Litigation 2019 Second Edition

Last Updated December 05, 2019

Puerto Rico

Law and Practice

Authors



Pietrantoni Méndez & Alvarez LLC is a premier full-service law firm located in San Juan, Puerto Rico. The firm’s attorneys represent a diverse range of commercial clients operating across all industry sectors, including banking and financial services, manufacturing, distribution, construction, insurance, health, energy and petroleum, government and telecommunications. PMA’s litigators represent clients in all areas of civil and commercial litigation before all trial and appellate levels of state and federal courts, administrative agencies and arbitration tribunals. PMA’s attorneys also assist clients in administrative proceedings before a wide range of Puerto Rico and federal agencies. The firm’s litigation practice covers virtually every business-related issue.

As a territory of the USA, the process by which civil and commercial disputes are judicially resolved in Puerto Rico is structurally and hierarchically similar to the court system of the 50 states. It follows an adversarial model. One major difference with the legal system of the 50 states (except Louisiana) is that a considerable portion of Puerto Rico’s substantive legal system is based on civil law, rather than on common law. The Puerto Rico Civil Code governs all matters related to real property, trusts and estates, obligations, contract law, and family law. Moreover, there is no employment-at-will in Puerto Rico – Puerto Rico law provides for damages where an employer terminates an employee without just cause.

The federal and state judiciaries face considerable challenges. At the trial level, both federal and state courts have large dockets. Although federal judges are assigned with considerable resources to help them to adjudicate controversies, they face the challenge of handling civil and criminal dockets. Due to constitutional considerations that guarantee criminal defendants a speedy trial, criminal cases take precedence over civil cases from a scheduling standpoint. This can often delay the adjudication of civil cases. 

State judges face a different kind of challenge when it comes to the efficient administration of justice. Most of them do not have law clerks to assist them with legal research and writing, and those who do share them with other judges. Moreover, civil trials in state court are not tried before a jury, leaving trial judges with the taxing task of having to make findings of fact and conclusions of law after trial. Some state trial judges request attorneys to submit proposed judgments or legal memoranda at the conclusion of trial. In this manner, judges can obtain a document upon which to base their final ruling.

Each jurisdiction in Puerto Rico – state and federal - has a trial, appellate (intermediate), and supreme court (court of last resort). The Puerto Rico Court of First Instance is the state court of first instance, while the U.S. District Court for the District of Puerto Rico is its federal counterpart. Where a case is filed will depend in large part on whether or not the court has jurisdiction. State courts are courts of general jurisdiction, meaning that, except for a federal law that mandates that a particular type of controversy be filed in federal court, all cases and controversies arising in Puerto Rico may be filed in state court. Unlike state courts, federal courts are of limited jurisdiction and therefore cases may be filed before them if the controversy arises out of the laws of the United States (federal question jurisdiction) or if it arises out of parties who reside or are citizens of different states and the controversy exceeds USD75,000.

Appellate courts – state and federal – are not trial courts and therefore do not assess evidence in the first instance. They review their lower courts for errors based on the records that are brought on appeal. For the most part, the intermediate appellate courts sit in panels of three judges when considering cases, thereby allowing decisions to be reached based on what the majority of the judges in the panel decides; dissenting judges will often issue separate opinions. Cases that are taken on appeal from the U.S. District Court for the District of Puerto Rico are heard by the U.S. Court of Appeals for the First Circuit. The First Circuit hears cases that are appealed from the federal districts of Maine, Massachusetts, New Hampshire, Puerto Rico, and Rhode Island.

The U.S. and Puerto Rico Supreme Courts are courts of last resort and, by and large, have discretion as to whether they will entertain a case. When either of these courts of last resort decides to hear an appeal, they issue a writ of certiorari. Opinions issued by the Puerto Rico Supreme Court are binding precedent on further cases heard before lower state courts on the island. Opinions issued by the U.S. Supreme Court bind all courts of the USA.

Court filings and proceedings are generally open to the public in both state and federal courts. Both jurisdictions have procedures to seal cases or particular filings so as to protect them from public disclosure. Filings are open to the public in federal court via the PACER electronic docket, though accessing the electronic docket requires a PACER account with its concomitant fees. There is an electronic docket known as SUMAC at the state level, which includes a large part of the courts of first instance.

Practitioners in Puerto Rico state courts must be admitted to practice by passing the state bar examination and after being favourably evaluated by the Supreme Court’s commission on professional reputation. Under particular circumstances, the Puerto Rico Supreme Court allows lawyers who are not admitted to practice in the state courts of Puerto Rico to apply for pro hac vice admission under certain circumstances. Local practitioners must comply with continued legal education requirements. Admission to the U.S. District Court for the District of Puerto Rico requires passing a federal bar examination. There are exceptions to this rule – for instance, judicial law clerks may be admitted after clerking for more than a year.

Third-party funding is permitted. However, Puerto Rico has a particular civil law rule, similar to "champerty", with respect to litigated credits (litigated credits are considered as such from the day the suit relating to the same has been answered). When litigated credits are assigned, debtors/defendants have the ability to extinguish the claim by reimbursing the assignee of the litigated credit the price paid for the litigated credit, plus costs and interest. In practice, this prevents third-party funders from getting a return on their investment.

Recently, the Puerto Rico Supreme Court decided that this rule does not apply to assignments of litigated credits relating to negotiable instruments.

Assignments of litigated credits relating to negotiable instruments are not subject to the litigated credit rule discussed in 2.1 Third-Party Litigation Funding and are thus more amenable to third-party funding.

The Puerto Rico Supreme Court has ruled that the sale of litigated credits relating to grief or mental anguish is restricted to interested parties.

Third-party funding is available to both plaintiffs and defendants. 

There is no legal minimum or maximum for a third-party funder, and no information available on market availability.

There is no available information as to the costs that a third-party funder will consider funding.

Contingency fees are permitted, but are capped at 33%.

Ideally, a party should obtain third-party funding before its complaint is answered in order to avoid running foul of the litigated credit rule described above in 2.1 Third-Party Litigation Funding.

Under certain circumstances, administrative remedies must be exhausted prior to filing a complaint. Mediation is now required in state law cases involving residential mortgage foreclosures.

The Puerto Rico Civil Code and some statutes contain the applicable statute of limitations or repose that apply for specific causes of action. Notably, there is a one-year statute of limitations for tort claims and a 15-year statute of limitations for breach of contract claims.

Defendants are protected under the due process clause of the US and Puerto Rico Constitutions in connection with being sued in federal or state courts. As to in personam jurisdiction, Puerto Rico has a long-arm statute that has been consistently construed by courts to extend as far as the outer bounds of due process permits.

At the federal and state trial level, a case will start with the filing of the complaint and the service of process on the defendants. Defendants then answer the complaint or move to dismiss the complaint. Parties are permitted to amend their initial complaint without leave of court before an answer or motion for summary judgment has been served, and with leave of court otherwise. 

An adversary party is served with process (summons) in both federal and state claims. A party that is outside the jurisdiction may be sued but only if that party is subject to in personam jurisdiction within Puerto Rico.

A plaintiff may move for default to be entered against a defendant that does not answer a complaint or otherwise plead. If the sum involved in the complaint is due and owing, the plaintiff may then move for a default judgment. Otherwise, a hearing on damages will be held. The defendant may move for the default to be lifted. Generally, state courts are more lenient in lifting defaults for good cause.

Puerto Rico allows for class actions to be filed. The standard for certifying a class is similar to Rule 23 of the Federal Rules of Civil Procedure. Puerto Rico also has a statute that provides for the filing of consumer-based class actions. Moreover, Puerto Rico’s General Corporations Law provides for the filing of derivative actions by shareholders.

There is no particular requirement to provide cost estimates. However, if requested by a client, an attorney should provide such information.

A party may request interim relief such as a request for a preliminary injunction, a temporary restraining order or a request for attachment to secure a judgment. Interim motions on non-substantive issues, such as discovery, are common. 

A party can move to dismiss a lawsuit at the pleading stage under the Puerto Rico Rules of Civil Procedure on bases and standards similar to that of Rule 12 of the Federal Rules of Civil Procedure. However, it is noteworthy that the Twombly pleading standard has not been explicitly adopted by Puerto Rico courts. As such, the granting of dispositive motions is more common in federal courts than in state courts due to the level of specificity with which complaints must be drafted in the former. Further, because federal courts have limited jurisdiction, jurisdictional challenges are often central to a controversy and discussed from the onset.

In both federal and state practice, once discovery has ended the parties will often file motions for summary judgment. Again, the experience in federal litigation is that disposing of a matter through summary judgment is more commonplace. State courts have in recent years shown more willingness to enter summary judgment after the Puerto Rico Supreme Court issued a series of opinions clarifying the standard for issuing dispositive motions.

Interested parties may join as parties to a complaint as intervenors. There are permissive and mandatory joinders, depending on the interest of the party.

Typically, courts will require a party moving for interim injunctive relief to post a bond. Similarly, non-resident claimants must post a non-resident bond.

Courts will oftentimes shy away from awarding costs to a party that prevails in an interim motion. If costs or fees are imposed at this stage, they will be the result of a finding of temerity or frivolous litigation.

Motions for preliminary injunctions are handled for the most part on an expedited basis. The San Juan Courthouse has two courtrooms that only handle extraordinary remedies, such as preliminary injunctions and temporary restraining orders. 

Federal and state discovery are a central aspect of civil litigation practice. The Puerto Rico Rules of Civil Procedure were amended in 2009 and incorporate many of the concepts set forth in the Federal Rules of Civil Procedure, such as the need to have the parties meet at an early stage to map out discovery and disclose their documents and persons with information prior to engaging in document or deposition discovery. Moreover, the Puerto Rico Rules of Civil Procedure provide for initial discovery, written discovery, production of documents, the taking of depositions of parties, and the issuance of subpoenas to witnesses or third parties to compel testimony or production of documents, all under similar standards to those in the Federal Rules of Civil Procedure. Both sets of rules seek to have cases resolved in an expedited fashion and without delay. However, civil practice in both state and federal courts are not without their challenges in the implementation of procedural efficiency.

Third parties may be compelled to provide discovery by way of a subpoena duces tecum or a subpoena ad testificandum.

The Puerto Rico Rules of Civil Procedure require each party to disclose all relevant documentation and electronically stored information that supports their claims and defences. The Federal Rules of Civil Procedure require each party to disclose all relevant documentation and electronically stored information (ESI) supporting their claims or defences. 

See 5.3 Discovery in This Jurisdiction.

The attorney client privilege and attorney work products are recognised under Puerto Rico law. The scope of the privilege protects outside and in-house counsel communications.

Privileged documents, such as those containing trade secrets, are also protected from disclosure.

Injunctions will be granted based on standards of equity. Preliminary injunctive relief will be granted so long as the applicant can establish that there are no other available bases for relief, the ultimate relief may become moot if injunctive relief is not granted and if the balance of the equities favours him or her.

Injunctive relief may be obtained on an urgent basis through an ex parte temporary restraining order.

Ex parte temporary restraining orders (TROs) may be issued in urgent circumstances. However, a TRO in state court will not exceed ten days, except for just cause for an additional term of ten days. Federal Court TROs are limited to a term of 14 days. 

The applicant for injunctive relief may be held liable for damages. For that reason, applicants will be required to post a bond to cover those potential damages.

The court may grant injunctive relief with respect to assets that are located outside of Puerto Rico.

Injunctive relief may under certain circumstances be issued against third parties so long as they are reasonably related to the controversy.

A party-respondent who fails to comply with the terms of an injunction may be held in contempt of court after a show cause hearing.

Trials are conducted in Puerto Rico state courts in a manner similar to federal courts.

Courts hold case management hearings at the initial stages of the case and discovery is scheduled at that time. Some judges will set status conferences to monitor the status of the case or will set oral arguments if a dispositive motion or if a non-dispositive motion posing an important issue is submitted.

Civil trials in state court are not tried before a jury.

Evidence will be admitted if it is relevant and reliable. Puerto Rico’s evidentiary rules and standards generally mirror the Federal Rules of Evidence. 

Expert testimony is permitted at trial. The parties or the court can seek expert testimony.

Hearings are usually open to the public with the exception of particular family law matters, such as divorce, custody, visitation, child support, adoptions, legitimation, and matters involving minors.

Judgments or dispositive rulings are usually held in abeyance and issued by way of a judgment or a resolution; non-dispositive issues may be ruled on from the bench.

The timeframe of a commercial case will depend on the complexity of the case (including substantive and non-discovery issues), the caseload of the judge and counsel’s willingness to streamline the case.

Generally, court approval is not required to approve a settlement. However, there are exceptions – class actions, for instance, require that the court approve the settlement. Moreover, certain employment cases and cases affecting the interests of minors require the approval of relevant state agencies.

In most circumstances, the settlement of a lawsuit can remain confidential.

If the court retains jurisdiction to enforce the settlement, the agreement may be judicially enforced. Otherwise, a party which breaches a settlement agreement may be subject to suit and civil liability.

Settlements may be set aside if a party is in breach of the agreement or if the agreement is deemed to be illegal.

The form of award will depend on the statute that underlies the claim being brought. For the most part, awards will be monetary or injunctive.

Punitive damages are not allowed under Puerto Rico state law. Punitive damages are allowed under certain federal laws. There are rules limiting maximum damages in cases brought against the government.

Puerto Rico provides for the collection of pre-judgment and post-judgment interest.

Judgments may be executed by the court that issued the judgment.

The Puerto Rico Rules of Civil Procedure provide for exequatur proceedings for the enforcement of foreign judgments.

Under Puerto Rico procedural law, an appeal may be taken to the intermediary court of appeals upon the entry of final judgment. An interlocutory revision may be taken to the court of appeals through a petition for writ of certiorari. For the most part, the Puerto Rico Supreme Court will only hear cases for which it has issued a writ of certiorari. In cases involving matters of high public interest, the Puerto Rico Supreme Court has certified questions for immediate consideration.

See 10.1 Levels of Appeal or Review to a Litigation.

The time within which to file an appeal or a certiorari is triggered upon the entry of the judgment or a resolution, as the case may be. A motion for reconsideration may be filed which may toll the period to file the appeal or petition for writ of certiorari.

Only jurisdictional issues may be raised on appeal for the first time. An argument that is not raised in a lower court will be waived on appeal. 

See 10.1 Levels of Appeal or Review to a Litigation, 10.2 Rules Concerning Appeals of Judgments, 10.3 Procedure for Taking an Appeal and 10.4 Issues Considered by the Appeal Court.

An appellate court may confirm, vacate, reverse or remand after an appeal.

Unless a statute specifically provides for it or in the event of temerity or vexatious litigation, each party shall be responsible for its attorneys’ fees. Costs are awarded to the party that prevailed.

See 11.1 Responsibility for Paying the Costs of Litigation.

Interest is awarded on costs.

Arbitration is strongly favoured in Puerto Rico as a matter of public policy (and has become increasingly common). Both the Puerto Rico Arbitration Act (PRAA) and the Federal Arbitration Act (FAA) may govern in state court, though the FAA will govern and pre-empt any conflicting state law when the contract involves interstate commerce. In any event, the PRAA is modelled after the FAA; in fact, several provisions of the PRAA are translations of their FAA counterparts. Both the PRAA and FAA provide for mandatory and binding arbitration when contractually agreed upon by the parties; confirmation of the award in court; and extremely limited grounds for judicial review (basically, corruption, fraud, partiality, or misconduct).

Mediation is also strongly favoured in Puerto Rico as a matter of public policy as an alternate dispute resolution mechanism. At both the federal and state level in Puerto Rico, all civil cases (with limited exceptions) are eligible for mediation and may be referred to mediation by the presiding judge at his or her discretion, with or without the parties’ consent (the parties can request by motion or agree by stipulation to submit to mediation).

There is a strong public policy favouring the resolution of matters through arbitration. For the most part, if the parties have agreed to arbitrate or mediate a controversy, courts will compel the parties to do so.

Institutions such as AAA and JAMS are fairly well organised and are common forums before which arbitrations will be handled.

The proceedings will be conducted based on the rules of the arbitral tribunal and the enforcement of awards will be based on the forum considering the confirmation, modification or reversal.

There are no subject matters that may not be taken to arbitration in a commercial litigation setting.

Like the Federal Arbitration Act, the Puerto Rico Arbitration Act limits the types of challenges that may be raised in arbitration awards. For instance, a court may reverse an award that was obtained through fraud, corruption or was the result of evident bias.

A competent court in Puerto Rico may enforce a domestic or foreign arbitration pursuant to the statutory provisions under chapters 259 and 260 of the Puerto Rico Civil Prosecution Code. If the award is enforced in federal court, the proceedings will be governed by the Federal Arbitration Act.

Pietrantoni Méndez & Alvarez LLC

Popular Center-19th Floor
208 Ponce de Leon Avenue
San Juan, Puerto Rico 00918

+1 787 274 1212

+1 787 274 1470

info@pmalaw.com www.pmalaw.com
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Law and Practice

Authors



Pietrantoni Méndez & Alvarez LLC is a premier full-service law firm located in San Juan, Puerto Rico. The firm’s attorneys represent a diverse range of commercial clients operating across all industry sectors, including banking and financial services, manufacturing, distribution, construction, insurance, health, energy and petroleum, government and telecommunications. PMA’s litigators represent clients in all areas of civil and commercial litigation before all trial and appellate levels of state and federal courts, administrative agencies and arbitration tribunals. PMA’s attorneys also assist clients in administrative proceedings before a wide range of Puerto Rico and federal agencies. The firm’s litigation practice covers virtually every business-related issue.

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