deal with temporary conditions, the district's
court decision to apply the federal law standard, given the ambiguous choiceof-law provision, was a reasonable one. The district court thus did not err in
applying federal law.
11
PRHS relies on Danieli & C. Officine Meccaniche S.p.A. v. Morgan Constr.

Co., 190 F.Supp.2d 148, 156-57 (D.Mass.2002), for the proposition that a
district court has the authority to make a provisional choice of law. Yet that
decision explicitly stated that when "an agreement contains a valid arbitration
clause as well as a choice of law provision, the determination of what law
applies should be made by the arbitrator." Id. The district judge in Danieli
declined to make a choice-of-law determination; rather, he simply selected what
law to apply for the limited purpose of evaluating the availability of
preliminary injunctive relief. Id. Similarly, in the case at hand, the district court
used the federal standard to determine if PRHS was entitled to an injunction,
but did not address the likelihood of success on the merits because PRHS had
not proven irreparable harm.
12
To determine whether PRHS was entitled to an injunction, an applicable law

must be selected the district court chose federal law.1 Both the Medika and
Danieli courts relied on the traditional four-part test for preliminary
injunctions, and the district court here did not err in doing the same. Because
this case involved the district court's authority to issue an injunction under the
FAA, and because the choice-of-law provision provided that the case should be
governed by federal law "to the extent applicable," the district court properly
applied federal law, leaving for the arbitrator the choice-of-law determination.
13
Even if the district court's application of federal law was in error, any such error
is harmless because there is no clear indication that the case would come out
differently under Law 75, which, although not explicitly requiring irreparable
harm, does entail a balancing of the equities. The federal test looks to the
following four factors: 1) the likelihood of success on the merits; 2) the
potential for irreparable harm if the injunction is not granted; 3) the balance of
impositions on both parties; and 4) the effect of the ruling on the public interest.
Air Line Pilots Ass'n, Int'l. v. Guilford Transp. Indus., Inc., 399 F.3d 89, 95 (1st
Cir.2005). Law 75 prohibits the termination of established business
relationships in Puerto Rico without "just cause," and to obtain an preliminary
injunction, the plaintiff must show: 1) the public policy of Law 75; 2) whether
the plaintiff is a dealer; and 3) the interests of the parties and balancing the
equities. Tatan Mgmt. v. Jacfran Corp., 270 F.Supp.2d 197, 200 (D.P.R.2003).
14
The district court denied PRHS's request for an injunction on the basis that it
could not show an irreparable injury. There is little to suggest that once the
district judge found there was no irreparable harm threatened, he would have
gone on to grant a preliminary injunction in light of the rather serious breach of
contract allegations raised by BSC against PRHS. PRHS claimed that it would
be harmed because it would lose profits, that one of its employees would be
affected in some way, and that its business would be impacted. None of these
factual findings has been challenged on appeal, and none of them is clearly
erroneous based on the record. These injuries are not irreparable because laterissued damages can properly compensate any wrong committed. Rio Grande
Cmty. Health Ctr. v. Rullan, 397 F.3d 56, 76 (1st Cir.2005). Because PRHS
cannot establish irreparable harm, the district court did not abuse its discretion
in denying the injunction, and any error of law is harmless.
IV. CONCLUSION
15
For the above reasons, the decision of the district court is AFFIRMED.
Notes:
*
Of the Sixth Circuit, sitting by designation
**
Of the District of Massachusetts, sitting by designation
Law 75 is a Puerto Rican dealers' law enacted "to protect Puerto Rico dealers
from the harm caused when a supplier arbitrarily terminates a distributorship
once the dealer has created a favorable market for the supplier's products,"
which prevents suppliers from refusing to renew or terminating a covered

contract, except for just causeR.W. Int'l Corp. v. Welch Food, Inc., 13 F.3d 478,
482 (1st Cir.1994).
1
The Massachusetts standard for issuing a preliminary injunction closely tracks

the federal standard:
The judge initially evaluates in combination the moving party's claim of injury
and chance of success on the merits. If the judge is convinced that failure to
issue the injunction would subject the moving party to a substantial risk of
irreparable harm, the judge must then balance this risk against any similar risk
of irreparable harm which granting the injunction would create for the opposing
party. What matters as to each party is not the raw amount of irreparable harm
the party might conceivably suffer, but rather the risk of such harm in light of
the party's chance of success on the merits.
Siemens Bldg. Techs., Inc. v. Div. of Asset Capital Mgmt., 439 Mass. 759, 791
N.E.2d 340, 343 (2003).

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426 F.

PUERTO RICO HOSPITAL SUPPLY, INC., Plaintiff,

United States Court of Appeals, First Circuit.

Humberto Guzman-Rodriguez, with whom Edward W. Hill-Tolinche and

PRHS is a Puerto Rico company in the business of distributing medical

and that PRHS would "maintain, at [PRHS's] own expense, an adequate

II. STANDARD OF REVIEW

A district court has jurisdiction to issue preliminary injunctions to preserve the

Ambiguous choice-of-law provisions should be determined by the arbitrator,

PRHS relies on Danieli & C. Officine Meccaniche S.p.A. v. Morgan Constr.

To determine whether PRHS was entitled to an injunction, an applicable law

Of the Sixth Circuit, sitting by designation

Of the District of Massachusetts, sitting by designation

which prevents suppliers from refusing to renew or terminating a covered

The Massachusetts standard for issuing a preliminary injunction closely tracks

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