Supreme Court of the United States · Federal Courts
Federal CourtsPuerto Ricoabstentionconstitutional avoidancePuerto Ricoabstentionconstitutional avoidanceauthoritative state-law construction
Facts
Puerto Rico enacted Act No. 75 in 1964, providing in substance that a dealer's contract with a manufacturer is indefinitely renewable at the dealer's option unless the manufacturer has "just cause" to terminate. The statute defines "just cause" as nonperformance of essential dealer obligations or conduct by the dealer that adversely and substantially affects the principal's interests in marketing or distribution, and it imposes substantial damages for termination without such cause. A dealer brought this action for damages for breach of his distributorship contract against Ridge Tool Co. The federal court of appeals treated the statute's "just cause" requirement broadly and concluded its retrospective impact on previously terminable contracts violated due process.
Issue
Should a federal court strike down Puerto Rico's Dealer's Contract Law as unconstitutional before the Supreme Court of Puerto Rico has authoritatively construed the statute, where a narrower construction of "just cause" might avoid any constitutional problem?
Rule
When a Puerto Rican statute is vague or unsettled and has not been authoritatively construed by the Supreme Court of Puerto Rico, a federal court should hold its hand on the constitutional question if the local court could reasonably give the statute a narrower construction that would avoid the constitutional issue.
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Luna Harbor Foods, a distributor in Ponce, sues North Valley Milling in federal district court in San Juan after North Valley ended their supply arrangement. Luna relies on a Puerto Rico statute that bars termination absent "adequate commercial reason," a phrase the Supreme Court of Puerto Rico has never interpreted. North Valley argues the statute is unconstitutional if applied to contracts that were freely terminable when made.
What is the best course for the federal court?
Explanation. When a Puerto Rico statute is vague or unsettled, and the Supreme Court of Puerto Rico has not authoritatively construed it, a federal court should hold its hand on the constitutional issue if a narrower local-law construction could avoid the constitutional question. The point is not that the statute is necessarily valid, but that constitutional adjudication is premature before Puerto Rico's highest court has spoken. (Derived from Fornaris v. Ridge Tool Co. (n.d.).)