The Supreme Court of Canada is set to hear a landmark case that
may change the way arbitration and choice of forum clauses are
enforced in Canada.
The Court recently granted leave to appeal in the case of
Momentous.ca Corporation et al. v Canadian American Association of
Professional Baseball Ltd et al, 2010 ONCA 722, 103 OR (3d) 467.
The conflict between the parties surrounds the downfall of the
Ottawa Rapidz, a professional baseball team owned by subsidiary
companies of Momentous.ca.
In 2008, the Rapidz joined and competed in the Can-Am League, a
baseball organization based in North Carolina. They played their
games at a stadium owned by the City of Ottawa. Prior to entering
the league, the Rapidz agreed to be bound by the league's
by-laws and signed a lease agreement and a league affiliation
agreement. Both agreements required the parties to resolve all
disputes using an internal arbitration process, which is detailed
in the by-laws. The agreements also contained choice of forum
clauses, which state that any arbitration decisions will be
enforced by the courts of North Carolina.
Due to significant financial losses, the Rapidz' owners
opted to shut the team down before the 2009 season. However, the
Can-Am directors rejected the Rapidz' application to
voluntarily withdraw from the league. Instead, they terminated the
Rapidz' membership in the league and drew down a $200,000
letter of credit posted by the team.
In turn, the Rapidz sued the league and its subsidiary company,
Inside the Park LLC, as well as several of the league's
principals and the City of Ottawa. All but two of the defendants
were based in the United States. The Rapidz claimed that its
membership in the league was illegally terminated and sought
damages for breach of contract and for the torts of intentional
misrepresentation, intentional interference with contractual
relations, and civil conspiracy.
The Rapidz brought their claim in Ontario. All of the
defendants, except for the City of Ottawa, delivered pleadings
defending the action on the merits and responding to the substance
of the allegations made by the Rapidz. These defendants ('the
Can-Am defendants') also pleaded and relied upon the
arbitration and choice of forum provisions in the lease agreement,
the league affiliation agreement, and league by-laws.
The Can-Am defendants denied that the Ontario courts have
jurisdiction over them and brought a motion to have the action
stayed or dismissed. The motions judge sided with the defendants
and dismissed the action.
The Ontario Court of Appeal upheld the motions judge's
decision. The Court did accept the Rapidz' argument that the
Can-Am defendants had consented or attorned to jurisdiction in
Ontario by defending the action on the merits. However, it held
that when the parties have agreed to an arbitration or choice of
forum clause, the courts should exercise discretion and may
nonetheless refuse to exercise jurisdiction over the parties.
When the Supreme Court hears the appeal, the parties will field
questions on whether the defendants can rely on arbitration and
choice of forum clauses after attorning.
In applying for leave to appeal, the Rapidz argued that it would
be unfair to allow a defendant to argue its case in Ontario, and
accept jurisdiction if the Ontario decision was favourable to it,
but refuse to accept jurisdiction if the result was unfavourable.
The Rapidz also reasoned that by attorning to the jurisdiction of
the Ontario Courts, Ontario jurisdiction, the Can-Am defendants
consented to an amendment of the contract which voided the
arbitration and choice of forum clauses.
The Can-Am defendants, in turn, argued that attornment has
little or no relevance to the question of whether an Ontario court
should exercise jurisdiction when the parties have agreed to
resolve disputes in a different jurisdiction or by a different
The Supreme Court is scheduled to hear the appeal in February
2012. The case has the potential to affect how arbitration and
choice of forum clauses in commercial agreements are interpreted
and enforced in Canada.
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