Court File and Parties

COURT FILE NO.: CV-16-545443 DATE: 20161011

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

McMILLAN McGEE CORP. Plaintiff – and – NORTHROP GRUMMAN CANADA (2004) INC., NORTHROP GRUMMAN CORPORATION and NORTHROP GRUMMAN SYSTEMS CORPORATION Defendants

Counsel: Shannon Kelley and Kevin Richard, for the Plaintiff James M. Wishart, for the Defendants

HEARD: September 28, 2016

M.D. FAIETA, j

Reasons for Decision

INTRODUCTION

[1] The Plaintiff brings this action against the Defendants seeking damages of about $2.4 million (U.S.) for unpaid invoices in relation to an environmental remediation project that it undertook on land in Brantford, Ontario (“Remediation Project”), which was formerly owned by a subsidiary of the Defendant Northrop Grumman Corporation (“Northrop”).

[2] The Defendants bring this motion under Rule 21.01(3)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, for an order: (1) to stay or dismiss this action on the grounds that this court has no jurisdiction over the subject matter of the action; and (2) to stay this action in favour of the state or federal courts of California in accordance with a forum selection clause agreed to by the parties.

[3] For the reasons described below, I have dismissed the Defendants’ motion.

BACKGROUND

[4] The Defendants Northrop Grumman Canada (2004) Inc. (“Northrop Canada”) and Northrop Grumman Systems Corporation (“Northrop Systems”) are subsidiaries of Northrop. Northrop is a global security company. At the time the contracts in question were issued, Northrop and Northrop Systems were incorporated in the United States of America and had their headquarters in Los Angeles, California. Northrop Canada is a Canadian corporation whose registered address is in Nova Scotia. Northrop owns land and has operations in many jurisdictions in North America and elsewhere.

[5] Evidence pertinent to the question of a court’s jurisdiction is admissible on a motion under Rule 21.01(3)(a): see Goudie v. Ottawa (City), 2003 SCC 14, [2003] 1 S.C.R. 141, at para. 32. Two affidavits were filed on this motion. The Defendants rely upon the affidavit of Matt Takiguchi, sworn May 17, 2016. The Plaintiff relies upon the affidavit of Brent Winder, sworn June 3, 2016.

[6] Takiguchi is a subcontract administrator and was responsible for overseeing the competitive request for proposals for the Brantford remediation project at issue in this proceeding and for dealing with certain administrative matters that arose during the course of that project.

Procurement of Remediation Services

[7] On April 5, 2010, Takiguchi distributed an email for the Remediation Project to Brent Winder, Vice-President, McMillan McGee Corp., whose headquarters are in Calgary, as well as three other companies located in the United States of America. The email states:

Per our phone conversations last Thursday, attached are the documents related to a new competitive RFP for a Thermal Heating Solution to treat impacted soil located at the former Kester-Brantford facility, located @ 68 Prince Charles Rd in Brantford, Ontario, Canada. The documents are as follows:

1. Statement to Bidders – This document summarizes and outlines this competitive RFP.
2. Request for Proposal – Due to the multiple number of bidders, the Bidder name, address and contact name was left blank. Please complete this portion of the RFP, sign at the bottom of page 1 and return along with your proposal and Exhibit B.
3. Exhibit A – Terms and Conditions: CT-6 (Commercial Fixed Price – Services) and the Environmental Remediation Services Addendum
4. Exhibit B – Scope of Work
5. Exhibit C – Bid Form/Form of Proposal
6. Exhibit D – Background Site Information …

As stated in the Statement to Bidders, there is a mandatory pre-proposal site walk scheduled for Wednesday, April 14, 2010. … The due date for the submittal of questions is Monday, April 19, 2010 and the bid due date is Friday, April 30, 2010. …

For any questions, please feel free to call me anytime.

Thank you,

Matt Takiguchi Northrop Grumman Corporation Corporate Office Procurement 222 West 6th Street San Pedro, CA 90731 Office: 310-[redacted]

[8] The Statement to Bidders is a letter dated April 5, 2010 from Northrop. It states:

… The Terms and Conditions for this work are provided in Exhibit A. If the Proposer wishes to amend or provide any alternative Terms and Conditions, the amendments or additions shall be submitted on a separate sheet as “proposed” along with the completed proposal package. …

It is the responsibility of each Proposer before submitting a proposal to:

i. Examine thoroughly the Contract Documents in Exhibit A and all other RFP Documents…

[9] Exhibit A is entitled “CT-6 Northrop Grumman Corporation – Purchase Order Terms and Conditions Commercial Fixed-Price – Services” (“CT-6”).

Forum Selection Clause

[10] Paragraph 13 of the CT-6 contains the following dispute resolution provision (“FSC”):

A. Any dispute that may arise under or in connection with this Order with respect to the rights, duties, or obligations of the Parties shall be submitted in writing for resolution to ascending levels of management of the respective Parties up to the Senior Executive of the Materiel [sic] or Procurement organization placing the Order, and Seller’s equivalent executive level.

B. If a dispute cannot be resolved to both Parties’ mutual satisfaction, after good faith negotiations, within ninety (90) calendar days from the date the written claim is received by the other Party, or such additional time as the Parties agree upon, in writing, either Party may only bring suit in federal or state court in the state from which this Order is issued. [Emphasis added.]

[11] Paragraph 1 of CT-6 defines “Order” as follows:

ORDER means the instrument of contracting including this Purchase Order and all referenced documents.

[12] CT-6, at paragraph 29, contains the following choice of law provision:

Both Parties agree that, irrespective of the place of performance of this Order, this Order will be construed and interpreted according to the law of the state from which this Order is issued, as identified in the Order, excepting that state’s laws on conflicts of laws. [Emphasis added.]

[13] The Plaintiff submitted a number of requests for clarification; however, it did not seek clarification of CT-6.

[14] Winder, on behalf of the Plaintiff, delivered a bid by email dated April 30, 2010, to Takiguchi, on behalf of Northrop.

[15] By email dated June 9, 2010, Takiguchi advised Winder that Northrop had selected the Plaintiff for the Remediation Project.

Purchase Orders

[16] By email dated July 22, 2010, Takiguchi sent the following email to Winder:

Attached is the new PO 2747852 which covers the cost of the referenced work at the Kester Brantford site in Ontario, Canada. Please note the invoicing instructions listed on page 2. Also, when you have a chance, please sign the last page of the PO and return to me via email or fax.…

[17] Purchase Order 2747852 is dated July 22, 2010, and is signed by Takiguchi (“First PO”). CT-6 is referenced and incorporated into the First PO. However, it does not expressly identify the state from which it this First PO is “issued.” That said, on page 1, it provides the following information:

Buyer Information

Buyer Matthew Takiguchi Phone 310-[redacted] EMAIL Address [redacted] Buyer Address Northrop – ISS ISS-El Segundo, California One Hornet Way El Segundo CA 90245-2804 USA

Billing Address Northrop Grumman Systems Corp. Attention: Accounts Payable 8710 Freeport Parkway, Suite 200 Irving, TX 75063-2577

[18] The Plaintiff returned a signed copy of the First PO on July 22, 2010 by email.

[19] Two purchase orders (“Second PO” and “Third PO”), and many change orders, were subsequently delivered by Northrop.

[20] Using the evidence of both affiants, a list of the various purchase orders, change orders to those purchase orders, invoices and invoice payments is attached as Schedule “A.”

[21] Schedule “A” shows that $4,633,866.55 has been invoiced by the Plaintiff and that the Defendants have paid $2,168,281.04. All of the unpaid invoices arise after the delivery of the Second PO.

[22] Takiguchi states that the Second PO incorporated and replaced the First PO following Northrop’s change to a new internal contract management system. The Second PO states that it was issued “as a replacement” to the First PO and “cover[s] the cost of Soil Heating Remediation Services at the former Kester Brantford facility…” It does not incorporate or mention CT-6. Instead, it provides that the terms and conditions of “T-6 Commercial Fixed Price – Services (R-1-11)” (“T-6”) are incorporated by reference. Similarly, the Third PO incorporates “PSS/T-6 Commercial Fixed Price – Services” by reference rather than CT-6. However, a copy of T-6 and PSS/T-6 was not filed in evidence.

ANALYSIS

[23] There are two issues to be addressed on a motion to challenge the court’s jurisdiction over the parties to an action:

(1) Does the Ontario court have jurisdiction over the subject-matter of this action? (2) If so, should the Ontario court take jurisdiction?

[24] The first issue is resolved by asking whether the subject-matter of the action has a “real and substantial connection” to Ontario: see Lapointe Rosenstein Marchand Melançon LLP v. Cassels Brock & Blackwell LLP, 2016 SCC 30, at paras. 25-36. At the hearing of this motion, Northrop conceded that this court has jurisdiction over the subject-matter of this action. However, it submits that this court should decline to take jurisdiction on the basis that an FSC provides exclusive jurisdiction over this action to the courts of the State of California.

[25] The second issue usually turns on a forum conveniens analysis. However, a different analysis applies when a party seeks to rely on an FSC that is valid, clear and enforceable and applies to the subject-matter of the litigation that the plaintiff seeks to bring in Ontario: see Douez v. Facebook, Inc., 2015 BCCA 279, at para. 11; 2249659 Ontario Ltd. v. Sparkasse Siegen, 2013 ONCA 354, at para. 41. In such cases, the forum selection clause chosen by the parties will govern unless the plaintiff shows “strong cause” for litigating in a forum other than the forum agreed upon: see Momentous.ca Corp. v. Canadian American Association of Professional Baseball Ltd., 2012 SCC 9, at para. 9. There are few exceptional circumstances which would direct that an FSC not be enforced. Such circumstances include a contract that is brought about by fraud or where the court in the forum named in the clause has declined jurisdiction: see Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27, at para. 19; Expedition Helicopters Inc. v. Honeywell Inc., 2010 ONCA 351, at para. 24.

[26] Applying the above principles, I am not satisfied that that the FSC relied upon by the Plaintiff governs the subject-matter of this litigation for the following reasons.

[27] First, and most importantly, I am not satisfied that the FSC is a term of the contract between the parties. The Statement of Claim advances a claim for breach of contract, which it alleges encompasses not only for First PO, but also the Second PO and the Third PO (see paragraphs 12, 16 and 18), as well as negligent misrepresentation and unjust enrichment. Although the First PO contained the FSC, by incorporating CT-6, the Defendants admit that the First PO has been incorporated and replaced by a new set of standard terms. There is no evidence that this or any FSC is present or incorporated by reference in the Second or Third POs. This is especially significant because the Plaintiff’s claim for unpaid services, as shown in Schedule “A,” arises after the First PO.

[28] Second, even if the FSC were present in all three purchase orders, the language of the FSC, when viewed in the context of the purchase orders, is unclear in establishing California as the exclusive forum for dispute resolution. The FSC does not reflect an intention of the parties to choose California or any a particular state as the exclusive forum, but rather essentially provides Northrop with an option to choose the forum as it controls the location of the issue of each purchase order. If the intention was to establish California as the exclusive forum for resolving disputes under the three purchase orders, then the purchase orders could have clearly identified California as place of issue of the purchase order as contemplated by paragraph 29 of CT-6. Alternatively, the FSC could have stated that California is the exclusive forum for resolving disputes. Neither approach was used.

[29] Third, even if the FSC was found to be a term of the Second and Third POs, I am not satisfied that the three purchase orders were issued in California. The definition of the verb “issue” in The Oxford English Dictionary, 2d ed (Oxford: Clarendon Press, 1991), which most closely relates to this matter is “to give or send out authoritatively or officially.” There is nothing on the face of the three purchase orders that identifies from which state they were issued, as contemplated by paragraph 29 of the CT-6. There is no evidence that the covering email, delivered with each of the three purchase orders, expressly identified the state from which each purchase order was issued. There is one covering email in evidence and that is in respect of the First PO. As noted, it states that the email is from Takiguchi and provides his address in California. I am not prepared to infer that this email was sent from California given that Takiguchi could have easily, but has not, provided sworn evidence that directly and explicitly states that he sent the three purchase orders by email to the Plaintiff while he was in California.

[30] Given my conclusions, there is no need to assess whether there is “strong cause” for this court to decline to enforce the FSC. Further, no submissions were provided, in the alternative, in respect of the forum conveniens test.

CONCLUSIONS

[31] I dismiss the Defendants’ motion to stay this action.

[32] Based on the agreement of the parties, I order that costs in the amount of $13,000.00, inclusive of disbursements and taxes, shall be paid by Defendants to the Plaintiff in respect of this motion.

Mr. Justice M. D. Faieta Released: October 11, 2016

SCHEDULE “A”

Date	Purchase Order Number	Invoice Number	Invoice Total	Amount Paid
July 22, 2010	PO 2747852 (First PO)
September 21, 2010	Change Order to the First PO
October 21, 2010		Kester-001	$47,145.07	$93,502.07
November 10, 2010		Kester-002	$630,476.00	$630,476.00
September 1, 2011	PO 4800007609 (Second PO). Incorporated and replaced the First PO.
November 2, 2011		Kester-003	$387,315.30	$387,315.30
November 30, 2011		Kester-004	$211,444.75	$211,444.75
June 14, 2012		Kester-005	$143,377.79	$143,377.79
September 14, 2012		Kester-006	$90,075.86	$90,075.86
October 1, 2012		Kester-007	$49,169.58	$49,169.58
October 2, 2012	Change Order to the Second PO
November 1, 2012		Kester-008	$75,818.35
November 27, 2012	Change Order to the Second PO
December 1, 2012		Kester-009	$73,372.60	$73,372.60
December 30, 2012		Kester-010	$73,038.76	$73,038.76
March 28, 2013	Change Order to the Second PO
March 31, 2012		Kester-011	$213,732.08	$213,732.09
April 30, 2013		Kester-012	$70,443.87	$70,443.87
September 30, 2013		Kester-013	$16,814.57	$16,814.57
October 31, 2013		Kester-014	$105,793.99
November 5, 2013	Change Order to the Second PO
January 31, 2014		Kester-015	$285,643.77
February 21, 2014	PO 4800024004 (Third PO)
February 28, 2014		Kester-016	$105,793.99
March 27, 2014	Change Order to the Third PO
June 8, 2014	Change Order to the Third PO
August 6, 2014	Change Order to the Third PO
October 16, 2014	Change Order to the Third PO
November 26, 2014		Kester-017	$115,517.80	$115,517.80
January 6, 2015	Change Order to the Third PO
July 7, 2015	Change Order to the Third PO
November 19, 2015		Kester-018	$1,949,491.82