Michael Axline, Esq., Miller, Axline, & Sawyer, Sacramento, California, Counsel for Commonwealth.
Robin Greenwald, Esq., Robert Gordon, Esq., Weitz & Luxenberg, P.C., New York, New York, Liaison Counsel for Plaintiffs.
Daniel M. Krainin, Esq., Beveridge & Diamond, P.C., New York, New York, Counsel for Defendants (on Brief).
Peter John Sacripanti, Esq., James A. Pardo, Esq., McDermott Will & Emery LLP, New York, New York, Liaison Counsel for Defendants.
OPINION AND ORDER
SHIRA A. SCHEINDLIN, District Judge.
At a Case Management Conference held on April 10, 2013, I denied the Commonwealth of Puerto Rico's motion seeking leave to amend its Complaint to add a claim for unjust enrichment, on the grounds that it would be prejudicial given the advanced age of the case. However, I permitted letter briefing on whether unjust enrichment might be permissible as a remedy for one of the claims alleged in the Complaint.
Presently before the Court on the parties' letter briefs is the Commonwealth's motion requesting that it be allowed to conduct written discovery and depositions on the income gained - and expense avoided - by Defendants through their sale and use of MTBE in Puerto Rico. The Commonwealth asserts that it is entitled to this discovery because, under the law of Puerto Rico, disgorgement of profits and expenses avoided is available as a remedy for its claims. Defendants dispute this assertion and object to the discovery. For the following reasons, the Commonwealth's motion is denied, and the Defendants' relevance objections are sustained.
A. The June 11 Conference
I heard oral arguments on the matters raised by the letter briefs at a Conference held on June 11, 2013. Ultimately, I reserved decision on whether to permit discovery of profits stemming from Defendants' use of MTBE-containing products in Puerto Rico.
Prior to the Conference, there was some indication that the Commonwealth's request was futile, because Defendants did not have responsive information. After the Conference, though, it is apparent that the question of whether disgorgement of the Defendants' profits would be permitted under the law of Puerto Rico must be decided, as its resolution will substantially impact the scope of discovery in this case.
B. The Parties' Arguments
In addition to submitting letter briefs relating to whether disgorgement or profits is a permissible remedy for the Commonwealth's claims, the parties also submitted stipulated and certified translations of Puerto Rico case-law. Defendants argued in their briefs that, under the law of Puerto Rico, unjust enrichment is not available as either a claim or a remedy when a legal claim or remedy is available. (Defendants also alleged that evidence from which their profits from MTBE products could be calculated do not exist). The Commonwealth took the opposite position: that unjust enrichment is available as an alternative remedy when a remedy at law is not susceptible to proof, and that Defendants would be able to provide the requested information, either through documentary evidence or expert analysis.
At the Conference, Defendants reiterated the arguments in their briefs, and additionally argued that: (1) the Commonwealth's requested remedy is overly broad, because it would require Defendants to disgorge all of the profits they made in Puerto Rico from the use of MTBE, even if those profits have no connection to the claims alleged in the Complaint; and, relatedly, (2) the requested remedy is irrelevant to any of the Commonwealth's claims, because they seek redress for environmental damage, not ill-gotten gains. The Commonwealth responded that: (1) under the law of Puerto Rico, a plaintiff seeking redress for ecological injury may elect to receive as a remedy the profits that a wilful tortfeasor reaps from a tort; and (2) it should be permitted to take the discovery at issue, in case there is no other way of proving damages at trial.
Because the Commonwealth's arguments to the contrary are unavailing, and based on my review of the relevant law, I conclude that the Supreme Court of Puerto Rico would not allow restitution of Defendants' profits from their use of MTBE in Puerto Rico. This analysis has two parts.
First, I reject the arguments offered by the Commonwealth at the Conference. The Commonwealth's reliance at the Conference on Comment C to Section 929 of the Second Restatement of Torts is misplaced, as it is not the law of Puerto Rico, is not likely to be adopted by Puerto Rico, and is not applicable to this case. Further, Arocho, a relatively recent Supreme Court of Puerto Rico case relied upon by the Commonwealth at the Conference, indicates that the proposed remedy is not available. Second, there is no indication that Puerto Rico would permit the sweeping remedy proposed by the Commonwealth under the claims asserted on any other rationale, and its arguments to the contrary are not persuasive.
A. The Arguments Offered by the Commonwealth at the Conference Are Unavailing
1. Comment C to Section 929(1)(a) of the Second Restatement of Torts Does Not Support the Commonwealth's Position
At the Conference, counsel for the Commonwealth argued that Rivera Colon v. Diaz Arocho,  a Supreme Court of Puerto Rico case, indicates that a disgorgement of profits is available as a remedy for the Commonwealth's claims under the law of Puerto Rico. Specifically, the Commonwealth argued that Arocho indicated that Puerto Rico has adopted (or would adopt) Comment c to the Restatement (Second) of Torts Section 929. The Commonwealth then argued that Comment c supports their point that restitution of Defendants' profits from MTBE throughout Puerto Rico is an available remedy.
The Commonwealth is mistaken both as to its premise that Arocho indicates that the Supreme Court of Puerto Rico would adopt Comment c, and its conclusion that Comment c supports discovery of Defendants' profits from MTBE throughout Puerto Rico. As to the premise: Arocho does not cite to Comment c at all. Instead, it cites Section 929(2) - a different subsection - in dicta for the proposition that "[o]ccasionally, the loss affects elements adhered to the soil, that can be valued in an independent manner from the terrain. In these cases, it is appropriate to compensate [the plaintiff for] the individual elements,  the value of the terrain[, ] or a combination of both." The Commonwealth's argument, then, is that because the Supreme Court of Puerto Rico cited Section 929(2) of the Second Restatement in dicta, it would adopt Comment c, which was not cited, and which does not comment on the subsection that was cited. This argument is completely without merit.
The Commonwealth's conclusion that Comment c supports its request for restitution of Defendants' profits from MTBE is also mistaken. Section 929 relates to the measure of damages for a tortious invasion to land that damages, but does not completely destroy the value of, the land (or a feature annexed to it). In states in part that:
(1) If one is entitled to a judgment for harm to land resulting from a past invasion and not amounting to a total destruction of value, the damages include compensation for
(a) the difference between the value of the land before the harm and the value after the harm, or at his election in an appropriate case, the cost of restoration that has been or may be reasonably incurred, ....
Comment c, which relates solely to Section 929(1)(a), is reproduced below; romanettes have been inserted for ease of exposition.
c. Restitutional Measure of Damages. The owner [of the land] may also be entitled to the restitutionary measure of damages based upon the value ...