Teti v. Mueller Water Products Inc., 2015 ONSC 2670

COURT FILE NO.: CV-13-489853

ENDORSEMENT RELEASED: May 4, 2015

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: ROBERT TETI and ITET CORPORATION v. MUELLER WATER PRODUCTS INC., MUELLER CO., MUELLER CANADA LTD., and MUELLER INTERNATIONAL, LLC.

BEFORE: Master R. Dash

COUNSEL: Joseph Etigson and Paul Lomic, for the plaintiffs

Kenneth D. Hanna, for the defendants

COSTS ENDORSEMENT

[1] This endorsement concerns the costs of two motions in this action. The motion by the defendants for a protective order (“PO”) was heard and determined on February 2, 2015 with reasons released February 4, 2015. The plaintiffs’ motion for a discovery plan (“DP”), a further and better affidavit of documents and case management was heard on April 8, 2015 with decision released April 9, 2015. The defendants seek costs of both motions.

The Motion for a Protective Order

[2] The defendants were entirely successful on their motion for a PO. The court granted the PO sought by the defendants. The motion was necessary because the plaintiffs consented to the order and then withdrew their consent with no evidence to justify the withdrawal. The defendants are entitled to their costs on a partial indemnity scale.

[3] The plaintiffs’ approach to the motion caused unnecessary complexity and drove up the costs of the motion. The plaintiffs opposed the granting of a PO that contained a provision for the designation of documents as highly confidential information (“HCI”) which would have been for counsel’s and expert’s eyes only, notwithstanding their earlier consent to exactly such a provision. They further opposed the appropriateness of the specific HCI designations. The PO itself contained within its provisions a mechanism for contesting the HCI designations. The motion before me was and should have been simply to provide for a PO that contained such mechanism.

[4] A motion to determine whether there were grounds for the plaintiffs to withdraw their consent would have been a simple motion with a minimal amount of evidence and case law required. Because the plaintiffs treated the motion as one to determine whether a PO with a HCI provision was appropriate and whether the specific HCI designations were appropriate, the defendants were required to put in substantial evidence and both parties put in case law on when a PO should be permitted with counsel eyes only provisions, including competing principles of fair trial and protection of trade secrets. This involved a complex weighing of factors that defendants’ counsel was required to address because it was raised by the plaintiffs. Had this proceeded on consent, the defendants would have had to put in some minimal evidence in any event to keep documents from the public record because of the open court principle, but it would have been unnecessary to put in evidence respecting keeping documents from the opposite party because they had a consent to that effect.

[5] It was also necessary for the defendants to prepare for and attend on the cross-examination of their affiant, Mr. Cullinan, which added to the costs of the motion.

[6] The motion was of great importance to the defendants since they disclosed and produced HCI documents, including confidential research and development documents leading to the creation of their 420RDM system, to plaintiffs’ counsel pursuant to the PO to which the plaintiffs had consented. Under the PO counsel were prohibited from disclosing the HCI documents to their clients and the plaintiffs now sought to withdraw that consent. While I appreciate that the plaintiffs claim that the plaintiff Teti must see the documents in order to determine if the defendants had inappropriately used the plaintiffs’ own technology to develop the 420RDM and thus in order to instruct counsel, this was not the appropriate motion to raise those concerns.

[7] Because of the plaintiffs’ actions, the defendants have had to prepare two motions for the PO, one as a consent motion, the other as an opposed motion after the plaintiffs purported to withdraw their consent thereby lengthening the proceeding. It is appropriate to award costs for both motions for the PO.

[8] The defendants claim that actual costs of $50,595, inclusive of HST and disbursements were incurred on the motion for a PO and seek costs on a partial indemnity scale in the amount of $27,621 all inclusive. Four lawyers worked on this motion for the defendants as well as a law clerk. I find the partial indemnity rate for each lawyer and clerk to be appropriate and appreciate why, given the complexity caused by the plaintiffs, the number of hours claimed were necessary. However, in my view there had to have been some duplication, particularly in the preparation of the motion record and factum as two lawyers worked on preparation for the consent motion and four lawyers on the opposed motion (including the original two).

[9] While I commend the Cadillac treatment provided to the defendants by their lawyers, the decision to use the services of four lawyers on the motion should not be on the backs of the plaintiffs, particularly on a partial indemnity scale. The awarding of costs is not designed to indemnify the winning party as to its costs incurred, although indemnity is one of the factors to consider. The appropriate determination of costs is to consider all relevant factors, including those set out in rule 57.01(1) and award costs that are fair and reasonable and within the reasonable expectations of the losing party.

[10] In my view fair and reasonable costs to be awarded to the defendants on the motion for the PO is the sum of $19,500 all-inclusive payable within 30 days. While the plaintiffs have not disclosed their own time, including the time of two senior lawyers, on this file, I am of the view that an award in the above amount would not have been beyond their reasonable expectations.

[11] While I have some concern that the breakdown of counsel’s time prior to February 2, 2015 may not have been allocated with exactitude as between the two motions, I am satisfied that the quantum of costs that I have determined to be fair and reasonable on the motion for the PO on a partial indemnity scale adequately accommodates any minor discrepancies.

The Motion for a Discovery Plan, a Further and Better Affidavit of Documents and Case Management

[12] The defendants indicate that they incurred actual costs of $35,208 on the plaintiffs’ motion for a DP, a further and better affidavit of documents and case management and seek costs on a partial indemnity scale of $18,472. In my view, however, there was mixed success on this motion.

[13] I refused to order a DP at this time without prejudice to move again. I held that a court ordered DP with specific terms as to production and discovery as sought by the plaintiffs was premature because (a) there were pending motions that might reduce the numbers of parties (a summary judgment motion by some defendant corporations) and affect whether the defendants may be required to produce a certain person as their discovery witness (a motion to amend the statement of defence); (b) certain contested Rule 31 and 30 issues must first be resolved by motion and a contested DP motion was not the appropriate forum to determine names of discovery witnesses, documents sought from non-parties, length of examination and order of examination; and (c) the parties had not yet exhausted all efforts to come to an agreement themselves on terms for a DP without requiring court intervention. I chastised both parties for not agreeing to a DP that would have at least set out those matters upon which they could agree and leave outstanding issues respecting document and discovery issues to Rule 30 and 31 motions. I set out terms to facilitate the resolution of the DP and permitted the motion to be brought back on if deadlock continues.

[14] I did make orders sought by the plaintiffs that would advance the litigation. One such order required the defendants to ask the inventors of the 420RDM, who were clearly non-parties to this litigation, to preserve and produce documents related to the creation of the 420RDM. If the inventors refuse, that sets a framework for a rule 30.10 motion. Although the defendants did not object to asking the inventors, neither did they offer to consent to such relief as a term of the order. They were of the view that elements of the DP not be determined piecemeal.

[15] The defendants strongly oppose producing Cullinan as their discovery witness as he is employed by a related company who is not a named defendant. While no order was made at this time in the absence of a full evidentiary record on the issue, I did comment that Cullinan is the person with the most knowledge on the key issue of independent creation and that “it would behoove the defendants to...facilitate rather than obstruct Cullinan’s discovery.”

[16] I also made a preservation order now rather than awaiting final determination of a DP. Again, the defendants did not object to a preservation order in the DP, but did not consent to a standalone order at this time. The preservation order included preservation of documents by certain companies related to the defendants who were not named as defendants, as well as former employees, as sought by the plaintiffs.

[17] The plaintiffs sought a privilege log in Schedule B of the defendants’ affidavit of documents but when the defendants swore, in response to this motion, that no relevant privileged documents exist, the issue became moot. The plaintiffs sought to quash a notice of examination for the discovery of Mr. Teti, improperly served by the defendants while this motion was outstanding; however that motion too became moot when the defendants agreed it was improper and undertook not to seek or rely upon any certificate of non-attendance.

[18] Finally, the plaintiffs’ motion for case management was successful. The defendants argued that the action would already be managed by a judge as set out in the order of Spence J., but it was clear, and I so ruled, that Justice Spence was referring to case management only of the defendants’ summary judgment motion.

[19] I agree with the plaintiffs that costs of this motion be in the cause.

ORDER

[20] I hereby order as follows:

(1) The plaintiffs shall pay to the defendants their costs of the defendants’ motion for a protective order within 30 days fixed in the sum of $19,500.

(2) Costs of the plaintiffs’ motion for a discovery plan, a further and better affidavit of documents and case management shall be in the cause.

Master R. Dash

DATE: May 4, 2015