COURT FILE NO.: CV-18-609315
DATE: 20191220
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Furniture.com, Inc. d/b/a Blueport Commerce
Plaintiff
– and –
Leon’s Furniture Limited
Defendant
Aaron Kreaden, for the Plaintiff
Geoff Hall and Will Horne, for the Defendant
HEARD: August 9, 2019
REASONS FOR DECISION
NISHIKAWA J.
Overview
[1] The Plaintiff, Furniture.com, Inc., doing business as Blueport Commerce (“Blueport”), brings this motion for summary judgment for $1,326,491.18 for services rendered under a contract with the Defendant, Leon’s Furniture Limited (“Leon’s”).
[2] Blueport submits that summary judgment is appropriate because there is no genuine issue requiring a trial that Leon’s owes Blueport the amount claimed.
[3] Leon’s position is that the motion for summary judgment is premature. Leon’s further submits that the motion cannot be determined because of its counterclaim and claim for equitable set-off against Blueport for inducing breach of a contract between Leon’s and an entity related to Blueport, Blueport Investors LLP (“Blueport Investors”).
[4] For the reasons that follow, I grant Blueport’s motion for summary judgment.
Factual Background
The Parties
[5] Blueport is a Delaware corporation with a registered head office in Boston, Massachusetts. Blueport’s business consists of providing websites to retailers who sell “big-ticket” items like furniture and appliances.
[6] Blueport is wholly-owned by Furniture.com Holdings, Inc. (“Holdings”). Blueport Investors, who is not a party to this proceeding, is a Delaware company operating in Ohio. Blueport Investors owns 96.51 percent of the shares in Holdings. Carl Prindle, the President and CEO of Blueport, owns the remaining shares in Holdings.
[7] Leon’s is a major Canadian retailer of furniture and appliances with a head office in Toronto. Leon’s has been in business in Ontario for over 100 years.
The Agreements Between Blueport and Leon’s
[8] In 2004, Leon’s decided to enter the online market for furniture and appliances. At the time, Leon’s lacked the e-commerce capabilities to do so.
[9] On April 13, 2005, Leon’s and Blueport entered into an agreement pursuant to which Blueport would provide technology and a full suite of services required to establish Leon’s online sales (the “First Agreement”). The term of the First Agreement was seven years. Blueport was to be paid twelve percent of website furniture sales and five percent of website appliance and electronics sales, payable on successful delivery of orders. This revenue sharing mechanism was labelled the “12/5% Fee.”
[10] In 2012, Leon’s acquired The Brick Group (“The Brick”). Leon’s sought to add The Brick’s businesses to its arrangement with Blueport. Leon’s and Blueport renegotiated the terms of the First Agreement over a period of approximately two years. During that period, the First Agreement continued to apply.
[11] On April 23, 2014, Blueport and Leon’s entered into an amended agreement (the “Amended Agreement”) which included a revised revenue sharing mechanism.
The LLC Agreement
[12] In April 2014, Leon’s invested $3 million into Blueport Investors and executed a subscription agreement. Leon’s holds 8.14 percent of the units in Blueport Investors and is a member of Blueport Investors, which is akin to a shareholder.
[13] The Amended and Restated Limited Liability Company Agreement (the “LLC Agreement”) between Blueport Investors and its members, including Leon’s, is governed by the law of the state of Delaware. The LLC Agreement requires that all disputes arising under the agreement be submitted to the courts of Ohio. Blueport is not a party to the LLC Agreement.
The Dispute Between Blueport and Leon’s
[14] In late 2016, a dispute arose between Blueport and Leon’s regarding the revenue sharing mechanism. On September 12, 2017, Leon’s issued a notice of dispute referring the dispute to arbitration. On September 25, 2017, Blueport gave notice of its intent to terminate the Amended Agreement, effective 90 days after notice.
[15] Leon’s disputed Blueport’s ability to terminate the agreement and brought a motion before the arbitrator for an injunction to prevent Blueport from terminating. The arbitrator dismissed Leon’s motion. On December 21, 2017, Leon’s application to this court for leave to appeal the arbitrator’s decision was dismissed by Hainey J.: Leon’s Furniture Limited v. Furniture.com (Blueport Commerce), 2017 ONSC 7666. Following the dismissal of Leon’s leave application, on December 27, 2017, the parties entered into a settlement agreement (the “Settlement Agreement”).
[16] Under the terms of the Settlement Agreement, Leon’s was permitted to remain on Blueport’s platform until September 30, 2018. The Settlement Agreement included a term amending the revenue sharing mechanism. While the Settlement Agreement contemplated a further agreement, the parties did not enter into a further agreement and acknowledged that they were bound by the terms of the Settlement Agreement.
The Outstanding Amount
[17] From January to July 2018, Leon’s paid fees invoiced by Blueport according to the terms of the Settlement Agreement.
[18] In August 2018, Leon’s stopped paying fees to Blueport. Blueport continued to provide services until September 30, 2018. Blueport invoiced Leon’s $567,821.42 for services provided in August 2018 and $527,570.08 for services provided in September 2018. Blueport rendered a further invoice for orders placed before September 30, 2018 but delivered after that date, in the amount of $231,099.68 (the “Post-Termination Amount”). The total of all the invoices, including the Post-Termination Amount, is $1,326,491.18 (the “Outstanding Amount”), which is the amount Blueport claims in this action. According to the terms of the Amended Agreement, the interest rate is five percent per year. The Settlement Agreement did not modify this term and confirmed that, subject to the modifications, the Amended Agreement remained in effect.
[19] After it was unsuccessful in seeking payment of the Outstanding Amount, Blueport commenced this action on November 21, 2018.
Leon’s Exercises Its Inspection Rights Under the LLC Agreement
[20] Shortly before Blueport commenced this action, on October 30, 2018, Leon’s gave notice to Blueport Investors that it intended to exercise its inspection rights as set out in s. 11.02 of the LLC Agreement, pursuant to which members have the right to inspect the company’s corporate, financial and similar records. Leon’s advised that it intended to commence the inspection on November 7, 2018. Leon’s rationale for exercising its inspection rights was to assess the “financial health” of Blueport Investors, given the loss of itself as one of Blueport’s most significant customers.
[21] Leon’s alleges that Blueport Investors delayed in complying with Leon’s request, and failed to honour its inspection rights. Blueport disputes Leon’s characterization of Blueport Investors’ responses to Leon’s request to inspect.
[22] In its Statement of Defence and Counterclaim in this action (the “Statement of Defence”), served on January 4, 2019, Leon’s alleges that Blueport intentionally precipitated, encouraged and induced Blueport Investors to breach the LLC Agreement. Leon’s position is that Blueport induced Blueport Investors to delay in order to prevent Leon’s from discovering financial irregularities and potential corporate wrongdoing, with the intent of maintaining a strategic advantage over Leon’s in this proceeding.
The Ohio Action
[23] On February 8, 2019, Leon’s commenced an action against Blueport Investors in the Court of Common Pleas in Franklin County, Ohio, alleging that Leon’s failed to honour Leon’s inspection rights under the LLC Agreement. Leon’s did not bring a claim against Blueport in that proceeding.
[24] On February 20, 2019, Blueport Investors’ counsel in the Ohio action, Marion Little Jr., wrote to advise Leon’s that the documents were available for inspection at his office.
[25] In the meantime, on March 11, 2019, Blueport Investors filed a motion to dismiss Leon’s action in Ohio on the basis that Leon’s was an unregistered foreign corporation doing business in Ohio. This motion was dismissed by the Ohio court on June 27, 2019.
[26] The inspection was rescheduled twice by Leon’s and eventually took place on March 28, 2019. Leon’s forensic accountants discovered a monitoring fee expense of $1,815,938.00 reported on Holdings’ 2017 tax return. The monitoring fee expense did not appear on the profit and loss statements, which is disclosed to members. Leon’s alleges that this is an irregularity that may have been concealed from the members for an improper purpose.
[27] On April 12, 2019, Leon’s requested further information. Blueport Investors’ counsel, Mr. Little, explained in a letter dated April 29, 2019 that the monitoring fee expense was “erroneously reported” and would be corrected in the 2018 tax return. Mr. Little further stated that the letter “fully responds” to Leon’s request, but invited counsel to contact him with any questions.
[28] Leon’s did not respond to the April 29, 2019 letter. In its materials on this motion, however, Leon’s states that the response was unsatisfactory and that it will continue to seek, among other documents, a “complete and forthright” accounting of the monitoring fee expense in accordance with its rights under the LLC Agreement.
[29] At a case conference on July 26, 2019, the Ohio court recommended that the parties explore a “business resolution” and reconvene after Blueport Investors had produced the requested documents. While Blueport Investors delivered a disk of documents shortly thereafter, Leon’s maintains that the documents do not fully respond to its request. The Ohio action is ongoing.
Issues
[30] Blueport’s motion for summary judgment raises the following issues:
(a) Is this an appropriate case for summary judgment or is Blueport’s motion for summary judgment premature?
(b) Is there a genuine issue requiring a trial as to whether Leon’s breached the Settlement Agreement?
(c) Is there a genuine issue requiring a trial on Leon’s counterclaim for inducing breach of contract and defence of equitable set-off?
(d) If summary judgment is appropriate, to what amount of damages is Blueport entitled?
(e) If summary judgment is granted, should the judgment nonetheless be stayed?
Analysis
Principles Applicable to Summary Judgment
[31] Rule 20.04(2)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 states that a court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.
[32] The Supreme Court of Canada has held that “summary judgment must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims:” Hryniak v. Mauldin, 2014 SCC 7, 1 S.C.R. 87, at para. 5. An issue should be resolved on a motion for summary judgment if: (i) the motion affords a process that allows the judge to make the necessary findings of fact and (ii) apply the law to those facts, and (iii) is a proportionate, more expeditious and less expensive process to achieve a just result than going to trial: Hryniak, at para. 49.
[33] On a motion for summary judgment, the judge must first determine whether there is a genuine issue requiring a trial based only on the evidence before him or her, without using the fact-finding powers under rr. 20.04(2.1) and (2.2). If there appears to be a genuine issue requiring a trial, the judge should then determine if the need for a trial can be avoided by using the fact-finding powers: Hryniak, at para. 66.
[34] The motion record before the motion judge must comprise a sufficient evidentiary basis on which to determine the issues: Aird & Berlis LLP v. Oravital Inc., 2018 ONCA 164, O.J. No. 865, at paras. 7-8. The court is entitled to assume that the record contains all the evidence that the parties would present if the matter proceeded to trial: Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, 242 A.C.W.S. (3d) 794, at paras. 26-27, aff’d 2014 ONCA 878, 247 A.C.W.S. (3d) 549, leave to appeal to SCC refused, 36341 (9 July 2015); Crescent Hotels and Resorts Canada Company v. 2465855 Ontario Inc., 2018 ONSC 5508, 297 A.C.W.S. (3d) 312, at para. 23; aff’d 2019 ONCA 268, 304 A.C.W.S. (3d) 730. It is a “well-established rule that both parties on a summary judgment motion have an obligation to put their best foot forward.” Mazza v. Ornge Corporate Services Inc., 2016 ONCA 753, 271 A.C.W.S. (3d) 735, at para. 9.
Is Blueport’s Motion for Summary Judgment Premature?
[35] Leon’s submits that Blueport’s motion for summary judgment is premature because it has not had the opportunity to discover necessary evidence, since Blueport brought this motion before documentary production and examinations for discovery. Leon’s seeks the opportunity to discover the evidence on which to make its case through a full discovery process. Leon’s argues that its ability to put its best foot forward is compromised because it has not had the opportunity to seek proper disclosure from Blueport, or from other sources, including Blueport Investors.
[36] A “motion for summary judgment may be premature where it does not serve the principles of proportionality, timeliness and affordability:” FFO Fiberglass Inc. v. Distribution Composites Inc., 2019 ONSC 4291, 308 A.C.W.S. (3d) 295, at para. 17. A summary judgment motion should not be brought until the issues in the action may appropriately be heard in a summary manner. In circumstances where a responding party lacks evidence because the only evidence is in the hands of the moving party, it may be unfair to expect the responding party to fully develop the evidentiary record at the time of the motion: Ali v. Ottawa (City), 2017 ONSC 739, 276 A.C.W.S. (3d) 325, at para. 31.
[37] In the circumstances of this case, I have determined that Blueport’s motion for summary judgment is not premature. Blueport’s claim for breach of contract can be appropriately heard in a summary manner because Leon’s has not disputed that it owes fees to Blueport. Leon’s only objection is to the Post-Termination Amount. The only substantive defence that Leon’s raises is its claim for equitable set-off on its counterclaim against Blueport for inducing breach of the LLC Agreement. For reasons that I expand upon further below, Leon’s counterclaim does not raise a genuine issue requiring a trial and does not preclude judgment in favour of Blueport.
[38] While Leon’s now complains that the motion for summary judgment is premature, in March 2019, Leon’s consented to a timetable for the motion and then responded to the motion on its merits. In Business Development Bank of Canada v. Nap Corp., 2013 ONCA 608, 232 A.C.W.S. (3d) 1000, at para. 11, the Court of Appeal upheld the motion judge’s decision refusing to stay a summary judgment motion where the party seeking the stay filed evidence in response to the summary judgment motion and was prepared to contest the motion on the merits. If Leon’s ability to respond to the motion was prejudiced by the lack of documentary production and discovery, Leon’s could have refused to consent to the timetable or could have brought a motion for directions to seek to stay or dismiss the motion: Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, 344 D.L.R. (4th) 193, at para. 58; FFO Fibreglass v. Distribution Composites, supra, at para. 14.
[39] Not only did Leon’s not bring a motion for directions or seek to stay the summary judgment motion, it did not attempt to build dates for the exchange of documents or for examinations for discovery into the timetable for the motion. Moreover, Leon’s did not attempt to cross-examine Blueport’s Chief Executive Officer and affiant, Carl Prindle, or to conduct any examinations pursuant to r. 39.03. Leon’s position is that any individuals it would have wished to examine under r. 39.03 are outside the jurisdiction and that they would have had to incur costs in seeking the assistance of the court. At no time, however, did Leon’s advise Blueport or Blueport Investors that it wished to examine any such individuals. It is possible that the individuals may have made themselves available or, in view of the Ohio action, that they could have agreed to a reciprocal arrangement. Leon’s made no such attempts.
[40] Having taken no steps to obtain further documents or evidence through the processes available to it, Leon’s cannot now argue that the motion is premature or inappropriate because it lacked sufficient opportunity to obtain evidence necessary to its defence or counterclaim: Ali v. Ottawa (City), supra, at para. 36.
[41] I reject Leon’s submission that the principle of proportionality precluded it from seeking a stay or further evidence on the motion. If Leon’s believed, as it claims, that the summary judgment motion was brought prematurely, it would have been logical to seek documentary disclosure and to conduct discoveries because those steps would be required in any event and would assist it in demonstrating a genuine issue. The decision not to seek further evidence in order to avoid incurring fees is a tactical choice that is at odds with Leon’s position on the motion. Alternatively, in the face of a genuinely premature summary judgment motion, a motion for directions could forestall incurring unnecessary costs. Once Leon’s consented to the summary judgment motion going ahead, it was required to put its best foot forward to respond. Leon’s cannot rely upon the principle of proportionality to relieve itself from that obligation.
Does Blueport’s Breach Of Contract Claim Raise A Genuine Issue Requiring A Trial?
[42] In its Statement of Defence, Leon’s denied Blueport’s entitlement to the Outstanding Amount. However, Leon’s evidence on the motion did not refute the amount claimed by Blueport. At the hearing, Leon’s confirmed that the only portion that it disputes is the Post-Termination Amount.
[43] Leon’s has not disputed that it is bound by the parties’ agreements, including the Settlement Agreement, or that Blueport delivered the services in accordance with their terms. Leon’s did not challenge Blueport’s evidence on any of the facts supporting its breach of contract claim, including Blueport’s invoices. On this motion, Leon’s has not taken the position that Blueport’s claim raises a genuine issue requiring a trial.
[44] Based on the evidence on the motion, there is no genuine issue requiring a trial as to Leon’s breach of the Settlement Agreement. Leon’s breached the Settlement Agreement by failing to pay Blueport for services it rendered until September 30, 2018.
Does Leon’s Counterclaim Raise A Genuine Issue Requiring A Trial?
[45] Leon’s opposes Blueport’s motion for summary judgment on the basis that Leon’s counterclaim for inducing breach of the LLC Agreement and defence of equitable set-off preclude Blueport from obtaining judgment. The Statement of Defence alleges as follows:
Based on the irrelevant consideration of the action it commenced against Leon’s, Blueport Commerce intentionally precipitated, encouraged, and induced Blueport Investors to breach section 11.02, among other sections, of the LLC Agreement. This was caused by Blueport Commerce or the directing minds common to both Blueport Commerce and Blueport Investors in an effort to maintain a strategic advantage over Leon’s, and was not justified by any legal right or other legitimate reason.
[46] Upon accessing Blueport Investors’ records, Leon’s discovered a monitoring fee expense of $1,815,938.00 in Holdings’ tax return that was not included in its profit and loss statements. Leon’s claims that it has incurred legal fees and forensic accounting expenses of $97,750.00 (CAD) that it would not have incurred but for Blueport inducing Blueport Investors to breach the LLC Agreement.
[47] As noted above, the dispute between Leon’s and Blueport Investors is subject to the exclusive jurisdiction of the courts of Ohio, where Leon’s has commenced a proceeding against Blueport Investors. Leon’s has not brought a claim against Blueport in Ohio for inducing breach of the LLC Agreement.
[48] In order to prove the tort of inducing breach of contract, Leon’s must demonstrate the existence of a valid contract, that Blueport knew about the contract, that Blueport intended to and did procure the breach of the contract, and that as a result of the breach, Leon’s suffered damages: Drouillard v. Cogeco Cable, 2007 ONCA 322, 282 D.L.R. (4th) 644, at para. 26. Leon’s has failed to adduce any evidence on this motion to support either that Blueport intended to procure the breach of the LLC Agreement or that it in fact did so.
[49] In support of its counterclaim, Leon’s relies upon the affidavit of Leon’s Chief Financial Officer, Constantine Pefanis, which states: “Based on the facts outlined above, it is Leon’s justified and sincere opinion that Blueport Commerce has induced Blueport Investors to breach section 11.02 of the LLC Agreement, thereby preventing Leon’s from discovering its financial irregularities and potential corporate wrongdoing, with the intent of maintaining a strategic advantage over Leon’s in the Ontario litigation.”
[50] Relying upon the Supreme Court of Canada’s decision in White Burgess Langille Inman v. Abbott and Haliburton Co., 2015 SCC 23, 2 S.C.R. 182, at para. 14, Blueport submits that the Mr. Pefanis’ statement is inadmissible opinion evidence. I agree. Not only is Mr. Pefanis’ opinion a legal conclusion on the very issue to be determined by the court on Leon’s counterclaim, it is offered by a non-expert who does not appear to be a lawyer. Even if the statement were admissible, I would give it no weight.
[51] The facts upon which Mr. Pefanis’ statement is based include the sequence of events after the breakdown of the relationship between Blueport and Leon’s. Weeks after Leon’s exercised its inspection rights, Blueport commenced this proceeding against Leon’s. In the meantime, Blueport Investors delayed in providing access to its records, thus raising Leon’s suspicions. Leon’s submits that Blueport Investors’ response to its request to inspect cannot be a coincidence, when Leon’s had previously exercised its inspection rights without any difficulty. At the same time, the sequence of events could suggest that, as Blueport submits, Leon’s exercise of its inspection rights was in retaliation for Blueport’s repeated demands for payment.
[52] Leon’s also relies upon the fact that Blueport is a subsidiary of Blueport Investors and that the two entities have overlapping “directing minds.” Blueport Investors is governed by a Board of Managers consisting of three individuals. Two of those individuals are directors of Blueport. The remaining manager is the Secretary of Blueport.
[53] In response to Leon’s allegations, Mr. Prindle, denies that he is a “directing mind” of Blueport Investors. Mr. Prindle is not an employee, manager, director, or officer of Blueport Investors. In his affidavit, Mr. Prindle states that neither he nor Blueport had any ability to control Blueport Investors’ actions. While Leon’s argues that Mr. Prindle’s statement is nothing more than a bald denial, Leon’s chose not to cross-examine him on his affidavit.
[54] Blueport and Blueport Investors are distinct corporate entities. Unless there are facts that would support lifting the corporate veil, their distinct corporate identities are to be respected: Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co., 1996 CanLII 7979 (ON SC), [1996] 28 O.R. (3d) 423, at para. 19 (Gen. Div.), aff’d [1997] O.J. No. 3754 (Ont C.A.). Leon’s has alleged no facts to support a lifting of the corporate veil, other than the existence of overlapping directing minds. The fact that there are overlapping directors or managers is not, on its own, sufficient to prove that Blueport controls Blueport Investors or that Blueport induced Blueport Investors to breach the LLC Agreement.
[55] Moreover, contrary to Leon’s allegation in its Statement of Defence, Blueport is not a wholly-owned subsidiary of Blueport Investors. Blueport is owned by Holdings, in which Blueport Investors has a majority interest.
[56] Even where it is alleged that a parent corporation has induced its subsidiary to breach a contract, the fact that the parent controls the subsidiary does not mean the parent is liable for inducing breach of contract. In a case decided by a panel of the Singapore Court of Appeal that included former Chief Justice of Canada, Beverley McLachlin, the court stated that “the fact that a company is wholly and entirely controlled by its parent company cannot, without more, mean that the parent had induced the subsidiary’s breach of contract:” Burmi Armada Offshore Holdings Ltd. v. Tozzi Srl, [2018] SGCA(I) 5, at para. 43 (panel). The court further stated, at para. 47:
In order to establish that a parent company is liable for inducing a breach of contract by its subsidiary, some factor over and above an actual act of inducement would be needed. In other words, the mere fact that a shareholder with a controlling interest acts in such a way as to induce a company to breach its contract as a matter of fact, is not enough to render the shareholder liable for inducing the breach of contract as a matter of law: something more is required. At least in the present case, we would consider that what would be needed would be a finding that, in so acting, the parent company was pursuing an interest unrelated to (or, possibly, in addition to) its capacity as owner of the shares in the subsidiary.
[57] It is even more difficult to see how Blueport, as an indirect subsidiary, could induce Blueport Investors, a parent corporation, to breach the LLC Agreement, when it has no control or ownership of Blueport Investors. Other than the overlap of directors and managers, Leon’s has alleged no facts or provided any evidence to support a finding that Blueport had the ability to control the actions of Blueport Investors.
[58] Not only has Leon’s failed to allege or demonstrate facts to support that Blueport has any degree of control over Blueport Investors, Leon’s cannot allege the “something more” referred to by the court in Burmi v. Tozzi. Leon’s argues that Blueport induced Blueport Investors to breach Leon’s inspection rights to gain a strategic advantage over Leon’s in this action. This is unconvincing. Since Leon’s has not substantially disputed Blueport’s claim, it is difficult to see what strategic advantage Blueport could gain in this action by inducing Blueport Investors to breach Leon’s inspection rights.
[59] In Northern Industrial Services Group Inc. v. Duguay, 2016 ONCA 539, 268 A.C.W.S. (3d) 327, the Court of Appeal upheld the motion judge’s decision granting summary judgment dismissing the plaintiff’s claim and granting judgment on the defendant’s counterclaim. In that case, the Court of Appeal held that the plaintiff’s was not based on “hard” facts. The Court further stated at para. 16:
Having found that certain of the evidence relied on by NISG to prove its breach of contract claim was ambiguous or inconclusive, the motion judge was not obliged to undertake detailed credibility assessments or to resolve the ambiguities in question. It was sufficient to establish that Duguay Sr.’s entitlement to summary judgment to find, as the motion judge did, that NISG owed the debt in question under the Share Purchase Agreement and that NISG had failed to put its best foot forward on the motion by adducing clear and reliable evidence of Duguay Sr.’s breach of the non-competition agreement.
[60] This is analogous to the circumstances of this case, where Leon’s breach is clear, and its counterclaim lacks any basis in fact. I am satisfied that Leon’s counterclaim raises no genuine issue requiring a trial and does not preclude summary judgment on Blueport’s claim.
[61] Given that the LLC Agreement grants exclusive jurisdiction over disputes arising under the agreement to the courts of Ohio, I decline to address Blueport’s arguments that Blueport Investors has not breached the LLC Agreement. I note, however, that the issue of whether Blueport induced Blueport Investors to breach the LLC Agreement would have required a finding as to whether Blueport Investors, a party not before this court, breached the LLC Agreement. This gives rise to a multiplicity of proceedings and the potential for inconsistent findings. Leon’s has not suggested any reason why its claim for inducing breach of contract could not have been raised in the Ohio action.
Do Credibility Issues Preclude Summary Judgment?
[62] Leon’s claims that resolving the central issue on its counterclaim “will necessarily involve a careful assessment of Mr. Prindle’s credibility in making this denial.” Despite the importance of Mr. Prindle’s credibility, Leon’s did not cross-examine Mr. Prindle on his affidavit. It is difficult to understand why, if credibility were so essential to Leon’s counterclaim, it would forego this opportunity. Leon’s position is that a cross-examination would be different from an examination for discovery, and that cross-examination “would be a meaningless exercise in the absence of full production.” As noted above, documentary production could have been, but was not, incorporated into the timetable for the motion for summary judgment.
[63] Leon’s further argues that even if it cross-examined Mr. Prindle, it would have no more information than it currently does. This is not a foregone conclusion. In its factum, Leon’s raises various questions that must be determined before judgment can be granted, such as, who controls Blueport, who controls Blueport Investors, and what role Blueport played in Blueport Investors’ position on Leon’s request to inspect. Leon’s cannot complain about lacking answers to those questions when they were never posed to the individual best placed to answer them.
[64] As a result, Mr. Prindle’s evidence as to Blueport’s inability to control Blueport Investors and the absence of any inducement went unchallenged. This evidence is consistent with the fact that Blueport is an indirect subsidiary of Blueport Investors. In the absence of any facts or evidence to the contrary, I see no reason to reject Mr. Prindle’s evidence.
[65] Leon’s has failed to put its best foot forward on the motion for summary judgment. Contrary to Leon’s submissions, it was not Blueport, but Leon’s own tactical choices that impeded it from doing so. Leon’s counterclaim does not raise a genuine issue requiring a trial. Accordingly, I dismiss Leon’s counterclaim for inducing breach of contract.
To What Amount of Damages is Blueport Entitled?
[66] Having found that Leon’s breached the Settlement Agreement and that its counterclaim does not preclude summary judgment in favour of Blueport, I find that Blueport is entitled to recover the Outstanding Amount, including the Post-Termination Amount.
[67] In respect of the Post-Termination Amount, Blueport continued to provide services to Leon’s until the termination date of September 30, 2018. The Settlement Agreement contemplated that Blueport would be paid for those services. Specifically, Section 7 of the Settlement Agreement states:
As of September 30, 2018, the parties shall mutually release all claims with respect to the Application and Services Agreement (again excluding claims for any fees owed Blueport pursuant to Section 4(a) modified above, including for orders initiated prior to the date of the release but delivered thereafter and for any unpaid transition fees).
[68] This provision would be unnecessary and illogical if Blueport was not entitled to fees for orders placed before September 30, 2018 but delivered thereafter.
[69] Based on the terms of the Settlement Agreement, fees for orders initiated before September 30, 2018 but delivered thereafter are owing to Blueport. Accordingly, I grant summary judgment to Blueport for the Outstanding Amount plus interest based on the contractual rate of five percent.
Should This Court Grant a Stay of Execution?
[70] In the event that Blueport is granted summary judgment, Leon’s seeks a stay of execution of any judgment, pursuant to r. 20.08, pending the outcome of the Ohio proceeding.
[71] Since I have determined it appropriate to dismiss the counterclaim, there would be no right to equitable set-off of Leon’s claim against Blueport for inducing breach of the LLC Agreement. As a result, no stay of execution is warranted.
Conclusion
[72] Blueport’s motion for summary judgment affords a process that allows the court to make the necessary findings of fact and apply the law to those facts, and is a proportionate, more expeditious and less expensive process to achieve a just result than going to trial.
[73] Accordingly, I grant Blueport’s motion for summary judgment and award damages for breach of contract in the amount of $1,326,491.18, plus interest at the contract rate of five percent. I further grant summary judgment dismissing Leon’s counterclaim.
[74] At the hearing, counsel agreed on the amount of costs in the event that either the Plaintiff or Defendant succeeded on the motion. Based on counsel’s agreement, I award $27,000.00 in costs of the motion and action to Blueport on a partial indemnity basis, including costs and disbursements.
Nishikawa J.
Released: December 20, 2019
COURT FILE NO.: CV-18-609315
DATE: 20191220
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Furniture.com, Inc. d/b/a Blueport Commerce
Plaintiff
– and –
Leon’s Furniture Limited
Defendant
REASONS FOR DECISION
Nishikawa J.
Released: December 20, 2019