Court File and Parties

COURT FILE NO.: CV-16-559997 DATE: 20190312 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Add Impact Inc. and Niceforo Holdings Ltd. Plaintiffs/Responding Parties

– and –

Mesquite Promotional Corporation, Michael Slathon, Frances Fortes, Nima Haghighian, Blueprint Promotions Inc., Trademark Industries Inc. and Shlomo Bohbot Defendants/Moving Parties

COUNSEL:

C. Holland, for the Plaintiffs/Responding Parties A. Meisels, for the Defendants/Moving Parties Mesquite Promotional Corporation, Michael Slathon, Blueprint Promotions Inc., Trademark Industries Inc. and Shlomo Bohbot N. Ajram, for the Defendants/Moving Parties Nima Haghighian and Frances Fortes

HEARD: November 6 and 19, and December 14, 2018

REASONS FOR DECISION

C. J. BROWN, J.

[1] The defendants move for summary judgment for an order dismissing the plaintiffs’ claim in its entirety on the ground that there are no genuine issues for trial.

[2] The plaintiffs maintain that there are several genuine issues requiring a trial, including clear issues of credibility and allegations of conspiracy.

[3] Add Impact Inc. (“Add Impact”), a business incorporated pursuant to the laws of Ontario, has been in the advertising industry for approximately 20 years. It is a distributor and vendor of a wide range of promotional products. It provides professional, turnkey and integrated promotional merchandise programs and strategic solutions.

[4] Niceforo Holdings Limited (“Niceforo”) is a company incorporated pursuant to the laws of Ontario. Its principal is Remo Niceforo (“Mr. Niceforo”), who is also a principal with Add Impact.

[5] Mesquite Promotional Corporation (“Mesquite”) is a company incorporated pursuant to the laws of Ontario. Michael Slathon (“Mr. Slathon”) is an individual who, at all material times, was an officer, director, shareholder and controlling mind of Mesquite. Mr. Slathon, acting through Mesquite, was a Senior Sales Director at Add Impact.

[6] Frances Fortes (“Ms. Fortes”) was an Inside Sales Representative and Sales Coordinator of Add Impact. According to the testimony of Mr. Slathon, he and Ms. Fortes had worked together in the industry for approximate 15 years at three other companies prior to Add Impact, and it was “understood in the industry that [they] are a package”. As a result of her position at Add Impact, Ms. Fortes obtained sensitive and confidential information belonging exclusively to Add Impact and, as a result, signed a Confidentiality/Non-Disclosure Agreement (“CNA”).

[7] Blueprint Promotions Inc. (“Blueprint”) is a competitor of Add Impact. Trademark Industries Inc. (“Trademark”) is a supplier of promotional products and a competitor of Add Impact. Shlomo Bohbot (“Mr. Bohbot”) was, at all material times, the sole officer, director and guiding mind of both Blueprint and Trademark, which are closely held companies with intermingled business.

[8] The promotional products industry is very competitive.

[9] Mr. Slathon’s/Mesquite’s responsibilities as Senior Sales Director included the following: researching, identifying and qualifying leads within targeted markets; spending significant time prospecting new business; meeting with client executives; learning and adhering to company processes and policies; learning Add Impact service offerings and marketing them to clients; and executing Add Impact marketing strategies. As a result of this, Mr. Slathon possessed sensitive and confidential information belonging exclusively to Add Impact and which could be of significant advantage to competitors of Add Impact if divulged. Accordingly, Mr. Slathon/Mesquite executed a CNA.

[10] It is of note that the CNA also prohibited Mr. Slathon/Mesquite from soliciting employees of Add Impact to new employment opportunities, or to cause them to be hired by another employee.

[11] Mr. Slathon/Mesquite joined Add Impact on September 7, 2010 as Senior Sales Director. He resigned, without any prior notice, on January 4, 2016. In mid-January, he joined Blueprint, a division of Trademark, as Vice President of Sales.

[12] Mr. Slathon advised Ms. Fortes that he was going to join Blueprint and spoke with Mr. Bohbot to ensure that Ms. Fortes could secure a position working with him at Blueprint, which she did. Mr. Slathon and Ms. Fortes both joined Blueprint in mid-January.

[13] Ms. Fortes also resigned without prior notice on January 4, 2016 and joined Blueprint, along with Mr. Slathon. At Blueprint, she assumed the position of National Account Manager. It was her evidence on cross-examination that Mr. Slathon had told her that he was moving to Blueprint and that, although there was no job posting for her position, she could go with him. She and Mr. Slathon approached Mr. Bohbot together. In this regard, Mr. Bohbot testified, in his cross-examination, to a different version of facts. He indicated that there had been an online job posting for Ms. Fortes’ position for which she applied and interviewed, although he could not produce a job posting or her application.

[14] Nima Haghighian (“Mr. Haghighian”) commenced employment with Add Impact on March 12, 2012 as a Sales and Marketing Coordinator and subsequently assumed more senior positions at Add Impact. As a result, he had access to confidential and sensitive information, and was required to enter into a CNA.

[15] In early April 2016, Mr. Haghighian resigned from Add Impact. When he tendered his resignation, he was asked whether he intended to join Blueprint and/or Trademark. He advised that he had no such intention and was moving to Iran to work. On cross-examination, he testified that he had moved to Iran, but admitted that he never started work there. Rather, shortly thereafter, he returned to Toronto to assume employment with Blueprint/Trademark as National Account Manager.

[16] Mr. Niceforo also resigned from Add Impact in April 2016 and began employment a few months later with Blueprint.

[17] The plaintiffs claim that the defendants, Ms. Fortes and Mr. Slathon, breached their obligations under the CNA by soliciting other individuals to leave Add Impact and join Blueprint as set forth at paragraphs 12 to 16 of these reasons.

[18] The action as regards misappropriation of business and business losses relates to three specific clients of Add Impact – Hyundai, Mazda and Kubota – which are listed in the CNA. They are part of the book of business brought by Mr. Slathon/Mesquite, accounts which Mr. Slathon would retain if the CNA were to end or be terminated by either party.

[19] The plaintiffs allege that the defendants misappropriated business opportunities and breached their fiduciary duties to Add Impact. The plaintiffs allege that in the late fall of 2015, Add Impact had become aware that Kubota, a long standing client of theirs, was looking for a new preferred vendor and may proceed with a Request For Proposal (“RFP”). Add Impact alleges that, at that time, it requested that Mr. Slathon and Ms. Fortes advise whether the RFP would be made public and asked that Mr. Slathon and Ms. Fortes arrange a meeting with Kubota. While the RFP was made public and a presentation was made to Kubota by Mr. Slathon and Ms. Fortes, Add Impact’s evidence was that it was not apprised of this. It only became aware after the fact that (i) Kubota had issued an RFP, (ii) Mr. Slathon and Ms. Fortes had received an RFP invitation from Kubota and (iii) the two had made a presentation on behalf of Blueprint/Trademark at the RFP meeting scheduled for December 7, 2015, while they were still employed with Add Impact.

[20] The representative of Kubota, Mr. Allison, testified in cross-examination that Mr. Slathon and Ms. Fortes had advised him in December that they would be leaving Add Impact to join Blueprint/Trademark. In cross-examination, Mr. Slathon provided two contradictory accounts of what occurred at the December 7 meeting. Further, he admitted the following: he did not tell anyone at Add Impact that RFP presentations were to occur on December 7; he did not forward the Kubota emails to anyone at Add Impact, except to Ms. Fortes; and he had not told anyone at Add Impact about his appearing with Mr. Bohbot on behalf of Blueprint/Trademark to present at the RFP meeting on December 7.

[21] Mr. Bohbot, in cross-examination, denied being at the December 7 meeting for an RFP, but stated that he was only there to “discuss the hammers”, in reference to a licensing agreement for Kubota-branded hammers.

[22] In February 2015, Add Impact became aware that Hyundai Canada, another long-standing client, was to circulate a RFP. Mr. Slathon, Ms. Fortes and two others made a presentation. However, Hyundai Canada decided to go to a competitor, ARPG. Mr. Slathon indicated to Add Impact that it was likely that ARPG would not be able to retain Hyundai and, as a result, Add Impact directed Mr. Slathon to keep in touch with the marketing manager at Hyundai Canada. However, Add Impact subsequently learned that Hyundai was being serviced by Mr. Slathon at Blueprint. The evidence of Hyundai’s Director of Customer Services, Annie DesLauriers, was that Hyundai had been in contact with Mr. Slathon and, subsequently, went with Mr. Slathon at Blueprint. Ms. DesLauriers further testified that Hyundai would not have delivered a notice of termination to ARPG to cancel the marketing arrangement unless there was another supplier in place, such that discussions between Mr. Slathon and Hyundai had likely gone on for some time prior to Mr. Slathon leaving Add Impact for Blueprint.

[23] While the evidence from Hyundai was that it had awarded Blueprint a marketing contract in January 2016, Mr. Bohbot, on his cross-examination, stated that he had no knowledge of a contract with Hyundai. Mr. Bohbot denied any knowledge of his company, Blueprint, being awarded a Hyundai marketing contract in January 2016, despite the evidence of two Hyundai representatives as regards their awarding the contract to Blueprint.

[24] The claims also include the claim between Niceforo and Trademark, Mr. Bohbot and Mr. Slathon/Mesquite regarding a verbal agreement for payment by Trademark to Niceforo of 5% royalties on Trademark’s sales of Kubota-branded products. Mr. Slathon was to receive a royalty of 5% from Trademark, which he was to divide equally with Mr. Niceforo through Niceforo. There will clearly be issues of credibility as regards the verbal agreement between the companies’ principals, Mr. Haghighian and Mr. Bohbot, on behalf of their respective companies.

[25] As well, allegations of conspiracy have been claimed. The jurisprudence is clear that allegations of conspiracy should not be decided by summary judgment: Akagi v. Synergy Group (2000) Inc., 2012 ONSC 2382, at paras. 32, 37–39; and Farooq v. Miceli, 2012 ONSC 558, at paras. 1, 10–15.

[26] There have been no examinations for discovery.

Positions of the Parties

Position of the Defendants/Moving Parties

[27] It is the position of the moving parties, Mr. Slathon/Mesquite, Blueprint, Trademark and Mr. Bohbot that there are no issues of credibility and no genuine issues requiring a trial, and that the issues can all be determined on the basis of the evidentiary record before the Court.

[28] It is the position of the moving party, Mr. Haghighian, that there are no claims against him except that he used sensitive and confidential information of the plaintiffs’. Furthermore, he argues there is no evidence that he breached any obligations as regards use of Add Impact’s confidential information and accordingly there is no need to proceed against him.

[29] It is the position of Ms. Fortes that there is no evidence to establish that she used the plaintiffs’ confidential information or trade secrets for her benefit and no evidence that she breached any fiduciary duties. She submits that the claims against her are baseless and should be dismissed.

Position of the Plaintiffs/Responding Parties

[30] It is the position of the responding parties that there are significant issues of credibility which can only be determined on a full evidentiary record.

Rule 20: Summary Judgment

[31] Pursuant to r. 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, summary judgment shall be granted where there is no genuine issue requiring a trial.

[32] In Hryniak v Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court of Canada determined that there would be no genuine issue requiring a trial where a judge is able to reach a “fair and just determination on the merits” of the case. This will be the case where the process: (1) permits the judge to make the necessary findings of fact on the basis of the evidence adduced, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[33] Pursuant to Hryniak, the motion judge should first determine if there is a genuine issue requiring a trial based only on the evidence before the court, without using the new fact-finding powers set forth in r. 20.04. There will be no genuine issue requiring a trial if the summary judgment process provides the court with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportional procedure. If there appears to be a genuine issue requiring a trial, the motion judge should determine if a trial can be avoided by using the new powers under rr. 20.04(2.1) and (2.2). The judge may, at his or her discretion, use those powers, provided that doing so does not offend the interest of justice, i.e., that it will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.

[34] In this regard, I am cognizant of and have taken into consideration the findings of Karakatsanis J. addressing the “interest of justice” requirement in Hryniak v. Maulden, supra, at para. 60, as follows:

The “interest of justice” inquiry goes further, and also considers the consequences of the motion in the context of the litigation as a whole. For example, if some of the claims against some of the parties will proceed to trial in any event, it may not be in the interest of justice to use the new fact-finding powers to grant summary judgment against a single defendant. Such partial summary judgment may run the risk of duplicative proceedings or inconsistent findings of fact and therefore the use of the powers may not be in the interest of justice. On the other hand, the resolution of an important claim against a key party could significantly advance access to justice, and be the most proportionate, timely and cost effective approach.

[35] The moving party bears the onus of establishing that there is no triable issue. However, a responding party must “lead trump or risk losing”: DaSilva v. Gomes, 2018 ONCA 610, at paras. 17-18; and 1061590 Ontario Limited v. Ontario Jockey Club (1995), 21 O.R. (3d) 547 (C.A.). The responding party may not rest on the allegations or denials in the pleadings, but must present by way of affidavit or other evidence, specific facts and coherent, organized evidence demonstrating a genuine issue. The motions judge is entitled to assume that the record contains all evidence that the parties will present if there is a trial. It is not sufficient for the responding party to say that more and better evidence will be available at trial. The court must take a “hard look” at the evidence to determine whether there is a genuine issue requiring a trial.

[36] The Court of Appeal has recently held in Butera v. Chown, Cairns LLP, 2017 ONCA 783, 137 O.R. (3d) 561, at para. 34, that a motion for partial summary judgment is a “rare procedure”:

A motion for partial summary judgment should be considered to be a rare procedure that is reserved for an issue or issues that may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost effective manner. Such an approach is consistent with the objectives described by the Supreme Court in Hryniak and with the direction that the Rules be liberally construed to secure the just, most expeditious, and least expensive determination of every civil proceeding on its merits.

See also Espresso Tax Credit Fund III Limited Partnership v. Arc Stainless Inc., 2018 ONSC 415.

Credibility

[37] There are numerous and significant issues of credibility based on the evidence before this Court, as seen from the foregoing.

[38] As regards misappropriation of business opportunities concerning both Kubota and Hyundai, there is divergent and contradictory evidence among Mr. Slathon/Ms. Fortes, Mr. Bohbot and representatives from Hyundai and Kubota as regards the issues of the presentation of RFPs and the contracts between those companies and Mr. Slathon, which cannot be determined without determining the credibility of the various individuals involved.

[39] The issues of Mr. Slathon and Ms. Fortes making a presentation vis-à-vis Kubota on December 7, 2015, while Mr. Slathon was still a senior employee with Add Impact, again will require assessments of credibility given contradictory evidence provided by a number of parties.

[40] Further, there was conflicting and contradictory evidence between Mr. Slathon/Ms. Fortes and Mr. Bohbot regarding the circumstances surrounding the hiring of Ms. Fortes by Mr. Bohbot/Blueprint.

[41] These issues are not document driven, but will depend largely upon the assessments of credibility of numerous witnesses.

[42] The claims also include the claim between Niceforo and Trademark, Mr. Bohbot and Mr. Slathon/Mesquite regarding a verbal agreement for payment by Trademark to Niceforo of 5% royalties on Trademark’s sales of Kubota-branded products. Mr. Slathon was to receive a royalty of 5% from Trademark, which he was to divide equally with Mr. Niceforo through Niceforo. There will clearly be issues of credibility as regards the verbal agreement between the companies’ principals, Mr. Haghighian and Mr. Bohbot, on behalf of their respective companies.

[43] As well, allegations of conspiracy have been claimed. The jurisprudence is clear that allegations of conspiracy should not be decided by summary judgment: Akagi v. Synergy Group (2000) Inc., supra; and Farooq v. Miceli, supra.

[44] Thus, based on the foregoing, and all of the evidence before me, there are significant issues of credibility which cannot be resolved in a summary judgment motion.

[45] There are also issues of fiduciary duty, breaches of good faith and fidelity, and issues of conspiracy that have been raised, and cannot be determined in the context of this summary judgment motion and based on the evidence before this Court.

[46] As regards damages, the defendants/moving parties submit that the plaintiffs claimed damages, including loss of business opportunity, which are hypothetical and not realized, and the action should therefore be dismissed. However, where the opportunity is sufficiently real and significant, damages may be claimed: see Kipfinch Developments Ltd. v. Westwood Mall (Mississauga) Ltd. (2008), 74 R.P.R. (4th) 221 (Ont. S.C.), aff’d in part 2010 ONCA 45, at paras. 113 to 128.

Analysis

[47] I have given considered thought to the motion and submissions of the parties, have reviewed the evidence and read the case law relied upon.

[48] I do not find this an appropriate matter for summary judgment. I not find there to be sufficient evidence before the Court to permit me to make the necessary findings of fact and to allow me to apply the law to the facts as found. Further, there are significant issues of credibility regarding several significant issues raised in this action. I find that there are genuine issues requiring a trial. Based on all of the evidence before me, I am not able to say that I can reach a just and fair determination of the facts in issue on the basis of the written record. Determination of the facts and issues in this action and application of the law to those facts, once determined, will require a full evidentiary record and assessments of credibility. As stated above, the issues of credibility are many and will require careful assessment based on the testimony of the witnesses and the evidentiary record before the Court. I find that the powers afforded to me pursuant to rr. 20.04 (2.1) and (2.2) will not assist in preventing a trial.

[49] I dismiss the defendants’ motion for summary judgment and order that this action proceed expeditiously to discoveries and trial.

Costs

[50] The parties have provided their costs outlines.

[51] Generally, the successful party is entitled to a portion of its costs. I see no reason to deviate from this general principle.

[52] The plaintiffs have been fully successful in this summary judgment motion. Accordingly, I find them to be entitled to their costs on a partial indemnity basis in the total amount of $13,027.69, which I find reasonable and proportionate. These costs are to be paid forthwith.

C. J. Brown, J. Released: March 12, 2019