Court File and Parties

COURT FILE NO.: 15-CV-21970 DATE: 20170519 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Savvas Koutros Plaintiff – and – Persico USA Inc. Defendant (Moving Party)

Counsel: Paul C. Nesseth, for the Plaintiff Michael A. Wills, for the Defendant (Moving Party)

HEARD: April 25, 2017

REASONS ON MOTION

Thomas J.:

The Motion

[1] The defendant, Persico USA Inc. (Persico), has brought a motion seeking to:

(a) dismiss and/or stay the action pursuant to r. 17.06 of the Rules of Civil Procedure, R.S.O. 1990, Reg. 194;

(b) in the alternative, an order setting aside the service of the statement of claim pursuant to r. 17.06 of the Rules of Civil Procedure.

[2] The action seeks damages for the termination of the plaintiff Savvas Koutros’ (Koutros) employment with Persico. Persico is a tool manufacturing company. Koutros resides in Ontario. He was plant manager of Persico’s plant in Rochester Hills, Michigan, at the time of his termination. Koutros brought this action in Ontario. Persico maintains that all the underlying circumstances point to Michigan as the appropriate jurisdiction.

Background

[3] This section of these reasons draws on the evidence provided in the affidavits of Persico’s representatives, Shadi Alshakaa, Karen Dombrowski, Alessandra Persico and Elizabeth Blanchard. I have, as well, affidavits from Koutros and a transcript from Koutros’ cross-examination. Plaintiff’s counsel elected not to cross-examine the Persico representatives.

[4] Most of the background set out below is not in conflict except where I have indicated otherwise.

[5] In 2013, Koutros was employed with Toolplas Inc. in Windsor, Ontario. He resided and continues to reside near Windsor. Toolplas and Auto-Plas, a related company, were both owned by Nick Mamatas. In April 2013, Mamatas offered Koutros the job of general manager of Auto-Plas in Rochester Hills, Michigan. It appears he wanted to improve the performance of the company.

[6] On April 19, 2013, Koutros signed a contract of employment with Auto-Plas for a three-year term effective May 1, 2013, conditional upon his attaining a U.S. working visa. He was to commute to the U.S. daily. He received $90,000 U.S. funds annually from Auto-Plas and $30,000 from Toolplas. In addition, he was provided with a $700 car allowance with Toolplas covering medical insurance in Canada.

[7] In September 2013, Auto-Plas was purchased by Persico. Persico is a corporation incorporated in the State of Delaware. Persico has no facilities in Canada.

[8] By letter dated September 17, 2013, Persico offered Koutros the position of general manager. The offer called for a salary of $120,000 annually, medical and dental benefits on the company’s U.S. plan, and a $700 per month car allowance. It is clear from the cross-examination of Koutros that at about the same date he made revisions to the offer adding a company credit card for gas and border tolls and $800 per month in lieu of the U.S. benefits plan so that he could maintain health care benefits in Canada.

[9] The negotiations and revisions were conducted at the Michigan plant and around September 20, 2013, Koutros sent the revisions to Persico’s attorney. Both Koutros and Alessandra Persico, vice-president of Persico, signed the amended offer letter, in Michigan, likely about September 27, 2013. Importantly, the document stated the following:

Your employment with the Company is “at will”, which means your employment may be terminated by you or the Company at any time for any reason, with or without notice.

[10] It seems for a short time after the sale, perhaps until January 2014, Koutros continued to use a cell phone with a Canadian number provided by Toolplas and continued on their Canadian benefit plan. By January 2014, the Canadian cell number had converted to a personal phone and he received a cell phone from Persico with a Michigan number. The Canadian benefit plan came to an end.

[11] Koutros carried on in the position of general manager of the Rochester Hills, Michigan plant then owned by Persico. It is without dispute that he commuted daily from his home in Ontario to the Michigan facility. It is also without dispute that a job at his level was not simply 9:00 to 5:00 and that he often worked evenings and weekends at home.

[12] Koutros visited a number of tool and die plants in the Windsor area while employed by Persico. He confirmed in his cross-examination that he hoped to acquire them as customers or perhaps encourage them to conduct joint ventures with Persico in Mexico. It seems that Sergio Gastaldi, general manager of Persico in Italy, came to Ontario to visit some of these facilities with him. No business was ever acquired in Ontario. No joint ventures with those companies were ever initiated.

[13] Persico did not provide Canadian health benefits. It did not make deductions from Koutros’ salary for Canadian Employment Insurance, the Canada Pension Plan or any other Canadian remittance.

[14] As a result of what Persico termed corporate restructuring, Koutros was terminated by a telephone call on September 12, 2014. There is a dispute whether Koutros was at the Michigan plant or at home in Ontario when he took the call.

[15] Koutros applied for, but did not receive, employment insurance benefits from the State of Michigan. He did not apply for Canadian benefits.

[16] Some discussions were held regarding the terms of severance but ultimately Koutros commenced this action in Ontario on March 9, 2015. The statement of claim was served in Michigan without leave. On June 22, 2015, Persico filed this motion. It has taken no other steps in the action. There is no argument that the defendant has attorned to the jurisdiction.

Issues

[17] It seems to me that the real issues in this dispute are twofold:

1. Should I assume jurisdiction over this litigation as there is a real and substantial connection between Ontario and this action?

2. Is there a more convenient forum than Ontario?

[18] Additionally, there is the concern about whether the service outside of Ontario without leave was appropriate. That concern will be resolved in the real and substantial connection analysis.

1. Real and Substantial Connection

[19] Persico moves in accordance with the procedure set out in r. 17.06 which is included below:

(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 an appearance,

(a) For an order setting aside the service and any order that authorized the service; or

(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 sets aside; or

(c) Ontario is not a convenient forum for the hearing or the proceeding.

(3) Where on a motion under subrule (1) the court concludes that service outside Ontario is not authorized by these rules, but the case is one in which it would have been appropriate to grant leave to serve outside Ontario under rule 17.03, the court may make an order validating the service.

(4) The making of a motion under subrule (1) is not in itself a submission to the jurisdiction of the court over the moving party.

[20] Service of pleadings outside Ontario without an order granting leave is governed by r. 17.02. In this case, the plaintiff Koutros relies upon r. 17.02(f) set out below:

(f) Contracts – in respect of a contract where,

(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 contract have agreed that the courts of Ontario are to have jurisdiction over 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.

[21] Rule 17.02(f) details some of the factors which are considered in the cases governing a real and substantial connection in an action alleging breach of contract.

[22] The importance of this rule to the resolution of this issue was considered by Sharpe J.A. in Van Breda v. Village Resorts Limited, 2010 ONCA 84, at para. 109 (Van Breda). He concluded that if a case fell within one of the connections listed in 17.02 (except (h) and (g)), a real and substantial connection should be presumed shifting the burden to the plaintiff to displace the presumption.

[23] The Supreme Court of Canada considered the concept of real and substantial connection in Club Resorts Ltd. v. Van Breda, 2012 SCC 17 (Club Resorts). This appeal considered the Court of Appeal’s decision in Van Breda along with a companion case both claiming damages for torts alleged to have taken place in Cuba. At para. 100, LeBel J. stated:

To recap, to meet the common law real and substantial connection test, the party arguing that the court should assume jurisdiction has the burden of identifying a presumptive connecting factor that links the subject matter of the litigation to the forum. In these reasons, I have listed some presumptive connecting factors for tort claims. This list is not exhaustive, however, and courts may, over time, identify additional presumptive factors. The presumption of jurisdiction that arises where a recognized presumptive connecting factor — whether listed or new — exists is not irrebuttable. The burden of rebutting it rests on the party challenging the assumption of jurisdiction. 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, subject to the possible application of the forum of necessity doctrine, which I need not address in these reasons. If jurisdiction is established, the claim may proceed, subject to the court’s discretion to stay the proceedings on the basis of the doctrine of forum non conveniens.

[24] While LeBel J. held open the recognition of new connecting factors, he listed presumptive connecting factors, albeit in a tort claim, at para. 90 of Club Resorts:

To recap, in a case concerning a tort, the following factors are 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.

[25] Counsel for Persico draws my attention to a decision of this court in Arsenault v. Nunavut, 2015 ONSC 4302, and specifically para. 36 which considers the necessary strength of a presumptive connection factor:

A court should not be taking such disparate points of contact and cobble them together into a finding that the GN carries on business in Ontario. A presumptive factor must indicate a significant tangible or substantial connection to a jurisdiction to promote the order, certainty, and predictability that is essential to a fair and principled private international law system.

[26] The court should not consider the issue of the most convenient forum unless and until it decides to accept jurisdiction (Club Resorts, at para. 100).

[27] The bulk of the argument here rests on: (a) what is the employment contract and where was it made; and (b) did Persico carry on business in the Province of Ontario?

(a) The Employment Contract

[28] Persico maintains that upon purchasing Auto-Plas, it negotiated an employment contract with Koutros. It had terms distinct from his prior deal with Auto-Plas and clearly relied upon the U.S. employment concept of “employment at will”.

[29] Koutros argues that his work with Persico was merely an extension of his deal with Auto-Plas. He suggests his signing of the offer letter was only part of the negotiations and he always expected to be presented with a new formal written contract from Persico. In cross-examination, he suggested that he told Persico representatives during the negotiations for his employment to make the new contract like the Auto-Plas contract.

[30] It seems clear that Koutros had no idea if Persico had ever seen the earlier contract and, in fact, he stated he only presumed they had. I have an affidavit from Elizabeth Blanchard, a human resource service provider, who was involved in the negotiation of Koutros’ agreement with Persico and then again in his termination. It is clear to me from her affidavit and her email communications with Koutros that the terms of the Auto-Plas contract only came to Persico’s attention in the discussions related to his termination in September 2014. In fact, Koutros provides Blanchard with the Auto-Plas contract on September 2, 2014.

[31] I find that Koutros entered into a new contract of employment with Persico upon their purchase of Auto-Plas in 2013. The terms were negotiated. Koutros made some revisions to the initial offer and those were incorporated into the final letter, still dated September 17, 2013, but likely signed on September 27, 2013. It was signed at the Michigan facility. It was a contract “at will” consistent with a U.S. contract of employment in this industry. While the full terms of the contract may not have been included in the written and signed offer, any further terms did not include the content of the previous Auto-Plas agreement and certainly did not mention a three-year term.

[32] Koutros worked for Persico for about a year receiving remuneration consistent with the new Persico contract. He was paid in U.S. funds bi-weekly consistent with the Persico offer letter. Salary records confirm deductions for U.S. federal social security and federal Medicare. In addition, he received benefits including the automobile allowance, a monthly payment in lieu of benefits all in U.S. funds. He received a U.S. company credit card for expenses and was eligible for the vacation and sick or personal days all consistent with the Persico offer letter dated September 17, 2013.

[33] Koutros received a U.S. cell phone from Persico. Counsel for Koutros has pointed me to the fact that a letter notifying customers of the Persico takeover in 2013 sent jointly by Persico/Auto-Plas indicates Koutros’ Ontario cell phone number. I am content that at this early phase of the takeover, September 24, 2013, it was prudent to maintain this continuity. The Verizon wireless records produced by Persico confirm extensive use of an American cell number assigned to Koutros.

[34] The employment contract between Persico and Koutros was made in the United States in September 2013. Where Koutros was located when he received a call from Michigan terminating his employment is, in my view, not of significance.

(b) Carrying on Business

[35] Koutros argues that his employment as general manager was 24/7. He often was required to work at home in the evening or on weekends and holidays. This fact is confirmed in an affidavit sworn by his spouse. More importantly, he emphasizes that he had connections throughout tool and die plants in Ontario. He stated on cross-examination he tried to cultivate new customers and suppliers in the Province. Perhaps, more importantly, he encouraged those Ontario businesses to enter joint ventures with Persico in Mexico. On a number of occasions, he took the general manager of Persico Italy with him.

[36] It was his evidence on his cross-examination that during his tenure no customers or suppliers were acquired in Ontario. No joint venture agreements were made. Persico never had a physical presence in Ontario. Koutros drove every working day from his home in Ontario to the Michigan plant.

[37] Employees at the level of Koutros have many responsibilities. Their work day does not end at 5:00 p.m. I suspect it is common practice to work in the evening, weekends and holidays. That does not mean their employer is carrying on business at their home location.

[38] Neither do I find that Koutros’ visits to Ontario plants, in the absence of a single contract, or a single physical location, meant Persico carried on business in Ontario.

[39] Counsel for Koutros asks me to consider the Court of Appeal decision in Hilton v. K & S Services Inc., 2009 ONCA 603 (Hilton). In that decision, the court considered the circumstances of Mr. Hilton living near Windsor and commuting to a Michigan business. It upheld the motion judge’s finding that there was a real and substantial connection to Ontario.

[40] There are many reasons to distinguish Hilton from the employment circumstances here. His employer had an Oakville, Ontario plant. He often worked in Oakville. He was placed on the Canadian payroll and paid by cheque issued from the Bank of Montreal in Toronto. Hilton had a Canadian record of employment and received Canadian employment insurance. The decision in Hilton does not assist Koutros.

[41] In summary then on this issue, I find an absence of common law presumptive connection factors. In light of my findings regarding the employment contract, none of the factors contained in r. 17.02 apply to this action. Specifically, as to r. 17.02(f), I find that the contract was made in the State of Michigan. It contained no provision as to the applicable law and the parties clearly dispute Ontario’s jurisdiction. Finally, if the employment contract was breached, it was simply breached outside Ontario when Persico U.S.A. determined Koutros was to be terminated and communicated that message.

[42] As a result, I find a failure of a real and substantial connection between this action and this Province and I decline to accept jurisdiction.

1) Forum Non Conveniens

[43] Concluding as I have above, it is not strictly necessary for me to consider whether Ontario or Michigan is the most convenient forum for this litigation. However, should I be found in error in my decision declining jurisdiction, I would offer the following comments. The analysis regarding forum non conveniens is contextual. Exhaustive lists of factors to be considered are impossible. The essence of the analysis is to achieve fairness and efficiency in the litigation (Club Resorts, at para. 105).

[44] I find it useful, however, to consider the list of factors suggested by the Court of Appeal in Young v. Tyco International of Canada Ltd., 2008 ONCA 709, at para. 26 (Tyco) set out below:

Decisions on forum non conveniens motions are exercises of judicial discretion. Typically, in exercising their discretion, motion judges consider a list of factors now well established in the case law. These factors are used to assess the connections to each forum. They include: (1) the location where the contract in dispute was signed; (2) the applicable law of the contract; (3) the location of witnesses, especially key witnesses; (4) the location where the bulk of the evidence will come from; (5) the jurisdiction in which the factual matters arose; (6) the residence or place of business of the parties; and (7) the loss of a legitimate juridical advantage.

[45] In this matter, I would suggest the factors overwhelmingly dictate that the State of Michigan is the most convenient forum. The contract was made there. If it was breached, it was breached there. Koutros was employed in Michigan daily and the Michigan place of business. The bulk of the evidence is in that State which includes the key witnesses. Koutros resides close to the international border. He commuted into Michigan daily. He would not be unduly inconvenienced by attending there for trial.

[46] Should Koutros be successful and gain a judgment, he would then need to seek its recognition and enforcement in Michigan.

[47] The only factor which arguably favours Ontario is judicial advantage. In all likelihood, the application of the common law in Ontario, together with the provisions of s. 9(1) of the Employment Standards Act, R.S.O. 2000, respecting the continuity of employment with successor employers would provide an advantage to the plaintiff. However, in weighing all the relevant factors, I would exercise my discretion in favour of the State of Michigan presenting the most convenient forum for this litigation.

[48] In coming to this conclusion, I recognize the comments of Laskin J.A. in Tyco, at paras. 33 and 34. He directs that in a motion of this sort, brought early in the proceedings, the motion judge will face conflicting evidence. He cautions that the motion judge take a prudential, non-aggressive approach to fact finding accepting the plaintiff’s version if the record discloses a reasonable evidentiary basis.

[49] I find that in this matter, for the reasons considered above, there is no reasonable evidentiary basis established by the plaintiff that detracts from my conclusion on the most convenient forum.

Conclusion

[50] For the reasons set out above and pursuant to the provisions of r. 17.06, the service of the statement of claim in this action is set aside. In addition, the action is ordered stayed. If the parties are unable to resolve the issue of costs, I will receive their written costs submissions delivered to the trial coordinator of the Superior Court of Justice in Windsor. The submissions are limited to five (5) typed pages excluding attachments and are to be received within 45 days of the release of these reasons. Should I not receive submissions in the timeframe suggested above, there will be no order as to costs.

Original signed by Justice Bruce Thomas

Bruce Thomas Justice

Released: May 19, 2017

COURT FILE NO.: 15-CV-21970 DATE: 20170519 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: Savvas Koutros Plaintiff – and – Persico USA Inc. Defendant (Moving Party) REASONS on motion Thomas J. Released: May 19, 2017