Michael Zigomanis v. 2156775 Ontario Inc. (D’Angelo Brands), 2016 ONSC 7053

CITATION: zigomanis v. 2156775 Ontario Inc. (D’Angelo Brands), 2016 ONSC 7053

COURT FILE NO.: CV-13-477038

DATE: 20161114

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

MICHAEL ZIGOMANIS

Plaintiff/Defendant by Counterclaim

– and –

2156775 ONTARIO INC. o/a D’ANGELO BRANDS

Defendant/Plaintiff by Counterclaim

David A. Whitten, for the Plaintiff

Gregory N. Hemsworth, for the Defendant

HEARD at Toronto: September 21, 22 and 23, 2106

REASONS FOR JUDGMENT

Stinson J.

[1] This is a contract case. The plaintiff, Mike Zigomanis, is a professional hockey player. In May 2011 he signed a promotional contract with the defendant, D'Angelo Brands, in connection with the marketing and promotion of an energy drink brand known as Cheetah Power Surge. The contract had a two-year term and was renewable for a further two years at the option of Mr. Zigomanis.

[2] In February 2012 the defendant terminated the contract, citing two reasons:

a) Mr. Zigomanis had been demoted to a minor league team, causing a loss of cachet for Cheetah Power Surge; and

b) Mr. Zigomanis had been the subject of major media coverage arising from a so-called “nude photo scandal”, which did not shed good light on the product.

[3] In this lawsuit Mr. Zigomanis asserts that the defendant wrongfully terminated their contract. He sues for the unpaid balance of the income he would have received over the remainder of the contract term and the renewal, totaling $162,500. The defendant maintains that it had cause to terminate. Initially it counterclaimed for the payments it made under the contract, totaling $37,500, but during argument at trial it abandoned its counterclaim.

Facts

[4] The factual situation giving rise to this lawsuit is relatively straight-forward. During the 2010 – 2011 hockey season, Mr. Zigomanis was under contract with Maple Leaf Sports and Entertainment. MLSE owns the Toronto Maple Leafs hockey team that competes in the National Hockey League and its “farm team” affiliate, the Toronto Marlies, which competes in the American Hockey League. Mr. Zigomanis’s contract with MLSE was a so-called “two way” contract that permitted MLSE to assign him to play for either team. Mr. Zigomanis played for the Leafs during the first 10 games of the 2010 – 2011 NHL season. At the end of October 2010, he was "sent down" to the Marlies. He played with that team for the balance of the 2010 – 2011 season. He never again played for the Leafs.

[5] In May 2011, Mr. Zigomanis met Frank D'Angelo, in connection an appearance by Mr. Zigomanis on Mr. D'Angelo's television talk-show. Mr. D'Angelo is a businessman, entrepreneur, entertainer and the president and controlling mind of the defendant. Among other products, the defendant produces and markets Cheetah brand energy drinks. Another professional hockey player, Luca Caputi, also appeared on the show at that time. Like Mr. Zigomanis, Mr. Caputi had a two way contract with MLSE and had been sent down to the Marlies in November 2010, and never played again for the Leafs.

[6] Mr. D'Angelo decided to invite Mr. Zigomanis and Mr. Caputi to become involved in promoting a new variety of Cheetah Power Surge energy drink. In particular, he wanted to involve them in helping to produce a television commercial for Cheetah in which the three would appear playing hockey. The commercial was filmed on May 14, 2011 and was aired on television for many months afterwards to promote the defendant’s product.

The contract

[7] In advance of the filming of the commercial, a form of Talent Services Agreement was prepared. Both athletes signed identical contracts before the television commercial was filmed.

[8] Under the terms of the contract, each athlete agreed that he would, in each calendar year, participate in one production session on a mutually agreeable date, and two personal appearances on mutually agreeable dates. He also agreed that he would autograph 50 items to be used for the defendant’s promotional or charitable purposes. For the rights granted and the other obligations undertaken, the defendant agreed to pay each athlete a minimum guaranteed royalty of $12,500 each on June 1, September 1, December 1 and March 1 of each contract year, for a total of $50,000 per year. (The contract also provided for higher royalties, but they never were triggered.) The athlete also agreed not to sign a personal services agreement with any other company allowing for the use of his likeness for the promotion of any other energy drinks.

[9] The contract had a two year term, from June 1, 2011 to May 31, 2013 and was renewable at the sole option of the athlete for a second two year term, ending May 31, 2015.

[10] The contract contained a termination clause in favour of the defendant which included the following terms:

10 (b) COMPANY shall be entitled to terminate this Agreement by delivery of a notice to ATHLETE declaring such termination, upon the occurrence of the following:

i)ATHLETE breaches or fails to observe or perform, in a material respect, any of his obligations, covenants or responsibilities under this Agreement, unless within thirty (30) days after notice from COMPANY specifying the nature of such breach or failure, ATHLETE cures such breach or failure;

ii) ATHLETE makes any disparaging or harmful remarks about COMPANY in public;

iii) ATHLETE commits any act which shocks, insults, or offends the community, or which has the effect of ridiculing public morals and decency;

iv) ATHLETE is convicted of a crime involving moral turpitude, or acknowledges, or is convicted of, illicit drug use;

v) ATHLETE dies.

[11] The contract made no mention of any requirement for either athlete to be playing for the Toronto Maple Leafs or any other hockey team. It contained no other material warranties or representations by the athlete. In addition, it contained a so-called “entire agreement clause" in the following terms:

This agreement constitutes the entire agreement between the parties and supersedes any prior written or oral agreement, proposal, representation or negotiation between the parties relating to the subject matter hereof.

[12] Subsequent to the filming of the television commercial, Mr. Zigomanis and Mr. Caputi were asked to travel to the city of Boston to participate in a D'Angelo Brands promotional event. The defendant had conducted a promotional contest offering as prizes a trip to a hockey playoff game of the winner's choice, complete with airfare, food and accommodation, and tickets to the game for the winner and a companion.

[13] Mr. Zigomanis travelled to Boston with Mr. Caputi and the rest of the D'Angelo group. There is some controversy on the evidence about the extent of participation by Mr. Zigomanis in the various aspects of this trip and his interaction with the prize winners. I will return to this subject in due course.

[14] As events unfolded, the Boston trip was the last promotional activity for the defendant in which Mr. Zigomanis participated. He was asked to attend an autograph session at an HMV record store in Woodbridge; according to him, he never agreed to do so; the defendant asserts that Mr. Zigomanis cancelled after he had agreed to attend. Mr. Zigomanis subsequently arranged to meet Mr. D'Angelo in person to discuss matters, but Mr. D'Angelo cancelled the meeting. It was never rescheduled. The two never communicated directly again.

[15] According to other witnesses called by the defendant, Mr. Zigomanis was asked to participate in two other promotional events, but he did not do so. According to them, he did not respond to their subsequent efforts to contact him. Mr. Zigomanis asserts he was never contacted and asked to participate. There is no record of any written communication passing between the parties between June 29, 2011 and the termination letter in February 2012. According to the defendant’s evidence, it upgraded its computer server at some time after the events in question, and in so doing lost a large number of emails, which may explain the lack of any record of communications between the parties. The defendant concedes, however, that it never sent Mr. Zigomanis any notice under clause 10(b)(i) of the contract warning him that he was in material breach of his obligations and giving him 30 days to cure his default.

[16] Pursuant to the contract, the defendant paid the plaintiff quarterly installments of $12,500, the first soon after the contract was signed, the second in the fall of 2011 and the third on January 10, 2012. The third installment was paid subsequent to the date upon which the defendant became aware of the media coverage concerning the nude photos of the plaintiff that were allegedly circulating on the Internet (as discussed below).

The photographs

[17] As I have mentioned, one of the grounds relied upon by the defendant in support of its termination of the contract with Mr. Zigomanis was the existence and circulation on the Internet of two nude photographs of him. Neither of the photographs shows the face of the subject; one shows his bare buttocks and the other shows his genitalia. At trial, Mr. Zigomanis testified that he took the photographs of himself and sent them electronically to his then-girlfriend around the end of 2010 or the beginning of 2011, well prior to the date he signed the contract with the defendant. There was no evidence or suggestion that the recipient of the photos was offended or upset, or that they were intended and received as anything other than an intimate communication between two consenting adults.

[18] At some unknown date, an unknown individual posted the photographs on a publicly accessible site on the Internet. Mr. Zigomanis testified that he was not aware of this fact when he signed the contract. There is no evidence that Mr. Zigomanis had anything to do with posting the photographs, other than having taken them and sent them to his girlfriend. According to him, he first became aware of the Internet posting of the photographs around the end of October or early November 2011, when a teammate told him.

[19] Mr. Zigomanis testified that, when he learned of the photographs on the Internet he retained a lawyer who tried without success to have them removed. In December 2011 the existence of the photographs became broadly known and several stories about them appeared in the media. Mr. Zigomanis was asked by his coach on the Marlies hockey team whether the photographs were of him. He falsely responded they were not. He claims he made that statement on the advice of his lawyer. The false denial was repeated by various representatives of the Marlies’ and Leafs’ organization in response to media inquiries. Although media attention to the story subsided after December 2011, it is unclear whether the photographs were ever removed from the Internet. Mr. Zigomanis never spoke to the media or to the defendant about the photos. None of the media stories mentioned his connection with the defendant or its products.

The termination letter

[20] Mr. D’Angelo learned of the posting of the photos from the media coverage. He spoke with his advertising and marketing advisor, Mike Cecere. He decided he would wait and see how the story unfolded. He ultimately concluded that he would sever relations with Mr. Zigomanis. The television commercial was pulled from the airwaves (where it had been running since it was filmed in May 2011) at the end of January 2012. On February 11, 2012 the defendant sent a letter to the plaintiff's agent terminating the contract. The full text of the letter is as follows:

In regards to the above talent agreement that D'Angelo Brands has signed with Mike Zigomanis to promote its Blueberry Cheetah Power Surge Energy Drink, please let this letter serve as thirty days notice [sic] of termination of our agreement for the following reasons:

When D'Angelo Brands signed the agreement with Mike Zigomanis he was playing for the Toronto Maple Leafs in the NHL. D'Angelo Brands signed the agreement expecting to have the cache of a Toronto Maple Leaf NHL player behind the Blueberry Cheetah Power Surge Energy Drink brand. Since Mike Zigomanis has been demoted to the Toronto Marlies of the AHL, this has caused a loss of cache for the Cheetah Blueberry product. In addition the negative press that came with his demotion has also reflected badly on the product.

Further loss of cache for the brand has also occurred with the Mike Zigomanis nude photos scandal that recently appeared in major media across Canada and still remain splattered over the internet, which do not shed any good light on the product.

Since the signing of the agreement D'Angelo Brands has spent hundreds of thousands of dollars to promote Mike Zigomanis alongside the Blueberry Cheetah Power Surge Energy Drink brand, and the product has not performed at all. Now we have stopped any promotion and marketing of the Cheetah Blueberry brand as it pertains to Mike Zigomanis and have to reassess our strategy.

Termination of our agreement will be effective as of March 12, 2012.

[21] The defendant also terminated Mr. Caputi’s contract on the same date. It sent him an almost identical letter, in which it said it was terminating their contract on the grounds that Mr. Caputi had been traded to an NHL team in the United States “causing a loss of cache and marketing power for the Cheetah Blueberry product in Canada” and further that his demotion to the AHL had “reflected badly on the product.” (Mr. Caputi was not involved with any nude photos.)

[22] On February 22, 2012 Mr. Zigomanis’s agent responded to his termination letter, asserting that the defendant did not have the right to terminate the contract. He pointed out that the contract was not contingent on Mr. Zigomanis playing with the Toronto Maple Leafs and thus this was not a valid reason for terminating the agreement. The response further stated – incorrectly – that the nude photos were not of Mr. Zigomanis and therefore he had not contravened the contract.

[23] There was no subsequent written communication between the parties. This lawsuit followed.

Issues and analysis

Positions of the parties

[24] The plaintiff’s case is straight-forward, and is founded on the contents of the contract. He says he met his obligations as set out in the contract. In any event, he relies on the contract terms relating to a written notice of default, the requirement for a 30-day cure period and the absence of any notice complaining of alleged non-performance of his obligations. In relation to the photographs, he argues that, since he did not post them, he committed no breach of the so-called “morals clause” contained in s. 10(b)(iii). Plaintiff also argues that the defendant waived any right to terminate when it continued to pay him after the “photo scandal” broke.

[25] The defendant no longer relies on the first ground set out in its termination letter, namely that Mr. Zigomanis was not playing for the Leafs before and during the performance of the contract. It does, however, argue that it was entitled to rescind or terminate the contract because (a) Mr. Zigomanis failed to perform his role on the Boston trip, (b) he did not respond to its requests to participate in subsequent events, and (c) the “nude photo scandal” meant that Mr. Zigomanis could not function as a brand ambassador for Cheetah Power Surge energy drink. As a consequence of the foregoing, the defendant submits, Mr. Zigomanis repudiated the agreement. It also argues that the “photo scandal” by itself gave it grounds for termination under the morals clause, s. 10(b)(iii).

Assessment of evidence

[26] While there are some factual conflicts between the two sides regarding some events, in my view those facts are not material for deciding the principal issues in this case. In case another court takes a different view of the issues, however, I propose to comment briefly on the evidence of the witnesses.

The plaintiff

[27] For the most part, the plaintiff's evidence in chief was logical. His explanations for his participation in the Boston trip, the need to rearrange his return trip and his reasons for non-participation in subsequent events made sense. They also coincided with the absence of any written record of communications from the defendant either enlisting his participation or complaining of any non-response. The fact that the defendant paid the fall 2011 instalment due under the contract – at a time when, says the plaintiff, he had been not asked to nor had he failed to attend any promotional events – is consistent with his evidence.

[28] The plaintiff conceded that he lied to his coach regarding the nude photos. His explanation for his lie – that he was advised by his lawyer to do so – is both suspect and problematic. To begin with, from an ethical standpoint, it would be questionable whether a lawyer should be giving such advice to a client, which leads me to question whether such advice was actually given. The lawyer was not called to testify. In any event, assuming his explanation is true, the plaintiff acted on the advice and knowingly made a false statement to his employer.

[29] On cross-examination the plaintiff denied the suggestion that he lied to his employer because he knew it would be damaging to his relationship with the hockey organization. He said he could not recall why he lied, except that that was what his lawyer told him to do. When it was suggested to him that he thought the truth would be damaging, he said he could not recall what he was thinking at the time. He was not prepared to admit the obvious - that if he admitted that the photos were of him, it might somehow be damaging for his career prospects.

[30] This leads me to another aspect of the plaintiff's testimony on cross-examination. When pressed about what he did from time to time and why, he repeatedly stated that he could not remember. He could not remember if he contacted his agent in December 2011 about the media coverage of the photos. He could not remember what he discussed with his agent after the termination letter arrived. He could not remember receiving his agent’s draft response to the termination letter and claimed that he never gave instructions to the agent to repeat the lie that the photographs were not photos of him. This last point is particularly telling. The record includes a copy of an email from the agent to the plaintiff dated February 21, 2012, enclosing a draft of the proposed response and requesting his comments. Despite that document, the plaintiff claimed he did not discuss the draft letter with the agent. The letter was sent out by the agent the next day, containing the incorrect information. He never discussed with the agent the fact that the contents were wrong.

[31] Mr. Zigomanis’s testimony on some issues, however, is not completely unsupported by other evidence. For example, his testimony regarding the interaction with the prizewinners on the Boston trip was consistent with the testimony of one of the prizewinners. She was an independent witness who had no reason to favour one side or the other. This was a very special event for her which would lead to strong memory and clear recollection. A Facebook photograph posted by her at the time shows her, Mr. Zigomanis and Mr. Caputi outside the arena before the game and includes the caption “after having dinner with them.” This document was created long before there was any controversy in this case and is consistent with her evidence that she had dinner with Mr. Zigomanis, as he testified.

The defence evidence

[32] The defendant called Mr. Caputi and Mr. D’Angelo to testify about the Boston trip. Mr. Caputi was an independent witness and much of what he said supported the complaints of Mr. D’Angelo about Mr. Zigomanis not being as actively involved in the events as Mr. D’Angelo wanted. That said, apart from recalling that Mr. Zigomanis was late for dinner, his recollection about that particular aspect of the trip was somewhat vague.

[33] Mr. D’Angelo described the circumstances of deciding to hire Mr. Zigomanis and Mr. Caputi, the signing of their contracts, the making of the commercial and the trip to Boston. He had no contact of significance with Mr. Zigomanis after the Boston trip, and was told by others about their dealings with him. Mr. D’Angelo also testified about his decision to terminate the contract.

[34] Not all of Mr. D’Angelo’s evidence about the Boston trip was consistent with what Mr. Caputi and the contest winner had to say. It was apparent that Mr. D’Angelo was very annoyed by what he perceived as Mr. Zigomanis’s failure to be a hospitable participant; he was particularly upset by a late-night call made by Mr. Zigomanis to Mr. D’Angelo’s assistant, Gemma Runaghan, to re-arrange his flight back to Toronto. His anger was reflected in a somewhat crude email message he sent to Mr. Zigomanis after the trip (which message, I note, purported to characterize the trip as a “good will gesture” to Mr. Zigomanis, despite the fact that Mr. D’Angelo had expected Mr. Zigomanis to help to entertain his contest winners, which corresponds more to a promotional exercise). In response to Mr. D’Angelo’s message, Mr. Zigomanis responded by email in a polite, professional and measured fashion, in an attempt to restore the relationship, with little success. That email made it clear that future communications and arrangements should be made in writing. Mr. D’Angelo acknowledged and agreed with that request.

[35] It is plain that Mr. D’Angelo bore an animus toward Mr. Zigomanis, which no doubt coloured his evidence. While I found fewer flaws in Mr. D’Angelo’s testimony than I did in Mr. Zigomanis’s evidence, I prefer and accept the recollections of the contest winner and Mr. Caputi over those of Mr. D’Angelo about what transpired in Boston.

[36] The other two witnesses called by the defendant were Ms. Runaghan and Mr. Cecere. For the most part, their evidence was internally consistent. I was particularly impressed by Ms. Runaghan’s testimony; she displayed confidence in her answers that reflected good recollection and she was logical in her explanations for the lack of documentation. Some of her answers conflicted with those of Mr. Cecere, but this did not detract from the evidence of either in a material fashion.

Conclusion re assessment of evidence and findings of fact

[37] On the material points of conflict, I prefer the evidence of Ms. Runaghan over that of Mr. Zigomanis that she circulated the details of the arrangements for the Boston trip. This means that Mr. Zigomanis should have known he was expected to be part of a “meet and greet” with the winners before the flight, but he failed to attend. I do find, however, that he was present (albeit possibly late) for the dinner at the hotel, as confirmed by the contest winner.

[38] I also accept the evidence of Ms. Runaghan that she made later attempts to contact Mr. Zigomanis about subsequent appearances. Given the absence of any documents reflecting communications after June 29, 2011, however, I am unable to make any finding regarding the number of attempts made by her or Mr. Cecere to contact Mr. Zigomanis. It remains the case that there is no evidence of any attempts by the defendant to contact Mr. Zigomanis’s agent. Most importantly, and as the defendant conceded, there is no evidence of any notice having been sent to Mr. Zigomanis under s. 10(b)(i) of the contract asserting that he was in material default in his performance of his obligations.

[39] As to the two nude photos, I accept the admission of Mr. Zigomanis that they were photos he took of himself in late 2010 or early 2011 and that he sent them to his girlfriend. I find that he had no involvement in posting them on the Internet.

Legal issues

Was the defendant entitled to rescind the contract?

[40] The defendant argues that Mr. Zigomanis repudiated the contract, and as a result it was entitled to rescind. It complains that Mr. Zigomanis failed to perform his role on the Boston trip, he did not respond to its requests to participate in subsequent events, and the “nude photo scandal” meant that Mr. Zigomanis could not function as a brand ambassador for Cheetah Power Surge energy drink.

[41] For an innocent contracting party to have a right to rescind based on repudiation by the other side, the innocent party must be deprived of substantially all of the benefit it was to receive under the contract. As stated by the Ontario Court of Appeal in Place Concorde East Ltd. Partnership v. Shelter Corp. of Canada Ltd. (2006), 2006 CanLII 16346 (ON CA), 270 D.L.R. (4th) 181 (Ont. C.A.), at para. 51: “A breach that allows the non-repudiating party to elect to put an end to all unperformed obligations of the parties is an exceptional remedy that is available only in circumstances where the entire foundation of the contract has been undermined, that is, where the very thing bargained for has not been provided: [authorities omitted].”

[42] Here, Mr. Zigomanis participated in the filming of the television commercial, which the defendant aired for many months to promote its product. As well, Mr. Zigomanis travelled to Boston for the first appearance he was obliged to carry out – although he did not participate to the level Mr. D’Angelo had hoped. What Mr. Zigomanis did not do was participate in the second appearance provided for in the contract, nor did he sign 50 autographs – although he was never specifically asked to do so nor was he provided with the memorabilia he was to sign.

[43] On these facts, I cannot agree that the defendant was “deprived of substantially all of the benefit it was to receive under the contract.” To the contrary, the defendant received much of what it bargained for.

[44] In relation to the defendant’s complaint that the “photo scandal” meant that Mr. Zigomanis somehow repudiated the contract because he could not function as a brand ambassador for Cheetah Power Surge energy drink, it is important to note what the contract required of him and what it did not. I have previously recited what he was required to do. The contract did not call on him to perform any additional services. It did not name him as a “brand ambassador”. It contained no mention of qualifications or conditions. (I will return to this topic when I discuss the morals clause below.) And it did not impose any additional limitations on his activities, except that he could not agree to endorse any other energy drink.

[45] Significantly, the contract did not address events or situations outside Mr. Zigomanis’s control which might cause the defendant decide it did not want to continue their relationship, such as his assignment to the Marlies. It did, however, contain an “entire agreement” clause. Counsel for the defendant conceded that, in the face of that clause, the defendant could not argue that it had grounds to terminate due to Mr. Zigomanis not playing for the Leafs. For the same reason, I cannot accept the defendant’s attempt to re-write the parties’ agreement by trying to insert or imply any other obligations, duties or conditions that were not included in the document they signed. In these circumstances (and leaving aside the defendant’s argument under s. 10(b)(iii), discussed below) the nude photo incident cannot be characterized as a repudiation by Mr. Zigomanis of his contractual obligations, sufficient for the defendant to rescind the contract.

[46] I note that the defendant chose to terminate its contract with Mr. Caputi on the very same date it terminated its contract with Mr. Zigomanis. There was no nude photo issue in the case of Mr. Caputi. The letters sent to each of them were otherwise almost identical, save in the case of Mr. Caputi the defendant relied on the fact he had been traded to another team. The fact that the defendant chose to terminate both athletes’ contracts suggests that the decision was motivated by other factors apart from the ones recited in the letters.

[47] I therefore conclude that the repudiation/rescission argument must fail.

[48] Additionally, and importantly, s. 10(b)(i) of the contract expressly required the defendant to provide written notice to Mr. Zigomanis of any alleged default by him in relation to his contractual obligations, and to provide him with 30 days in which to cure such default. As I have found as a fact, no such notice was provided by the defendant. It therefore cannot rely on its right to terminate under s. 10(b)(i).

Was the defendant entitled to terminate the contract under the “morals clause” contained in s. 10(b)(iii)?

[49] For ease of reference, I will repeat the operative language of this provision:

10 (b) COMPANY shall be entitled to terminate this Agreement by delivery of a notice to ATHLETE declaring such termination, upon the occurrence of the following:

(iii) ATHLETE commits any act which shocks, insults, or offends the community, or which has the effect of ridiculing public morals and decency; …

[50] The defendant submits that the nude photo incident falls within this clause and justified its decision to terminate the contract. For the reasons that follow, I do not accept that submission.

[51] To begin with, I note that the clause is concerned with actions of the athlete. In other words, the act in question must be one that has been committed by the athlete, not someone else. On the undisputed evidence, the Internet posting of the nude photos was not the action of Mr. Zigomanis, but instead was carried out by someone else. It was done without Mr. Zigomanis’s knowledge or consent. To this extent, then, the Internet posting was not an act committed by Mr. Zigomanis and the clause was therefore not triggered.

[52] Nevertheless, Mr. Zigomanis was both the subject of the nude photos and the photographer. He also chose to send them to his then-girlfriend. To that extent, it could be argued that the creation of the photos and their release to the girlfriend were his actions. Significantly, however, all of this activity took place well before the contract was signed; the term of the contract commenced on June 1, 2011. The issue thus becomes whether the morals clause has any retrospective effect. In my view it does not.

[53] For the defendant to rely on past conduct as justification for termination, is an attempt to insert into the contract an additional clause amounting to a warranty of past good conduct. As one commentator has stated: “Buyers should consider the period that talent's compliance with the morals clause is necessary. Some clauses … require what amounts to a warranty of past good conduct.” See Noah B. Kressler, Using The Morals Clause in Talent Agreements: A Historical, Legal and Practical Guide, 29 Colum. J.L. & Arts 235, 254 (2005). And, as noted by another author, Caroline Epstein in Morals Clauses: Past, Present and Future, 5 NYU J. Intell. Prop. & Ent. L. 72, at 98 (2015), “the term of the clause must be stipulated. Some clauses only apply to future conduct, while others apply to past conduct.”

[54] Just as the defendant could have inserted a clause concerning Mr. Zigomanis’s past and future status as an NHL player with the Toronto Maple Leafs, it could have inserted a clause concerning his past and future personal conduct. The morals clause in s. 10(b)(iii) is not stated to be retrospective. In the absence of any such provision and in light of the entire agreement clause, I am not prepared to interpret the clause to give it retrospective effect.

[55] Assuming, for sake of analysis, that the clause should be interpreted to apply to past actions and not just to future ones - and bearing in mind that there is no evidence that Mr. Zigomanis was involved in the Internet posting of the pictures - the remaining question is whether, by taking nude photos of himself and sending them to his girlfriend, Mr. Zigomanis committed an act “which shocks, insults, or offends the community, or which has the effect of ridiculing public morals and decency.”

[56] The private communication of intimate information is a fact of life that is not a new phenomenon. Private letters, poems, sketches, photographs and the like, containing intimate information, have been exchanged between individuals for centuries, in the expectation that they would remain private between sender and recipient. Therefore, for consenting adults to communicate in such a fashion, with an expectation of privacy, would not, in my view, be likely to shock, insult, or offend the community or ridicule public morals and decency.

[57] In recent years, new methods of communication have emerged that enable individuals to exchange information via email, text message and in numerous other ways. Many people choose to privately exchange intimate information and photographs in this fashion. This reality has been recognized and the privacy of such communications has been protected by the Parliament of Canada. In 2014, Parliament amended the Criminal Code to create the offence of "publication of an intimate image without consent": Criminal Code, R.S.C., 1985, c. C-46, as amended, s. 161.1. The Province of Manitoba has enacted legislation to create the tort of “non-consensual distribution of intimate images”: see The Intimate Image Protection Act, C.C.S.M. c. I87, s. 11.

[58] In light of historic practices, the realities of modern communication, individuals’ continuing expectations of privacy and the protection given to such communications by legislators, I conclude that to send an intimate photograph to another consenting adult by electronic means would not be likely to shock, insult, or offend the community or ridicule public morals and decency. It follows that, in my opinion, the defendant cannot rely on the past act of Mr. Zigomanis in sending the photographs to his girlfriend as triggering s. 10(b)(iii). Thus, this defence fails as well.

Did the defendant waive its right to terminate by continuing to pay the plaintiff?

[59] In light of my previous conclusions, this issue is moot.

What are the plaintiff’s damages?

[60] Mr. Zigomanis testified that, had the contract not been terminated by the defendant, he would have exercised the option to renew it for a further two years. That evidence is uncontradicted. It is also logical that he would have done so, since it was in his economic interest to continue to receive payment from the defendant for what was, in relative terms, fairly effortless work. I find as a fact that he would have exercised the renewal option and that, as a result, the term of the contract would have extended to May 30, 2015.

[61] Over the term of the contract as extended, Mr. Zigomanis would have earned a minimum of $200,000. The defendant paid him only three quarterly instalments of $12,500, or $37,500. This means that he is due the remainder, being $162,500.

[62] Although the defendant raised the issue of mitigation, the evidence does not support a finding that Mr. Zigomanis had any opportunity to sign and earn income for any other endorsement-like contract of the sort in issue here. I therefore conclude that he did not fail to mitigate his damages.

Conclusion and Disposition

[63] For these reasons, I find that the defendant wrongly terminated the contract between the parties. I order the defendant to pay the plaintiff damages of $162,500, plus pre-judgment interest, calculated from the dates the various instalments payable under the contract should have been paid.

[64] In relation to costs, I encourage the parties to reach agreement. Should they be unable to do so, I direct as follows:

(a) The plaintiff shall serve his Bill of Costs on the defendant, accompanied by written submissions, within 30 days of the release of these reasons.

(b) The defendant shall serve its response on the plaintiff within 20 days thereafter. I expressly invite the defendant to submit the Bill of Costs it would have presented had it been successful at trial.

(d) In all cases, the written submissions shall be limited to three double-spaced pages, plus Bills of Costs.

(e) I direct counsel for the plaintiff to collect copies of all parties' submissions and arrange to have that package delivered to me in care of Judges' Administration, Room 170 at 361 University as soon as the final exchange of materials has been completed. To be clear, no costs submissions should be filed individually: rather, counsel for the plaintiff will assemble a single package for delivery as described above.

___________________________ Stinson J.

Released: November 14, 2016

CITATION: zigomanis v. 2156775 Ontario Inc. (D’Angelo Brands), 2016 ONSC 7053

COURT FILE NO.: CV-13-477038

DATE: 20161114

ONTARIO

SUPERIOR COURT OF JUSTICE