Court File and Parties
COURT FILE NO.: CV-20-00644655 DATE: 20220421 ONTARIO SUPERIOR COURT OF JUSTICE
RE: ONTARIO FEDERATION OF OSTEOPATHIC PROFESSIONALS, Plaintiff -and- THE ONTARIO OSTEOPATHIC ASSOCIATION, Defendant
BEFORE: FL Myers J
COUNSEL: Lou Brzezinski and Cristina Fulop, for the Plaintiff Emrys Davis and Mehak Kawatra, for the Defendant
HEARD: April 19, 2022
Endorsement
The Motion and Outcome
[1] The defendant moves to strike the statement of claim without leave to amend under Rule 21.01(1)(b) of the Rules of Civil Procedure, RRO 1990, Reg 194. The defendant submits that the statement of claim does not assert a viable or reasonable cause of action against it.
[2] The plaintiff cross-moves for leave to amend the statement of claim to advance causes of action for damages under the Trademarks Act, RSC 1985 c T-13 and for intentional interference with its economic relations.
[3] For the reasons set out below, the statement of claim is struck and the motion to amend is dismissed. The plaintiff may deliver a draft amended statement of claim on or before June 1, 2022 to try again if so advised.
The Background
[4] A motion to strike a statement of claim under Rule 21.01(1)(b) invokes a narrow process. It is designed to weed out untenable or frivolous claims that cannot succeed even if the facts alleged are all true. There is a high burden on the defendant and a low threshold to be surmounted by the plaintiff’s pleading.
[5] Under Rule 21.02(2)(b) no evidence is admissible on this motion. Rather, the facts alleged in the statement of claim are presumed to be true for the purpose of this motion (subject to exceptions that do not apply here). My task is to read the claim generously and not technically, to determine if the plaintiff could be entitled to judgment if the case were to proceed to a trial and the plaintiff proves everything that it alleges in its pleading.
[6] The facts recited below are therefore taken from the statement of claim and the proposed amended statement of claim.
[7] The plaintiff is a corporation that represents approximately 180 osteopathic practitioners in Ontario. Nothing more is pleaded about what the plaintiff is or does.
[8] The defendant is also a corporation that represents osteopathic practitioners in Ontario. It is a competitor of the plaintiff.
[9] Osteopathic practitioners in Ontario receive the bulk of their revenue from insurance companies that insure their patients. If an insurance company refuses to cover a practitioner, she will likely experience a significant decline in revenue.
[10] Osteopathic practitioners can be trained in two ways – referred to fittingly, as Type I and Type II training.
[11] There is no regulatory oversight of osteopaths in Ontario. Therefore there is no formal recognition of either type of training under local law. Nevertheless, both types of training are recognized internationally by the Osteopathic International Alliance and the World Health Organization.
[12] The plaintiff’s members all received Type II training. The defendant’s members all received Type I training.
[13] The identity of the bodies who train osteopaths is not pleaded. It might be schools here or abroad. Or perhaps the parties provide their members with their Type I and Type II training respectively. I do not know. The statement of claim does not say.
Analysis of the Draft Amended Statement of Claim
[14] In 2018, the defendant participated in a conference hosted by the Canadian Life and Health Insurance Association entitled 2018 Claims and Antifraud Annual Conference.
[15] The defendant displayed a PowerPoint presentation that compared Type I training to Type II training and essentially concluded that recognizing osteopathic practitioners who have Type II training creates an enhanced risk of insurance fraud.
[16] The PowerPoint presentation is contained in the motion record because it is incorporated by reference into the statement of claim.
[17] The plaintiff pleads:
- The overall purpose of the Presentation was to assert that osteopaths who receive Type II training, such as those belonging to [the plaintiff], are illegitimate, sub-standard, and ultimately unworthy of insurance coverage approval.
[18] The plaintiff denies the truth of the statements disparaging Type II training made by the defendant in its presentation.
[19] As a result of the defendant’s presentation, the Type II trained osteopaths including plaintiff’s members were de-listed by a major health insurer Industrial Alliance. The plaintiff has sued Industrial Alliance as a result.
[20] Initially, the statement of claim in this action advanced a claim in defamation against the defendant. The plaintiff claimed $20 million. The plaintiff did not sue for defamation or damage to itself however. It purported to represent its members in advancing their defamation and loss of professional revenue claims against the defendant. However, it did not bring a class action. Rather, it asserted that it had authority under Rule 12 of the Rules of Civil Procedure to represent its members in suing for the tort committed against or upon them.
[21] The defendant moved to strike the initial claim principally on the basis that as an incorporated association of members, the plaintiff had no right to advance a defamation claim on behalf of its members.
[22] As a result, the plaintiff now moves to amend the statement of claim. It has abandoned its claim for defamation and its claim to sue as a representative of its members. Instead it proposes to sue for damages under the Trademarks Act and for intentional interference with its economic relations.
[23] The plaintiff makes no effort to support its initial pleading and it is accordingly struck out due to the plaintiff’s lack of standing to advance torts allegedly committed upon its member practitioners.
[24] The motion was argued on the plaintiff’s draft amended statement of claim.
(i) The Proposed Trademark Claim
[25] The plaintiff proposes to plead:
The [defendant] made this baseless statement at this conference in the Presentation to these attendees with the deliberate intent to damage [the plaintiff] and its training processes and in fact to damage all Osteopathic practitioners who have received Type 2 training.
In the context of this antifraud conference, the [defendant] indicated in its PowerPoint shown to the attendees that there was a "high incidence of fraud/extended billing" in respect of Type 2 training (the conference defamatory words). The attendees at the conference knew and understood that the training provided to members of [the plaintiff] was Type II training. As a direct result of the comments contained in the conference defamatory language, [the plaintiff] was de-listed by Industrial Alliance, making its insureds ineligible to receive payment for treatment received by a member of [the plaintiff].
The plaintiff states that in this regard, the statements made in the presentation were false and misleading, which tended to discredit the services of its competitor, the plaintiff which caused resulting damage as set forth herein. These false and misleading statements related to the training procedures and process taught by the plaintiff and used by its members which are the intellectual property belonging to the plaintiff. In this regard, the plaintiff relies on Sections 7(a) and 53.2(1) of the Trademarks Act RSC 1985 c T-13. [Emphasis added]
[26] The pleading asserts that the plaintiff association has some unidentified teaching or training processes. They are not defined. As noted at the outset, the plaintiff does not plead what it does or whether its members obtained their Type II training at schools abroad of from the plaintiff.
[27] There is similarly no pleading of any intellectual property associated with the “training procedures and process taught by the plaintiff” whatever they may be.
[28] Both counsel agree that under s. 7 of the Trademarks Act, the damages remedy for discrediting the services of a competitor is limited to claims related to intellectual property. Parliament has jurisdiction to legislate in respect of intellectual property across Canada. Were the remedy not limited to IP, it would likely be an unconstitutional intrusion into plenary authority of the provincial legislatures to legislate in respect of property and civil rights in the provinces. See: Core Specialties Inc. v Sonoco Ltd., 2001 FCT 801 at paras. 9 and 22.
[29] In Milano Pizza Ltd. v. 6034799 Canada Inc., 2022 FC 425, earlier this month, Fuhrer J. reiterated:
[134] As I previously have held, “[t]here is a constitutional limitation on section 7, in that standing alone and in association only with (now) section 55, it would not be valid federal legislation under subsection 91(2) of the British North America Act; the section derives its ‘nourishment’ or validity from rounding out the regulatory schemes prescribed by Parliament exercising its legislative power in respect of patents, copyrights, trademarks and trade names”: Immigration Consultants of Canada Regulatory Council v CICC The College of Immigration and Citizenship Consultants Corp., 2020 FC 1191 at para 62, citing MacDonald et al v Vapor Canada Ltd, [1977] 2 SCR 134 [Vapor] at 172.
[135] The Supreme Court in Vapor stated further at 172: “The subparagraphs of s. 7, if limited in this way, would be sustainable.” The Supreme Court, thus, concluded that paragraph 7(e) was not sustainable (and hence, it later was repealed) because there was no subject matter left in relation to patents, copyright, trademark and trade names, once paragraphs 7(a) to 7(d) were taken into account.
[136] Regarding the TMA s 7(a) specifically, this Court has held, “[f]or section 7(a) to be valid, its application must be limited to creating a cause of action relating to false and misleading statements made about a trade-mark or other intellectual property owned by the claimant”: Canadian Copyright Licensing Agency v Business Depot Ltd., 2008 FC 737 [Canadian Copyright] at para 27. As I explain below in connection with issue H, to the extent the that Defendants base this claim on alleged rights in MILANO BAXTER, the Defendants have not established that they have used MILANO BAXTER as a trademark within the meaning of section 4 of the TMA, or as trade name for that matter.
[30] There is law relied upon by the plaintiff to the effect that there can be intellectual property, principally copyright, claimed in the manner of expression of training processes. But copyright requires some fixed expression of an idea, like a piece of paper, a training manual, or a video. A plaintiff cannot claim copyright in “education” or even “Type II osteopathic education” as an abstract idea. If the plaintiff claims (a) it provides type II training to its members; and (b) it has intellectual property rights in some fixed embodiment of its training manuals or processes, it has not pleaded so.
[31] Absent some pleading that the plaintiff provides Type II training to members and that it owns IP rights in its fixed expressions of its training processes, the defendant’s attack on Type II training cannot be actionable under s. 7 of the Trademarks Act.
[32] In addition, without its own IP, the plaintiff’s pleading quoted above simply continues to refer to the rights of members rather than any personal right advanced by the plaintiff association on its own behalf. As noted above, the plaintiff eschews any right to sue on behalf of its members at this time.
(ii) Intentional interference with Economic Relations
[33] The plaintiff also pleads the tort of intentional interference with its economic relations. The plaintiff adopts the constituent elements of this tort listed by the Divisional Court in Resolute Forest Products Inc. et al. v. 2471256 Canada Inc. DBA Greenpeace Canada et al, 2014 ONSC 3996 set out by the defendant at para. 33 of its factum as follows.
- A plaintiff must plead four elements in an intentional interference with economic relations claim: (a) the defendant intended to injure the plaintiff's economic interests; (b) the defendant interfered with the plaintiff's business or livelihood by an illegal or unlawful act; (c) the unlawful act was directed at a third party, who has an actionable claim, or an actionable claim but for the absence of having suffered a loss; and (d) the plaintiff suffered an economic harm or loss as a result of the unlawful means.
[34] The gravamen of the tort as described by the Supreme Court of Canada in A.I. Enterprises Ltd. v. Bram Enterprises Ltd., 2014 SCC 12 is that the defendant committed an actionable tort against a third party with the intent to injure the plaintiff. To make out this tort, a plaintiff needs to identify the unlawful acts that the defendant committed against a third party that were intended to also injure the plaintiff.
[35] The plaintiff pleads the tort in two ways. First it says that the defendant’s presentation and false words were unlawful to insured osteopathic practitioners with the purpose of injuring the plaintiff:
[36] It pleads:
The Defendant participated in various unlawful acts towards Industrial Alliance and Industrial Alliance's insureds for the purpose of negatively impacting the economic relations of [the plaintiff].
The communications made via the Presentation constitute an unlawful act towards Industrial Alliance's insureds because they induced Industrial Alliance to breach the contract it had with its insureds to provide insurance coverage.
[37] The plaintiff claims the unlawful act of the defendant induced the insurer to cancel coverage to osteopaths in breach its contracts with them. The plea is all insured osteopaths and not just the plaintiff’s members. It does not continue to advance the tort of defamation to the members.
[38] The plaintiff also pleads that the unlawful means employed by the defendant were misrepresentations made to the insurers. The plaintiff pleads that the insurer relied on the defendant’s statements to terminate its coverage of the osteopaths including its members. The plaintiff pleads:
Industrial Alliance did in fact rely on them, and as a result exposed itself to litigation, in which it is now involved.
These unlawful acts towards Industrial Alliance and Industrial Alliance's insureds have negatively impacted the economic relations of [the plaintiff’s] members by: (a) removing a number of patients from their client base; and (b) decreasing the number of patients they will receive moving forward.
The Defendant's conduct is deliberate, premeditated, and designed to damage the business of its direct competitors, osteopathic practitioners with Type II training, including [the plaintiff’s] members.
Further, the Defendant's conduct was malicious, anti-competitive and intended to cause, and has caused, harm to the Plaintiff and their business interests. [Emphasis added.]
[39] Once again the plaintiff’s failure to plead what it does and its intermingling of the rights of and damages to all osteopaths including its members in their professional practices obscures the potential liability claimed. Even when discussing the defendant’s injury to its “competitor”, the plaintiff identifies the competitors osteopathic practitioners in para. 32 rather than itself or even its members. The bald plea of damage to “the plaintiff and their business interests” in para. 33 is a non sequitur. What business interests does the plaintiff have that de-listing of all Type II trained osteopaths by Industrial Alliance is said to have affected and is “their business interests” not a reference again to the loss of patient revenue suffered by all osteopathic practitioners rather than to the plaintiff itself?
[40] This could perhaps be a matter of particulars. But I agree with Master Sandler’s seminal decision in Copland v. Commodore Business Machines Ltd., that the remedy for failing to plead a constituent element of a claim is to strike the claim rather than just to order particulars. There is no allegation of material fact to particularize. There is no allegation that the plaintiff does something in its business that could be harmed by an attack on the quality of Type II osteopathic training, or by de-listing of all osteopathic practitioners in Ontario, or that the plaintiff can be or was injured in that regard.
Leave to Amend
[41] It follows that the proposed pleading does not set out a tenable cause of action against the defendant. As such, leave to amend under Rule 26 is denied.
[42] What remains before me then is the original statement of claim that has been withdrawn or superseded. The next issue is whether the plaintiff should be granted leave to try again.
[43] There is a limit on the number of chances a plaintiff should have to plead a cause of action. At some point the running up of costs in an effort to find a cause of action can itself become abusive.
[44] I do not know why the plaintiff has chosen to sue personally rather than sponsoring a class action on behalf of its members or the broader group of all Type II trained osteopathic practitioners who were allegedly injured by the defendant’s presentation. But, having decided to sue in its own name, the plaintiff needs to plead facts that, if true, would entitle it to judgment.
[45] I have identified above the need for the plaintiff to plead ownership and damage to its IP to make a claim under s. 7 of the Trademarks Act. Similarly, I have identified a need for the plaintiff to plead that it has some kind of economic relation that can be and was injured by the allegedly unlawful acts taken by the defendants against insured osteopathic practitioners or Industrial Alliance.
[46] Moreover the tort of inducing breach of contract in relation to an insurer’s determination to end coverage also seems far-fetched. But the defendant did not seek particulars of that allegation.
[47] I am therefore unable to conclude that the plaintiff has no possible cause of action available to it. I also do not know if the plaintiff actually has facts that it can allege that would support any of the possibilities. But if it does, then I see no reason to stop it in its tracks now. The prejudice to the defendant to this point is simply the costs that it has incurred.
[48] If the plaintiff cannot make out a valid cause of action in its next try, especially given the very express discussion of the elements of pleading in this endorsement, a court may well conclude that letting it try yet again would be useless and abusive.
[49] Accordingly, I grant the plaintiff leave to deliver a draft amended statement of claim on or before June 1, 2022. If the defendant does not consent to its delivery, then a motion before an associate justice for leave to amend may be needed.
Costs
[50] Mr. Brzezinski submits that this is not a case for costs. He submits that the plaintiff responded responsibly to the defendant’s expressed concerns about the plaintiff’s standing and it fixed the statement of claim. Moreover, this claim has been outstanding for two years and the defendant has yet to deliver a statement of defence. In essence, the plaintiff claims to have been injured and has yet to be able to get beyond the defendant’s invocation of procedural technicalities to have the merits joined and heard.
[51] I do not agree. The plaintiff’s standing and its lack of pleading what it does or that it owns intellectual property are not small matters of technicality.
[52] In my view, when competitors use the courts to advance their business purposes, they should and do expect costs to follow the event in the ordinary course. The plaintiff cannot blame the defendant for failing to defend when the plaintiff has yet to be able to plead a claim that could win a judgment if not defended.
[53] While motions to strike pleadings are rarely useful because they just teach plaintiffs how to do a better job the next time, this case may be an exception. I am not teaching the plaintiff anything that its counsel does not already know full well. Rather, the plaintiff proceeds as it does in its own name for its own purposes. That is perfectly acceptable. But, given the plaintiff’s approach, it is also fair and reasonable for costs to follow the event.
[54] The defendant incurred very substantial costs on this motion. It points to the fact that the plaintiff delivered a fresh claim amid stream and this required a new factum on new issues. It did not mention the case law that says that amending a pleading in face of a motion to strike can be improper. Here however, there was no point fighting a motion on a pleading that advanced claims that the plaintiff was willing to concede did not lie.
[55] I make no criticism of the delivery of a draft amended pleading. But it did cause costs to be thrown away.
[56] The defendant is content to assert a claim for costs on a partial indemnity basis in the lower amount claimed by the plaintiff. Doing so resolves any question of what the plaintiff ought reasonably to have expected.
[57] In my view, having reviewed both sides’ Costs Outlines, I find that it is fair and reasonable for the plaintiff to pay the defendant its costs of the motion fixed at $25,000 all-inclusive and I so order. The costs shall be paid before the plaintiff delivers a further draft statement of claim so that the parties can start afresh.
FL Myers J Date: April 21, 2022