Ontario Human Rights Commission v. Alliance Atlantis Cinemas, 2006 HRTO 21

HUMAN RIGHTS TRIBUNAL OF ONTARIO

B E T W E E N:

Ontario Human Rights Commission

Commission

-and-

Nancy Barker, Gary Malkowski and Scott Simser

Complainants

-and-

Alliance Atlantis Cinemas, Cineplex Galaxy LP & Famous Players, a division of Viacom Canada Inc. (now known as Cineplex Entertainment LP), Universal Studios Canada Inc., Paramount Pictures Canada Distribution Inc., AMC Entertainment International Inc., and Rainbow Centre Cinemas Inc.

Respondents

INTERIM DECISION

Adjudicator: Mary Ross Hendriks Date: August 10, 2006 Citation: 2006 HRTO 21

Human Rights Tribunal of Ontario 400 University Avenue, 7th Floor Toronto ON M7A 1T7 Phone (416) 314-0004 Fax (416) 314-8743 Toll free 1-800-668-3946 TTY (416) 314-2379 / 1-800-424-1168 E-mail hrto.registrar@jus.gov.on.ca Website www.hrto.ca

INTRODUCTION

1Several complaints have been brought under the Human Rights Code, R.S.O. 1990, c.H.19 as amended (“the Code”), alleging infringements of the Complainants' right to be free from discrimination in services on the basis of disability. The Complaints are being heard together, on the consent of all parties, since they involve the same or similar issues with respect to the accommodation of deaf patrons at movie theatres.

MOTION

2The parties have agreed that the Tribunal could consider this contested motion by way of written submissions only, in accordance with section 5.1 of the Statutory Powers Procedure Act, R.S.O. c.S.22 ("SPPA").

3Counsel for the Ontario Human Rights Commission (the "Commission") have brought a motion seeking production related to financial disclosure and captioning, based on its earlier correspondence to the Respondents seeking same, which fell under four categories:

1. Financial documents, from 2000 to present, for all Respondents
2. Documents with respect to making or adapting digital projectors to deliver captions, requested of all Respondents
3. Cineplex Entertainment LP was asked to provide merger documentation, including: the terms of the acquisition or merger by Cineplex Entertainment LP of Cineplex Galaxy LP, Famous Players and Alliance Atlantis Cinemas, plus any valuations of these companies obtained in the merger process.
4. Universal Studios Canada Inc. was asked to set out what movies were captioned in 2000 and 2001.

ISSUES

4The Tribunal considered the following relevant issues:

1. Whether the Tribunal has the jurisdiction to order production of financial documents and documents relating to the making or adapting of digital projectors
2. If so, whether those financial documents are arguably relevant to the matters in issue herein.

DECISION

5The motion is granted in part. The Tribunal has the jurisdiction under Rules 46-47 of its Rules of Practice, July 2004, and section 5.4 of the SPPA to order the production requested; the information sought more than meets the test of arguable relevance.

WRITTEN SUBMISSIONS ON THE MOTION

6The Complainants took no position on this motion before the Tribunal.

7In its correspondence of July 31, 2006, the Respondent Paramount Pictures Entertainment Canada Inc. ("Paramount") responded by stating that it does not intend to claim that the cost of distributing either closed or open captioned motion pictures would cause it undue hardship. It also stated that it does not have any documents in its possession related to making or adapting digital projectors other than what it has previously disclosed to the Commission. Based on this letter, the Commission stated in its Reply that it was no longer seeking this information from Paramount. Since the parties have resolved these issues themselves, the Tribunal finds that no determination is required.

8Similarly, in its Response dated July 31, 2006, Universal Studios Canada Inc. ("Universal") stated that it has not and does not intend to claim undue hardship as a defence, and so its financial documents do not meet the test of arguable relevance. Instead, it provided that, "Universal enthusiastically endorses captioning as being in the best interests of the hearing impaired and deaf community," at paragraph 5. Moreover, it said that it is agreeable to disclosing any information it has regarding digital captioning, and also agreed to provide the Commission with an updated list of captioned and non-captioned movies, back to 2000 as requested. Based on this Response, the Commission stated in its Reply that it was no longer seeking any financial documents from Universal, and only asked that the Tribunal set a deadline for Universal to provide it with the updated list of captioned films. The Tribunal accedes to that request, and directs Universal to provide the Commission with that updated list of captioned films thirty days from the date of this Interim Decision.

9The Respondent Rainbow Centre Cinemas Inc. ("Rainbow") did not file a response to this motion with the Tribunal. However, in the Commission's original motion record, it noted that Rainbow had advised it in correspondence of June 14, 2006 that it did not have any documents related to making or adapting digital projectors. The Commission also advised the Tribunal of the financial disclosure for 2002-2005 made by Rainbow at that time. In the Commission's Reply, it advised that Rainbow sent it an email on July 21, 2006, explaining the timing of its incorporation and providing that it had made disclosure of all relevant financial documents in existence. The Commission's Reply indicates that it accepts Rainbow's answer. Since the parties have resolved these issues themselves, no determination is required to be made by the Tribunal.

10The Respondent AMC Entertainment International Inc. ("AMC") filed a Response dated July 31, 2006. AMC has confirmed that it is relying upon a defence of undue hardship, based on two issues: its own lack of profitability and on a number of concerns it raises with RWC technology's ability to meet the needs of the deaf, deafened and hard of hearing communities. However, AMC submits that since it has already disclosed its CT23 Corporations and Annual Return Year End Balances, pursuant to the Income Tax Act, R.S.C. 1985, C.1, for the years 1997 to 2005, which disclose regular net losses, it maintains that this disclosure is sufficient to demonstrate its lack of profitability. It also states that it has disclosed the financial viability of its Ontario theatres. In the Commission's Reply, it submits that without full financial disclosure, the defence of undue hardship cannot be assessed, nor can AMC's claim that it could provide one RWC unit at one screen at each AMC location without it constituting undue hardship. The Tribunal finds that the financial information provided by AMC to the Commission is incomplete, for the reasons set out under Analysis.

11The Respondent Cineplex Entertainment LP ("Cineplex") made a number of submissions in its Response dated July 31, 2006. First, it said that it sent further financial information to the Commission on July 25, 2006 for Alliance Atlantis for its year ends 2001-2005. Secondly, it stated that it gave the Commission the 2004 and 2005 financial results for Famous Players recently, and that it expects to provide 2001, 2002 and 2003 within approximately one month's time. It explained this delay as flowing from the integration of accounting systems for Cineplex and Famous Players. Thirdly, it stated that it has produced all financial statements for Cineplex Galaxy Limited Partnership ("CELP") that exist, from the date of its initial public offering, and some other financial records. It disclosed that Cineplex Odeon Corporation ("COC") had filed for and was granted bankruptcy protection on February 15, 2001. It said that COC emerged from its restructuring proceedings on March 21, 2002, with the final payments under the Amended and Restated Plan of Compromise being made on April 15, 2005. Cineplex has agreed in its Response to this motion to provide the Amended and Restated Plan of Compromise and related bankruptcy documents within one month's time.

12Cineplex rejected the Commission's request for unconsolidated financial documents and financial information related to Ontario, arguing that it does not generate provincial financial statements, nor does it break down its financials in any meaningful way to relate to only one province of operations, and thus are irrelevant and unjustified. Moreover, Cineplex maintains that financial statements for periods before the Complaints were filed are also irrelevant. Similarly, Cineplex maintains that the "bankruptcy speaks for itself," and there is no relevance for financial production by COC prior to the date of bankruptcy. Cineplex rejects the request for merger documents, stating that they are intended to be private, are potentially damaging in the marketplace, and that financial statements provide a complete picture and thus the merger documents are irrelevant. Cineplex maintains that it filed a prospectus when it acquired Famous Players, and that its audited financials were part of that filing.

13Cineplex also states that it has provided the Commission with information pertaining to the digital technical standards, and that no further information exists. It agrees to disclose further technical documentation as it is provided to Cineplex.

14The Commission's Reply indicates that it is satisfied with receiving financial documents for Cineplex Galaxy Limited Partnership from November 26, 2003. It has received some but not all of Alliance Atlantis's financial statements for 2001-2005, and does not accept the 2004 financial statements since they are marked "draft." The Commission maintains that it did not receive the 2004 financial results for Famous Players. The Commission submits that the merger transaction was valued at $500 million, and wants the details of the merger documents since it maintains that any valuation of the parties to the Cineplex merger is relevant to the issue of undue hardship. It argues that unconsolidated financial statements are necessary to understand a company's operations, which are relevant to an assessment of undue hardship. Further, it maintains that filing for bankruptcy does not negate the relevance of prior financial documents. The Commission submits that if Cineplex does have financial documents broken down by province, then they are relevant to this proceeding. In terms of the timing of disclosure, the Commission submits that the duty to accommodate patrons to the point of undue hardship exists independently of the filing of complaints, rather than being triggered at the time a complaint is filed. Thus, it maintains that its request for financial disclosure from 2000 is reasonable. Finally, the Commission states that it acknowledges that Cineplex advised it that it has no further information concerning digital projectors and is not seeking an order against Cineplex in this regard.

ANALYSIS

15Rules 46 to 47 of the Tribunal’s Rules of Practice, July 2004, provide as follows:

46. Disclosure is an on-going obligation and each party must promptly disclose and produce: i. any relevant document subsequently acquired; and ii. any changes to the information disclosed or provided.

47. At any time in a proceeding, subject to determining any claim of privilege asserted, a panel may order any party to deliver to any other party particulars, physical or documentary evidence, expert reports, lists of witnesses and witness statements for the purpose of the hearing and anything else the panel considers appropriate for a full and satisfactory understanding of the issues in the proceeding.

16Similarly, subsection 5.4(1)(e) of the SPPA provides the Tribunal, in accordance with its own Rules, with the authority to make orders for “any other form of disclosure.” The Tribunal must be able to assess what constitutes undue hardship, and cannot do so in a vacuum. Meaningful financial disclosure is required, including traditional consolidated and unconsolidated financial statements and tax returns.

17The Code is the law that is always in force, regardless of whether or not particular incidents may constitute non-compliance. The date of a complaint that contains an allegation of a prior breach, as yet unproven, is not the starting point from which it is to be measured. Thus, the request that financial disclosure begin with the year 2000 is reasonable to create a record by which the defence of undue hardship may be tested.

18Since AMC clearly wishes to rely on the defence of undue hardship, it is only fair not only to the Complainants and the Commission but critically important to AMC, that it establish this defence on a financial as well as on a technical or substantive basis. Moreover, AMC's Response did not address the other disclosure issue of making or adapting digital projectors to deliver captioning. The Tribunal finds that the both types of disclosure requested more than meet the test of arguable relevance, as set out in Ontario Human Rights Commission v. Dofasco Inc. (2001), 2001 CanLII 2554 (ON CA), 57 O.R. (3d) 693.

19Because AMC operates theatres, the Tribunal questions, without knowing, whether or not AMC has separate entities that are concession corporations (e.g. to sell popcorn and soft drinks, or run video games, as examples), perhaps set up separately by province, and whether or not it has a holding company(s). The Tribunal also questions if any rent, service charges or management fees flow between these related entities. Finally, the Tribunal questions whether or not AMC engages in any other related lines of business, such as owning real estate and leasing out space in the same shopping mall, for example. AMC's name itself, by referring to "entertainment" indicates these possibilities. In many industries, the add-on services offered are more profitable than the original item purchased, such as the "lost leader container of milk" in a grocery chain that entices customers to enter the premises, for example. When considering how to assess the defence of undue hardship from a financial perspective, the Tribunal wants to know how profitable these other related entities or services are. If AMC has a line of business or source of revenue that has no nexus to its theatres, then the Tribunal will not consider it relevant. Consolidated financial statements are useful, but they tend to blur the distinctions between entities, which are more transparent with unconsolidated financial statements.

20AMC's financial disclosure obligations from 2000 to present include all entities that are or are related to its theatres, their concession subsidiaries, the parent company(s), and any related party transactions such as rent received from real estate holdings which are leased out in the same location as their theatres or any revenue received from separate concession companies that operate in the same location as their theatres, as follows:

• Consolidated and Unconsolidated Balance Sheets
• Consolidated and Unconsolidated Statements of Income
• Consolidated and Unconsolidated Statements of Cash Flows
• Consolidated and Unconsolidated Statements of Equity/Deficiency

21Tax returns are also relevant financial disclosure to the defence of undue hardship. The Tribunal appreciates the fact that AMC has voluntarily disclosed its CT23 Corporations and Annual Return End Balances for the years 1997 to 2005. The Tribunal also requires disclosure of the Federal T2 tax returns, including schedules, from 2000 to present, since T2s typically break down net income by province, and the Tribunal’s jurisdiction is Ontario.

22Cineplex, similarly, is resistant to producing unconsolidated financial statements, arguing that they are irrelevant. With respect, the Tribunal fundamentally disagrees, for the same reasons stated above regarding AMC's operations. Cineplex’s financial disclosure obligations from 2000 to present include all entities that are theatres or are related to its theatres, their concession subsidiaries, the parent company(s), and any related party transactions such as rent received from real estate holdings which are leased out in the same location as their theatres or any revenue received from separate concession companies that operate in the same location as their theatres, as follows:

• Consolidated and Unconsolidated Balance Sheets
• Consolidated and Unconsolidated Statements of Income
• Consolidated and Unconsolidated Statements of Cash Flow
• Consolidated and Unconsolidated Statements of Equity/Deficiency

23Cineplex is also required to produce its CT23 Corporations and Annual Return End Balances and its Federal T2 tax returns, including all schedules, for the years 2000 to present.

24The Tribunal agrees with Cineplex's submission about the reliability of audited financials related to its prospectus filing. Merger documents are not financial statements, consolidated or unconsolidated, nor are they tax returns, and there is a reasonable expectation of non-disclosure in a competitive marketplace that the Commission has failed to refute. However, it is reasonable to require Cineplex to produce the portion of the merger documents that were filed with the provincial Securities Commissions as part of the public record, and the Tribunal so directs Cineplex to do so.

25Cineplex has agreed to produce the Amended and Restated Plan of Compromise related to the insolvency proceedings/bankruptcy within one month's time. In addition to those documents, Cineplex is also directed to produce the Trustee in Bankruptcy's first report, which should provide a synopsis of the causes of its financial difficulties. If the proceedings were under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (“CCAA”), instead of the Bankruptcy and Insolvency Act, R.S.C. 1985, c.B-3 (“BIA”) then instead of the Trustee in Bankruptcy’s first report, the Tribunal requires production of the court reports and reports to creditors made pursuant to the CCAA, since the compromises with creditors would have required approval by the court pursuant to the CCAA.

26The Tribunal is satisfied that Cineplex has responded to the question regarding digital technical standards and no determination is required on this issue.

ORDER

27Within thirty days of the date of this Interim Decision:

(a) Universal is ordered to provide an updated list of captioned films to the Commission

(b) AMC and Cineplex are ordered to provide financial disclosure from 2000 to present, for all entities that are related to its theatres, such as any concession subsidiaries, parent companies, and any related party transactions such as rent received from real estate holdings which are leased out in the same location as their theatres, or any revenue received from separate concession companies that operate in the same location as their theatres, as follows:

• Consolidated and Unconsolidated Balance Sheets
• Consolidated and Unconsolidated Statements of Income
• Consolidated and Unconsolidated Statements of Cash Flow
• Consolidated and Unconsolidated Statements of Equity/Deficiency
• CT23 and Federal T2 tax returns, including all schedules

(c) Cineplex is also required to produce the portion of the merger documents previously filed with the provincial Securities Commissions.

(d) Cineplex must produce the Amended and Restated Plan of Compromise, as agreed, as well as either the Trustee in Bankruptcy’s first report if the proceeding was under the BIA, or the court reports and reports to creditors if the proceeding was pursuant to the CCAA.