Court File and Parties
COURT FILE NO.: CV-19-00002374 DATE: 2020 05 15 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Touchup RX Canada Inc., Plaintiff/Responding Party AND: Dr. Colorchip, Corp. and Anthony Pando, Defendants/Moving Parties
BEFORE: Chozik J.
COUNSEL: Matthew T. Soble, for the Plaintiff/Responding Party Daniel Szirmak, for the Defendants/Moving Party
HEARD: January 28, 2020
RULING ON MOTION to stay proceedings
OVERVIEW
[1] The issue on this motion is whether the Superior Court of Justice in Ontario has jurisdiction to adjudicate this action. The plaintiff, Touchup RX Canada Inc. (“Touchup RX” or “plaintiff”), is an Ontario corporation. The defendants, Dr. Colorchip, Corp. (“Dr. Colorchip”) and Anthony Pando, are based in Florida. The defendants argue that this court lacks actual jurisdiction. In the alternative, the defendants ask this court to decline to exercise jurisdiction because a Florida court is a more appropriate forum.
[2] For the reasons that follow, I have concluded that this litigation is sufficiently connected to Ontario that this court has jurisdiction. The more challenging issue is whether Ontario is the more convenient forum to decide this case. The plaintiff’s claim is framed in breach of contract and various torts allegedly committed by the defendants. These include interference with the plaintiff’s economic interests, violation of the Competition Act, R.S.C. 1985, c. C-34 by making misrepresentations to the public, and defamation.
[3] For the reasons set out below, I find that this conduct took place in Ontario. The plaintiff has no business, presence or reputation in Florida or elsewhere in the US. At all material times, its economic interests and reputation were in Ontario.
[4] At the same time, I find that the contracts governing the relationship between the parties were formed in Florida. Their interpretation is governed by Florida law. There are also two actions – one in the U.S. Federal court and one in the Florida state court – initiated by the defendant, Dr. Colorchip, that overlap with the subject matter and factual claims of this Ontario action.
[5] Having weighed the requisite factors, I am satisfied that the defendants have demonstrated that this court should decline jurisdiction. Multiplicity of proceedings should be avoided. The risk of inconsistent verdicts here is significant. Florida is a clearly more appropriate forum to hear and resolve this dispute. As a result, the defendants’ motion to stay the action in Ontario is granted.
BACKGROUND
[6] Dr. Colorchip is a Florida company founded in 2003 by Daniel McCool (“McCool”), who also resides in Florida. Dr. Colorchip manufactures, distributes, and sells automotive touch up paint, paint chip repair kits, commercial paint, retail systems, and related services. It sells these goods, domestically and internationally, to automotive dealerships, service centres, mobile technicians and directly to consumers. Most of its sales are conducted over the Internet.
[7] From 2009 to 2016, Bill McLean (“McLean”) was Daniel McCool’s partner in running Dr. Colorchip. He was a shareholder, director, and officer. He held the title of vice-president. He is also a Florida resident. Dr. Colorchip’s offices and employees are in Florida. Dr. Colorchip has several registered trademarks in the U.S. and Canada [^1] relating to its name and branding. The formulas for its products are secret. It is not disputed that the defendant, Anthony Pando was employed by Dr. Colorchip, and is also a Florida resident.
[8] The plaintiff is an Ontario corporation. It was originally incorporated as “Dr. Colourchip Canada” but in 2018 it changed its name to Touchup RX Canada Inc.
[9] It is not disputed that the plaintiff and Dr. Colorchip had an agreement granting the plaintiff an exclusive license to use Dr. Colorchip’s name and trademarks in Canada. This allowed the plaintiff to market and sell Dr. Colorchip branded commercial-use products and services to individuals in Canada and to sub-license and manage its commercial paint repair services. The plaintiff also held a non-exclusive license to market and sell Dr. Colorchip’s products and services in the United States. In exchange for these licenses, the plaintiff was to pay a monthly licensing fee per sub-licensee.
Written Agreements between the Parties:
[10] A licensing agreement between the plaintiff and Dr. Colorchip was first placed in writing in 2014. At that time, Duane King (“King”) incorporated “Dr. Colourchip Canada.” He is its only director and shareholder. The plaintiff, as Dr. Colourchip Canada, was incorporated in Ontario. It does business exclusively in Ontario and elsewhere in Canada. King is an Ontario resident who vacations in Florida during winters.
[11] King deposed that he met with McLean in the summer of 2014, when McLean came to Ontario to negotiate the license agreement. Later that fall, the two executed the one year written License Agreement. Dr. Colorchip, disputes that this agreement was a valid contract. McCool testified that he did not know about it. He claims that McLean signed it without his approval.
[12] The 2014 the Licence Agreement granted the plaintiff both the license to and the right to sub-license the distribution, marketing and sales of Dr. Colorchip’s products in Canada for one year. Specifically, the License Agreement granted to the plaintiff an exclusive licence to:
a. Use Dr. Colorchip’s name and its registered Canadian trademark, Dr. Colourchip, in Canada; b. Market and sell Dr. Colourchip branded commercial-use products and services to individuals in Canada; c. Sub-license and manage Dr. Colourchip’s name and trademarks in Canada and to define sub-territories within Canada for said purposes; d. Register and use the internet domain name www.drcolourchip.ca to promote and sell commercial paint repair services in Canada; and e. Appointed the plaintiff as Dr. Colorchip’s exclusive agent to ADESA [Automobile Dealer Exchange Services of America] Canada.
[13] The plaintiff was Dr. Colorchip’s only licensee in Canada.
[14] In February 2016, the parties entered into an agreement entitled “Renewal Ammendent [sic]” that extended many but not all of the terms of the 2014 License Agreement to 2021. Despite its name, the parties do not agree on whether the Renewal Amendment was in fact a renewal or extension of the original Licensing Agreement, or an addendum to the Non-Disclosure Agreement signed a few days earlier. The Renewal Amendment did not grant the plaintiff an exclusive right to act as Dr. Colorchip’s agent to ADESA Canada. In most other respects, however, it did grant to the plaintiff substantially the same rights as the 2014 License Agreement. The Renewal Amendment was signed by King (on February 9, 2016), by McLean (on February 10, 2016), and by McCool (on February 16, 2016).
[15] Also in early February 2016, the parties entered into a Non-Disclosure Agreement (“NDA”). It prohibited the plaintiff from disclosing certain information, including business records, plans, trade secrets, technical information and product design information. Unlike the other agreements, the NDA contained a choice of laws provision. It provided that the NDA is to be construed under the laws of the State of Florida. Significantly, the parties did not include a choice of law or jurisdiction provision in the original License Agreement of 2014 or the Renewal Amendment of 2016. The NDA was signed by King on February 6, 2016. It was effective February 1, 2016.
The Falling Out:
[16] Sometime after the Renewal Amendment was signed between Dr. Colorchip USA and Dr. Colourchip Canada, McLean and McCool had a falling out. In September 2016, McLean incorporated a new company in Florida, Touchup RX Corporation. McCool sued McLean in Florida’s state court in Palm Beach alleging a breach of fiduciary duty based on McLean’s alleged misappropriation of Dr. Colorchip’s domain name and domain registration. McLean in turn counterclaimed against Dr. Colorchip and McCool for breach of fiduciary duty. Neither the plaintiff nor King were named in that action.
[17] McCool and McLean settled their dispute in November 2018. Under the terms of their settlement agreement, McLean relinquished all rights, title and interest in the Dr. Colorchip website, domain name and domain registration. McLean also warranted that he had not entered into any agreements with Dr. Colourchip Canada or any of the Canadian distributors or that he had sold more than $30,000 of paint products to them, collectively.
[18] In its Amended Statement of Claim, the plaintiff asserts that in December 2017, after complaints from its sub-licensees as to quality of paint, the plaintiff ceased coordinating and facilitating the purchase of paint from Dr. Colorchip. Instead it began coordinating and facilitating the purchase of paint by its sub-licensees from an alternate source, Touchup RX USA (McLean’s company). In December 2018, Dr. Colourchip Canada changed its name to Touchup RX Canada. At the cross-examination on this motion, King maintained that despite the name change, it remained the same company. In December 2018, he sold the company.
[19] The Amended Statement of Claim also asserts that the plaintiff’s sub-licensees “remained free and able to purchase” paint supplies from Dr. Colorchip or others.
[20] Dr. Colorchip alleges that at the time McCool and McLean fell out, the plaintiff started buying products from McLean’s company, Touchup RX USA, and selling those products to the Canadian sublicensees as Dr. Colorchip branded products. These accusations were raised in the dispute between McLean and McCool. One of the terms of the settlement agreement recites that, around November 2017, Dr. Colourchip Canada and the Canadian distributors stopped paying fees to Dr. Colorchip but continued to sell “Dr. Colourchip” branded products in Canada. This assertion is affirmed in the plaintiff’s Statement of Claim.
[21] Dr. Colorchip wrote to the plaintiff shortly after McCool and McLean settled their legal dispute. In a letter to King dated November 30, 2018, Dr. Colorchip terminated any and all rights granted to him and/or Dr. Colourchip Canada under the Renewal Amendment because King and/or Dr. Colourchip Canada:
a. failed and refused to pay Dr. Colourchip substantial monthly royalties and fees for products sold under the “Dr. Colourchip” trademark; b. continued to unlawfully use the Dr. Colourchip trademark despite failing to pay the required royalties; c. continued to unlawfully use the “drcolourchip.ca” domain, including redirecting it to a direct competitor, “touchuprx.ca”; and d. had unlawfully and falsely informed “Dr. Colourchip” brand distributors in Canada that Dr. Colorchip no longer exits and is no longer doing business, and e. solicited those distributors to become Touchup Rx distributors.
[22] Anthony Pando (“Pando”) held the title of Global Development Manager at Dr. Colorchip. In December 2018, Dr. Colorchip started referring to him as the “Canadian Territory manager”. In December 2018 Pando came to Ontario to meet with Dr. Colorchip sub-licensees. McCool testified that this meeting was organized because he was of the view that King had terminated the Canadian sub-licences. He felt that the plaintiff had made misrepresentations to the Canadian sub-licensees about Dr. Colorchip. He wanted to “let folks know” that Dr. Colorchip was still in business and could still ship product to Canada.
[23] Pando held a meeting with a number of Canadian sub-licensees, including Karen Hall. Emails and other correspondence suggest that Dr. Colorchip’s intention for that meeting was to persuade the Canadian sub-licensees to purchase Dr. Colorchip’s products directly rather than through the sublicense agreement with the plaintiff.
[24] Dr. Colorchip then corresponded directly to the Canadian sublicensees on December 6, 2018. This letter, bearing McCool’s signature, gives rise to the defamation claim. It was addressed “Dear Valued Distributor,” and stated:
It has recently come to our attention that Dr. Colourchip Canada has ceased operations and that Mr. King is now doing business as TouchUp RX Canada Inc., which offers substantially the same services as Dr. Colourchip Canada. In conjunction with this, it is our understanding t hat Mr. King has asserted that your Licensee Agreements have been terminated. We also understand that Mr. King has offered you new contracts with TouchUp RX, and advised that you may be sued for breaching the non-complete provisions of your Licensee Agreements with Dr. Colourchip Canada if you do not enter into those new contract. [sic?] We are also informed that some of you may have been told that Your Dr. Colourchip brand expensive paint kits (which you purchased with your own funds) may be confiscated if you do not enter into contracts with TouchUp Rx.
In particular, as set out below, we are concerned that the above statements are not based on a correct interpretation of the Licensee Agreement but, rather, are being used as a pressure tactic to induce you into signing new contracts with TouchUp RX. We believe that any such conduct intended to induce you away from Dr. Colourchip and into contracts to sell TouchUp RX products is unlawful. To the extent you have questions about your Licensee Agreement, or you have entered into a new contract with TouchUp RX as a result of these statements, we also urge you to seek independent legal advice regarding your rights.
Finally, it is our view that you are free to continue selling Dr. Colourchip brand products should you wish to do so. You may place ordered for our Dr. Colourchip brand paint and accessory products by contacting Tony Pando, our Canada territory manager, at ...”
[25] Also in December 2018, Dr. Colorchip commenced an action against the plaintiff, Duane King, and Bill McLean in the United States District Court, Southern District of Florida (the “Federal Court Action”). That action alleges that the plaintiff stopped paying the required royalties and sold unbranded products to the Canadian Dr. Colorchip sublicensees. The action is framed in breach of contract, tortious interference with business relations, conspiracy, unfair competition and counterfeiting. The Federal Court Action was dismissed on May 31, 2019 without prejudice to the parties, due to their failure to schedule a mediation as required by the court. At the time of the hearing of this motion, the Federal Court Action remained inactive.
The Ontario Action:
[26] On the same day that the Federal Court Action was dismissed, the plaintiff had issued its Statement of Claim in Ontario. In this action (as subsequently amended), the plaintiff claims that Dr. Colorchip breached its agreements, acted in bad faith, interfered with the economic relations of the plaintiff, violated the Competition Act, R.S.C. 1985, c. C-34, by making false representations to the public, and otherwise defamed the plaintiff.
[27] The underlying factual claims made by the plaintiff in this action are, in part, as follows:
a. Dr. Colorchip violated the agreement that gave the plaintiff exclusive license to sell Dr. Colorchip branded products in Canada by trying to sell or actually selling its products directly to Canadian customers; b. Dr. Colorchip and Pando made allegedly false, unfounded and defamatory statements regarding the plaintiff; c. At the meeting in Ontario in December 2018, Pando attempted to induce (and in some instances successfully induced) the sub-licensees to terminate or breach their agreements with the plaintiff d. Dr. Colorchip improperly prevented the plaintiff from using the Canadian trademark; e. Dr. Colorchip refused to approve new sub-licensees arranged for by the plaintiff.
[28] On June 4, 2019, after refusing service of the plaintiff’s Statement of Claim in Ontario, Dr. Colorchip filed a complaint in Circuit Court of the 15th Judicial Circuit in and for Palm Beach Country, Florida (the “Florida State Action”). The allegations made by Dr. Colorchip in the Federal Action and the Florida State Action are the same.
POSITIONS OF THE PARTIES
[29] The defendants argue that this court lacks jurisdiction simpliciter because the defendants and the subject matter of the litigation is “most” connected to Florida. The defendants say they have no presence in Ontario and do not carry on business here. In the normal course, the corporate defendant conducts business internationally from Florida. It has no offices and no employees in Canada. McCool and Pando are both Florida residents. Bill McLean, who is one of the key witnesses, is a Florida resident and director of a Florida based corporation, Touchup RX Corp.
[30] The defendants also argue that this case is really about breaches of a contract made in Florida, governed by Florida law and fundamentally tied up with litigation already before courts in the United States. They argue that the plaintiff’s tort claims are merely ancillary breach of contract claims which constitute the gravamen of the dispute. Those claims are already the subject matter of litigation in Federal Court action and the Florida State action. They argue that the Ontario action should not be viewed in isolation and that it is duplicative of litigation commenced by the defendants in the United States. It should therefore be prevented from proceeding here.
[31] Alternatively, the defendants argue that this court should decline to exercise its jurisdiction by applying the doctrine of forum non conveniens. In other words, according to Dr. Colorchip, Florida is a clearly more appropriate forum to hear and resolve the dispute brought by the plaintiff.
[32] The plaintiff in turn argues that this matter is sufficiently connected to Ontario, and that the action can (and should) be heard here. The defendants carried on business in Ontario and the torts alleged were committed here. Despite the legal actions in Florida, the balance of convenience does not clearly favour Florida as the better forum to hear the matter.
THE LEGAL TEST FOR JURISDICTION
[33] The central issue in the analysis of jurisdiction is whether there is a connection between the forum chosen by the plaintiff and the subject matter of the litigation. Where there is a foreign defendant, the plaintiff must satisfy the court in which the action is brought that the court has actual jurisdiction (jurisdiction simpliciter). To do so, there must be a real and substantial connection between the subject matter of the litigation and the location of the litigation (Club Resorts Ltd. v. Van Breda, 2012 SCC 17 at paras. 79-80; Haaretz.com v. Goldhar, 2018 SCC 28, at paras. 27-30).
[34] Even where the court has jurisdiction simpliciter, it may decline to exercise that jurisdiction pursuant to the doctrine of forum non conveniens and stay the action, if another forum is clearly more appropriate for the pursuit of the claims and the interests of the parties (Van Breda, at para. 46; Haaretz.com, at para. 185). The two steps of the analysis – assumption of jurisdiction and forum non conveniens – are conceptually and sequentially distinct (Van Breda, at paras. 46 and 56; Haaretz.com, at para. 27).
[35] Presence in a jurisdiction is an independent basis for jurisdiction, which need not be subsumed into an analysis of real and substantive connection (Van Breda, at para. 79). Where an out of province corporate defendant is carrying on business in the province at the time of the action, there is no need to consider whether a real and substantial connection exists (Chevron Corp. v. Yaiguaje, 2015 SCC 42 at para. 87; Stephen G.A. Pitel and Nicholas Rafferty, Conflicts of Laws, 2nd ed, (Toronto: Irwin Law, 2016) at p.62). The litigation itself need not be connected to the aspect of the business that is being conducted in the province.
ISSUE ONE: Does This Court Have Jurisdiction Simpliciter?
[36] In this case, the defendants have no actual presence in this jurisdiction. As such, the plaintiff must first establish that the defendant or the subject of the action has a real and substantial connection to Ontario (Van Breda, at paras. 75, 78 and 100; Haaretz.com, at para. 122; Incorporated Broadcasters Ltd. v. CanWest Global Communications Corp., (2003), 63 O.R. (3d) 43, at para. 29 (Ont. C.A.)). Jurisdiction must be established primarily on the basis of objective factors that connect the legal situation or the subject matter of the litigation with the chosen forum (Van Breda, at para. 82).
[37] Certain factors will trigger a presumption that there is a real and substantial connection to the chosen forum (Van Breda at para. 90). In tort cases, these presumptive connective factors include:
(i) that the defendant is domiciled or resident in the forum, (ii) that the defendant carries on business in the forum, (iii) that the tort alleged was committed in the forum, and (iv) that a contract connected with the dispute was made in the forum.
[38] The plaintiff only needs to establish one of these factors. Additional presumptive connective factors could be identified in any specific case (Van Breda, paras. 68, 80-90).
[39] Where a presumptive factor is established by the plaintiff, the defendant can rebut the presumption (Van Breda, at paras. 81, 95 and 100). Concerns relating to the insufficiency of a presumptive connecting factor must be considered either at the rebuttal stage of a jurisdiction simpliciter analysis or at the forum non conveniens stage (Haaretz.com, at para. 37).
[40] In my view, the plaintiff has not established that the defendants are residents or carry on business in Ontario. The plaintiff has also failed to establish that the contract at the centre of the dispute was made in Ontario. Rather, it was made in Florida. However, the allegedly tortious conduct in this action was clearly committed in Ontario and this is presumptive factor connecting the subject matter of this action to Ontario.
Did the Defendants Conduct Business in Ontario?
[41] The plaintiff argues that the defendants carried on business in Ontario. They sold and shipped their goods to Ontario and conducted in-person business meetings in Ontario. The first meeting occurred in the summer of 2014 when Bill McLean met with Duane King. The second Ontario meeting took place in December 2018, when Anthony Pando met with sublicensees. On that last occasion, Pando held the title of Dr. Colorchip’s “Canada Territory Manager”. These meetings, the plaintiff argues, are sufficient to establish that the defendants were carrying on business here.
[42] In Van Breda, the Supreme Court of Canada cautioned that the notion of carrying on business in a jurisdiction requires a reserved analysis in order to avoid creating what would amount to a form of universal jurisdiction. For example, active advertising or the ability to access a website in a jurisdiction would not be sufficient to establish that a defendant is carrying on business there. The notion of carrying on business “requires some form of actual, not only virtual, presence in the jurisdiction, such as maintaining an office there or regularly visiting the territory of the particular jurisdiction” (Van Breda, at para. 87) [Emphasis added].
[43] The shipping of goods into a jurisdiction and the place of performance of all or a substantial part of the contact are factors that show some connection to a particular forum. However, that conduct must be looked at in a broader context. One must ask: where is the purchase order received? where is the product prepared for shipping and packaged? from where is the product shipped? where are invoices prepared? and where is payment of invoices to be made? These are all factors that must be considered when determining whether there is a substantial connection to the other jurisdiction (Corona Steel Industry Private Ltd. v. Integrity Worldwide Inc., 2018 ONSC 3901, at paras. 38, 41).
[44] The real and substantial connection test is intended to prevent jurisdictional overreach and prevent a court from “unduly entering into matters in which the jurisdiction in which it is located has little interest” (Yip v. HSBC Holdings plc, 2018 ONCA 626, at paras. 27-30). In Beals v. Saldanha, 2003 SCC 72, the Supreme Court of Canada held that a “fleeting or relatively unimportant connection will not be enough to give a foreign court jurisdiction” (at para. 32). A restrained approach is required in assessing whether the foreign defendant conducted business in a jurisdiction. Not every fleeting or relatively unimportant event will establish a presumptive connective factor that gives rise to a “real and substantial” connection.
[45] On the evidence before me, I am not persuaded that the defendants carried on business in Ontario. The factors identified by the plaintiff, individually and cumulatively, do not establish that the defendant was carrying on business in Ontario. Its presence here was too fleeting to make that finding.
[46] In the alternative, this presumptive connective factor is so tenuous that it is rebutted by the defendants. It is too weak a connection to ground jurisdiction simpliciter.
Were the Alleged Torts Committed in Ontario?
[47] The location of a tort may be the place that was most substantially affected by the defendant’s activities or its consequences. (Haaretz.com, at para. 125; Van Breda at para. 89). For torts such as defamation, the tort tends to be located where the damage is sustained (Van Breda, at para. 89; and see Haaretz.com). However, the situs of the tort does not create an irrebuttable presumption of jurisdiction, even in defamation cases (Haaretz.com, at para. 44).
[48] The defendants argue that the torts claimed in this action are simply ancillary to a breach of contract, and should be disregarded when determining jurisdiction. The substance of the case is the breach of contract, formed and performed in Florida. The torts claimed by the plaintiff are incidental to those breaches of contract. These tort claims, argue the defendants, are ‘cooked up’ in an effort to persuade this court to accept jurisdiction.
[49] The relevance of jurisdiction simpliciter and forum non conveniens is dependent on the scope of the claim (Haaretz.com, at para. 20). I can neither ignore the pleadings nor weigh the strength and weaknesses of the allegations. At this stage, I am required to assume that the pleadings are proven. I am also not prepared to interpret the pleadings in the way urged by the defendants because that would fundamentally change the scope of the action.
[50] I am satisfied that the plaintiff has established that the conduct giving rise to the torts alleged was committed in Ontario. This clearly connects the subject matter of this litigation to this forum. The defendants agreed to grant the plaintiff an exclusive license to sell its product to sub-licensees in Canada. The plaintiff did so for a number of years. The defendants shipped its goods for sale in Ontario. There was a falling out between McLean and McCool. The plaintiff – wrongly or rightly – changed its corporate name, and then stopped buying and paying for products. The defendants suspected that the plaintiff was now selling ‘fake’ Dr. Colorchip branded products to the sublicensees.
[51] The defendant, Pando, attended in Ontario to meet with the Canadian sublicensees. Wrongly or rightly, the defendants tried to persuade those sublicensees – all Ontario and Canadian based entities who had contracts with the plaintiff – to purchase its products directly from it, instead of the plaintiff. In the letter dated December 6, 2018, the defendant made statements about the plaintiff that could be defamatory, if false.
[52] If these facts are established, they give rise to legitimate (as opposed to ‘cooked up’) claims of interference with economic interests and defamation. The acts occurred in Ontario. I am therefore satisfied that the situs of the torts alleged by the plaintiff are a presumptive connective factor. The subject matter of the litigation has a real and substantial connection to Ontario.
[53] A presumptive factor is not irrebuttable. A defendant may show that a given connection is inappropriate in the circumstances of the case. The test for rebutting a presumptive connecting factor requires the defendant to show that:
(a) the presumptive connection “… does not point to any real relationship between the subject matter of the litigation and the forum or points only to a week relationship between them” (Van Breda, at para. 95) (b) it would not be reasonable to expect to be called on to answer a proceeding in that jurisdiction (Haaretz.com, at para. 43, citing Van Breda, at paras. 81, 97, 92,)
[54] It is the defendant’s onus to establish the facts in support of the above claims. In doing so, the defendant must rely on factors other than those that would justify a stay in the forum non conveniens analysis.
[55] Where the presumptive connecting factor is the commission of a tort, it is difficult to rebut the presumption of jurisdiction (Van Breda, at para. 96). The defendants in this case have not raised any factors – other than those in relation to the forum non conveniens analysis – that are capable of rebutting the connection to Ontario. They argue only that the torts alleged are ancillary to the breach of contract. I find that this is not enough to rebut the presumption of jurisdiction.
Was the Contract Connected to the Dispute Formed in Ontario?
[56] As set out below, I am not satisfied that the contract(s) which is/are the subject matter of the dispute was/were formed in Ontario.
[57] The Rules of Civil Procedure, R.R.O. 1990, Reg. 194, offer some guidance as to when a contractual dispute has a connection to Ontario. Rule 17.02 sets out four situations where Ontario courts may assume jurisdiction over a claim for breach of contract against a foreign defendant:
(i) the contract was made in Ontario, (ii) the contract provides that it is to be governed by or interpreted in accordance with the law of Ontario, (iii) the parties to the contact have agreed that the courts of Ontario are to have jurisdiction over the legal proceedings in respect of the contract, or, (iv) a breach of the contract has been committed in Ontario, even though the breach was preceded or accompanied by a breach outside Ontario that rendered impossible the performance of the part of the contract that ought to have been performed in Ontario.
[58] In this case, the 2014 License Agreement is silent as to the governing law. At the time of the relevant events, it had expired. The Renewal Amendment is, in my view, an extension of that initial agreement. It states:
We, Dr. ColorChip Corporation (DCC USA), are pleased to renew this Agreement with you, Duane King and your company, Dr. Colourchip CANADA (DCC CAN), to continue with approval for you to market Dr. ColorChip commercial-use products and services to individual within all provinces of Canada. In addition, you have the Right to define territories in Canada, and sell said individuals, exclusive use/,manage Rights in those Canadian geographic locations.” [emphasis added]
[59] The defendants argue that the NDA, which includes a jurisdiction and governing law clause, is part and parcel of the Renewal Amendment or that one was intended to be an addendum to the other. I do not find this to be so. The Renewal is called an “ammendent” (sic.) not an “addendum”. These words, in their ordinary and usual meaning, lead me to conclude that the Renewal was a change to the initial license agreement, rather than an addition to the NDA.
[60] The initial licensing agreement was signed in November 2014 between Dr. Colorchip (at that time represented by Bill McLean) and the plaintiff (at that time operating as Dr. Colourchip Canada). It was effective for one year from August 1, 2014 and open to renewal. The initial licensing agreement also stated that the parties could enter into a long-term agreement or terminate the agreement prior to September 30, 2015.
[61] In any event, I find that the 2014 License Agreement, the 2016 Renewal “Ammendent” and the NDA were formed in Florida, not Ontario.
[62] The evidence as to the formation of the contracts is not in dispute. The parties agree that the Renewal “Ammendent” was prepared by Dr. Colorchip in Florida and presented to the plaintiff by email. King accepted it by signing it in Ontario on February 9, 2016 and emailed it back to Dr. Colorchip. McLean signed it on February 10, 2016, but there is no evidence as to where it was signed. McCool signed it on February 16, 2020, in his office in Florida.
[63] Similarly, the Non-Disclosure Agreement was prepared by Dr. Colorchip in Florida and emailed to King in Ontario. King signed it in Ontario on February 6, 2019 and emailed it back to Florida.
[64] The plaintiff submits that the 2014 License Agreement was negotiated and formed in Ontario, first by oral agreement and then by written agreement prepared and offered in Florida and accepted by the plaintiff in Ontario.
[65] Acceptance of an offer by an offeree must be communicated to the offeror before a contact can be regarded as concluded. A contract is formed when and where acceptance is received by the offeror, not where it is sent. (Eastern Power Ltd. v. Azienda Communale Energia & Ambiente, (1999), 178 D.L.R. (4th) 409 (Ont. C.A.) at para. 24, leave to appeal ref’d). The place of contract formation is the location the offeror receives the offeree’s acceptance of the agreement (Trillium Motor World Ltd. v. General Motors of Canada Ltd., 2014 ONCA 497 at paras. 66-68). In this case that was clearly in Florida.
[66] Although there was once a postal exception to this rule – which held that the location where an acceptance was mailed determined the place of contract formation – this exception was born of commercial expedience and did not apply where the communication was instantaneous, such where it is sent by telex, facsimile or, as here, email (Inukshuk Wireless Partnership v. NextWave Holdco LLC et al, 2013 ONSC 5631, at paras. 25-29; Christmas v. Fort McKay, 2014 ONSC 373, at paras. 18-19).
[67] The plaintiff argues that the 2014 License Agreement was negotiated and formed in Ontario, first by oral agreement and then by written agreement prepared and offered in Florida and accepted by the plaintiff in Ontario. The fact of oral agreement or negotiations does not determine the issue of contract formation. In Eastern Power Ltd., the parties engaged in multiple negotiations in Ontario and Italy. The court held that the contract was formed in Italy. Ultimately, it is not the place of negotiations that determined the place of contact formation, but the general principle that a contract is formed when and where acceptance is received by the offeror.
[68] Applying these principles with respect to contract formation, it is clear that the contracts in question – including the 2014 License Agreement, the 2016 Renewal Addendum and NDA – were all formed in Florida. The plaintiff has not satisfied me that this fourth presumptive factor arises in this case.
[69] Despite the fact that the contracts were formed in Florida, I find that the plaintiff has met the test for finding jurisdiction simpliciter in Ontario because the torts alleged in the Statement of Claim (as amended) were committed in Ontario.
ISSUE TWO: Should this Court Decline to Exercise Jurisdiction on the Basis of Forum Non Conveniens?
[70] Even though jurisdiction simpliciter has been established, the defendants may succeed on their motion to stay this action if they satisfy the court that Florida is “clearly more appropriate” jurisdiction than Ontario to resolve this dispute. This is a discretionary question. In other words, I would have to find that Florida is clearly more appropriate for the pursuit of this action and it is in the interests of the parties to proceed there. (Van Breda, at paras. 101-112; Haaretz.com, at para. 46).
[71] The purpose of the forum non conveniens rule is to ensure a fair and efficient resolution to litigation (Van Breda, at para. 105) Where the evidence indicates that the alternative forum is in a better position to dispose fairly and efficiently of the litigation, a stay should be granted. Where there is a foreign defendant, the court should be concerned with whether the chosen forum will provide the defendant with a fair opportunity to present its case (Haaretz.com, at para. 47). Where defamation in particular is alleged, a robust and careful examination of forum non conveniens is required (Haaretz.com, at para. 48).
[72] Being a forum in a better position to fairly and efficiently dispose of the litigation does not mean that a comparable forum exists. In Van Breda, LeBel J. explained this concept as follows:
[109] The use of the words “clearly” and “exceptionally” should be interpreted as an acknowledgment that the normal state of affairs is that jurisdiction should be exercised once it is properly assumed. The burden is on a party who seeks to depart from this normal state of affairs to show that, in light of the characteristics of the alternative forum, it would be fairer and more efficient to do so and that the plaintiff should be denied the benefits of his or her decision to select a forum that is appropriate under the conflict’s rules. The court should not exercise its discretion in favour of a stay solely because it finds, once all relevant concerns and factors are weighed, that comparable forums exist in other provinces or states. It is not a matter of flipping a coin. A court hearing an application for a stay of proceedings must find that a forum exists that is in a better position to dispose fairly and efficiently of the litigation. But the court must be mindful that jurisdiction may sometimes be established on a rather low threshold under the conflict’s rules. Forum non conveniens may play an important role in identifying a forum that is clearly more appropriate for disposing of the litigation and thus ensuring fairness to the parties and a more efficient process for resolving their dispute. [Emphasis added]
[73] The following factors must be considered in deciding whether another forum is clearly more appropriate:
a. Comparative convenience and expense of the parties; b. Comparative convenience and expense for witnesses; c. Loss of legitimate juridical advantage; d. Fairness; e. Enforcement; f. Applicable Law; g. Avoidance of multiplicity of proceedings and avoidance of conflicting decisions of the courts.
(Van Breda, para.105-111; Haaretz.com, para.52-95)
[74] Most of the factors mandated under the forum non conveniens analysis are neutral as between Ontario and Florida. However, the desirability of avoiding a multiplicity of proceedings and the significant risk of inconsistent verdicts in this particular case tip the scales in favour of Florida as “a clearly more appropriate forum” to fairly and efficiently deal with this action.
(a) Comparative convenience and expense of the parties:
[75] The plaintiff is a relatively small corporation that does business solely in Canada by licensing and assisting others. The plaintiff has no presence in the state of Florida. The defendants are Florida based. They have very little, if any presence in Ontario. Dr. Colorchip has no offices here and no other ties to Ontario except that: 1) twice or three times [^2], in 6 years, its representative came to Ontario for a meeting, and 2) it ships goods ordered on line to Ontario. The comparative convenience and expense of the litigation for the parties does not, in my view, favor one forum over the other.
(b) Comparative convenience and expense for witnesses:
[76] The plaintiff submits that most of the witnesses are residents of Ontario and/or other provinces. This includes more than twenty sub-licensees and former sub-licensees of the plaintiff, their customers and automotive dealers. In contrast, the only Florida-based witnesses I have been made aware of in this action are McCool, Pardo and McLean.
[77] The fact that some witnesses are in Ontario does not mean that significant additional expense has to be incurred for those witnesses to testify in Florida. No evidence has been presented as to the manner in which evidence can or will be presented. I am not prepared to assume that the only way for these witnesses to testify is to incur the expense of travelling to Florida. The current global shut down due to the COVID-19 pandemic has shown that new technologies can be adopted for various court operations. Witnesses may testify remotely or by video. I cannot find that the comparative convenience and expense to the witnesses’ favours one jurisdiction over the other.
(c) Loss of Legitimate Juridical Advantage:
[78] Neither party has presented any evidence that establishes that there would be any loss of legitimate juridical advantage as a result of proceeding in one forum or the other.
(d) Fairness:
[79] The comparative fairness of the procedures do not tip the scales in favour of one forum or the other.
(e) Enforcement:
[80] The plaintiff submits that enforcement considerations favour Ontario, as it may seek injunctive relief which would have to be enforced in Ontario. However, no injunctive relief has been pled. Dr. Colorchip’s assets are in Florida. If the plaintiff is ultimately successful, any order against Dr. Colorchip would need to be enforced by the Florida courts. Therefore, considerations about enforcement do not tip in favour of one forum or the other.
(f) Applicable Laws:
[81] Usually, applicable law depends on where the tort occurred or the contract was formed. This action includes allegations of torts that exist under the common law in Ontario and Canada that were committed in Ontario. Those torts may exist and have occurred separate and apart from the contractual breaches. Those tort claims are subject to the common law of Ontario. The action further includes allegations that the defendants violated the Competition Act. This is clearly a Canadian law and the claim in this regard must be addressed under Canadian law.
[82] At the same time, I have found that the contracts in this case were formed in Florida. The NDA contains a clause that the applicable law is that of Florida. The licensing agreements of 2014 and 2016 are silent on this issue, but they were formed in Florida. Therefore, the laws of Florida would govern the claims of breach of contract.
[83] As a result, I do not think this factor tips the scales of convenience in favour of one forum or the other. In any event, the courts routinely determine claims like this with the benefit of appropriate evidence about the law to be applied.
(g) Avoidance of multiplicity of proceedings:
[84] In my view, the need to avoid of a multiplicity of proceedings and inconsistent verdicts is determinative of the forum non conveniens analysis. The Courts of Justice Act, R.S.O. 1990, c. C.43 provides, in section 138, that “[a]s far as possible, multiplicity of legal proceedings shall be avoided”.
[85] There are multiple proceedings in this matter with the same factual underlying dispute.
[86] As I have already set out, there is a Federal Court Action and a Florida State Action pending in Florida. The allegations in those two actions are identical to each other. There is also a common set of facts underlying those actions and the Ontario action.
[87] In the end, the court hearing any one of these actions must determine a common question: did McLean and the plaintiff wrong the defendants or did the defendants wrong McLean and the plaintiff? McCool alleges that McLean improperly started up a competitor for Dr. Colorchip’s business, and that the plaintiff fell in with McLean. The plaintiff improperly stopped paying royalties to Dr. Colorchip, and stopped buying its products. Instead, the plaintiff started selling Touchup RX USA or other unbranded products to Dr. Colorchip’s sub-licensee’s in Canada. The plaintiff does not deny these allegations. Rather, it takes the position that it was permitted to do so. The plaintiff claims that Dr. Colorchip was the one that breached the agreements and committed torts against it. The determination of the same factual questions crosses all three actions.
[88] If multiple proceedings were permitted to proceed, there is a very real risk of inconsistent verdicts. One court may render its decision based on one set of findings of fact, while another court may render a different verdict based on a different set of findings of fact. The parties will have been put through the expense of prosecuting and defending at least two proceedings, but in the end neither will have achieved a final resolution to the dispute. It would be fundamentally unfair to all of the parties for these proceedings to be conducted in different courts.
[89] Avoidance of multiplicity of proceeding and the risk of inconsistent verdicts weighs heavily in favour of having this action proceed in same jurisdiction. It would be unfair to the defendants to defend this action in Ontario when they are already prosecuting two actions in Florida with the same underlying allegations. It is fairer and more efficient for this action to proceed in Florida.
[90] I am satisfied by the defendants that Florida is clearly a more appropriate forum to hear this action. Whether the action should proceed at the Florida state or U.S. Federal level must be decided by those courts in accordance with the laws and rules of those jurisdictions.
CONCLUSIONS
[91] I conclude that the Ontario Superior Court of Justice has jurisdiction simpliciter over the plaintiff’s claims. Having weighed and considered the various factors under the forum non conveniens doctrine, I am satisfied that Florida is clearly the better forum for resolving this dispute and that this court should decline to exercise that jurisdiction.
[92] The defendants’ motion to stay the proceedings is therefore granted.
[93] Rule 59.01 of the Rules of Civil Procedure provide that this Order is in effect from the date it is made, that date being the date such order is made by the judge whether such Order is contained in a signed endorsement, order or judgment.
COSTS OF THIS ACTION
[94] The parties are encouraged to agree upon appropriate costs for this action. If the parties are not able to agree on costs, they may make brief written submissions to me (maximum two pages double-spaced, plus a bill of costs). The defendants may have 14 days from the release of this decision to provide its submissions, with a copy to the plaintiff; the plaintiff shall have a further 14 days to respond; and the defendants shall have a further 7 days for a reply, if any.
[95] If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as between themselves.
[96] If I have not received response or reply submissions within the specified timelines after the defendants’ initial submission, I will consider that the parties do not wish to make any further submissions and I will decide on the basis of the material that I have received.
(“ Original signed by”)
Chozik J. Date: May 15, 2020
COURT FILE NO.: CV-19-00002374 DATE: 2020 05 15 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: Touchup RX Canada Inc., Plaintiff/Responding Party – and – Dr. Colorchip, Corp. and Anthony Pando Defendant/Moving Parties ruling on motion to stay a proceeding Chozik J. Released: May 15, 2020