COURT FILE NO.: CV-21-00657458-00CL DATE: 20210226 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: RAGEON INC., Applicant AND: SHOPIFY INC., Respondent
BEFORE: Justice Cavanagh
COUNSEL: David N. Delagran, for the Applicant Caitlin R. Sainsbury, Laura M. Wagner and Mahnaz Shariati, for the Respondent
HEARD: February 24, 2021
Endorsement
Introduction
[1] RageOn Inc. (“RageOn”) conducts an online business which allows third party users to upload and offer for sale products such as clothing items bearing user-generated prints and designs. RageOn operated its business through the commerce platform offered by Shopify Inc. (“Shopify”).
[2] Shopify has a policy regarding acceptable use of its platform which prohibits certain activities in connection with the use of its services including prohibitions on using the services to promote or condone hate or violence and allowing content which is associated with terrorist organizations.
[3] Beginning in October 2020, Shopify notified RageOn on several occasions that it found and removed content on RageOn’s online store that promoted or condoned hatred or violence and that is associated with terrorist organizations. Shopify advised RageOn that such content violates Shopify’s policy and that RageOn was required to remove such content from its site.
[4] In January 2020, Shopify gave RageOn a final warning that content which violated its policy would not be tolerated on its platform and that any further violation would result in the immediate termination of RageOn’s account. RageOn responded that it was committed to complying with Shopify’s policy, and it asked Shopify to assist it to do so.
[5] After giving this final warning, Shopify again identified content which had not been removed from RageOn’s website and which violated Shopify’s policy against hateful content and content associated with terrorist organizations. On February 17, 2021, Shopify gave written notice to RageOn that it was terminating its agreement with RageOn.
[6] RageOn brings this motion for an interim injunction directing Shopify to (i) restore all rights and benefits of its contract with RageOn, including, without limitation, access to all web facilities pending final determination of the issues; and (ii) fulfil its contractual obligations to RageOn.
[7] For the following reasons, RageOn’s motion is dismissed.
Factual Background
Parties
[8] Shopify carries on business as a commerce platform. Shopify provides over a million merchants with the tools and technology to set up online stores and sell their products and services to their own customers.
[9] RageOn operates its business through the Shopify platform. It has done so since 2013. RageOn’s business is as an online retailer. RageOn’s business is based on user-generated content. RageOn does not create images or designs itself. Rather, it allows third party users to upload and offer for sale products such as clothing items bearing user-generated prints and designs. Customers select artwork uploaded by other users. A third party manufacturer produces the product and ships it to the customer.
Contractual relationship between Shopify and RageOn
[10] Shopify provides hosting, software and e-commerce services to RageOn in accordance with the Shopify Plus Agreement Existing Merchant (the “Agreement”).
[11] The Agreement provides that RageOn agrees to be bound by Shopify’s Terms of Service (the “Terms of Service”). The Agreement provides that if there is a conflict between the Terms of Service and the Agreement, the conflicting provisions of the Agreement shall prevail.
[12] The Terms of Service required that RageOn agree with and accept all the terms and conditions contained or expressly referenced in the Terms of Service including Shopify’s Acceptable Use Policy (“AUP”).
[13] Section 3.2 of the Agreement provides that RageOn shall be responsible for the content and the operation of and transactions processed through its website.
[14] Section 7 of the Agreement addresses its term and termination. Pursuant to section 7.1, unless terminated earlier pursuant to the terms and conditions of the Agreement, the Agreement is renewable on an annual basis. Section 7.2 of the Agreement provides that either party may terminate the Agreement with written notice if, among other things, the other party fails to correct a material breach of its obligations under the Agreement within 30 days after receipt by such other party of written notification from the notifying party of such material breach.
[15] Shopify’s Terms of Service incorporate the AUP which describes activities that are prohibited in connection with merchants’ use of Shopify’s services. The prohibited activities include child exploitation, harassment and bullying, defamation, illegal activities, and other activities. The AUP prohibits activities described as “Hateful content” and “Terrorist organizations” as follows:
Hateful content: You may not use the Services to promote or condone hate or violence against people based on race, ethnicity, color, national origin, religion, age, gender, sexual orientation, disability, medical condition, veteran status or other forms of discriminatory intolerance. You may not use the Services to promote or support organizations, platforms or people that: (i) promote or condone such hate; or (ii) threaten or condone violence to further a cause.
Terrorist organizations: You may not offer goods or services, or post or upload Materials, that imply or promote support or funding of, or membership in, a terrorist organization.
[16] The AUP provides that Shopify has the right, but not the obligation, to monitor merchants’ accounts and use of its services for compliance with the AUP, the Terms of Service and any other agreement between it and the merchant. Under the AUP, Shopify’s determination of whether a violation of the AUP has occurred will be final and binding and any action taken with respect to enforcing the AUP, including taking no action at all, will be at Shopify’s sole discretion. The AUP states that Shopify may, at any time and without notice, remove any materials and suspend or terminate the account or access to services if the merchant engages in activities that violate the letter or spirit of the AUP, including activities outside of the merchant’s use of the services.
[17] The AUP provides that where there is any conflict between the AUP and Terms (defined as “the Shopify Terms of Service, or any other agreement between you and Shopify governing your use of the Services”), the AUP will take precedence, but only to the extent required to resolve such conflict.
Actions taken by Shopify to enforce the AUP and responses from RageOn
[18] Before the middle of 2020, RageOn had not received notification of non-compliance with the AUP. Shopify’s evidence is that historically it focused principally on responding to reports of violations of the AUP. Over the course of 2020, in response to a variety of highly publicized world events, Shopify adjusted its approach to the enforcement of several categories of AUP violations, including content that promotes or supports violence or hate.
[19] On October 6, 2020, Shopify sent a notice to RageOn advising that certain products in its online shop were in violation of the AUP. In particular, Shopify noted that any content associated with QAnon, the Proud Boys, and the Boogaloo movement, as well as content depicting the Confederate battle flag, violated the terms of the AUP.
[20] In the October 6 notice, Shopify provided a list of 21 links to products that it had removed from RageOn’s shop for violating the AUP. Shopify specifically advised RageOn:
Please note that the reposting of the removed content, or any other violation of Shopify’s AUP, may result in the suspension or termination of your account. Carefully review the rest of your shop to ensure that it complies with Shopify’s AUP and Terms of Service.
[21] In response to this notice, RageOn’s CEO, Mike Krilivsky, advised that RageOn is a “User Generated Content Marketplace” which does not upload designs; its users do. He suggested working together with Shopify to prevent products that respond to keyword searches for offending content from appearing. Mr. Krilivsky asked Shopify to provide ideas on how RageOn and Shopify can mitigate this type of product uploads from random users.
[22] Over the following months, Shopify continued to identify material on RageOn’s website including content associated with QAnon, the Proud Boys, Nazism, and the Boogaloo movement, as well as content depicting the Confederate battle flag.
[23] On October 8, 2020, Shopify notified RageOn of additional content on its shop that was in violation of the AUP, identifying 17 links that had been removed by Shopify. This included QAnon and Nazi paraphernalia and content featuring the Confederate battle flag. Shopify notified RageOn that it is responsible for ensuring compliance with the Agreement, the AUP and the Terms of Service. Shopify advised RageOn to carefully review the rest of its store to ensure that it complies with the AUP and the Terms of Service by the end of day on October 9, 2020. Shopify advised that any further violation of the AUP may result in termination of RageOn’s account.
[24] On October 21, 2020, representatives from Shopify spoke with Mr. Krilivsky by telephone. During this call, Mr. Krilivsky was reminded that RageOn is responsible for all content posted to its store regardless of whether such content is posted by third parties, and that compliance with the AUP is a requirement of RageOn’s use of Shopify’s services. On October 23, 2020, Shopify sent Mr. Krilivsky a follow-up email reiterating this information.
[25] On November 12, 2020, Shopify sent a notice to RageOn that another 35 products on its website had been removed for violating the AUP. The products included paraphernalia associated with QAnon and the Boogaloo movement.
[26] On January 15, 2021, Shopify sent a notice to RageOn that products had been identified on its shop that violated the AUP. Shopify notified RageOn that “[a]s a final warning, any further violation of Shopify’s AUP will result in the immediate termination of your account”.
[27] On January 19, 2021, RageOn wrote in response to the January 15, 2021 notice. RageOn set out all of the steps taken since October 6, 2020 in efforts to comply with Shopify’s AUP. The steps included actions taken by RageOn to: implement a filter with auto-detect software that flags more than 70% of upload; remove upwards of 100 uploads each day due to what it perceives are violations; add two more employees whose primary goals are to monitor the site for policy violations; add 70+ keywords to its autodetect system of keywords to remove keyword prohibited content and activities; permanently ban more than 10 users from the site for violations of the RageOn AUP; and remove thousands of design violations on RageOn’s AUP. RageOn asked Shopify to share its keywords used to flag AUP violations. RageOn expressed that it wants to do everything it can to ensure that the content shared on its platform does not violate Shopify’s AUP.
[28] On January 21, 2021, Shopify wrote to RageOn to reiterate that the January 15, 2021 notice was a final warning and that any further violation of the AUP would result in the immediate termination of RageOn’s account.
[29] On February 2, 2021, RageOn’s legal counsel wrote to Shopify. In his letter, RageOn’s legal counsel advised that RageOn accepted the terms of Shopify’s platform. He advised that RageOn does not object to the terms of the AUP or the Terms of Service, or to the “expansion of prohibited activities to include the newly-added terms”. RageOn’s legal counsel expressed that RageOn objects to Shopify’s failure to perform its contractual obligations in good faith and to Shopify’s failure to assist RageOn in its efforts to filter out the prohibited content. RageOn’s counsel sought to reach agreement on processes and protocols to enable RageOn to comply with the AUP on an ongoing basis. RageOn’s counsel requested that if Shopify intended to terminate RageOn’s account, it be given seven days notice of its intention to terminate in order to provide RageOn with the ability to have the matter determined by the court before Shopify “unilaterally changes the status quo”.
Termination of RageOn’s Account
[30] Shopify provided evidence that following the January 15, 2021 notice, it once again identified content on RageOn’s website in violation of the AUP, including paraphernalia associated with QAnon, Nazism, and the Proud Boys.
[31] On February 17, 2021, Shopify sent a letter to RageOn’s counsel providing notice under section 7.2 the Agreement and Shopify was terminating the Agreement effective in 14 days (the “Termination Notice”).
[32] Shopify advised RageOn in the Termination Notice that the customer-facing storefront had been suspended effective immediately. Shopify provided RageOn with 14 days continued administrative access to its accounts and the “backend” of its store so that it could finish fulfilling orders, provide customer refunds, and/or export its data to another platform.
Analysis
[33] The issue on this motion is whether RageOn should be granted an interim injunction directing Shopify to (i) restore all rights and benefits of its contract with Shopify including, without limitation, access to all web facilities pending final determination of the issues; and (ii) fulfil its contractual obligations to RageOn.
[34] The test for obtaining an interim or interlocutory injunction was established by the Supreme Court of Canada in RJR-MacDonald v. Canada (Attorney General), [1995] 3 S.C.R. 199 in which was held that an injunction may be granted where the applicant establishes that (a) there is a serious issue to be tried with respect to an infringement of the moving party’s rights; (b) the moving party will suffer irreparable harm if an injunction is not granted; and (c) the balance of convenience favours granting the relief sought.
[35] Shopify submits that where, as here, a mandatory interlocutory injunction is sought, the applicant must meet a modified version of the RJR-MacDonald test which requires the applicant to demonstrate a strong prima facie case that it will succeed at trial.
[36] In R. v. Canadian Broadcasting Corp., 2018 SCC 5, the Supreme Court of Canada held, at para. 15, that on an application for a mandatory interlocutory injunction, the appropriate criterion for assessing the strength of the applicant’s case at the first stage of the RJR-MacDonald test is not whether there is a serious issue to be tried, but rather whether the applicant has shown a strong prima facie case. The Supreme Court of Canada in CBC explained that a mandatory injunction “directs the defendant to undertake a positive course of action, such as taking steps to restore the status quo, or otherwise ‘put the situation back to what it should be’”. The Court observed that “the potentially severe consequences for a defendant which can result from a mandatory injunction, including the effective final determination of the action in favour of the plaintiff, further demands what the Court described in RJR-MacDonald as ‘extensive review of the merits’ at the interlocutory stage”.
[37] In CBC, the Supreme Court of Canada held, at para. 16, that the application judge, in characterizing the interlocutory injunction as mandatory or prohibitive, is required to look past the form and language in which the order sought is framed, in order to identify the substance of what is being sought: “the application judge should examine whether, in substance, the overall effect of the injunction would be to require the defendant to do something, or to refrain from doing something”.
[38] On this application, RageOn requests an order which would require Shopify to reinstate the Agreement which it terminated and to reinstate its services to RageOn under the Agreement. This relief, if granted, would in substance require Shopify to take a positive course of action. I am satisfied that RageOn is seeking a mandatory interim injunction. I note that RageOn characterized the relief sought in paragraph 1(b) of its Notice of Application as an “interim, interlocutory mandatory injunction”.
[39] RageOn contends that Shopify acted precipitously in terminating the Agreement because it did so without notice to RageOn after counsel for RageOn had requested on February 2, 2021 that it be given seven days notice before Shopify acted to terminate in order to seek relief from the court. Shopify did not agree to restrict its rights under the Agreement, and it did not agree to the accommodation requested by RageOn’s counsel. The letter from RageOn’s counsel did not create any additional legal obligations to which Shopify was subject, and Shopify was not obliged to agree to the requested accommodation.
[40] The question at the first stage of the inquiry is whether Shopify has shown a strong prima facie case that Shopify breached the Agreement when it notified RageOn on February 17, 2021 that the Agreement was terminated.
[41] In order to meet its burden to demonstrate that it has a strong prima facie case, RageOn must show that there is a strong likelihood on the law and the evidence presented that, at the hearing of this application on the merits, RageOn will be ultimately successful in proving the allegations set out in the Notice of Application: CBC, at para. 17.
[42] The test for granting an interim injunction is the same as that for granting an interlocutory injunction: Healthy Body Services Inc. v. Muscletech Research & Development Inc., 2001 CarswellOnt 2853 (S.C.J.), at para. 7.
Has RageOn demonstrated that it has a strong prima facie case on the merits?
[43] RageOn submits that there are three main issues in relation to its case on the merits: (i) whether RageOn breached the AUP, (ii) whether Shopify was entitled to terminate the Agreement, and (iii) whether Shopify acted in good faith in fulfilling its obligations under the Agreement. At the first stage of the analysis, RageOn must demonstrate that there is a strong likelihood that at the hearing of the application on its merits these issues will be decided in its favour.
[44] As part of the Agreement, RageOn is bound by the terms of the AUP. The AUP prohibits activities described as “Hateful content” and “Terrorist activities” as described in the AUP. The evidence is that over a period of months beginning in October 2020, Shopify identified content on RageOn’s online shop that was in violation of the terms of the AUP prohibiting hateful content and support for terrorist organizations. RageOn’s online shop included content associated with QAnon, the Proud Boys, the Boogaloo movement, Nazism and depictions of the Confederate battle flag. In its email dated October 6, 2020, Shopify notified RageOn that “[i]n particular, we consider the content of your shop that depicts the Confederate battle flag, and any content associated with the Boogaloo movement and Proud Boys to be in violation of Shopify’s AUP”. Shopify sent further notices identifying content associated with these organizations, and with QAnon, Nazism and the Confederate battle flag as being in violation of the AUP.
[45] Shopify provided evidence that in early February 2021 the Government of Canada placed the Proud Boys on a list of terrorist entities. Shopify also provided evidence that the FBI has identified conspiracy theories, including those promoted by QAnon, as potential domestic terrorism threats, and that the FBI assesses Boogaloo adherents as posing an anti-government threat who may engage in violent activities.
[46] Pursuant to the AUP, Shopify’s “determination of whether a violation of this AUP has occurred will be final and binding”.
[47] On the evidence before me, RageOn has failed to show that there is a strong likelihood that it will succeed in this application in demonstrating that the content identified by Shopify as being associated with hateful content and terrorist activities does not violate the AUP. RageOn has not shown that there is a strong likelihood that it will succeed in proving that it did not breach the AUP.
[48] RageOn submits that Shopify was not entitled to terminate the Agreement for two reasons, first, the termination was premature and defective pursuant to the terms of the Agreement and, second, the alleged material breaches do not go to the “root” of the Agreement.
[49] RageOn submits that Shopify was not entitled to terminate the Agreement unless and until RageOn failed to correct a material breach within 30 days of RageOn receiving notice of such breach. RageOn contends that by providing notice on February 17, 2021 of a material breach of the Agreement and removing the RageOn’s online presence that day and effectively terminating the Agreement, RageOn was deprived of its contractual right to remedy the material breach within the 30 day curing period. RageOn argues that the curing period applies to each material breach of the Agreement and, therefore, Shopify may not cite notifications prior to February 17, 2021 as justification for its decision to effectively terminate the Agreement on February 17, 2021. RageOn submits that each material breach is a singular and unique breach.
[50] In its notices to RageOn beginning on October 6, 2020, particular types of content were identified as being in breach of the AUP. The content identified in the February 17, 2021 Termination Notice was the same type of content as had been previously identified. Shopify had notified RageOn in October 2020 of the particular types of content that violated the AUP and that in order to comply with the AUP, it was required to review the rest of its store to ensure that it is in compliance. RageOn admits that content identified by Shopify in February 2021 was not new, and some of this content had been in its shop for years.
[51] It does not make commercial sense to interpret the Agreement and related agreements, the AUP and Terms of Service, as requiring that each violation of the AUP must be considered separately. This would put the onus on Shopify to expend resources to monitor RageOn’s online shop on an ongoing basis to ensure that no content in violation of the AUP was present. Under RageOn’s interpretation of the Agreement and the AUP, an online merchant who removed content which violated the AUP within the 30 day curing period could, immediately after the contractual notice was given, include virtually the same content, or similar content that would clearly violate the AUP for precisely the same reason as content subject to the notice, and Shopify would be required to give a fresh notice to compel the online merchant to take down the offending content. This would effectively eliminate Shopify’s ability to enforce its contractual right to ensure that no content prohibited by the AUP was on its platform, which is the clear purpose of the AUP.
[52] Section 7.2 of the Agreement provides that either party may terminate the Agreement with written notice if the other party fails to correct a material breach of its obligations under this Agreement within 30 days after receipt by such other party of written notification from the notifying party of such material breach. As I have noted, as early as October 8, 2020, Shopify notified RageOn that it was required to carefully review the rest of its store to ensure that it complies with the AUP and the Terms of Service. On January 15, 2021, Shopify notified RageOn that other products had been identified in RageOn’s shop which violated the AUP and RageOn was informed that any further violations would result in termination of its account. The February 17, 2021 Termination Notice was given more than 30 days after the January 15, 2021 notice, and several months after the October 8, 2020 notice.
[53] Shopify submits that where a merchant violates the AUP, the termination provision in the AUP takes precedence over the termination provision in section 7.2 of the Agreement, and the AUP provides for a right for Shopify to terminate the merchant’s account without notice. I do not need to decide whether this is correct because even if section 7.2 of the Agreement applies, RageOn has failed to demonstrate that it has a strong prima facie case that Shopify breached the Agreement by terminating it as it did.
[54] RageOn submits that the alleged breaches of the AUP did not go to the root of the Agreement and do not justify termination of the Agreement. RageOn relies on the common law principle that a non-breaching party cannot elect to treat a contract as at an end when the other party has committed only a minor breach. RageOn submits that only a fundamental breach gives the innocent party the right to elect to put an end to all unperformed primary obligations of both parties.
[55] In Growthworks WV Management Ltd. v. Growthworks Canadian Fund Ltd., 2018 ONSC 3108, a contracting party terminated an agreement which provided for termination upon a “material breach” of the agreement. The other contracting party submitted that “material breach” means a “fundamental breach” as that term is understood in the common law. Wilton-Siegel J. held that where there is a right of termination in a contract for a “material breach”, the term “material breach” does not mean a “fundamental breach” as that term is understood for purposes of the common law. Wilton-Siegel J. held that determination of whether a breach is a “material breach” is fact specific and dependent upon the conduct and the contract at issue. See Growthworks, at paras. 246-254. I agree with Wilton-Siegel J. in this regard.
[56] When I read the Agreement, the Terms of Service and the AUP together, it is clear that the prohibition on activities described in the AUP is a significant contractual right upon which Shopify relies in its contractual relationships with merchants. Indeed, under the AUP, Shopify reserves the right to suspend or terminate the account of a merchant who engages in activities that violate the letter or spirit of the AUP.
[57] RageOn has failed to demonstrate that it has a strong prima facie case that Shopify was not entitled to terminate the Agreement because the alleged breaches of the AUP were not material breaches.
[58] RageOn submits that Shopify failed to act in good faith in performing the Agreement. RageOn relies upon Bhasin v. Hrynew, [2014] 3 S.C.R. 494 in which the Supreme Court of Canada held, at para. 65:
The organizing principle of good faith exemplifies the notion that in carrying out his or her own performance of the contract, a contracting party should have appropriate regard to the legitimate interest of the contracting partner. While “appropriate regard” for the other party’s interest will vary depending on the context of the contractual relationship, it does not require acting to serve those interests in all cases. It merely requires that a party not seek to undermine those interests in bad faith.
[59] In Bhasin, the Supreme Court of Canada recognized that the principle of good faith must be applied in a manner that is consistent with the fundamental commitments of the common law of contract which generally places great weight on the freedom of contracting parties to pursue their individual self-interest. The Court cautioned, at para. 70, that “[t]he development of the principle of good faith must be clear not to veer into a form of ad hoc judicial moralism or “palm tree” justice. In particular, the organizing principle of good faith should not be used as a pretext for scrutinizing the motives of contracting parties”.
[60] RageOn submits that Shopify failed to act in good faith in performing the Agreement because it (a) acted in a high-handed manner by adding new, arbitrary, prohibited terms to its AUP; (b) did not provide reasonable notice of alleged violations to RageOn or provide a reasonable opportunity to rectify the alleged violations in contravention of the express and implied terms of the Agreement; and (c) explicitly refused to provide RageOn with reasonable information and assistance, such as sharing search terms used by Shopify to monitor accounts of merchants, so that RageOn could comply with what it contends were the ever-changing standards set out in the AUP.
[61] Shopify provided evidence that the AUP was last updated in April 2020. The AUP clearly prohibits content that promotes or condones hatred or violence or that is supportive of terrorist organizations. The content on RageOn’s online shop identified by Shopify as contravening the AUP - paraphernalia associated with QAnon, Proud Boys, Nazis, and the Boogaloo movement, and depictions of the Confederate battle flag - fits within the prohibitions in the updated AUP. The evidence on this motion does not support the assertion made by RageOn that Shopify added new, arbitrary, prohibitive terms to its AUP.
[62] Shopify had no contractual obligation to provide its keywords to RageOn and, on the evidence before me, its choice not to do so was not a failure to act in good faith. Shopify’s evidence is that AUP compliance and monitoring is proprietary and, if details of its monitoring, including search terms or frequency, were to become public, some users could use this information to conceal violations of the AUP. Shopify identified to RageOn the particular type of content that violated the AUP. RageOn failed to remove such content.
[63] RageOn has failed to demonstrate that there is a strong likelihood on the law and the evidence presented that, at the hearing of this application, RageOn will be ultimately successful in proving that Shopify failed to act in good faith in its performance under the Agreement.
Has RageOn shown that it will suffer irreparable harm if an injunction is not granted?
[64] RageOn is required to show that if the interlocutory injunction is not granted it will suffer irreparable harm. “Irreparable” refers to the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other. Examples of irreparable harm include instances where one party will be put out of business by the court’s decision or where one party will suffer permanent market loss or irrevocable damage to its business reputation. See RJR-MacDonald, at para. 59.
[65] To satisfy the requirement to show irreparable harm, the moving party must provide clear and not speculative evidence that harm not compensable in damages will result if the interlocutory injunction is not granted. See Healthy Body Services Inc. v. Muscletech Research & Development Inc., 2001 CarswellOnt 2853 (S.C.J.), at para. 38.
[66] RageOn submits that if an injunction is not granted, it will suffer irreparable harm due to loss of business. RageOn contends that without Shopify’s hosting and software, it has no ability to promote, sell, process orders, and manage its business or generate any revenue. According to RageOn, maintaining relationships day-to-day with creators and customers, as well as facilitating the link between creators and their customers, is vital for its business and the harm that will result from lost creators and customers cannot be adequately measured in damages. RageOn asserts that it stands to lose approximately $12,750 per day as well as significant damage to its reputation in an intense and highly competitive industry. RageOn argues that it will be unable to capture market share through a web presence and will go bankrupt if injunctive relief is not granted. RageOn maintains that to establish itself through another platform could take years and the cost of doing so will put it into bankruptcy. RageOn asserts that it expended significant capital developing its products and marketing platforms using functions that are unique to Shopify’s platform and are incapable of being used elsewhere. In support of these submissions, RageOn relies on the affidavit of Mr. Krilivsky.
[67] In the affidavit evidence given by Shopify in response to this motion, the deponent states that there is no reason to believe that RageOn could not continue its business from any number of e-commerce or website hosting platforms of which Shopify is but one of many. The deponent states that there are other merchants who have had their agreements terminated by Shopify who have successfully moved their content to other platforms within a short period of time.
[68] Shopify provided evidence that on February 23, 2021, RageOn published a post to its Facebook account that includes the statements, “[w]e have some super big and exciting announcements where RageOn will be live again - please stay tuned!” and “PS - most of our iOS app is still working because it’s mostly custom-built, check it out here” with a link to access the application.
[69] The statements made in Mr. Krilivsky’s affidavit that RageOn would be forced to cease operations and declare bankruptcy if it is unable to continue to operate its business on the Shopify platform are little more than bald, declaratory, and conclusory assertions. RageOn has not tendered evidence showing with particularity and factual support why it would be unable to transition its business to another platform. There is no evidence of the steps that would need to be taken to transition to another platform, the costs required to take such steps, or the time that each step would require. RageOn has not provided evidence of its financial capabilities to make a transition. RageOn has not provided evidence of the functions it expended funds to develop that are unique to Shopify’s platform. The statements made in the recent Facebook posts suggest that RageOn has plans to transition to another platform, which conflicts with statements made in Mr. Krilivsky affidavit.
[70] If it is possible for RageOn to transition its business to another platform, then RageOn would have a remedy in damages for any wrongful conduct on the part of Shopify through termination of the Agreement. Even if there is some delay before RageOn is able to transition to another platform, RageOn would have a remedy in damages.
[71] RageOn has failed to tender clear evidence, which is not speculative, showing that it will suffer irreparable harm if an interlocutory injunction is not granted.
Has RageOn shown that the balance of convenience favours the granting of an interim injunction?
[72] The third test to be applied is a determination which of the two parties will suffer the greater harm from the granting or refusal of an interlocutory injunction, pending a decision on the merits. The factors which must be considered in assessing the balance of convenience are numerous and will vary in each individual case.
[73] RageOn submits that if an injunction is not granted, it will face financial ruin, whereas any inconvenience to Shopify arising from injunctive relief flows directly as a consequence of its own unlawful activity. RageOn submits granting an injunction will cause minimal short-term effort for Shopify, and any other concern raised by Shopify is merely theoretical. In the circumstances, RageOn submits that the balance of convenience favours granting injunctive relief.
[74] RageOn has not provided evidence beyond conclusory declarations that it will be forced out of business if it is unable to continue to use Shopify’s platform. Shopify has allowed RageOn to have administrative access to its accounts and it has been allowed to continue to fulfill existing orders while it transitions to another platform. RageOn has a remedy in damages for any breach of the Agreement by Shopify.
[75] Granting an injunction would require Shopify to restore access to its platform to a merchant which has repeatedly included content which violates Shopify’s AUP. The AUP makes it clear that Shopify is unwilling to host material that promotes hatred or violence or that is supportive of terrorist organizations. The evidence discloses that despite repeated warnings, RageOn failed to remove content from its site which violated these prohibitions in the AUP. If Shopify is ordered to restore access to its platform to RageOn, it will be forced to assume the risk that content which violates its prohibitions on offensive content will return to its platform, notwithstanding efforts made by RageOn to comply with the AUP.
[76] RageOn has failed to show that the balance of convenience favours granting injunctive relief.
Disposition
[77] For these reasons, RageOn’s motion for interim injunctive relief is dismissed.
[78] If the parties are unable to resolve costs, Shopify may make written submissions within 10 days. RageOn may make written responding submissions within 10 days thereafter. Shopify may make brief reply submissions, if so advised, within 5 days thereafter.
Cavanagh J. Date: February 26, 2021