CITATION: Sgromo v. Polygroup International et al., 2017 ONSC 2525
COURT FILE NO.: CV-16-0565-SR
DATE: 2017-04-24
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
PIETRO, PASQUALE-ANTONIO SGROMO (PETER ANTHONY SGROMO), WIDE EYES MARKETING LTD.,
Unrepresented
Plaintiffs (Responding Party)
- and -
POLYGROUP INTERNATIONAL, (a Hong Kong Corporation); POLYGROUP LIMITED (MACAO COMMERCIAL OFFSHORE), a Corporation duly organized under the laws of S.A.R., People’s Republic of China; POLYGROUP SERVICES N.A., INC., (a United States Corporation); RICKY TONG (an Individual); WILLIAM KAUFMANN (an Individual); SCOTT HERSHOCK (an Individual); LEWIS CHENG (an Individual); ELMER CHENG (an Individual); and PAUL CHENG (an Individual).
Peter W. Choe, for the Defendants
Defendants (Moving Party)
HEARD: April 13, 2017, at Thunder Bay, Ontario
Mr. Justice D. C. Shaw
Decision On Motion
[1] The defendants bring a motion to dismiss this action for want of jurisdiction
Background
[2] Part of the factual background for the issues presented in this motion and for the discussion that follows is set out in my reasons on a motion to dismiss in action CV-16-0529-FW, Sgromo v. Scott et al., 2017 ONSC 2524, released concurrently with the within reasons. Pietro Pasquale-Antonio Sgromo and his company, Wide Eyes Marketing Ltd., are the plaintiffs in both actions. I dismissed action CV-16-0529-FW. I am also dismissing the within action for want of jurisdiction.
[3] The plaintiffs have caused a statement of claim of 253 paragraphs to be issued. As with the statement of claim in action CV-16-0529-FW, the statement of claim herein contains extensive, improper pleadings of argument, law and evidence and is far from a concise statement of material facts as contemplated by Rule 25.06 if the Rules of Civil Procedure.
[4] In the prayer for relief in the statement of claim, the plaintiffs seek a declaration that a Non-Disclosure Agreement was breached. The prayer for relief seeks disgorgement of all profits made from a certain American patent (the “440 Patent”), and from a trademark. The plaintiffs seek mandatory orders relating to documents filed with the United States Patent Office to reverse the transfer of patents and trademarks and to return ownership of the patents and trademarks to Mr. Sgromo. The prayer for relief also contains a quantum meruit claim for consulting and claims for injunctive relief.
[5] Mr. Sgromo is a Canadian citizen. At all times material to this action, he lived and worked in San Francisco, California. He lived and worked in the United States from May 2001 to August 2010, and from October 2011 to June 2015.
[6] Wide Eyes Marketing Ltd. is a corporation incorporated in British Columbia. Mr. Sgromo is the sole officer and shareholder of the company. The company is in the process of being dissolved. At all material times, Wide Eyes maintained a mailing address in San Francisco. Wide Eyes, as a corporation, is not represented in this proceeding by a lawyer as required by Rule 15.01(2) of the Rules of Civil Procedure. Wide Eyes was not represented by a lawyer in action CV-16-0529-FW.
[7] The defendant, Polygroup International, is incorporated under the laws of Hong Kong and is located in Hong Kong.
[8] The defendant, Polygroup Limited (Macao Commercial Offshore), is incorporated under the laws of the People’s Republic of China and is located in China.
[9] The defendant, Polygroup Services N.A., is incorporated in Delaware, with its head office in Illinois.
[10] The defendant, Ricky Tong, resides in Hong Kong. He has never resided in Canada and is not a citizen of Canada.
[11] The defendants, Lewis Cheng, Elmer Cheng, and Paul Cheng reside in Hong Kong. They lived in Canada between 1987 and 1991. Lewis Cheng and Elmer Cheng became Canadian citizens and have not lived in Canada since 1991. None of them have assets in Canada.
[12] The defendant, William Kaufmann, resides in Arkansas. He has resided in Canada and is not a citizen of Canada.
[13] The defendant, Scott Hershock, resides in Illinois. He has never resided in Canada and is not a citizen of Canada.
[14] Mr. Sgromo is an inventor and a consultant.
[15] In December 2014, Mr. Sgromo reached out to Polygroup N.A. by way of an e-mail to Mr. Tong. Mr. Sgromo deposes that he explained to Mr. Tong his role with Eureka Inventions LLC. Eureka is a company incorporated in California. Eureka is one of the defendants in action CV-16-0529-FW. Leonard Gregory Scott, who is also a defendant in action CV-16-0529-FW, and Mr. Sgromo have been engaged in a dispute as to who is the rightful owner of Eureka. Mr. Scott claims that he is the sole owner. Mr. Sgromo claims that his company, Wide Eyes, is the sole shareholder of Eureka. Mr. Sgromo and Mr. Scott also dispute ownership of the 440 Patent issued by the United States Patent Office. The 440 Patent plays a central role in action CV-16-0529-FW. It is the same patent for which the plaintiffs in this action seek disgorgement of profits and mandatory orders requiring the United States Patent Office to reverse the transfer of the patent. The 440 Patent is presently registered in the name of Eureka. Mr. Sgromo’s position is that the 440 Patent was unlawfully transferred from Wide Eyes to Eureka.
[16] Following the e-mail from Mr. Sgromo to Mr. Tong in December 2014, Eureka and Polygroup N.A. entered into a Non-Disclosure Agreement, dated December 17, 2014. Mr. Sgromo, as “Director”, signed the Non-Disclosure Agreement on behalf of Eureka. Mr. Tong signed on behalf of Polygroup N.A. This is the Non-Disclosure Agreement referred to in the statement of claim and for which the plaintiffs, in their prayer for relief, seek a declaration that it was breached. The Non-Disclosure Agreement is the only signed agreement referred to in the statement of claim.
[17] Paragraph 13 of the Non-Disclosure Agreement provides:
This Agreement shall be governed and construed in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to its choice of law provisions. The parties hereby agree that any action arising out of this Agreement shall be brought in the state of Massachusetts and the parties hereby irrevocably consent to the jurisdiction of the state and federal courts located in Massachusetts.
[18] Paragraph 7 of the Non-Disclosure Agreement provided that if the parties wanted to establish a business relationship, a further written contract was required:
Company and Polygroup each agree that nothing contained in this Agreement shall be construed as a binding commitment to establish a business relationship. If the parties desire to establish a business relationship, such business relationship shall be set forth in a written contract signed by duly authorized representatives of both parties.
[19] Mr. Sgromo travelled to Hong Kong to meet with Polygroup. Polygroup expressed an interest in some of Mr. Sgromo’s ideas. Negotiations took place between Eureka, represented by Mr. Sgromo, and Polygroup. Draft agreements were exchanged but none of the draft agreements were finalized. None of the draft agreements referred to Ontario law or named Ontario as a jurisdiction. The draft agreements referred either to California or Hong Kong law. Ultimately, no agreements other than the Non-Disclosure Agreement were signed. The defendants had become aware of and were nervous about the disputes surrounding Mr. Sgromo, Mr. Scott and Eureka.
[20] Mr. Sgromo alleges that he worked in good faith with the defendants, creating, designing, developing and branding various product lines on the understanding that the parties would enter into a signed agreement and that he and the defendants were under the Non-Disclosure Agreement. He deposes that he and Mr. Tong had a private meeting and agreed that Mr. Sgromo would be paid a monthly consulting fee of $12,000.
[21] Mr. Sgromo alleges that Polygroup has unlawfully taken his intellectual property and registered trademarks for products which he created, designed, developed and branded. He states that his entire portfolio of products that he discussed with and disclosed to the defendants in confidence is being sold at various third party retailers in Ontario.
Discussion
[22] This court has jurisdiction to stay or dismiss an action under s. 106 of the Courts of Justice Act and under Rule 17.06 and Rule 21.01 of the Rules of Civil Procedure.
[23] Section 106 of the Courts of Justice Act provides:
- A court, on its own initiative or on motion by any person, whether or not a party, may stay any proceeding in the court on such terms as are considered just.
[24] Rule 17.06 of the Rules of Civil Procedure provides:
17.06 (1) A party who has been served with an originating process outside Ontario may move, before delivering a defence, notice of intent to defend or notice of appearance,
(b) for an order staying the proceeding.
(2) The court may make an order under subrule (1) or such other order as is just where it is satisfied that,
(a) service outside Ontario is not authorized by these rules;
(b) an order granting leave to serve outside Ontario should be set aside; or
(c) Ontario is not a convenient forum for the hearing of the proceeding.
[25] Rule 21.01(3) of the Rules of Civil Procedure provides:
(3) A defendant may move before a judge to have an action stayed or dismissed on the ground that,
(a) Jurisdiction – the court has no jurisdiction over the subject matter of the action.
[26] The defendants submit that there are three grounds on which this court should dismiss the action:
(a) The dispute is governed by the forum selection clause in the Non-Disclosure Agreement;
(b) The court lacks jurisdiction simpliciter because there is no real and substantial connection between the litigation and Ontario; and
(c) Ontario is the forum conveniens.
[27] I will deal with the forum selection clause in the Non-Disclosure Agreement and jurisdiction simpliciter. Because I have determined that this court does not have jurisdiction, it is not necessary to deal with the issue of forum conveniens.
(a) Forum Selection Clause
[28] In my reasons on the motion to dismiss in action CV-16-0529-FW, I set out the law on the issue of forum selection clauses:
The decision of the Supreme Court of Canada in Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27 is the leading authority regarding the enforcement of a forum selection clause. As observed by Juriansz J.A., writing for the Court of Appeal panel in Expedition Helicopters Inc. v. Honeywell Inc., 2010 ONCA 351, at para. 8, the central thrust of Pompey is that the law favours the enforcement of forum selection clauses. The exercise of the court’s discretion not to enforce a forum selection clause is governed by a “strong cause test.” Juriansz J.A. stated, at para. 11, “The plaintiff must show ‘strong cause’ that the case is exceptional and the forum selection clause should not be enforced.”
Justice Juriansz expanded on what a party seeking to avoid a choice of forum clause would have to establish to show that the case was exceptional. At para. 24 he stated:
[24] A forum selection clause in a commercial contract should be given effect. The factors that may justify departure from that general principle are few. The few factors that might be considered include the plaintiff was induced to agree to the clause by fraud or improper inducement or the contract is otherwise unenforceable, the court in the selected forum does not accept jurisdiction or otherwise is unable to deal with the claim, the claim or the circumstances that have arisen are outside of what was reasonably contemplated by the parties when they agreed to the clause, the plaintiff can no longer expect a fair trial in the selected forum due to subsequent events that could not have been reasonably anticipated, or enforcing the clause in the particular case would frustrate some clear public policy. Apart from circumstances such as these, a forum selection clause in a commercial contract should be enforced.
[29] The Non-Disclosure Agreement, which the plaintiffs claim was breached, provides that it is to be governed and construed in accordance with Massachusetts law and that any action arising out of the agreement shall be brought in Massachusetts. Mr. Sgromo submits that the Non-Disclosure Agreement is ambiguous. There is nothing ambiguous about this choice of law provision. It is clear, unequivocal and mandatory.
[30] The plaintiffs have not established any of the factors set out by Juriansz J.A. that may justify departure from the principle that a forum selection clause in a commercial contract should be given effect. They have not established any analogous factors.
(b) Jurisdiction Simpliciter
[31] In my reasons on the motion to dismiss in action CV-16-0529-FW, I set out the law on the issue of jurisdiction simpliciter:
The determination of whether the court has a right to assume jurisdiction over the claims of the plaintiffs is governed by the principles set out by the Supreme Court of Canada in Van Breda v. Village Resorts Ltd., 2012 SCC 17. The analysis concerning the assumption of jurisdiction is grounded in the real and substantial connection test – objective factors which connect the subject matter of the litigation to the forum.
Van Breda set out four presumptive connecting factors that, prima facie, entitle a court to assume jurisdiction over a dispute:
(a) the defendant is domiciled or resident in the province;
(b) the defendant carries on business in the province;
(c) the tort was committed in the province; and
(d) a contract connected with the dispute was made in the province.
The burden is on the plaintiffs to establish a recognized presumptive factor. The burden of rebutting a presumptive factor lies with the party challenging the assumption of jurisdiction. At para. 100, the court stated:
If the court concludes that it lacks jurisdiction because none of the presumptive connecting factors exist or because the presumption of jurisdiction that flows from one of those factors has been rebutted, it must dismiss or stay the action….
The plaintiffs must establish on admissible evidence a good arguable case that one of the presumptive factors is present (See Shah v. LG Chem, Ltd., 2015 ONSC 2628, at para. 10).
[32] Mr. Sgromo submits that the Polygroup companies are carrying on business in Ontario because a number of third party retailers in Ontario, including several in Thunder Bay, are selling products from Polygroup.
[33] In Van Breda, at para. 87, the Supreme Court of Canada stated that caution must be exercised in considering whether an entity is carrying on business in the jurisdiction, to avoid what would amount to assuming universal jurisdiction in respect of tort claims arising out of certain categories of business or commercial activity. “The notion of carrying on business requires some form of actual, not only virtual, presence in the jurisdiction, such as maintaining an office or regularly visiting the territory of the particular jurisdiction.”
[34] Although retailers in Ontario may carry Polygroup products, and although Polygroup therefore did business with Ontario retailers, this does not mean that Polygroup carried on business in Ontario. For Polygroup to carry on business in Ontario, it would require a finding that Polygroup had some form of actual presence in the Province. In Parque Industrial Avante Monterrey, S.A. de C.V. v 1147048 Ontario Ltd. and Advantage Engineering Inc., 2016 ONSC 6004, at para. 17, the fact that the defendant foreign corporation had intermittently visited Ontario and had done business with a Canadian based company was insufficient to establish that it had been carrying on business in Ontario. In Yemec and Rapp v. Atlantic Lottery Corporation, 2012 ONSC 4207, the court held that the fact that two of the foreign defendant’s auditors visited the plaintiff in Ontario for two weeks and conducted a compliance audit and reviewed the plaintiff’s entire business operation was insufficient to establish jurisdiction. In Yemec, Belobaba J., by way of example, said that the fact that an offshore oil supplier which simply sold oil to an Ontario refinery that was completely dependent on its product would not be sufficient to establish that the offshore oil supplier was carrying on business in Ontario.
[35] No alleged torts were committed in Ontario. Any alleged torts occurred in Hong Kong or China or California.
[36] No contract connected with the dispute was made in Ontario. The Non-Disclosure Agreement was made in Hong Kong or California, with Massachusetts law named as the choice of law forum. Even if there were binding oral agreements, notwithstanding paragraph 7 of the Non-Disclosure Agreement which required further written agreements as a prerequisite to the establishment of a business relationship, those oral agreements were not made in Ontario.
[37] An Ontario court has no jurisdiction to make orders disgorging profits from a disputed United States Patent or to make orders requiring documents to be filed with the United States Patent and Trademark Office to reverse patent transfers on file with that Office.
[38] The plaintiffs have not provided any evidence to show a good arguable case that would justify the Ontario Superior Court of Justice assuming jurisdiction over these defendants. None of the presumptive factors set out in Van Breda is present. No analogous factor has been established. There is no real and substantial connection.
Conclusion
[39] For the reasons given, this action is dismissed.
Costs
[40] If the parties are unable to agree upon costs, the defendants shall deliver written submissions and a Bill of Costs within 20 days. The plaintiffs shall deliver written submissions within 20 days after service of the defendants’ submissions and Bill of Costs. The written submissions shall not exceed five double spaced pages, exclusive of the Bill of Costs. If the defendants fail to deliver their submissions and their Bill of Costs within 20 days, the issue of costs shall be deemed to be settled.
___“original signed by”
The Honourable Justice D. C. Shaw
Released: April 24, 2017
CITATION: Sgromo v. Polygroup International et al., 2017 ONSC 2525
COURT FILE NO.: CV-16-0565-SR
DATE: 2017-04-24
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
PIETRO, PASQUALE-ANTONIO SGROMO (PETER ANTHONY SGROMO), WIDE EYES MARKETING LTD.,
Plaintiffs (Responding Party)
- and -
POLYGROUP INTERNATIONAL, (a Hong Kong Corporation); POLYGROUP LIMITED (MACAO COMMERCIAL OFFSHORE), a Corporation duly organized under the laws of S.A.R., People’s Republic of China; POLYGROUP SERVICES N.A., INC., (a United States Corporation); RICKY TONG (an Individual); WILLIAM KAUFMANN (an Individual); SCOTT HERSHOCK (an Individual); LEWIS CHENG (an Individual); ELMER CHENG (an Individual); and PAUL CHENG (an Individual).
Defendants (Moving Party)
DECISION ON MOTION
Shaw J.
Released: April 24, 2017
/sab