Información acerca de Juicio ganado por Rubén Blades contra Martínez, Morgalo & Asociados.

A quien interese.

Información acerca de Juicio ganado por el Sr. Rubén Blades contra Martínez, Morgalo & Aociados.
(Incluye documentación oficial: fallo contra la corporación Martínez, Morgalo & Asociados y el fallo denegando la acción por libelo y calumnia.)

Aseveraciones falsas que ameritan desmentirse: 

#1 -   Rubén Blades perdió el caso contra Morgalo.  

Aclaración -   Rubén Blades prevaleció en todas las acciones que se presentaron en su contra. El Tribunal Federal encontró a Morgalo responsable civilmente en su carácter corporativo por incumplimiento de contrato y deberes fiduciarios, condenando a su empresa al pago de $133,168 más intereses.  Esta cantidad no ha sido pagada a Blades al día de hoy.  El Tribunal declinó hacer este fallo extensivo al señor Morgalo en su carácter personal bajo la doctrina del "velo corporativo," pero como principal ejecutivo y administrador de Martínez, Morgalo & Asociados fue y sigue siendo responsable.  

#2 -  Morgalo intima tardíamente que la reclamación de Willie Colón sobre supuesto acuerdo verbal tenía mérito. 

Aclaración -   Willie Colón retiró su demanda contra Blades justo antes de que comenzara el juicio alegando que había llegado a un acuerdo extrajudicial con Robert Morgalo.  Colón tuvo que pagarle aproximadamente $10 mil en costas judiciales a Blades.   

#3 - Todo es culpa de la guerra en Irak (que coincidió justamente con el destape del problema financiero)  (Si Morgalo no hubiese sido activado al servicio militar, nada de esto hubiera pasado.)

Aclaración - El señor Morgalo era el presidente y principal ejecutivo de MM&A.  El Tribunal determinó a base de la prueba en el caso de difamación que la imputación en cuestión era sustancialmente cierta. Por ello, la expresión de Blades ("nos robaron a los dos") estaba justificada.  Por otro lado, el Magistrado también encontró que las expresiones de Blades no tuvieron impacto en la reputación de Morgalo como promotor de eventos en la industria a la fecha en que fueron hechas (2007).  

Más abajo Documentos Oficiales de la Justicia. 

Rubén Blades
28 de agosto, 2016

CIVIL 07-1380 (JA) OPINION AND ORDER IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

WILLIAM ANTHONY COLÓN,
Plaintiff
v.
RUBÉN BLADES,
ROBERTO MORGALO,
MARTÍNEZ, MORGALO &
ASSOCIATES,
Defendants
RUBÉN BLADES,
Cross-Plaintiff
v.
ROBERTO MORGALO, in his personal
capacity and as owner and member
of MARTÍNEZ, MORGALO &
ASSOCIATES, LLC; MARTÍNEZ,
MORGALO & ASSOCIATES, LLC.,
Cross-Defendants
CIVIL 07-1380 (JA)
OPINION AND ORDER

This matter is before the court on motion for default judgment filed on
March 1, 2010 by cross-plaintiff Rubén Blades against cross-defendant Martínez,
Morgalo & Associates, Inc., (hereinafter “M.M.A.”). (Docket No. 133.) A hearing
on damages was held on April 5, 2010. (Docket No. 163.)
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CIVIL 07-1380 (JA) 2
I. FACTUAL AND PROCEDURAL BACKGROUND
In 2002, Roberto Morgalo, Arturo Martínez, and their company M.M.A.
entered into negotiations to book a concert featuring a musical performance
between William Anthony Colón and Mr. Blades to commemorate the album
“Siembra” originally released in 1978. (Docket No. 56, at 4, 12.)
On or about January, 2003, Mr. Morgalo’s company acting as an agent on
behalf of Mr. Blades and Mr. Colón, entered into an Engagement Contract with
DISSAR Productions to hold the concert in May, 2003, at the Estadio Hiram
Bithorn in San Juan, Puerto Rico. (Docket No. 14-5.) According to the contract,
Mr. Colón and Mr. Blades were to receive a $350,000 all-inclusive fee, except for
sound and lights, as compensation for their performance. (Id. at 1.) Mr. Blades
and Mr. Colón would each receive fifty percent (50%) of the fee after all of the
concert expenses were paid. (Docket No. 56, at 5, ¶ 14.)
On May 4, 2007, seeking the collection of monies which he alleged were
owed to him, Mr. Colón filed a complaint against Mr. Blades, Mr. Morgalo, and
M.M.A. alleging that Mr. Blades was solely responsible for breaching the contract.
(Docket No. 1.) On April 29, 2008, Mr. Colón filed an amended complaint to
which Mr. Blades replied on May 9, 2008. (Docket Nos. 45 & 48.) On June 5,
2008, Mr. Blades sought indemnification from Mr. Morgalo in his personal capacity
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CIVIL 07-1380 (JA) 3
and as owner and member of M.M.A., and also from M.M.A. by filing a cross claim
which was amended on July 29, 2008. (Docket Nos. 49 & 56.)
Mr. Morgalo also filed a defamation claim against Mr. Blades and his
company, Blades Productions, Inc., in the United States District Court for the
Southern District of New York on May 2, 2008. (Docket No. 58-2.) The claim was
consolidated with this action on August 12, 2008. (Id.) On September 2, 2008,
Mr. Morgalo answered Mr. Colón’s amended complaint as well as Mr. Blades’
amended cross claim (Docket Nos. 66 & 67) and on October 17, 2008, Mr. Blades
answered Mr. Morgalo’s defamation claim. (Docket No. 73.) That claim was
dismissed on March 31, 2010. (Docket No. 154.)
On April 21, 2009, Mr. Morgalo waived service of summons specifically on
behalf of M.M.A. pursuant to Federal Rule of Civil Procedure 4(d). (Docket No.
97.) On February 2, 2010, Mr. Blades asked the Clerk of the Court to enter
default against M.M.A. for its failure to plead or otherwise defend. (Docket No.
118.) See Fed. R. Civ. P. 55(a). The Clerk entered default as to M.M.A. in
relation to the amended cross-claim on February 25, 2010. (Docket No. 128.)
Finally, Mr. Blades moved for default judgment as to M.M.A. on March 1, 2010.
(Docket No. 133.) Specifically, Mr. Blades asks for $143,000 in damages plus
interest under the first cause of action, cost and attorneys fees, and judgment by
default on all six causes of action of the amended cross-claim. (Id.) The default
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hearing was set for March 23, 2010 and then moved to and held on April 5, 2010.
(Docket Nos. 141 & 144.) On May 6 and May 7, 2010, Mr. Colón moved to
voluntarily dismiss his claims against Mr. Blades, Mr. Morgalo, and M.M.A.
(Docket Nos. 188 & 194.) Mr. Colón’s amended complaint was voluntarily
dismissed on May 9, 2010. (Docket No. 196).
II. STANDARD OF REVIEW
A judgment by default pursuant to Federal Rule of Civil Procedure 55(b) “is
a ‘final disposition of the case and an appealable order’ that has the same effect
as a judgment rendered after a trial on the merits.” U.S. v. $23,000 in U.S.
Currency, 356 F.3d 157, 163 (1st Cir. 2004) (quoting 10A Charles Alan Wright,
Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure Civil § 2684 (3d
ed. 1998)). “Pursuant to Rule 55(b), a [party] ‘must apply to the court for a
default judgment’ where the amount of damages claimed is not a sum certain.”
Lang-Correa v. Díaz-Carlo, 672 F. Supp. 2d 265, 269 (D.P.R. 2009) (quoting Fed.
R. Civ. P. 55(b)(2)). The court may enter a judgment by default provided that
“[i]f the party against whom a default judgment is sought has appeared personally
or by a representative, that party or its representative must be served with
written notice of the application at least 7 days before the hearing.” Fed. R. Civ.
P. 55(b)(2); see U.S. v. $23,000 in U.S. Currency, 356 F.3d at 163-64. Also, Rule
55(b)(2) provides that “[t]he court may conduct hearings . . . when . . . it needs
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CIVIL 07-1380 (JA) 5
to: . . . determine the amount of damages.” Fed. R. Civ. P. 55(b)(2)(B). Entry
of default by the Clerk “constitutes an admission of all facts well-pleaded in the
complaint.” Metropolitan Life Ins. Co. v. Colón-Rivera, 204 F. Supp. 2d 273, 274
(D.P.R. 2002) (citing Banco Bilbao Vizcaya Argentaria v. Family Restaurants, Inc
(In re The Home Restaurants, Inc.), 285 F.3d 111, 114 (1st Cir. 2002)); see
Franco v. Selective Ins. Co., 184 F.3d 4, 9 n.3 (1st Cir. 1999). Consequently, “
defaulting [party will be precluded] from contesting liability.” Lang-Correa v.
Diaz-Carlo, 672 F. Supp. 2d at 269. However, the court may “examine [the]
complaint to determine whether it alleges a cause of action.” Id. (quoting
Quirindongo Pacheco v. Rolón Morales, 953 F.2d 15, 16 (1st Cir. 1992)). “Once
the entry of a default establishes the fact of damage, the trial judge . . . has
considerable latitude in determining the amount of damages.” Jones v.
Winnepesaukee Realty, 990 F.2d 1, 4 (1st Cir. 1993) (citing Sony Corp. v. Elm
State Elecs., Inc., 800 F.2d 317, 321 (2d Cir. 1986)).
III. FINDINGS OF FACT
At all relevant times, Mr. Morgalo and M.M.A. were involved in the business
of promoting and representing performers of salsa and Latin music. (Docket No.
56, at 3, ¶ 7.) Mr. Morgalo also was the owner, business proprietor, manager
member, principal, agent, servant, representative and/or employee of M.M.A., and
was acting within the course and scope of such ownership, membership, agency
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and employment. (Id. ¶ 8.) When the company was organized, Mr. Morgalo and
co-owner Mr. Martínez assigned membership interest as follows: fifty-one percent
(51%) to Mr. Morgalo and forty-nine percent (49%) to Mr. Martínez. Mr. Morgalo
was and served as president of the company and Mr. Martínez was named vice
president. (Id. at 4, ¶¶ 9 & 10.)
On 2002, M.M.A. began negotiations for the performance of a reunion
concert between Mr. Blades and Mr. Colón to commemorate the album “Siembra”
originally released in 1978 (hereinafter the “Siembra concert or show”). (Id. ¶
12.) On January 2003, M.M.A. executed an Engagement Contract with the Puerto
Rican promoters DISSAR Productions and ROMPEOLAS for the performance on
behalf of both Mr. Blades and Mr. Colón. (Id. ¶ 13.) In the fall of 2003, Mr.
Martínez transferred and/or assigned his membership interest in the company to
Mr. Morgalo, and Mr. Morgalo then became the sole owner and member of M.M.A.
(Id. ¶ 11.) The Engagement Contract provided that the fee payable to both
artists-Colón and Blades-was $350,000, all-inclusive, except for sound and lights.
(Id. at 5, ¶ 14.) Mr. Blades and Mr. Colón would receive fifty percent (50%) of
the fee after payment of concert expenses, including production and personnel,
which were to also be split between Mr. Blades and Mr. Colón. (Id.)
On or about February 2002, Mr. Morgalo and M.M.A. received $62,500 for
a concert between Mr. Blades and Cheo Feliciano. (Id. ¶ 15.) However, the
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CIVIL 07-1380 (JA) 7
concert was cancelled and Mr. Blades never received the money. (Id.) Instead,
M.M.A. applied the $62,500 as a “credit” toward the Siembra Concert, without the
knowledge, consent or approval of either Mr. Blades or Mr. Colón. (Id.) Thus, the
$62,500 are exclusively owed to Mr. Blades, over and above and independent
from the balance of the fee owed to Mr. Blades for the Siembra Concert. (Id.)
Despite owing money to Mr. Blades, M.M.A. charged and received a booking
commission equal to ten percent (10%) of the fee, or $35,000 for the Siembra
concert. (Id. at 6, ¶ 16.)
As booking agents Mr. Morgalo and M.M.A. served Mr. Blades and Mr. Colón
in a fiduciary capacity and owed such fiduciary duties to act and handle the
concert’s affairs with the care, skill, and diligence a fiduciary rendering that kind
of service would reasonably be expected to use. (Id. ¶ 17.) Mr. Morgalo and
M.M.A. were also responsible for collecting and paying the fee to both artists,
payment of musician salaries, travel and accommodation arrangements,
transportation, security, etc. (Id. ¶ 18.)
The Engagement Contract provided that all payments were to be made by
the promoters to M.M.A in the form of wire transfer, cash, certified check or
money order payable to M.M.A. (Id. ¶ 19.) Mr. Morgalo and M.M.A. were
required to make full payment to the artists prior to traveling to Puerto Rico. (Id.)
Mr. Colón received an up front advance of $62,500 from M.M.A. while Mr. Blades
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received an up front advance of $68,000 from M.M.A. (Id. ¶¶ 20 & 21.) Mr.
Morgalo and M.M.A. failed to make the scheduled payments of the balance of the
fee to Mr. Blades and Mr. Colón under the terms of the Engagement Contract.
(Id. at 7, ¶ 22.)
As of April 30, 2003, Mr. Morgalo and his partner Mr. Martínez could not be
found to account for the money that was due to be paid to Mr. Colón and Mr.
Blades. (Id. ¶ 23.) M.M.A. wrongfully misappropriated and/or converted the
concert funds to its own use. (Id. ¶ 24.) Mr. Morgalo directly or indirectly, used
or caused the balance of the fee due to Mr. Blades to be used to settle other
M.M.A. debts, without the knowledge or consent of Mr. Blades. (Id. ¶ 25.) Mr.
Morgalo knew or should have known that concert funds were withdrawn from the
company account to pay other company debts. (Id. ¶ 26.) At all relevant times
Mr. Morgalo maintained telephone or electronic communication with his partner
Mr. Martínez to provide instructions and/or follow up with what debts and which
creditors were to be paid using the money due to Mr. Blades and Colón under the
Engagement Contract. (Id.) Mr. Morgalo and M.M.A. failed to inform Mr. Blades
as to the payments made by the promoters under the Engagement Contract or to
give information relevant to the affairs entrusted to the company as agents. (Id.
at 8, ¶ 27.) Also, Mr. Morgalo failed to pay Mr. Blades in accordance with the
Engagement Contract. (Id. ¶ 28.)
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CIVIL 07-1380 (JA) 9
At the default hearing on April 5, 2010, Mr. Blades testified that he had
business with M.M.A. since 1999. (Docket No. 214, at 3:4-7.) As far as Mr.
Blades knew, Mr. Morgalo and Mr. Martínez were the sole owners of M.M.A. (Id.
at 3:8-10.) According to Mr. Blades, he has performed in approximately ten
shows with M.M.A. as his agent. (Id. at 5:20-23.) As an agency M.M.A. worked
as a receptor. (Id. at 5:24-25.) It would receive inquiries and consult with Mr.
Blades about the shows in which he would perform. (Id. at 6:1-4.) M.M.A. would
also received funds in his behalf. (Id. at 6:9-10.) However, Mr. Blades would
determined how much money was going to be charged, and when payment was
going to be received. (Id. at 6:11-16.) Mr. Blades liked to receive payment in
advance just in case a show did not go well. (Id. at 6:17-20.) Thus, Mr. Blades
would always try to figure out if the money was being paid on time. (Id. at 7:15-
17.) Mr. Blades explained that M.M.A. would communicate with his business
manager, Jerry Shustek, or with him, to say if the money had arrived. (Id. at 7:
18-21.)
M.M.A. would keep Mr. Blades informed as to available dates, and asked for
his consent before committing to a date for a concert. (Id. at 8:1-8.) Mr. Blades
expected M.M.A. to be truthful, and comply with its fiduciary duty with him. (Id.
at 8:9-12.) For its services M.M.A. usually received ten percent (10%) of the total
amount of the show. The percentage would vary if the show was big or small, or
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if it was a benefit performance. (Id. at 8:13-23.) M.M.A. also had the authority
to sign contracts on behalf of Mr. Blades. (Id. at 9:1-3.) As to how M.M.A. made
its payments to Mr. Blades, Mr. Blades explained that M.M.A. would send the
funds to either Mr. Shustek or to himself. (Id. at 9:4-8.)
In 2002, Mr. Blades authorized M.M.A. to negotiate shows for him in the
Dominican Republic. (Id. at 9:17-20 & at 10:1-16.) Mr. Blades also authorized
M.M.A. to negotiate the Siembra Concert with Mr. Colón. (Id. at 10:17-20.) The
promoters of the concert were Ángel Rivas and César Sainz. (Id. at 11:21-22.)
The fee for the concert was $350,000, of which M.M.A. would receive ten percent
(10%) for its services. (Id. at 12:1-7.) According to Mr. Blades he did not
negotiate on behalf of Mr. Colón. (Id. at 12:10-13.) Mr. Blades testified that he
and Mr. Colón agreed to do the show, and that M.M.A. would take care of
expenses. (Id. at 12:21-25 & at 13:1.) Also, M.M.A. would take care of sound
and lights and Mr. Colón and Mr. Blades would have to take care of everything
else, such as hotels, airfares, per diems, musician’s fees, rehearsal. (Id. at 13:
3-7.)
Mr. Blades received an advance of $68,000. (Id. at 18:7-8.) However, Mr.
Blades was not informed of the payments made by the Puerto Rico promoters to
M.M.A. (Id. at 18:21-23.) Mr. Blades, nevertheless, called M.M.A. to see whether
the funds had been sent, but was informed by Mr. Martínez that they had not
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received them. (Id. at 18:24-25 & at 19:1-8.) Mr. Blades stated during his
testimony that he relied on the statements made by Mr. Martínez, because
promoters do not always follow the schedule of payments. (Id. at 19:11-15.) Mr.
Blades did not receive the full balance of the fee before the concert. (Id. at 20:5-
7.) At that time, Mr. Morgalo was in Iraq. (Id. at 19:13-15.) At one point, Mr.
Blades called M.M.A. and told them that if he was not paid he would not perform
at the concert. (Id. at 19:23-25 & at 21:1-18.) Mr. Blades talked to one of the
promoters of the concert and was sent copies of the payments to M.M.A. by fax.
(Id. at 23:1-8.) According to Mr. Blades, the promoters showed him a contract
where it said that the $62,500 deposit was being applied as an advance for the
Siembra Concert. (Id. at 23:20-25 & at 24:1-3.)
Mr. Blades testified that he never received $62,500 from M.M.A. (Id. at
24:4-11.) Also, Mr. Blades stated that he did not authorize or consent to the
application of the $62,500 as a deposit to the Siembra Concert. (Id. at 26:9-12.)
Mr. Blades claimed that Mr. Rivas told him that Mr. Morgalo had authorized that
arrangement. (Id. at 27:9-19.) Mr. Blades also testified that he never received
the balance of his fee before performing the Siembra Concert. (Id. at 27:22-24.)
A couple of weeks after the show Mr. Blades met with Mr. Martínez at Juan
Toro’s office weeks after the concert. (Id. at 28:3-23.) With Mr. Toro present,
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Mr. Martínez said to Mr. Blades that the company was going through a tough time
because of some investments and that they started diverting funds to resolve
their economic problems. (Id. at 29:10-17.) With regard to the $62,500 that
were missing, Mr. Martínez told Mr. Blades that they had received the money and
that it was used to pay other debts. (Id. at 30:10-19.) Also, Mr. Martínez told
Mr. Blades that the decision to divert funds was made by him and Mr. Morgalo.
(Id. at 30:24-25 & at 31:1-4.) The expenses for the Siembra Concert were
$72,663.69. (Id. at 33:1-25.)
After the concert, Mr. Blades went to the Treasury Department in Puerto
Rico. (Id. at 34:7-9.) He explained to them that he could not pay the taxes
because he had not received the money that was owed to him from the concert.
(Id. at 35:1-19.) Mr. Blades testified that M.M.A. was not entitled to the $35,000
commission given its betrayal of its fiduciary duty. (Id. at 36:16-22.) Mr. Blades
never recovered the commission. (Id. at 36:23-25.)
Mr. Ariel Rivas testified that he has worked as a promoter and a booking
manager for 15 years. (Id. at 43:20-24.) He is licensed in different countries,
such as Panamá, Costa Rica and the Dominican Republic. (Id. at 44:4-10.) Mr.
Rivas also owns Ariel Rivas Entertainment and is a partner in DISSAR Productions
with Danny Rivera. (Id. at 44:16-24.) Mr. Rivas is Danny Rivera’s agent. (Id.
at 44:25 & at 45:1.)
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1
CIVIL 07-1380 (JA) 13
Mr. Rivas testified that he met with Mr. Martínez and Mr. Morgalo in 2002.
(Id. at 45:2-10.) Mr. Rivas wanted to contract Mr. Blades to do a show in the
Dominican Republic with Mr. Rivera. (Id.) The show did not take place. (Id. at
45:21-25.) In that same year Mr. Rivas and M.M.A. started a business
relationship. (Id. at 46:8-13.) Mr. Rivas proposed to Mr. Morgalo to do a show
with Mr. Blades and Mr. Feliciano in Puerto Rico. (Id. at 46:14-15.) Mr. Morgalo
said yes, and they came to an agreement. (Id. at 46:16-18.) The fee for Mr.
Blades was $125,000 of which a fifty percent (50%) deposit was sent. (Id. at
47:6-10.) The amount paid as a deposit ($62,500) had to be paid in four
transfers by May 2002. (Id. at 48:4-7.) The transfers were made to the M.M.A.’s
account. (Id. at 48:8-10.) Although the show did not take place, Mr. Rivas
testified that Mr. Morgalo told him that there could be an anniversary celebration
of the Siembra album. (Id. at 48:18-25 & at 52:4-8.) Mr. Rivas told Mr. Morgalo
that he was interested in doing the show. (Id. at 52:13-18.) Mr. Rivas and Mr.
Morgalo agreed on a $350,000 all inclusive fee for the participation of Mr. Blades
and Mr. Colón’s participation in the Siembra Concert. (Id. at 53:5-7.) According
to Mr. Rivas, Mr. Morgalo proposed that the money that had been deposited to
that point would be credited to the Siembra Concert. (Id.)
The all inclusive term meant that all expenses were incurred by the artist
up to when the artist reaches the stage presence, that is rehearsals, airfare, hotel,
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per diem, security, transportation. (Id. at 53:21-25 & at 54:1-3.) Mr. Rivas only
had to pay for the stage, sound, lights, and rentals. (Id. at 54:4-5.) The concert
was set in Puerto Rico, and M.M.A. went on to represent Mr. Colón and Mr. Blades.
(Id. at 54:19-20.) The deal was closed on May 3,2003. (Id. at 55:16-18.) When
Mr. Rivas talked to Mr. Morgalo in relation to the Siembra Concert, Mr. Morgalo
said he had been called to go to Iraq. (Id. at 55:19-25.) At his going away party
in New York, Mr. Morgalo told Mr. Rivas that Mr. Martínez was going to be in
charge of the company. (Id. at 56:12-22.) Mr. Rivas claims that Mr. Morgalo
never told him that the company was under financial distress. (Id. at 56:23-25
& at 57:1.)
On January 22, 2003, Mr. Rivas received a fax from M.M.A. confirming the
March 3, 2003 date for the concert at Hiram Bithorn Stadium. (Id. at 58:9-16.)
Mr. Rivas also received a letter signed by Mr. Martínez confirming the date of the
concert. (Id. at 58:1-12.) Thirteen (13) wire transfers were made in total for
$351,000. (Id. at 61:16-21.) The first four were for the $62,500 that were
deposited for the show with Mr. Feliciano. (Id. at 61:22-25 & at 62:1.) The
amounts and dates of the deposits were $12,500 on May 21, 2002, $20,000 on
June 27, $20,000 on October 3, and $10,000 on October 29, 2002. (Id. at 62:
2-5.) All wire transfers were deposited in M.M.A.’s account in New York City. (Id.
at 62:6-16.) The fifth wire transfer to M.M.A. was on February 27, 2003, after
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CIVIL 07-1380 (JA) 15
getting the signed offer. (Id. at 62:24-25 & at 63:1-4.) The amount of the
transfer was for $72,500. (Id. at 63:5-6.) The remaining dates and amounts of
the remaining transfers are as follow: (a) the sixth payment was for $15,000
made on March 7, 2003; (b) the seventh payment was for $60,000 made on
March 25, 2003; (c) the eight payment was for $20,000 made on March 28, 2003;
(d) the ninth payment was for $10,500 made on April 8, 2003; (e) the tenth
payment was for $25,000 made on April 22, 2003; (f) the eleventh payment was
for $10,000 made on April 24, 2003; (g) the twelfth payment was for $26,000
made on April 29, 2003; (h) the thirteenth payment was for $52,500 made on
April 30, 2003. (Id. at 63:16-25 & at 64:1-2.) Evidence of these payments was
sent to Mr. Blades five or six days prior to the concert. (Id. at 64:5-13.)
During his testimony Mr. Rivas was shown a copy of an engagement
contract. (Id. at 65:18-23.) Mr. Rivas examined the document and stated that
contract was different than the one that had been given to him. (Id. 65:24-25 &
at 66:1.) According to Mr. Rivas, the contract that was shown to him required a
deposit of $62,500 to be paid immediately while in the contract that was given to
him the $62,500 appeared credited. (Id. at 66:15-18 & at 69:13-22.) Also, Mr.
Rivas testified that after he realized that the $62,500 were missing, he explained
to Mr. Blades that the money had been sent to his representative, M.M.A., in April
2002 and credited to the Siembra Concert. (Id. at 71:5-10.) When asked if Mr.
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CIVIL 07-1380 (JA) 16
Blades had consented to the application of the credit, Mr. Rivas answered that he
only negotiated with Mr. Blades and Mr. Colón’s representatives. (Id. at 71:16-
19.)
Mr. Roberto Morgalo was called as an adverse witness. (Id. at 78:11-12.)
He testified that he was the president of M.M.A. until January 16, 2003 when he
was called to active duty. (Id. at 79:6-9.) Mr. Morgalo reported to his unit on
January 16, 2003; a warning order had said to report on January 21,2003. (Id.
at 80:3-13.) Mr. Morgalo left the continental United States on March 23, 2003.
(Id.) According to Mr. Morgalo, M.M.A. was formed in 1999 and was
administratively dissolved in 2005. (Id. at 81:2-5 & at 82:6-7.) Mr. Morgalo
testified that as president he had a fifty one percent (51%) interest in M.M.A., had
the authority to sign contracts, and sought grants, sponsorships, and loans. (Id.
at 82:8-25 & at 83:1-10.) Also as an agent Mr. Morgalo was responsible for
finding the best deals for his clients. (Id. at 85:11-22.) Mr. Morgalo
acknowledged that as an agent he owed a duty of diligence and loyalty to his
clients. (Id. at 85:23-25 & at 86:1-2.) Furthermore, Mr. Morgalo admitted that
he had a duty to let a client know when payments were received. (Id. at 86:3-6.)
Mr. Morgalo testified that he received an offer for a show in the Dominican
Republic with Mr. Blades. (Id. at 88:4-6.) However, according to Mr. Morgalo a
deal was not signed. (Id. at 88:7-8.) Mr. Morgalo also negotiated with Mr. Rivas
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CIVIL 07-1380 (JA) 17
to do another show with Mr. Feliciano but it was canceled by Mr. Rivas. (Id. at
88:9-16.) Mr. Morgalo admitted that even though the show with Mr. Feliciano had
been canceled, Mr. Rivas made a deposit for $62,500. (Id. at 88:17-21.)
According to Mr. Morgalo, he notified Mr. Blades about the payments that were
made to M.M.A. (Id. at 88:22-24.) When asked if Mr. Blades had agreed to apply
the $62,500 as a deposit towards the February 16, 2003 show, Mr. Morgalo
answered that Mr. Blades had not agreed. (Id. at 91:9-11.)
Also during his testimony, Mr. Morgalo admitted that M.M.A. was in financial
distress and that he applied for an economic injury disaster loan to the Small
Business Association (“SBA”). (Id. at 97:4-16.) The loan was approved in
February of 2002. (Id.) The loan was used by Mr. Morgalo to pay other loans.
(Id. at 97:20-25 & at 98:1-6.) Besides the SBA loan, Mr. Morgalo testified that
he received in that same year $100,000 from a sponsor as well as private and
government grants. (Id. at 98:7-18.) Mr. Morgalo denied talking to Mr. Martínez
after he left to Iraq. (Id. at 99:9-11.) Also, Mr. Morgalo denied instructing Mr.
Martínez to pay M.M.A.’s debts. (Id. at 99:12-17.) Mr. Morgalo admitted that
prior to his deployment he had received a total of $350,000, not counting
commissions, in 2002. (Id. at 101:3-7.) While Mr. Morgalo was in Iraq he found
out that something had happened with Mr. Martínez. (Id. at 105:1-25 & at
106:1.) Mr. Morgalo immediately called Mr. Blades but was not able to get a hold
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CIVIL 07-1380 (JA) 18
of him so he contacted Mr. Toro’s office. (Id. at 106:2-20.) Mr. Morgalo testified
that Mr. Toro told him that Mr. Martínez had tried to commit suicide and that he
disappeared with the money, and that there was a show in Puerto Rico. (Id. at
110:16-22.) After learning of what had happened Mr. Morgalo wrote a letter to
Mr. Martínez asking for his cooperation to solve the problems with Mr. Blades and
M.M.A. (Id. at 112-116.) Mr. Morgalo also submitted an application to the SBA
for a loan enlargement. (Id. at 117:12-15.) The loan according to Mr. Morgalo
was to pay the money that was owed to Mr. Blades. (Id. at 118:1-7.)
With regard to payments made by Mr. Rivas, Mr. Morgalo admitted that
M.M.A. received $62,500 in wire transfers. (Id. at 154:8-12.) According to Mr.
Morgalo, the wire transfers were not for the Siembra Concert. (Id. at 154:13-15.)
Mr. Morgalo testified that the money sent was for the concert between Mr. Blades
and Mr. Feliciano. (Id.) Mr. Morgalo testified that the $62,500 were never
assigned to the Siembra Concert. (Id. at 160:11-15.)
Mr. Arturo Martínez was a booking agent, treasurer, and a vice president at
M.M.A. (Id. at 168:3-9.) According to Mr. Martínez he joined M.M.A. in February
of 2000 after the company was incorporated in December 1999. (Id. at 169:3-6.)
Mr. Martínez testified that Mr. Morgalo was the one who negotiated the Siembra
Concert with Mr. Rivas. (Id. at 169:25 & at 170:1-4.) When asked if Mr. Blades
was sent the $62,500 deposit, Mr. Martínez answered that the money was never
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CIVIL 07-1380 (JA) 19
sent. (Id. at 171:24-25 & at 172:1-5.) Mr. Martínez testified that the money was
used to pay M.M.A.’s debts. (Id. at 172:18-25 & at 173:1-5.) Also, Mr. Martínez
testified that Mr. Morgalo knew that he had received money from Mr. Rivas. (Id.
at 174:22-24.) Mr. Martínez admitted that he was the one responsible for
withdrawing the money to pay the company debts. (Id. at 174:25 & at 175:1-4.)
He also stated that the $62,500 was applied as a credit for the Siembra Concert.
(Id. at 176:17-25.) According to Mr. Martínez, Mr. Rivas and Mr. Morgalo were
the ones who agreed to apply the money as a credit. (Id. at 177:1-3.) However,
neither Mr. Blades nor Mr. Colón authorized that the deposit be applied for the
Siembra Concert. (Id. at 177:4-11.) Mr. Martínez acknowledged that he had the
duty of informing Mr. Blades about the money. (Id. at 178:10-13.) Mr. Martínez
testified that he and Mr. Morgalo kept in touch after Mr. Morgalo was deployed to
Iraq, and that Mr. Morgalo was aware of the situation with M.M.A. (Id. at 180:5-
24.) By May 2003 M.M.A. did not have enough money in its account to pay the
fees owed to Mr. Blades and Mr. Colón. (Id. at 184:15-18.) Mr. Martínez stated
that neither Mr. Blades nor Mr. Colón were aware that the money that was owed
to them was being used to pay other debts. (Id. at 185:1-18.) Mr. Martínez
transferred all his shares in M.M.A. to Mr. Morgalo. (Id. at 188:6-16.)
Mr. Martínez also admitted that as an officer of M.M.A. he did not act in an
open, fair and honest manner with Mr. Colón and Mr. Blades. (Id. at 192:13-20.)
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CIVIL 07-1380 (JA) 20
Mr. Martínez testified that M.M.A. was not entitled to the commission that was
charged for the Siembra Concert. (Id. at 193:18-25 & at 194:1.) Mr. Martínez
admitted that he was aware of the loans and grants that Mr. Morgalo was applying
for and that he participated in the process. (Id. at 194:5-7.)
IV. CONCLUSIONS OF LAW
A. Jurisdiction
Cross-plaintiff Rubén Blades is a citizen of Panamá. Cross-defendant
Martínez, Morgalo & Associates, LLC (“Martínez & Morgalo” or “the Company”) is
and at all times herein mentioned was a limited liability company or corporation
organized and existing under the laws of the State of Delaware doing business in
the State of New York.
This cross-complaint is an action for damages that exceed $75,000,
exclusive of interests, costs and attorney’s fees.
B. Breach of Contract
When jurisdiction is based on diversity of citizenship, federal courts must
apply state substantive law. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 92 (1938);
Valenzuela Fuentes v. Dictaphone Corp., 334 F. Supp. 2d 94, 97 (D.P.R. 2004).
Thus, Puerto Rico substantive law applies.
Under the freedom of contract principle “the contracting parties may
establish the agreements, clauses, and conditions they may deem convenient,
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CIVIL 07-1380 (JA) 21
provided that they are not contrary to law, morals, or public order.” Soc. de
Gananciales v. Vélez & Asoc., 145 D.P.R. 508, 516-17 (1998) (citing Puerto Rico
Civil Code § 1207 (P.R. Laws Ann. tit. 31, § 3372 (1990)). A contract under
Puerto Rico law “has three elements: consent, a definitive (and legal) object, and
consideration.” Citibank Global Mkts., Inc. v. Rodríguez-Santana, 573 F.3d 17,
24 (1st Cir. 2009). “[O]nce a contract is perfected, the parties are bound to
comply with what has been expressly stipulated and to bear the consequences
derived from the same in accordance with good faith, use, and law.” Soc. De
Gananciales v. Vélez & Asoc., 145 D.P.R. at 517 (citing Puerto Rico Civil Code §
1210 (P.R. Laws Ann. tit. 31, § 3375 (1990)). “[W]hen the breach of a
contractual obligation causes harm to any of the contracting parties, an action for
damages for breach of contract lies.” Id. at 508. The Puerto Rico Supreme Court
has held that in order to succeed in a breach of contract claim:
there must have been a meeting of minds that gave rise
to an obligation, situation, or state of law resulting from
an agreement, and that created certain expectations on
the basis of which the parties acted. Ordinarily, each
party trusts that the other party will comply with what
has been freely agreed upon, in keeping with the binding
nature of contracts and with good faith. A voluntary act
or omission that results in the breach of a previously
constituted obligation gives rise to an action for
contractual damages.
Soc. De Gananciales v. Vélez & Asoc., 145 D.P.R. at 517. However, “[t]he Puerto
Rico Civil Code distinguishes between damage resulting from breach of contract
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CIVIL 07-1380 (JA) 22
. . . and damage resulting from breach of obligations and duties imposed by
nature and by law that are necessary for social coexistence ....” Soc. De
Gananciales v. Vélez & Asoc., 145 D.P.R. at 521 (citing P.R. Laws Ann. tit. 31, §§
3018 & 5141 (1990)). “Actions ex contractu are based on the breach of a duty
that arises from an express or implied contract, and seek fulfillment of promises
agreed to by the contracting parties.” Id. (citing Ramos-Lozada v. Orientalist
Rattan Furniture Inc., 130 D.P.R. 712, 727 (1992)). On the other hand, an ex
delicto action “does not stem from the will of the parties, but from the breach of
some obligation and duties imposed by law[,]” “which ordinarily arises out of a
negligent or wrongful act unconnected with any contract between the parties, but
may rise either independently of any contract or by virtue of certain contractual
relations . . . . ” Santiago-Nieves v. A.C.A.A., 119 D.P.R., 711, 716-17, 19 P.R.
Offic. Trans. 755, 760-61 (1987). To that effect, “an action for damages for
breach of contract . . . only lies when the damage suffered exclusively arises as
a consequence of the breach of an obligation specifically agreed upon, which
damage would not occur without the existence of a contract.” Ramos-Lozada v.
Orientalist Rattan Furniture Inc., 130 D.P.R. at 727. Nevertheless, “a claim for
noncontractual damages resulting from the breach of a contract lies if the act that
caused the damage constitutes a breach of the general duty not to injure anyone
and, at the same time, a breach of contract.” Id. If a claim for noncontractual
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CIVIL 07-1380 (JA) 23
damages exists, a plaintiff may only be able to choose either a tort claim or a
contract claim but not both. See Ramos-Santiago v. Wellcraft Marine Corp., 93
F. Supp. 2d 112, 116 (D.P.R. 2000).
Conduct that breaches a fiduciary duty is an example of a noncontractual
damages claim. In re Evangelist, 760 F.2d 27, 31 (1st Cir. 1985) (holding that
“conduct that breaches a fiduciary duty . . . might constitute a tort (such as fraud)
or breach of contract.”); see also Quinlan v. Koch Oil Co., 25 F.3d 936, 943 (10th
Cir. 1994) (holding that when a breach of fiduciary duty does arise from contract,
the injured party must “choose whether to sue for breach of contract or for tort.”)
An agent “is a fiduciary [who] is required to exercise fidelity and the utmost good
faith, loyalty and honesty toward his principal at all times.” An-Port, Inc. v. MBR
Indus., Inc., 772 F. Supp. 1301, 1314 (D.P.R. 1991). “The primary obligation
imposed on an agent by the fiduciary duty of loyalty is to avoid self-dealing with
reard to the business of the principal.” Richard A. Lord, 19 Williston on Contracts
§ 54:28 (4th ed.) “[A]n agent, may not take part in any transaction adverse to
the interests of the principal without obtaining the principal’s permission, after full
disclosure of all facts that might affect the principal’s decision.” Id.
C. Damages
“Under Puerto Rico law, when a party breaches a contract, he is liable to the
aggrieved party for damages which were foreseen or may have been foreseen.”
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CIVIL 07-1380 (JA) 24
Oriental Fin. Group, Inc. v. Fed. Ins. Co., 483 F. Supp. 2d 161, 165 (D.P.R. 2007).
But “when a party acts with bad faith (“dolo”) in breaching a contract, the
aggrieved party may recover all damages that originate from the nonfulfillment
of the obligation.” Id. (citing P.R. Laws Ann. tit. 31, § 3024 (2004)). If a claim
is noncontractual in nature, a party may seek damages pursuant to Article 1802
of the Puerto Rico Civil Code which provides, in its pertinent part, that “[a] person
who by an act or omission causes damage to another through fault or negligence
shall be obliged to repair the damage so done.” P.R. Laws Ann. tit. 31 § 5141.
In order to prevail in an Article 1802 claim, “a plaintiff must prove, by
preponderance of the evidence, the following elements: (1) an act or omission
constituting fault or negligence; (2) injuries; and (3) a casual connection between
the act or omission and the injuries.” In re Caribbean Petroleum, LP, 561 F. Supp.
2d 194, 199 (D.P.R. 2008) (citing Admor, F.S.E. v. Almacén Ramón Rosa, 151
D.P.R. 711, 725 (2000)). “The principle underlying the calculation of damages is
clear: damages in Puerto Rico are compensatory.” In re Caribbean Petroleum, LP,
561 F. Supp. 2d at 199 (citing Torres v. Castillo Alicea, 111 D.P.R. 792, 804 & n.
7 (1981); Pérez v. Sampedro, 86 D.P.R. 526, 530 (1962)). “When determining
the amount of damages that a party is entitled to recover, however, the courts
‘must not lose sight of the fact that [Article 1802], being a remedial statute,
should be liberally construed to accomplish its purpose.” In re Caribbean
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CIVIL 07-1380 (JA) 25
Petroleum, LP, 561 F. Supp. 2d at 199 (quoting Rivera Colón v. Díaz Arrocho, 165
D.P.R. 408, 427 (2005) (citing Dorante v. Wrangler, 145 D.P.R. 408 (1998); and
Muñoz-Hernández v. Policía de P.R., 134 D.P.R. 486 (1993)).
Article 1061 of the Puerto Rico Civil Code, provides that “[s]hould the
obligation consist in the payment of a sum of money, and the debtor should be in
default, the indemnity for losses and damages, should there not be a stipulation
to the contrary, shall consist in the payment of the interest agreed upon, and
should there be no agreement, in that of the legal interest.” P.R. Laws Ann. tit.
31, § 3025. Under the law of Puerto Rico, interest has to be awarded from the
moment the complaint is filed until judgment is entered even when no stipulation
has been made. See Noble v. Corporación Insular de Seguros, 738 F.2d 51, 55
(1st Cir. 1984); Salgado v. Villamil, 14 D.P.R. 449 (1908); and P.R. Laws Ann. tit.
32, Ap. III, R. 44.1(d).
In this case, there is contractual liability and tort liability. By converting the
payments made by the promoters for its own use, and by failing to make
payments to Mr. Blades, M.M.A. breached the engagement contract and its
fiduciary duties. The person aggrieved as a result of the double violation is Mr.
Blades. The double violation was committed by M.M.A. See Ramos-Lozada v.
Orientalist Rattan Furniture Inc., 130 P.R. Dec. at 725. As such, Mr. Blades had
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CIVIL 07-1380 (JA) 26
a right to choose to sue for breach of contract or for tort. Based on the damages
sought it in can be inferred that the contract claim instead of the tort claim was
elected. Consequently, upon reviewing the Engagement Contract (Docket No. 14-
5) the court finds that M.M.A. failed to comply with the terms of said agreement.
According to the contract, the fee for the Siembra Concert was $350,000.
Mr. Blades and Mr. Colón were supposed to receive fifty percent (50%) each of
whatever was left after all the concert expenses were paid. However, that did not
happened. Although Mr. Blades complied with all conditions, covenants, and
promises in accordance with the Engagement Contract, he only received an
advance of $68,000 for his services after the payments were sent by Mr. Rivas to
M.M.A.’s account.
The contract specified that Mr. Blades had to be paid 14 days prior to his
departure for Puerto Rico. (Docket No. 14-5, at 1.) M.M.A., however, failed to
make the scheduled payments of the balance of the fee to Mr. Blades under the
terms of the Engagement Contract. Instead, the monies owed were used to settle
other M.M.A. debts without the knowledge or consent of Mr. Blades. Specifically,
M.M.A. applied $62,500 that had been deposited by Mr. Rivas for a concert
between Mr. Blades and Mr. Feliciano as a credit for the Siembra Concert without
Mr. Blades’ authorization.
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CIVIL 07-1380 (JA) 27
Based on the foregoing it is clear that M.M.A. breached the terms of the
Engagement Contract and is therefore liable to Mr. Blades for the losses suffered.
Accordingly the court finds that after deducting the advances ($130,500) and
expenses for the Siembra Concert ($72,663.69), Mr. Blades is entitled to damages
in the amount of $70,668.16. Also, since the deposit made by Mr. Rivas for the
concert between Mr. Blades and Mr. Feliciano was misappropriated, M.M.A. must
pay Mr. Blades $62,500 in additional damages.
Furthermore, although payment of interest was not expressly stipulated in
the Engagement Contract, Mr. Blades is entitled to prejudgment interest from the
date the amended cross-claim was filed until judgment is entered.
In view of the above, and having determined that there is no just reason for
delay, I am directing the Clerk to enter a partial final judgment in favor of Rubén
Blades against Martínez, Morgalo & Associates, LLC, in the amount of
$133,168.16, plus interest at the legal rate, beginning on June 5, 2008.
At San Juan, Puerto Rico, this 15th day of June, 2010.
S/ JUSTO ARENAS
Chief United States Magistrate Judge
Case 3:07-cv-01380-JA Document 228 Filed 06/15/10 Page 27 of 27


FINAL JUDGMENT
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
ROBERTO MORGALO, CIVIL NO. 07-1380 (BJM)
Plaintiff,
v.
RUBEN BLADES and RUBEN BLADES
PRODUCTIONS, INC.,
Defendants.
FINAL JUDGMENT
Judgment is hereby entered dismissing Morgalo’s claim with
prejudice.
This case is now closed for statistical purposes.
SO ORDERED.
In San Juan, Puerto Rico this 16th day of May, 2013.
s/Bruce J. McGiverin
BRUCE J. McGIVERIN
United States Magistrate Judge
Case 3:07-cv-01380-BJM Document 365 Filed 05/16/13 Page 1 of 1


OPINION IN A NON-JURY TRIAL IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

ROBERT MORGALO,

Plaintiff,

v.

RUBÉN BLADES and RUBEN BLADES

PRODUCTIONS, INC.,

Defendants.

Civil No. 07-1380 (BJM)

OPINION IN A NON-JURY TRIAL

To commemorate the twenty-fifth anniversary of Siembra, their hallmark salsa

album, Willie Colón and Rubén Blades performed a reunion concert in San Juan, Puerto

Rico. Their fee was handled by the booking agency Blades was then using, Martínez,

Morgalo & Associates, Inc. But something went wrong with the money, and life gave

Blades a surprise when Colón sued in 2007.

Reacting at a press conference, Blades said he and Colón were both “robbed” by

Martínez and Morgalo. Robert Morgalo then sued Blades and Ruben Blades Productions,

Inc. (“RBPI”) for defamation. His diversity suit was originally brought in the Southern

District of New York, but it was voluntarily transferred and consolidated with Colón’s

then-pending case here. The claims in Colón’s case have since been resolved.

Morgalo’s case was tried without a jury on February 11, 2013. The court heard

testimony from Rubén Blades, Ariel Rivas, Arturo Martínez, and Juan Toro, and admitted

ten exhibits. A transcript was prepared. Docket No. 356 (“Tr.”). The parties filed a

partial stipulation of facts and post-trial briefs. See Docket Nos. 346 (“St.”), 358 (“Def.

Br.”), 359 (“Pl. Br.”), 362 (“Pl. Reply”), and 361 (“Def. Reply”). In light of the findings

of fact and legal discussion set forth below, Morgalo’s action is dismissed on the merits.

Case 3:07-cv-01380-BJM Document 364 Filed 05/16/13 Page 1 of 12

Morgalo v. Blades, Civil No. 07-1380 (BJM) 2

FINDINGS OF FACT

1. The company Martínez, Morgalo & Associates, Inc. (“M&M”) was formed by

Robert Morgalo and Arturo Martínez around November 1999. Its business

purpose was to provide booking and management agency services, including road

managing for musical artists. Its stockholders were Morgalo (owning fifty-one

percent) and Martínez (with forty-nine percent). Morgalo was its President, and

Martínez its Vice President. St., ¶¶ 11–14.

2. M&M had offices in New York City. Both Martínez and Morgalo had authority to

inspect, access, and draw checks on M&M’s bank accounts. Martínez Test., Tr.

110:10-15, 115:6-19.

3. M&M acted as Blades’ agent and representative. St., ¶ 15.

4. M&M produced fifteen concerts from June 2001 to December 2002 at the Apollo

Theater in New York. St., ¶ 21. The Apollo Theater series was not financially

successful; by December 2002, M&M had run up debts to radio stations,

newspapers, artists, private lenders, and the Small Business Administration.

Martínez Test., Tr. 112:2–113:21.

5. Morgalo hired Danny Rivera, a client of Ariel Rivas, to perform in New York in

September 2001, but the show was canceled after the September 11 attacks.

Rivas later approached Morgalo about holding a concert featuring Blades and

Rivera in the Dominican Republic in 2002. The Blades/Rivera show did not

happen as Rivas planned; Rivas was incommunicado during a three-day trip, and

Morgalo meanwhile directly set up a deal that did not include Rivera. Rivas Test.,

Tr. 68:18-20, 69:17– 70:10.

6. Morgalo, as an M&M employee, negotiated with César Sainz of Rompeolas to

book a show for Blades in Puerto Rico, together with Cheo Feliciano. St., ¶ 2.

Rivas was also involved in the Blades/Feliciano planning. The date they first

chose coincided with another salsa concert featuring Richie Rey and Bobby Cruz.

Rivas Test., Tr. 70:17-23. Rivas’s company paid M&M a $62,500 deposit for the

Blades/Feliciano concert. Rivas Test., Tr. 71:3-18; Martínez Test., Tr. 116:19-24.

Although Martínez believed he and Morgalo were obligated to tell Blades about

this deposit, they never did. Martínez Test., Tr. 118:17-25. Rivas and Morgalo

Case 3:07-cv-01380-BJM Document 364 Filed 05/16/13 Page 2 of 12

Morgalo v. Blades, Civil No. 07-1380 (BJM) 3

first planned to reschedule the Blades/Feliciano concert for February 2003. Rivas

Test., Tr. 71:8-22.

7. M&M had produced other shows with Blades in 2002. Martínez Test., Tr.

154:16–155:16.

8. In lieu of rescheduling the Blades/Feliciano concert, Morgalo proposed what

wound up being the Siembra concert: a show in Puerto Rico reuniting Blades and

Colón. Rivas and Morgalo discussed possibilities for taking the Siembra reunion

show to more cities and dates. Rivas Test., 71:21–72:3, 73:3-16. 1

9. Morgalo told Rivas that the $62,500 that had already been paid could be credited

towards the fee for the San Juan Siembra concert. Rivas Test., Tr. 72:4-9.2 But

M&M used that money to cover other debts and expenses. Martínez Test., Tr.

119:1–13. Rivas wired an additional $287,500 to M&M. Rivas Test., Tr. 74:5-17.

M&M wired $50,000 to “Ruben Blades Productions Inc. LA” in late 2002.

Martínez Test., Tr. 150:4–151:17; Exhs. 9, 10.

10. Rompeolas, acting through Cesar Sainz, and Dissar Records, acting through Ariel

Rivas, were the promoters of the Siembra concert. Sometime in January 2003,

M&M executed an engagement contract with the Puerto Rico-based promoters

Dissar Productions and Rompeolas for the performance of the Siembra concert.3

The concert was to be held on May 3, 2003 in San Juan, Puerto Rico. The

engagement contract provided that the fee payable to both artists was $350,000 in

U.S. dollars, “all-inclusive” except for sound and lights. M&M was the booking

agency for the Siembra concert. M&M was to receive a ten percent ($35,000)

commission in connection with the Siembra concert. Blades and Colón would

each receive from M&M one-half of the all-inclusive fee after payment of concert

expenses, which were also to be split equally between Blades and Colón.

1 Morgalo claims “[t]here has never been evidence” that Rivas negotiated with Morgalo for the Siembra

concert. Pl. Reply at 10. Perhaps he means documentary evidence, but Rivas’s uncontradicted and unimpeached

firsthand testimony is competent evidence all the same. This anemic “no evidence” objection springs up in a few other

places throughout Morgalo’s briefing; though not noted in every instance, I wholly reject it.

2 Whether Morgalo and Rivas agreed on this term in writing was the subject of extensive cross-examination.

However, Rivas never altered his original position about the agreement to cross-apply $62,500, and Morgalo did not

introduce any written contract into evidence, nor did he put on any contradictory testimony.

3 Though the parties stipulated to the existence of a contract, they did not stipulate to the admission of any

written contract.

Case 3:07-cv-01380-BJM Document 364 Filed 05/16/13 Page 3 of 12

Morgalo v. Blades, Civil No. 07-1380 (BJM) 4

Morgalo admitted that M&M had “no separate mind, will, or existence of its

own” with respect to the Siembra concert. St., ¶¶ 9, 16–19, 22–24.

11. On January 16, 2003, Morgalo received a warning order from the U.S. Army to

report to Bethlehem, Pennsylvania on January 21, 2003. Before Morgalo reported

to base in Pennsylvania, there was a farewell party at Morgalo’s house. St., ¶¶ 3,

20. Rivas recalled that the party happened around January 18, 2003; there,

Morgalo told him to keep in contact with Martínez, that he would come back, and

that “everything would run the same.” Rivas and Morgalo spoke on the phone

“practically every day” about the upcoming show until January 19, 2003. Rivas

heard from Morgalo only one more time before the concert. He called shortly

before shipping out about a potential sponsorship deal with Presidente beer if the

show went to the Dominican Republic. Rivas Test., Tr. 75:6-17, 75:21–77:2,

77:18–78:4.

12. No written letter or corporate resolution marks Morgalo’s resignation or

substitution as president of M&M. St., ¶ 4.

13. On January 21, 2003, Rivas wrote to Martínez about the timeframe and logistics

of radio promotions for the Siembra concert. Among other details, he proposed

that the artists’ fee be reduced to $300,000 so that additional promotions could be

purchased. Rivas Test., Tr. 98:6–102:12; Exh. 6. On January 22, 2003, Martínez

wrote a letter to Rivas confirming the May 3 concert date. Rivas Test., Tr.

104:20-23; Exh. 7.

14. M&M’s New York office closed sometime in “early” 2003, and the Siembra

concert was the company’s last project. Martínez Test., Tr. 109:25–110:5.

15. About a week before the concert, Blades believed he and Colón had not yet been

paid in full. He told a reporter for El Nuevo Día that he doubted the concert

would happen because neither he nor Colón had been paid in full. Blades Test.,

Tr. 14:19–15:3, 36:19–37:3. Rivas heard about this comment from the reporter.

He tried, unsuccessfully, to reach Blades through M&M. Rivas eventually got in

touch with Blades and gave him proof of money being wired. Rivas Test., Tr.

78:23–79:16, 79:20–80:2.

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Morgalo v. Blades, Civil No. 07-1380 (BJM) 5

16. A press conference was held on May 2, 2003 at Restaurant El Zipperle in San

Juan, Puerto Rico concerning the Siembra concert. St., ¶ 25. The promoters

wanted Blades to reassure the public that the concert would go on. When asked

whether he believed that the concert money had been stolen, Blades responded

that the money was not accounted for. Blades Test., Tr. 15:8-10, 15:15–16:9.

17. Martínez attempted suicide on April 29, 2003. St., ¶ 5. Shortly before or after the

concert, Martínez gave Juan Toro access to M&M’s account; Martínez was unsure

how much money it had at that time, or what withdrawals were made. Martínez

was hospitalized at the time, and gave Toro the bank access code so he could

withdraw money for Blades. Martínez Test., Tr. 149:19–150:3, 155:23–156:10.

18. Through various agencies, Toro has worked in the music industry for about thirtynine

years. Following the Siembra concert, Toro felt Morgalo had garnered a

reputation in the industry for being “scattered and irresponsible,” and that the

industry was “scared to do dealings with him.” Toro Test., Tr. 159:21-24, 171:25–

172:9. Rivas has not worked with M&M or Morgalo again. Rivas Test., Tr.

81:24–82:5. Toro said that Morgalo’s reputation in the music industry today is

“non-existent,” and that his past associates have said they would not work with

him again. Toro Test., Tr. 174:17-21.

19. In a letter dated May 14, 2003, Blades wrote to Colón:

I also want Arturo to clarify the extent of Roberto Morgalo’s

involvement in this situation. So far, Arturo is the one we all have

focused on. But it seems to me it’s obvious Morgalo had a hand as

well in the embezzlement and it’s in Arturo’s personal interest to

explain what role the latter played in this.

. . .

As for Arturo and Morgalo: the only reason I have waited before

going through with a criminal action against them is that we need

to understand what was the final amount stolen.

Blades Test., Tr. 20:1-6, 22:2-12; Exh. 4.

20. In a letter dated May 15, 2003, Blades wrote to Toro: “First of all, thanks for all

the help you have given us to try and sort out the mess created by Martínez &

Morgalo’s larcenous conduct.” Blades Test., Tr. 23:1-6; Exh. 5. In a letter titled

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Morgalo v. Blades, Civil No. 07-1380 (BJM) 6

“Report on expenses for the May 3rd show” and dated “[a]s of May 16th,” Blades

wrote to Colón that $62,500 had been “stolen” in 2002, and that $63,033.20 had

been “stolen” in 2003. Blades Test., Tr. 17:17-20; Exh. 3.

21. Sometime in June or July 2003, Blades met with Martínez and Toro at Toro’s

offices. Blades had demanded a meeting with Martínez because he still believed

he had not gotten paid. Martínez explained to Blades that M&M had liquidity

problems, and that he and Morgalo had agreed to divert Blades’s money to cover

the company’s debts. Blades recalled Martínez telling him about both the $62,500

deposit and other Siembra money, but Martínez did not clearly remember what

amounts were discussed. Blades Test., Tr. 37:8–40:1; Martínez Test., Tr. 131:17-

22, 132:6-13. 4

22. In August 2003, Martínez pleaded guilty to drug trafficking in Georgia, and was

sentenced to fifteen years’ incarceration; he served about five years before being

released on parole. Martínez Test., Tr. 133:2–134:10. While Martínez was in

prison, Morgalo wrote a letter saying he intended to seek a loan to M&M to

resolve the monies owed to Blades. St., ¶ 8. In response, Martínez wrote a

notarized letter to Morgalo, intending to give over his share of M&M. Martínez

Test., Tr.; Tr. 134:11–139:16; Exh. 8.

23. Martínez now works for The Relentless Agency. St., ¶ 6. Juan Toro is The

Relentless Agency’s sole owner. Toro Test., Tr. 158:25–159:1.

24. Blades recalls speaking with Morgalo sometime around 2004, and that Morgalo

said he was trying to get money to repay Blades. Blades maintains he has never

been repaid, and conceded that he never asked Morgalo for his version of what

happened. Blades Test., Tr. 40:12-19, 48:4-5.

25. On May 4, 2007, Colón sued Blades for breach of contract. St., ¶ 26. Blades first

learned of the suit by reading reports in a newspaper. Blades Test., Tr. 24:1. On

May 8, 2007, Blades held a press conference in Panama regarding Colón’s suit,

which was the subject of stories by the Associated Press and People En Español.

4 With respect to Blades, this line of questioning was allowed over Morgalo’s hearsay objection and limited

to showing Blades’s state of mind by the time he gave the 2007 press conference. Morgalo’s counsel agreed to this

limitation. Tr. 38:10-19. But as noted, Martínez also testified firsthand about his conversation with Blades.

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Morgalo v. Blades, Civil No. 07-1380 (BJM) 7

St., ¶¶ 10, 28. The press conference and all of Blades’s remarks were in Spanish.

Blades Test., Tr. 36:2-7. At the time of Colón’s suit, Blades was serving as

Minister of Tourism for the Government of Panama. St., ¶ 27. Officials in the

Panama tourism department called the conference so Blades could refute the

allegation that Blades kept Colón’s money. Blades believed that these allegations

undermined his image as a public official. Blades Test., Tr. 24:11-25:5, 26:8-11.

Blades was reported as saying “nos robaron a los dos”—translated by a certified

interpreter as “[t]hey robbed both of us”—and that Martínez and Morgalo

“misspent” half of the money. Exhs. 1 and 2. Blades says he understood that

phrase to mean he and Colón “got robbed,” “got screwed,” and “were had” by

M&M, and not that “[t]hey robbed us.” During the conference, he always

mentioned “Martínez and Morgalo,” without separately identifying either Arturo

Martínez or Robert Morgalo. Blades Test., Tr. 26:21–27:5, 27:12-16.

26. Martínez admitted that he was the one responsible for withdrawing the money to

pay the M&M debts. St., ¶ 31.

27. M&M was found liable by default to Blades, and a hearing on damages was held

on April 5, 2010. Colón voluntarily dismissed his suit against Blades, Morgalo,

and M&M on May 9, 2010. The court found that M&M breached the terms of the

engagement contract and found it liable to Blades in the amount of $133,168.16,

plus interest at the legal rate, beginning on June 5, 2008. This judgment remains

unpaid. St., ¶¶ 29, 30, 32.

DISCUSSION

Morgalo seeks to recover damages for defamation arising from Blades’s 2007

press conference. The parties stipulated that New York law governs his claim. Docket

No. 329. Under New York law, a defamation plaintiff must prove “that the defendant

published to a third party a defamatory statement of fact that was false, was made with

the applicable level of fault, and either was defamatory per se or caused the plaintiff

special harm, so long as the statement was not protected by privilege.” Chandok v.

Klessig, 632 F.3d 803, 814 (2d Cir. 2011). But “it is ‘fundamental that truth is an

absolute, unqualified defense to a civil defamation action,’ and ‘substantial truth’ suffices

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Morgalo v. Blades, Civil No. 07-1380 (BJM) 8

to defeat a charge of libel.” Guccione v. Hustler Magazine, Inc., 800 F.2d 298, 301 (2d

Cir. 1986) (quoting Fairley v. Peekskill Star Corp., 445 N.Y.S.2d 156, 159 (App. Div.

1981) and Commonwealth Motor Parts Ltd. v. Bank of Nova Scotia, 355 N.Y.S.2d 138,

141 (App. Div. 1974), aff'd, 339 N.E.2d 888 (N.Y. 1975)); Ingber v. Lagarenne, 750

N.Y.S.2d 172, 173-74 (App. Div. 2002) (applying substantial truth test in mixed libel and

slander case); Carter v. Visconti, 650 N.Y.S.2d 32, 33 (App. Div. 1996) (same in pure

slander case).

Here, Blades has established the substantial truth of his statement. The test under

New York law is whether “the published statement could have produced no worse an

effect on the mind of a reader than the truth pertinent to the allegation.” Guccione, 800

F.2d at 302-03 (citing Fleckenstein v. Friedman, 193 N.E. 537 (N.Y. 1934) and Cafferty v.

S. Tier Publ’g Co., 123 N.E. 76 (N.Y. 1919)). The facts and holding of Guccione are

instructive. Robert Guccione, the publisher of Penthouse magazine, sued the

corporations behind Hustler magazine and its publisher, Larry Flynt, over a 1983 article

in which Flynt wrote Guccione “is married and also has a live-in girlfriend . . . .” Id. at

299. In fact, Gucione had actually been “married in 1956, separated in 1964, and

divorced in 1979,” and began living with his girlfriend in 1966. Id. Guccione alleged

defamation per se in light of New York’s criminal adultery statute, and a jury awarded

one dollar in nominal damages and a total of $1.6 million in punitive damages.

The Court of Appeals found error in the jury instructions and reversed, holding

both (1) that Flynt’s statement was substantially true, and (2) that Guccione was a libelproof

plaintiff. Regarding substantial truth, the court explained:

The published statement read, “Considering he is married and also has a

live-in girlfriend, Kathy Keeton... we wonder if he would let either of

them pose nude with a man.” Substituting the truth for the false statement

yields the following: “Considering that from 1966 to 1979 he was married

and also had a live-in girlfriend, Kathy Keeton... we wonder if he would

let either of them pose nude with a man.” The only difference in effect

between the two statements worked in Guccione’s favor; as printed, the

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Morgalo v. Blades, Civil No. 07-1380 (BJM) 9

statement merely points out the fact of his adultery, without calling

attention to its duration for thirteen of the preceding seventeen years.

. . .

Of course, “former long-time adulterer” would have been more precise.

But on the facts of this case, to require such a level of accuracy is

unreasonable. The article labels Guccione an adulterer. The average

reader would understand that term to include a man who unabashedly

committed adultery for thirteen of the last seventeen years and whose

adulterous behavior ended only because his wife ultimately divorced him.

Where, as here, “the truth is so near to the facts as published that fine and

shaded distinctions must be drawn and words pressed out of their ordinary

usage to sustain a charge of libel, no legal harm has been done.”

Id. at 302-03 (quoting Cafferty, 123 N.E. at 78).

Without crediting Blades’s opinion of how literally his remark should be

translated, see Tr. 27:12-16, saying that he was “robbed” by Morgalo was substantially

true. A preponderance of the evidence shows that Morgalo’s company accepted Colón

and Blades’s performance fees for the Siembra concert, as well as earlier concerts by

Blades alone. M&M was behind on its debts, and Martínez and Morgalo both agreed to

use Siembra fees to service those debts. This began well before Morgalo left for Iraq; as

Martínez put it, by 2002 they were already robbing Peter to pay Paul. See Tr. 127:14-19

(discussing the use of $100,000 in advances on 2003 financing to pay debts). So instead

of saying “Martínez and Morgalo robbed both of us,” Blades perhaps could have said that

“Martínez and Morgalo used both of our money to pay their company’s debts without our

permission, and still haven’t paid us in full.” Regardless, I find the impact on Morgalo’s

reputation in the industry would be the same, and therefore conclude that Blades’s

statement was substantially true under New York law.5

5 Blades further contends, in passing, that his statement “involved a matter of public concern” because he was

a public minister in Panama, and Colón alleged that Blades kept the Siembra money. Blades concludes that Morgalo

must prove Blades acted with First Amendment “actual malice,” and that he did not. Def. Br. at 22. Since Blades

prevails on his state-law defense, it is not necessary to scrutinize any constitutional boundaries on Morgalo’s claim.

For the same reason, I do not pass on Blades’s assertion of various state-law privileges.

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Morgalo v. Blades, Civil No. 07-1380 (BJM) 10

Morgalo’s contrary arguments fall short. First, Morgalo highlights the fact that

the tort and contract claims against him were dismissed at summary judgment. But this is

a red herring. Blades’s failure to maintain his civil claims does not, one way or the other,

bear on the truth of whether Morgalo was involved in his company’s loss of Siembra

money. And Morgalo’s involvement in that loss—not his liability vel non—determines

the frame of reference for the substantial truth defense.

Morgalo next attacks Rivas’s testimony about the Siembra negotiations,

complaining that the key point of the narrative—that they agreed $62,500 from the

cancelled Blades/Feliciano show would be credited against the Siembra fees—was never

“authenticated” by reference to a written contract or bank statement. Cf. note 1, supra.

Morgalo therefore concludes that the substantial truth defense fails because “no amounts

were ever stolen, robbed, embezzled[,] or taken” from Blades. Pl. Br. at 9. At best, the

absence of such corroboration perhaps allows doubt about whether Morgalo had agreed

to accept $62,500 less in new money for Siembra. But the burden of proof in a New York

civil case is only a fair preponderance of the evidence. See, e.g., Jarrett v. Madifari, 415

N.Y.S.2d 644, 649 (App. Div. 1979). Despite extensive cross-examination, Morgalo did

not elicit anything undermining Rivas’s account, notwithstanding some evasiveness in

identifying a possible written contract. On balance, I found Rivas’s testimony

sufficiently credible on this point. And since Morgalo neither introduced any written

contract nor put on conflicting testimony (such as his own), I find Rivas’s version to be

more likely true than not.

Morgalo also indirectly suggests that Juan Toro or Martínez’s wife became

responsible for M&M’s remaining money once Martínez turned over the bank access

code in the hospital. Morgalo was in Iraq by that time, and now takes particular umbrage

to the fact that Blades, Martínez, Rivas, and Toro have all chosen not to hear out “his

story.” From all this, he reasons that the precise amount at issue remains unclear. But

Blades is not seeking (in this action, at least) to recover a sum for the concert. His

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Morgalo v. Blades, Civil No. 07-1380 (BJM) 11

defense is adequately served by the evidence that M&M paid its creditors out of Blades

and Colón’s money, and that the matter had not been settled by May 2007.

Morgalo further argues that the default judgment against M&M was flawed

because he “was not allowed to cross[-]examine Ruben Blades Productions, Inc.

witnesses,” and that “the judgment was given for amounts the promoters never paid as

evidenced by Rivas[’s] testimony” at this trial. Pl. Mem. at 9-10. But Blades’s

substantial truth defense was more than adequately supported by the live, cross-examined

testimony described above, together with Morgalo’s counseled stipulations. This makes

Morgalo’s contention irrelevant—finding Blades’s statement substantially true does not

depend on the fact of M&M’s default judgment. I therefore give no further consideration

to Morgalo’s complaints about the default proceedings, particularly given that this is not

an appeal or rehearing of that action.

I note that Morgalo correctly observes that under the doctrine of defamation per

se, a serious crime can be imputed even when not precisely named. Pl. Br. at 8 (citing

Liberman v. Gelstein, 590 N.Y.S.2d 857, 861 (N.Y. 1992) (noting that “‘there is a cop on

the take from Liberman’ charges a serious crime—bribery,” but affirming summary

judgment on other grounds)). But establishing defamation per se merely relieves

Morgalo of his burden to prove special damages. See Chandok, 632 F.3d at 814; Weldy v.

Piedmont Airlines, Inc., 985 F.2d 57, 61 (2d Cir. 1993). The doctrine does not undermine

a substantial truth defense, and therefore does not save Morgalo’s claim. Cf. Guccione,

800 F.2d at 299-300 (finding substantial truth defense in case where statement imputed

criminal adultery).

By proving that his statement was substantially true, Blades wields a complete

defense to Morgalo’s defamation claim under New York law. Defendants Rubén Blades

and Ruben Blades Productions, Inc. are therefore entitled to judgment.

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Morgalo v. Blades, Civil No. 07-1380 (BJM) 12

CONCLUSION

For the foregoing reasons, Morgalo’s claim is DISMISSED ON THE MERITS.

This opinion sets out the court’s separate findings of fact and conclusions of law pursuant

to Fed. R. Civ. P. 52(a)(1). Final judgment shall be entered.

IT IS SO ORDERED.

In San Juan, Puerto Rico, this 16th day of May, 2013.

S/Bruce J. McGiverin

BRUCE J. MCGIVERIN

United States Magistrate Judge


PARTIAL FINAL JUDGMENT IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

WILLIAM ANTHONY COLON

Plaintiff(s)

v.

RUBEN BLADES, ET AL

Defendant(s)

CIVIL NO. 07-1380 (JA)

PARTIAL FINAL JUDGMENT

The Court, through the Honorable Chief Magistrate Judge Justo Arenas, has entered an

Opinion and Order, filed on June 15, 2010, (Docket #228), granting the Motion for Default

Judgment, filed on March 1, 2010, (Docket #133), by defendants. WHEREFORE, it is

ORDERED and ADJUDGED that a partial final judgment is entered in favor of Rubén

Blades against Martínez, Morgalo & Associates, LLC, in the amount of $133,168.16, plus interest

at the legal rate, beginning on June 5, 2008.

IT IS SO ORDERED.

At San Juan, Puerto Rico, this 17th day of June, 2010.

FRANCES RIOS DE MORAN

CLERK OF COURT

s/ Brenda Gonzalez-De la Concha

Brenda Gonzalez-De la Concha

Courtroom Deputy Clerk