Court File and Parties
COURT FILE NO.: BK-20-02675583-0031 DATE: 20241015 ONTARIO - SUPERIOR COURT OF JUSTICE – COMMERCIAL LIST IN BANKRUPTCY AND INSOLVENCY
RE: Conforti Holdings Limited AND: Morrocanoil, Inc.
BEFORE: Peter J. Osborne J.
COUNSEL: Erin Craddock, for Conforti Holdings Limited Thomas Gertner and Cliff Prophet, for Moroccanoil, Inc. Brendan Bissell, for the Proposal Trustee Bobby Sachdeva, Observer Hans Rizarri, Court officer
HEARD: October 15, 2024
Endorsement
[1]
Overview
Morrocanoil moves for an order under sections 135 and 183 of the Bankruptcy and Insolvency Act for an order granting leave, if required, to supplement the evidentiary record in its appeal from the disallowance of its proof of claim in this insolvency proceeding of Conforti Holdings Inc. (“CHL”) to include certain Confidential Documents in the affidavit evidence filed by Morrocanoil and CHL in these proceedings.
2I pause to observe that Moroccanoil submits that the Confidential Documents are already part of the evidentiary record since they were specifically referenced in its proof of claim, but it brings this motion out of an abundance of caution. CHL submits that the Confidential Documents are not part of the evidentiary record, were not considered by the Proposal Trustee when the Morrocanoil proof of claim was disallowed, and that the relief should not be granted.
3Defined terms in this Endorsement have the meaning given to them in the motion materials and/or the Eighth Report of the Proposal Trustee dated October 14, 2024, unless otherwise stated.
[4]
Background
CHL operate salons across Ontario. Morrocanoil is a significant creditor of CHL. After tracing allegedly counterfeit Morrocanoil products to salons affiliated with SDI (now CHL), Morrocanoil sued SDI in New Jersey in 2011. As part of that litigation, a Discovery Confidentiality Order was issued by the United States District Court for the District of New Jersey on October 19, 2011.
5The litigation was the subject of a settlement agreement entered into between SDI and Conforti in July 2013. However, in or around December 2014, Morrocanoil learned that SDI breached (it alleges) the Settlement Agreement by selling or otherwise diverting a significant quantity of Morrocanoil products to an unauthorized retail store in Macau. Morrocanoil is a party to ongoing litigation with CHL in New Jersey, which includes Morrocanoil’s motion to enforce the settlement agreement referred to above.
6As against all of this, CHL filed a Notice of Intention under the BIA on September 28, 2020 and the Proposal Trustee was appointed.
7Morrocanoil then filed a proof of claim in the NOI proceeding. It referenced at paragraph 46 the Confidential Documents, the two key Confidential Documents being a transcript of the deposition of Antonio Conforti dated April 5, 2017 and the transcript of the deposition of Florianna Ottaviani also dated April 5, 2017, both with exhibits thereto.
8This motion was briefed, and initially proceeded on the basis that although those two transcripts were referenced in the proof of claim, they were not attached since they were subject to the Discovery Confidentiality Order of the New Jersey Court referred to above, but Morrocanoil takes the position that they ought to have been considered by the Proposal Trustee when it disallowed the claim, and in any event ought to be part of the evidentiary record on the appeal from that disallowance. CHL disagrees. It would appear that notwithstanding the significant passage of time since the proof of claim was filed, and indeed, since the Proposal Trustee issued the disallowance, neither Morrocanoil nor CHL took any steps to inquire alone ensure whether the Proposal Trustee had the documents in question or take any other steps related thereto (such as, for example, seeking any necessary relief from the New Jersey Court).
[9]
Analysis
However, during the hearing of the motion and in particular hearing the submissions of the parties, it became clear to them and to the Court that in fact, and while the full transcripts were apparently not provided to the Proposal Trustee, both Morrocanoil in its proof of claim, and CHL in its response to questions asked by the Proposal Trustee in the course of its review and analysis of the claim, provided certain excerpts from these two transcripts dated April 5, 2017. This is patently clear on the record. What is not clear, however, is the extent of those excerpts.
10Accordingly, and in the circumstances, and further with the agreement of the parties, I have adjourned this motion to allow the parties to further review the record, and determine whether the excerpts already provided to the Proposal Trustee provided by each of Morrocanoil and CHL respectively are the same; whether either or both parties wish to rely on additional excerpts from either or both of the two transcripts at issue; and whether any relief should be requested from the New Jersey Court before any of the Confidential Documents are provided to the Proposal Trustee here given the order already made in that proceeding.
[11]
Disposition
Given that the appeal from the disallowance of the claim has already been scheduled for February 25, 2025, the parties will advise no later than October 28, 2024 with respect to the above issues, from which will follow the consideration of what, if any, relief is required and what, if any, relief should be granted. If necessary, the return of this motion may be scheduled through the Commercial List office.
Osborne J.