Case 3:18-cv PAD Document 5 Filed 01/14/18 Page 1 of 16 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO FOR:

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1 Case 3:18-cv PAD Document 5 Filed 01/14/18 Page 1 of 16 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO PAN AMERICAN GRAIN CO, INC., PAN AMERICAN PROPERTIES, INC., PAN AMERICAN MFG, CO, INC., v. SAN JUAN MAYOR CARMEN YULIN SOTO; DIRECTOR OF MUNICIPAL PERMIT OFFICE, JUAN CARLOS GALLISA; PRESIDENT OF MUNICIPAL ASSEMBLY, MARCOS ANTONIO RIGAU AND RAFAEL JAUME No. 3:18-CV FOR: VIOLATION OF FIRST AND FOURTEENTH AMENDMENTS, INJUNCTION FIRST AMENDED VERIFIED COMPLAINT FOR A TEMPORARY RESTRAINING ORDER AND INJUNCTIVE RELIEF Co-Plaintiffs PAN AMERICAN GRAIN MFG. CO., INC., PAN AMERICAN PROPERTIES, INC., and PAN AMERICAN GRAIN COMPANY, INC., (collectively referred as PAN) file this Amended Complaint for a Temporary Restraining Order against Defendant MUNICIPALITY OF SAN JUAN ( Defendant or San Juan ), co-defendant Carmen Yulin Cruz, co-defendant Marcos Rigau, co-defendant Rafael Jaume, codefendant Juan Carlos Gallisá, and in support thereof allege as follows: I. NATURE AND BASIS OF ACTION 1. This is an action for the impairment of contractual obligations under Section 10 of the Constitution of the United States of America, the impairment of commercial speech under the First Amendment of the Constitution of the United States of America, and the violation of the preemption doctrine under Article 6 of the -1-

2 Case 3:18-cv PAD Document 5 Filed 01/14/18 Page 2 of 16 Constitution of the United States of America. 2. PAN seek a temporary restraining order, preliminary injunction, and a permanent injunction, pursuant to Rule 65 of the Federal Rules of Civil Procedure, instructing the defendant to immediately cease and desist from their explicit efforts of deliberately impeding the PANs freedom of commercial speech and from illegal barriers, undue restrains and prohibitions imposed under Municipal Ordinance No. 12, Series approved on December 26, 2017 (hereinafter, Ordinance ). 3. PAN also seek declaratory relief, which may be granted under the Declaratory Judgment Act, 28 U.S.C. secs , and Rule 57 of the Federal Rules of Civil Procedure. 4. Furthermore, PAN seeks recovery of its damages and attorney s fees and costs. II. THE PARTIES 1. Plaintiff, PAN AMERICAN MANUFACTURING. CO., INC., is the holding company of CO-PLAINTIFF PAN AMERICAN PROPERTIES, INC. and CO-PLAINTIFF PAN AMERICAN GRAIN COMPANY, 2. PAN are all affiliated corporations organized pursuant to the laws of the Commonwealth of Puerto Rico, with their principal place of business located at 9 Claudia Street Amelia Industrial Park Guaynabo, Puerto Rico Defendant Juan Carlos Gallisá is the director of the Office of Permits of the Municipality of San Juan. At all times relevant to this complaint, Codefendant Gallisá has acted under the color of law. 4. Defendant Marcos Rigau is the current president of the Municipal Assembly (Legislature) of the Municipality of San Juan. At all times relevant to this complaint, -2-

3 Case 3:18-cv PAD Document 5 Filed 01/14/18 Page 3 of 16 Codefendant Rigau has acted under the color of law. 5. Defendant Rafael Jaume is the vice-mayor of San Juan. At all times relevant to this Complaint co-defendant Jaume has acted under color of law. 6. Defendant Carmen Yulin Cruz is the mayor of the Municipality of San Juan. At all times relevant to this Complaint Mayor Cruz acted under color of law. 7. Co-Defendant Municipality of San Juan is an autonomous municipality created in accordance with PR Laws Ann. Tit 21 Section 4003 with legal capacity separate from the Government of the Commonwealth of Puerto Rico, with legal, legislative, and fiscal capacity in all matters. III. JURISDICTION 1. This action is brought, and jurisdiction lies pursuant to 42 U.S.C. secs 1983, as amended, Article 6, First, and Fourteenth Amendments of the United States Constitution, 1 U.S. Const. art. VI, amends. I, XIV. This Honorable Court s jurisdiction over state law claims is invoked pursuant to the doctrine of pendent or supplemental jurisdiction, 28 U.S.C. sec The proper venue for this case lies in this Court, as all individual parties are resident of Puerto Rico, the Municipality of San Juan s principal place of business is Puerto Rico, and the causes of action are taking place in Puerto Rico, 28 U.S.C. secs, 1391 and IV. STATEMENT OF FACTS 1. The Fiestas de la Calle San Sebastián (FCSS) is a four-day event that encompasses events that include commercial, cultural and artistic elements promoting Puerto Rican culture. It is held in Old San Juan, on the third week of -3-

4 Case 3:18-cv PAD Document 5 Filed 01/14/18 Page 4 of 16 January. The FCSS is a national and internationally renowned celebration. 2. The FCSS is a highly attractive celebration for Puerto Rican citizens as well as for thousands of tourists. According to the Puerto Rico Tourism Company, it is expected that about twelve (12) cruise ships are scheduled to arrive at Old San Juan precisely for the celebrations. It is estimated than no less than one point two million (1,200,000) people will be present during the festivities. The enormous concentration of national and international consumers during the festivities provides a unique opportunity for merchants to promote, publicize, position, and sell its products. 3. For many years, PAN like other merchants, businesses, and distributors have engaged in commercial activities throughout FCSS, including but not limited to distributing promotional materials, displaying advertisements, using flying recording devices (also known as drones) for social media purposes, and sponsoring local resident as well as commercial entities parties. 4. The consumer products bearing the Gasolina, Salsa Rico and Space Gang brands are owned by Pan American Properties, Inc. In addition, the consumer products bearing the brand Arroz Rico is owned by Pan American Grain Manufacturing Company, Inc. and the consumer products bearing the brands Café Mami, Café del Patio and Harina Rico are owned by Pan America Grain Company, Inc. 5. On December 26, 2017, the Municipal Assembly, presided by Marcos Rigau, Esq., of the Municipality of San Juan approved the Ordinance concerning the 2018 FCSS. 6. This year, unlike previous years it will be a 5-day celebration, beginning on -4-

5 Case 3:18-cv PAD Document 5 Filed 01/14/18 Page 5 of 16 January 17 th of The Ordinance imposes prohibitions and restrictive regulations which unreasonably and arbitrarily limits PAN and others similarly situated their right to commercial speech protected by the First Amendment. The Ordinance deprives PAN of its right to position, market, and distribute and/or sell its products during the limited period of FCSS. 8. Section No. 9 of the Ordinance states as follows: The installation, use, presentation, raising all kinds of promotional inflatables of any item or product in the areas of Puerta de Tierra, Old San Juan, La Puntilla and La Perla within the Isleta de San Juan is prohibited. Any natural or legal person, company, trade or residence owner who violates the provisions of this Section of this Ordinance shall be subject to payment of an administrative fine of five thousand dollars ($ 5,000.00) for each occurrence, This provision applies both to the natural person or legal owner of the inflatable, and the natural or legal owner of the establishment, space and / or residence where the inflatable article is located, as the trading company that promotes, the organizer and / or promoter activity and / or meeting where the inflatable installed; They are all subject to being ticketed separately and independently in the sum of five thousand dollars ($ 5,000.00) each way for each occurrence. From a second offense, if he / trader insists on violating the provisions of this section, it incurs a concerted act, repeated or systematic failure, the municipal police or inspectors Permit Office will proceed with proceedings -5-

6 Case 3:18-cv PAD Document 5 Filed 01/14/18 Page 6 of 16 before offices, agencies or appropriate for revocation of permits for the establishment and closure of the establishment or kiosk. (See Dkt 1-Exhibit 1). 9. Section No. 14 of the Ordinance states as follows: The distribution of promotional products or samples of commercial products in the area of the islet of San Juan during the Festival of San Sebastian Street without written permission from the Permit Office of the Autonomous Municipality of San Juan authorization is prohibited. This includes the installation of inflatable advertisements in public areas and facades. Understanding that a commercial product is any material that can be susceptible for sale or represent an economic transaction. Any person who violates the provisions hereof shall be subject to payment of an administrative fine of five thousand dollars ($5,000). (SEE DKT 1- Exhibit 1). 10. Section 18 of the Ordinance states as follows: It is prohibited that the owners of business and / or residences, rent or cede their balconies in order to carry out promotions, or for commercial advertising be deployed for such purposes, and / or display products from these balconies, without the proper permits to be issued by the Office of permits of the Municipality of San Juan. It is further provided that it is prohibited to throw any promotional material or object from the balconies and / or elevated structures, including temporary platforms. Any person who violates the provisions hereof shall be subject to payment of an -6-

7 Case 3:18-cv PAD Document 5 Filed 01/14/18 Page 7 of 16 administrative fine of five thousand dollars ($ 5,000.00) per occurrence. This provision applies both to the person who launches the promotional materials or objects such as commercial business being promoted, the organizer and / or promoter activity and / or meeting, and the owner or owner of the establishment or residence from where the act is done; They are all subject to being ticketed separately and independently in the sum of five thousand dollars ($ 5,000.00) above provided. It is also provided that, according to the inspection process conducted by the Municipality of San Juan by the Fire Department of Puerto Rico, and recommendation issued by the latter regarding the balconies of residential and commercial structures in disrepair, it is essential to submit to the Permit Office of the Municipality of San Juan a certificate by a structural engineer to the effect that the balcony meets standards required in the industry to be used, and that there is no risk in carrying out any activity in the balcony. Failure to comply with this requirement will prevent the granting of any license and use of space during the holiday period for reasons of public safety. (SEE DKT 1-Exhibit 1) 11. Section No. 19 of the Ordinance states as follows: Temporary Signage on public facades or on public spaces, is prohibited including temporary signage to look outside through a glass facade without the approval of the Permit Office of the Municipality of San Juan, during the days of the Festival. Similarly, the deployment of comparsas promoting any commercial product is prohibited without the authorization of the Office of Permits of the Municipality. Any person who violates the provisions hereof -7-

8 Case 3:18-cv PAD Document 5 Filed 01/14/18 Page 8 of 16 shall be subject to payment of an administrative fine of two thousand dollars ($ 2,000.00) per occurrence, and in the case of commercial troupes, the company whose product is promoted shall be subject to payment of an administrative fine of five thousand dollars ($ 5,000.00) per occurrence. It will also be subject to payment of an administrative fine of one thousand dollars ($ 1,000.00) each member of the commercial comparsa per person. For these purposes, it will be considered as part of the commercial comparsa all uniformed person where that uniform promotes the product advertised in the parade or any musician who is part of this with the purpose of promoting the product advertised. See Dkt1-Exhibit The aforementioned sections of the Ordinance represent unusual restrictions and in some instances a complete banned or prior censorship to PANs and others similarly situated s right to commercial speech. The Ordinance requires that PAN and other merchants obtain a written authorization from the Municipal Permit Office (MPO) in order for them to execute a series of common commercial activities such as distributing promotional materials, displaying advertisement, using flying recording devices (also known as drones) for social media purposes, and sponsoring local resident private parties. As previously explained, such written authorizations were not required in past years. 13. Nevertheless, the Ordinance nor the Municipality of San Juan s regulations provides information on the procedures to obtain the written authorization, PAN made a series of due diligence efforts in order to obtain authorization from the MPO which are specified as follows: -8-

9 Case 3:18-cv PAD Document 5 Filed 01/14/18 Page 9 of 16 a. On January 9, 2018, the Marketing Coordinator Supervisor of Pan, Xiomara Rivera Montalvo ( Coordinator ), travelled to the MPO to obtain information on how to request the permit required by the Ordinance. b. Although Xiomara Rivera Montalvo s employer is Pan American Grain Mfg., Co. Inc., she is the sole supervisor coordinator of all marketing efforts for all other affiliated companies (Pan American Property Inc., and Pan American Co.). See Exhibit 1. c. Alejandro Cuadrado, an officer of MPO, told the Coordinator that he had to ask his supervisor because he was unfamiliar with the process on how to obtain the permit. Several minutes later, he came back and informed that, because there was no formal process and that PAN should submit a temporary permit request. Mr. Cuadrado explained that PAN should present an explicative memorandum to be considered and evaluated by Codefendant Juan Gallisá and pay a non-refundable fee. d. Also, Mr. Cuadrado warned that such memorandum would not guarantee the temporary permit. e. Later that day, Coordinator submitted such memorandum and the corresponding non-refundable fee on behalf of PAN (See DKT1-Exhibit 3). f. Although the memorandum was made thru Pan American Grain Mfg., Co., Inc., the request was made on behalf of all other affiliated companies (i.e. Pan American Properties Inc., and Pan American Grain Co.). See Exhibit 1. g. According to Mr. Cuadrado the evaluation of PAN s application would take -9-

10 Case 3:18-cv PAD Document 5 Filed 01/14/18 Page 10 of 16 three to four days in order for the Municipality of San Juan to respond. 14. On January 10, 2018, the Vice Mayor Jaume of San Juan called PANs legal representative to inform him that the application was presented on January 10, 2018 and the application process had ended on January 9, Mr. Jaume claimed that the request would be denied since it had been filed late. 15. However, PAN filed the temporary application request on January 9, (See DKT1-Exhibit 3). 16. Due to the effects of the Ordinance, PAN commercial relationships with Old San Juan s and Puerta Tierra s merchants as well as its product placement and positioning has been curtailed and is suffering substantial and irreparable losses which are specified as follows: a. During past FCSS s, PAN (specifically its subsidiary, Pan American Property Inc.,) has sponsored a series of events hosted by four gas stations (one Total gas station, two Shell gas stations, which are adjacent to one another, and one Gulf gas station, all located in Puerta de Tierra). The attendance for such events significantly increased in the dates of the celebration of the FCSS. PAN s promotional efforts in these events included the sponsorship of music DJs, promotional inflatables, and the distribution of promotional merchandise. b. Due to this year s restrictive measures and fear of suffering reprisal from the Municipality of San Juan, all four gas stations have retracted from allowing PAN brands to be exposed on such events, representing substantial losses. -10-

11 Case 3:18-cv PAD Document 5 Filed 01/14/18 Page 11 of 16 c. PAN has cultivated a commercial relationship with the Bar Cofresí for the past four years. On or about November 21, 2017 PAN entered into a promotional contract with the commercial establishment named Bar Cofresí, located at Old San Juan, by which the latter agreed to display promotional materials of Pan American Properties Inc. s renowned alcoholic beverage brand named Gasolina. Nevertheless, due to the Ordinance, Bar Cofresí retracted in fear of retaliation by the Municipality of San Juan. d. Pan used flying recording devices ( drones ) in order to live stream Gasolina s and PAN s events in social media platforms such as Facebook, Twitter and Instagram. Due to this year s prohibition stated in Section 22 of the Ordinance, PANs ability to promote, advertise, outreach and internationally exposition throughout social media platforms is severely affected. e. PAN have traditionally exploited the highly effective promotional activity of sponsoring pleneros as part of an outreach to expand its brand throughout the musical traditions. The restrictions imposed in the Ordinance impedes PANs traditional sponsorship of pleneros by disallowing the pleneros and dancers to wear PAN s logos during FCSS. 16, As of today, MPO has not responded to PAN s application. PAN would need at least two working days to prepare and install all promotional materials requested and/or to coordinate its traditional sponsored events. V. APPLICABLE LEGAL STANDARDS A. MUNICIPAL ORDINANCES 9, 14, 18 AND 19 VIOLATE THE FIRST -11-

12 Case 3:18-cv PAD Document 5 Filed 01/14/18 Page 12 of 16 AND FOURTEEN AMENDMENTS OF THE CONSTITUTION OF THE UNITED STATES 17. PAN incorporate as if realleged the preceding paragraphs with the same force and effect as if herein set forth. 18. Sections 9, 14, 18 and 19 of the Ordinance regulate arbitrarily how businesses can handle advertising, promotional items and promotional events during the FCSS. 19. Section 9 states that no promotional inflatables may be used in the entire area of Old San Juan. 20. Section 14 prohibits the distribution of promotional items and products unless authorized by the Municipal Permit Office. 21. Section 18 prohibits business owners and residents to rent or sponsor promotional events and displaying advertisement on roofs and balconies unless authorized by the MPO. Section 19 prohibits displaying advertisements and any commercial promotion unless previously authorized by the MPO. 22. Nevertheless, there is no stablished procedure nor written criteria on how MPO grants such authorization. This was confirmed by PAN s marketing coordinator, Xiomara Rivera Montalvo when she traveled to MPO with the intention of obtaining such authorization for PAN brands. (See Attachment 1 and 5, Declaration of Xiomara Rivera Montalvo). 23. It has been long recognized that advertising is protected under the First Amendment of the United States as commercial speech. Although it has a limited protection, if the advertisement is truthful, an intermediate level of scrutiny shall be applied for the restriction of such speech. -12-

13 Case 3:18-cv PAD Document 5 Filed 01/14/18 Page 13 of The landmark case of Central Hudson Gas & Elec. Co. v. Public Service Commission of New York 1 established a four-factor test for commercial speech regulation: commercial speech is protected under the first amendment if (i) it is not misleading and pertains a lawful activity; (ii) whether the government interest in regulating commercial speech is substantial; (iii) the regulation advances the government interest asserted; (iv) and the regulation must not be more extensive than is necessary to serve that interest (emphasis added). 25. Sections 9, 14, 18, 19 of the Ordinance restrains commercial speech and arbitrarily limits it during the FCSS. Pursuant to the aforementioned sections, a written permit from the MPO must be obtained in order for PAN to exercise their constitutional right to commercial speech. As mentioned before, no written criteria exist for MPO to issue the permits. Therefore, the restriction is arbitrary. 26. Section No. 9 specifically prohibits the installation, use, presentation and raising all kinds of promotional inflatables of any item or product in the areas of Puerta de Tierra, Old San Juan, La Puntilla and La Perla within the Isleta of San Juan. This prohibition, in other words, constitutes a prior restraint or prior censorship on the commercial expression. 27. Upon information and belief, the process of obtaining the permit does not exist. 28. PAN s commercial speech, including the use of promotional inflatable advertisement, handling promotional items, sponsoring promotional events and the display of advertising throughout the FCSS is a lawful and truthful activity under Central Hudson 2 four-factor test U.S. 557 (1980) 2 Supra -13-

14 Case 3:18-cv PAD Document 5 Filed 01/14/18 Page 14 of The Ordinance s excessive restrictions on commercial speech does not justify any substantial government interest. 30. The Municipality of San Juan has not provided a clear process for PAN to engage in activities protected by commercial speech. 31. The Municipality of San Juan s process of obtaining the permit is muddled with secrecy. 32. Since there is no pressing interest to restrict commercial speech during the FCSS, as incorporated in the Ordinance, the Municipality of San Juan s restriction of commercial speech does not follow any of the four-factor test established by the Supreme Court of the United States in Central Hudson In sum, sections 9, 14, 18 and 19 of the Ordinance constitute a violation of the protections established by the First and Fourteen Amendment of the Constitution of the United States of America. 4 B. SECTION 22 OF ORDINANCE, RESTRICTING THE USE OF FLYING RECORDING DEVICES ( DRONES ) IS UNCONSTITUTIONAL 34. Section 22 of the Ordinance prohibits the use of flying recording devices, also known as drones, unless authorized by government entities, the Municipality of San Juan or authorized sponsors of the FCSS. 35. PAN intend to use flying recording devices to promote its brands presence during the FCSS by streaming it in different social media platforms as a strategy for brand recognition, promotion and economic purposes. 3 Supra. 4 See also Sorrell v. IMS Health Inc., 131 S. Ct (2011) and Cincinnati v. Discovery Network, Inc., 507 U.S. 410 (1993) -14-

15 Case 3:18-cv PAD Document 5 Filed 01/14/18 Page 15 of The United States Federal Aviation Administration (FAA), under SUMMARY OF SMALL UNMANNED AIRCRAFT RULE (PART 107), set guidelines for commercial use of flying recording devices. However, the United States Court of Appeals for the District of Columbia Circuit in its ruling Taylor v. Huerta 5 stated that the FAA lacked authority to regulate model aircraft and therefore, a requirement to register drones under the FAA was eliminated. 37. On December 2017, the President of the United States signed law No: , National Defense Authorization Act for Fiscal Year 2018 and giving the FAA authority to regulate model aircraft and to require registry of drones. 38. Registry of drones requires a minimum requirement of age, a permit, a fee and complying of operating rules subject to waiver upon request. 39. The Municipality of San Juan does not have the power to regulate drones. Congress has already preempted regulations to the FAA. 40. Pursuant to the Supremacy Clause of the United States Constitution, Article VI, Clause 2, the Section 22 of the Ordinance is unconstitutional since the Municipality of San Juan does not have the power to regulate drones said power was delegated by Congress to the FAA. PRAYER FOR RELIEF: WHEREFORE, by virtue of the unlawful conduct of Defendants, as alleged herein PAP respectfully pray that the Court: A. Declare the arbitrary procedures and provisions set forth in sections 9, 14, 18, 19 and 22 of the Ordinance. 5 No (D.C. Cir. 2017) -15-

16 Case 3:18-cv PAD Document 5 Filed 01/14/18 Page 16 of 16 B. A preliminary and a permanent injunction restraining Defendants from imposing the aforesaid restrictions against all marketing efforts made by PAN and ordering Defendants to immediately enable PAN s reasonable opportunities to immediately place, distribute and affix each and all promotional and labeled material and the use of inflatables. Furthermore, it is hereby requested to allow PAN the use of flying recording devices, commercially known as drones through the extend of the FCSS activities. C. Ordering the Defendants to pay costs, and attorney s fees, pursuant to 42 USCA sec. 1988; and D. Granting such other and further relief as may be just and proper. RESPECTFULLY SUBMITED. In San Juan, Puerto Rico this January 14, WE HEREBY CERTIFY that, we electronically filed the foregoing with the Clerk of the Court using the CM/ECF system. Notice of this filing will be sent to all counsels of record. s/edwin PRADO GALARZA, ESQ. USDCPR NO PRADO, NÚÑEZ & ASOCIADOS, CSP Del Parque Street 403, 8th Floor San Juan PR, T. (787) F. (787) pradolaw10@gmail.com -16-