After fielding a team in the Can-Am League during the 2008 season, Rapidz Baseball advised the League that it would not operate the following year and requested a voluntary withdrawal based on financial hardship. The League rejected the application after holding an arbitration hearing before the League’s Board, terminated the team’s membership and drew down a $200,000 letter of credit. Rapidz Baseball had signed a variety of contractual agreements with the League. These agreements included a forum selection clause which stipulated that the North Carolina Courts had jurisdiction over any litigation and that North Carolina law was to be applied. In addition, the agreements provided that any disputes were to be handled by arbitration as the exclusive remedy, as opposed to litigation.
Ontario Superior Court of Justice: Momentous.ca Corporation v. Canadian American Association of Professional Baseball Ltd, 2009 CanLII 65823 (ON SC)
Despite the forum selection, choice of law and arbitration clauses and after the arbitration hearing was held, Rapidz Baseball and its related companies sued the League, its principals and the City of Ottawa in Ontario in contract and tort. When served with a statement of claim for an action commenced in Ontario we, as counsel for the League and most of its principals (“the League defendants”), were faced with two options: 1) defend the claim on the basis of the jurisdiction clauses alone, and risk being deemed to have admitted all other allegations; or 2) defend the claim on the merits and underline our objection to the jurisdiction of the Ontario Courts in light of the forum selection clause and the arbitration clause while risking attornment to the Ontario courts’ jurisdiction.
We chose the latter, defended the action on the merits and pleaded and relied on the forum selection and arbitration clauses. We then brought a motion to strike out the plaintiffs’ claim under Rule 21 of the Ontario Rules of Civil Procedure, for lack of jurisdiction and as it disclosed no reasonable cause of action.
The motion was heard by the Honourable Madam Justice Ratushny of the Ontario Superior Court of Justice. Madam Justice Ratushny found that there was no ambiguity in the forum selection clause in the agreements. She noted that the only reason supporting the plaintiffs’ argument that it should not be bound by the forum selection clause was that the League defendants had attorned to the jurisdiction by filing a defence on the merits. Madam Justice Ratushny found that the League defendants had not attorned and that attornment was not sufficient to usurp the forum selection clause. She stated that to allow plaintiffs to bring an action in another jurisdiction and then argue that the defendants had attorned to that jurisdiction by defending on the merits was “too tactical a procedure and too circular in its reasoning to be able to succeed”. The plaintiffs’ action was dismissed against all defendants, including the City of Ottawa who was not a party to the agreements.
Ontario Court of Appeal: Momentous.ca Corporation v. Canadian American Association of Professional Baseball Ltd., 2010 CanLII 722 (ONCA)
The plaintiffs appealed to the Ontario Court of Appeal. The submissions made by the plaintiffs on appeal were as follows: 1) that the League defendants had attorned to the jurisdiction of the Ontario courts by filing a notice of intend to defend followed by a statement of defence on the merits; 2) that the League defendants could not rely on the choice of forum and arbitration clauses in the agreements as they had fundamentally breached these agreements; and 3) that the Ontario action should be allowed to proceed against the City of Ottawa and Miles Wolff, a director of the League who had been sued in his personal capacity, as they were not parties to the agreements.
The appeal was heard by the Honourable Justices Laskin, Gillese and Juriansz. The Court unanimously found that despite the fact that an Ontario court had jurisdiction over the matter they agreed with Madam Justice Ratushny’s decision not to take jurisdiction in light of the forum selection and the arbitration clauses. When determining whether or not Ontario had jurisdiction, the Court of Appeal confirmed that there were two separate issues: 1) whether an Ontario court has or can assume jurisdiction; and 2) whether an Ontario court should take jurisdiction. Attornment is only relevant to the first of the two issues. Therefore, despite finding that the League defendants had attorned to the jurisdiction of Ontario by defending on the merits, the Court still had to decide whether or not to exercise that jurisdiction.
The Court of Appeal confirmed that the test when determining whether or not to take jurisdiction in cases with a clear and unambiguous forum selection clause is not that of forum non conveniens. When parties have agreed to a forum to resolve their disputes the Court of Appeal confirmed that the party seeking to displace the forum chosen must meet the strong cause test. Therefore, the party must show strong cause as to why a forum selection clause should not prevail. The Court added inordinate delay in bringing the jurisdiction motion to the list of factors set out by them in their 2010 decision of Expedition Helicopters Inc. v. Honeywell Inc.
The plaintiffs in this appeal relied only upon the attornment by the League defendants in filing a defence on the merits to support their position. However, this is only relevant to the question as to whether Ontario has jurisdiction and not to whether an Ontario court should exercise jurisdiction. Furthermore, the Court held that the fact that the parties in this matter had also agreed to an internal dispute resolution process (arbitration) gave the court an even firmer basis to preclude the plaintiffs from suing in Ontario. The plaintiffs were unsuccessful on the first ground of their appeal.
When analyzing the second ground of the appeal, the allegation that the League defendants had breached the agreements and therefore could not rely upon them, the Court of Appeal agreed with Madam Justice Ratushny that this ground was to be dealt with by a judge or arbitrator in the appropriate jurisdiction.
The third ground was the plaintiffs’ position that the action against the City of Ottawa and Miles Wolff in his personal capacity should not have been dismissed as they were not parties to the agreements. The Court of Appeal found that the plaintiffs’ submissions might have some validity but for the manner in which they pleaded their claim. The plaintiffs alleged that all of the defendants were necessary to the action and their claims for relief arose out of the same transactions, occurrences and raised the same questions of fact and law. Therefore, the Court found it impractical to separate these matters. The plaintiffs’ appeal was dismissed on all three grounds.
Supreme Court of Canada: Momentous.ca Corp. v. Canadian American Association of Professional Baseball Ltd., 2012 CanLII 9 (SCC)
The plaintiffs were granted leave to appeal to the Supreme Court of Canada and the matter was heard by a panel of 7 judges on February 10, 2012. The appeal brought forward two grounds: 1) does attornment by a defendant supersede a prior forum agreement, and if so, did the Court of Appeal, having ruled that the Can-Am Defendants did in fact attorn to the jurisdiction of the Ontario Court, then err in concluding that they could nevertheless rely upon foreign selection and dispute resolution clauses?; and 2) Did the Court of Appeal err by dismissing the claim against all defendants?
The decision of the Supreme Court was unanimous and was released on March 15, 2012. The Supreme Court did not specifically comment of the issue of whether the League defendants had attorned to the jurisdiction but disagreed with the plaintiffs’ submissions that a party who delivers a statement of defence on the merits is precluded from relying upon a forum selection clause. The Court further stated that the filing of a statement of defence which specifically pleads a forum selection clause does not amount to consent to the jurisdiction where the defence is filed.
The Court relied upon their 2003 decision in Z.I. Pompey Industrie v. ECU-Line N.V. which confirmed that the proper test in determining whether to enforce a forum selection clause was the strong cause test which was discretionary in nature. The Court agreed with the Court of Appeal on the second ground regarding the dismissal of the action against all defendants and dismissed the appeal on both grounds.
In light of the unanimous decisions cited above, the law in Canada is now clear in that a defendant faced with a claim in a jurisdiction other than that specified by a forum selection clause will not be precluded from relying upon that forum selection clause by defending the matter on the merits unless the plaintiff can prove strong cause to disregard the forum selection clause. Attorning to the jurisdiction by filing a defence on the merits does not qualify as strong cause to dispel the application of a forum selection clause.