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Tuesday, August 28, 2018
Richard Kranitz, Canadian Supreme Court unanimously rules that neither considerations of personal jurisdiction over some U.S. defendants nor the greater weight of factors appropriate for forum non conveniens analysis warrants dismissal of the Canadian action for trial in the courts of Illinois
In dispute over international Business Consulting Services, reviewing a complex defamation suit brought in the Ontario Courts, the Canadian Supreme Court unanimously rules that neither considerations of personal jurisdiction over some U.S. defendants nor the greater weight of factors appropriate for forum non conveniens analysis warrants dismissal of the Canadian action for trial in the courts of Illinois
In this appeal involving business consulting services applied internationally, the Canadian Supreme Court deals with the manner in which the Court should the apply the Canadian law of personal jurisdiction and more fully of its version of the forum non conveniens doctrine, which this Court recently reviewed in Van Breda v. Village Resorts Ltd., 2012 SCC 17 (S.C.C.) (Club Resorts), to this multi-jurisdictional defamation claim. The Plaintiff below is Lord Conrad Black. He filed six libel actions in the Ontario Superior Court against the ten Defendants, who are directors, advisors and a vice-president of Hollinger International, Inc. (hereinafter “International”).
Lord Black alleges that certain statements issued by the Defendants and posted on International’s website are seriously defamatory. Moreover, three newspapers had published this material which the Ontario community downloaded, read and republished.
The Defendants counter, however, that the Ontario court should not have taken jurisdiction over the actions because, alternatively:  they are essentially American in substance or,  because the Illinois court is a more convenient forum than the Ontario court. The Supreme Court of Canada, however, disagrees and dismisses the appeal.
Some background facts are needed. Plaintiff is a high-profile business consultant with an international reputation. He established a reputation as a newspaper owner and publisher first in Canada, and then internationally. He was a Canadian citizen until 2001. At that point, he abandoned his Canadian citizenship to accept an appointment to the U. K. House of Lords.
Until January 2004, Plaintiff was the chairman of International, a publicly traded company incorporated in Delaware and headquartered at different times in New York or Chicago. Plaintiff and his Canadian associates had effective control over International through The Ravelston Corporation (Ravelston) and Hollinger Inc., two privately held Ontario companies.
In May 2003, a minority shareholder of International challenged the legitimacy of certain “non-compete” and “Business Consulting Service” payments that International had made to Plaintiff or to companies under his ownership or control. International’s Board of Directors formed a Special Committee to look into look into these matters (the Committee’). It also retained Richard Breeden (an Appellant) and his consulting firm as outside legal counsel to advise the Committee.
Five months later, the Special Committee found out that International had made US$32.15 million in unauthorized “non-compete” payments to Plaintiff, to Hollinger Inc., and to certain senior managers. Moreover, Plaintiff’s share had been US$7.2 million. The Committee finished its report in August 2004.
A U.S. Consent Order sprang from an injunctive complaint filed by the U.S. Securities and Exchange Commission (SEC) against International in an Illinois federal court. The Committee sent its report to both the SEC and the U.S. District Court; it also posted it on International’s website.
Plaintiff filed six tort actions in the Ontario Superior Court between February 2004 and March 2005. The first four actions had to do with press releases that were posted on International’s website in January (the first three actions) and May of 2004 (the fourth action). The fifth action deals with the Committee’s report. The sixth and last lawsuit complains about defamatory statements published in International’s annual report that summarized the Committee’s findings. The press releases contained contact information directed at Canadian media. International’s website was accessible worldwide.
It is alleged by the Plaintiff that the press releases and reports issued and posted online by the Defendants contained defamatory statements. The Globe and Mail, the Toronto Star and the National Post had downloaded, read and republished this material within Ontario Province. Plaintiff claims damages for injury to his reputation in Ontario.
The motions judge summarized these alleged misdeeds in 8 allegations:  that Plaintiff took money from [International] in the form of unauthorized non-compete payments, thus improperly enriching himself;  that Plaintiff misappropriated more than US $200 million from [International] by taking part in repeated and systematic schemes to wrongfully divert corporate assets to himself and his associates;  that Plaintiff had presided over a corporate “kleptocracy” that carried out a systemic, willful and deliberate looting of [International];  that Plaintiff created an entity in which ethical corruption was a defining characteristic of the leadership team;  that Plaintiff misled the board, breached his fiduciary duties, engaged in self-dealing, lined his pockets at the expense of [International] almost every day, engaged in tax evasion, and used company money to make millions of dollars worth of charitable donations in his own name;  that Plaintiff took US $500 million from [International] for himself and his associates; and  that Plaintiff was continuing to use his position as the controlling shareholder to the detriment of [International] and its public shareholders and in breach of U.S. securities laws.
The Defendants moved to stay the six libel actions on the grounds that, jurisdictionally, there was no real and substantial connection between the alleged actions and Ontario province. In the alternative, they urged that a New York or Illinois court would be the more appropriate forum for this case under the Canadian doctrine of forum non conveniens. At the hearing before this court, counsel for the Defendants narrowed the latter doctrine down to the Illinois court as least inconvenient.
Five parties are Defendants in all six of the actions. These are: Richard C. Breeden; Richard C. Breeden & Co.; Gordon A. Paris; Graham W. Savage; and Raymond G.H. Seitz. James R. Thompson and Richard D. Burt are also Defendants in the first four actions. Paul B. Healy is a Defendant in the fifth action and James R. Thompson, Richard D. Burt, Shmuel Meitar and Henry A. Kissinger are Defendants in the sixth action.
Mr. Savage lives in Ontario and Mr. Meitar in Israel. The rest of the Defendants live in the U.S. These include three in Connecticut (Messrs. Kissinger and Breeden plus Richard C. Breeden & Co.); two in New York (Messrs. Paris and Healy); and one each in Illinois (Mr. Thompson), the District of Columbia (Mr. Burt) and New Hampshire (Mr. Seitz). The parties did not differentiate between the six actions for the purposes of the present motion; nor did the courts below.
Independently of this litigation, governments in the U.S. and Canada brought several related civil and criminal proceedings soon after the 2007 release of the Committee’s report. That same year, a U.S. federal court convicted Plaintiff on three counts of mail fraud and one count of obstructing justice. The court sentenced him to 6.5 years in prison. A federal appellate court later vacated two of the convictions for mail fraud. The argument that these convictions are relevant to the litigation since they affect Plaintiff’s admissibility into Canada was made in the courts below. In June 2011, after the hearing before this Court, a U.S. federal trial court resentenced Lord Black to 42 months in federal prison where he is now languishing.
International’s Delaware and Illinois civil actions against Plaintiff also bear on this litigation. The Delaware action claimed that Plaintiff and Hollinger Inc. had breached their contractual and fiduciary duties under Delaware law.
The Illinois suit asserted that Plaintiff and his associates have received more than US$90 million in unauthorized or improperly authorized non-compete payments. It also alleges that Ravelston and Hollinger Inc. had collected improperly negotiated and grossly excessive Business Consulting Service fees. The Illinois court stayed its action pending resolution of the criminal proceedings against Plaintiff. The lower Canadian courts had taken into account the existence and nature of the civil actions pending in Delaware and Illinois. The case ended up before the Canadian Supreme Court which dismissed the appeal. In a thoughtful opinion by Mr. Justice Louis LeBel, the Supreme Court of Canada explains the Court’s rationale.
15. “The Defendants allege that Plaintiff is a libel tourist. In their view, the ‘place of reading’ approach to libel should be eschewed in cases involving transnational libel claims in favour of an approach that considers whether a real and substantial connection exists between the forum and the substance of the action.”
“In the case of a libel claim, that is the subject matter and conduct giving rise to the words complained of and the context in which they were made. The Defendants contend that the substance of Plaintiff’s actions is American and that both New York and Illinois are clearly more appropriate forums for the trial of the actions than Ontario.”
16. “The Defendants also reject the focus of the courts below on damage sustained in the jurisdiction as misplaced and contend that the analogy to product liability cases is inappropriate. In addition, they submit that whether or not the ‘targeting’ approach is adopted in Canadian law, there was an insufficient basis to make such a finding on these facts. With regard to choice of law, the Defendants reject the use by the courts below of the lex loci delicti test. In their view, lex loci delicti is ill-suited to transnational defamation claims if it is determined solely on the basis of where damage occurs, as damage may occur in multiple jurisdictions. The Defendants submit that American law should be applied to the actions, reflecting their substance.”
17. “Plaintiff rejects the allegation that he is a ‘libel tourist.’ He submits that, when properly applied to transnational defamation claims, the real and substantial connection test is satisfied where: (a) there is substantial publication in the jurisdiction; (b) the plaintiff has a substantial reputation to protect in the jurisdiction; and (c) the defendant is in a position to reasonably foresee substantial publication in the jurisdiction and to know of the plaintiff’s substantial reputation there. In Plaintiff’s view, the courts below correctly applied this test to find that all three conditions were satisfied on the facts of this case.”
18. “Plaintiff also contends that the approach advocated by the Defendants would improperly shift the focus of Canada’s defamation law from the reputation of the plaintiff to the conduct of the defendant. With regard to choice of law, Plaintiff submits that this Court has established that lex loci delicti is the choice of law rule for tort claims. In libel cases, that is the place of publication, which in this case is Ontario.”
19. On the first question of personal jurisdiction simpliciter, Mr. Justice LeBel concisely explains his Court’s reasoning. “Presence and consent are the two traditional bases of court jurisdiction in private international law. As discussed above, however, in this case, only one of the ten defendants is resident in Ontario and none of the other nine has consented to submit to the jurisdiction of the Ontario court. It is therefore necessary to engage in the real-and-substantial-connection analysis to determine whether the Ontario court may properly assume jurisdiction over the six libel actions brought by Plaintiff. The framework for the assumption of jurisdiction was recently set out by this Court in Club Resorts, cited supra.”
20. “The issue of the assumption of jurisdiction is easily resolved in this case based on a presumptive connecting factor—the alleged commission of the tort of defamation in Ontario. It is well established in Canadian law that the tort of defamation occurs upon publication of a defamatory statement to a third party.”
“In this case, publication occurred when the impugned statements were read, downloaded and republished in Ontario by three newspapers. It is also well established that [the law regards that] every repetition or republication of a defamatory statement constitutes a new publication. The original author of the statement may be held liable for the republication where it was authorized by the author or where the republication is the natural and probable result of the original publication (see R. E. Brown, The Law of Defamation in Canada (1987), vol. 1, at pp. 253-54).”
“In my view, the republication in the three [Ontario] newspapers of statements contained in press releases issued by the Defendants clearly falls within the scope of this rule. In the circumstances, the Defendants have not displaced the presumption of jurisdiction that results from this connecting factor.”
21. “Having established that there is a real and substantial connection between Ontario and the libel actions, I must now turn to the question of whether the Ontario court should exercise jurisdiction over the actions — the issue of forum non conveniens.”
22. “Having found that a real and substantial connection exists between the actions and Ontario, I must now determine whether the Ontario court should nonetheless decline to exercise its jurisdiction on the ground that a court of another jurisdiction is clearly a more appropriate forum for the hearing of the actions. The Defendants contend that Illinois is a clearly more appropriate forum than Ontario. For the reasons that follow, I disagree.”
23. “Under the forum non conveniens analysis, the burden is on the party raising the issue to demonstrate that the court of the alternative jurisdiction is a clearly more appropriate forum (see Club Resorts, supra, at para. 103). The factors to be considered by a court in determining whether an alternative forum is clearly more appropriate are numerous and variable.”
“While they are a matter of common law, they have also been codified, for example, in a non-exhaustive list in s. 11(2) of the British Columbia Court Jurisdiction and Proceedings Transfer Act (CJPTA) S.B.C. 2003, c. 28. [That Act and others are themselves based on a uniform Act proposed by the Uniform Law Conference of Canada (Lloyd’s Underwriters v. Cominco Ltd., 2009 SCC 11,  1 S.C.R. 321 (S.C.C.), at para. 22; Club Resorts, at paras. 105-106), the Uniform Court Jurisdiction and Proceedings Transfer Act (CJPTA).]”
“Section 11 of the CJPTA states: ‘11(1) After considering the interests of the parties to a proceeding and the ends of justice, a court may decline to exercise its territorial competence in the proceeding on the ground that a court of another state is a more appropriate forum in which to hear the proceeding; (2) A court, in deciding the question of whether it or a court outside [the enacting province or territory] is the more appropriate forum in which to hear a proceeding, must consider the circumstances relevant to the proceeding, including: (a) the comparative convenience and expense for the parties to the proceeding and for their witnesses in litigating in the court or in any alternative forum; (b) the law to be applied to issues in the proceeding; (c) the desirability of avoiding multiplicity of legal proceedings; (d) the desirability of avoiding conflicting decisions in different courts; (e) the enforcement of an eventual judgment; and (f) the fair and efficient working of the Canadian legal system as a whole.’”
24. “As the drafters of the CJPTA confirm in their comments on s. 11, the factors enumerated in s. 11(2) reflect ‘factors that have been expressly or implicitly considered by courts in the past’. Section 11 of the CJPTA is also similar to the forum non conveniens provision of the Civil Code of Québec, S.Q. 1991, c. 64, and the factors considered by Quebec courts in exercising their discretion under that provision. Article 3135 of the Civil Code states: ‘Even though a Québec authority has jurisdiction to hear a dispute, it may exceptionally and on an application by a party, decline jurisdiction if it considers that the authorities of another country are in a better position to decide [it].’”
25. “As stated in Club Resorts, the use of the term ‘exceptionally’ in art. 3135, like ‘clearly more appropriate ... forum’, reflects ‘an acknowledgment that the normal state of affairs is that jurisdiction should be exercised once it is properly assumed’ [Cite] The factors most commonly considered by Quebec courts in exercising this discretion were reviewed in Lexus Maritime Inc. v. Oppenheim Forfait GmbH [1998 CarswellQue 638 (Que. C.A.)], 1998 CanLII 13001, where the Quebec Court of Appeal established that the relevant considerations include, among others, the following factors which are not individually determinative but must be considered globally. (para. 18).”
“[They consist of ] (1) the place of residence of the parties and witnesses; (2) the location of the evidence; (3) the place of formation and execution of the contract; (4) the existence of proceedings pending between parties in another jurisdiction and the stage of any such proceeding; (5) the location of the defendant’s assets; (6) the applicable law; (7) the advantage conferred on the plaintiff by its choice of forum; (8) the interests of justice; (9) the interests of the two parties; and (10) the need to have the judgment recognized in another jurisdiction.”
26. “With the exception of juridical advantage, the Oppenheim factors appear to largely correspond to the factors enumerated in s. 11(2) of the CJPTA. The CJPTA does not provide for consideration of any factor corresponding to the advantage conferred on the plaintiff by its choice of forum, although it also does not specifically exclude consideration of this factor where it is relevant.”
“This approach is consistent with this Court’s observation in Club Resorts that an emphasis on juridical advantage may be inconsistent with the principles of comity. In particular, a focus on juridical advantage may put too strong an emphasis on issues that may reflect only differences in legal tradition which are deserving of respect, or courts may be drawn too instinctively to view disadvantage as a sign of inferiority and favour their home jurisdiction (para. 112).”
27. “Juridical advantage not only is problematic as a matter of comity, but also—as a practical matter—may not add very much to the jurisdictional analysis. As this Court emphasized in Amchem Products Inc. v. British Columbia (Workers’ Compensation Board),  1 S.C.R. 897 (S.C.C.), ‘[a]ny loss of advantage to the foreign plaintiff must be weighed as against the loss of advantage, if any, to the defendant in the foreign jurisdiction if the action is tried there rather than in the domestic forum’ (p. 933). Juridical advantage therefore should not weigh too heavily in the forum non conveniens analysis.”
28. “In addition to the list of factors that a court may consider in determining whether to decline to exercise its jurisdiction, the CJPTA also sets out the role that considerations of fairness to both parties play in the forum non conveniens analysis: s. 11(1) states that ‘[a]fter considering the interests of the parties to a proceeding and the ends of justice, a court may decline to exercise its territorial competence in the proceeding on the ground that a court of another state is a more appropriate forum in which to hear the proceeding’ While the factors relevant to the forum non conveniens analysis will vary depending on the context of each case, s. 11 of the CJPTA serves as a helpful reference.”
29. “When the forum non conveniens analysis is applied to the circumstances of the instant appeal, it becomes apparent that both the courts of Illinois and Ontario are appropriate forums for the trial of the libel actions. Indeed, many of the relevant factors favour proceeding in Illinois. Others favour a trial in Ontario.’
“In the end, however, giving due deference to the motion judge’s exercise of discretion, I am not convinced that the Defendants have established that the Illinois court emerges as a clearly more appropriate forum and that the motion judge made a reviewable error. I will consider each of the relevant factors in turn.”
30. “In my view, the comparative convenience and expense for the parties and their witnesses favours a trial in Illinois. First, … most of the witnesses and the bulk of the evidence are located in the U.S. It is significant in this regard that International was headquartered, at least for a time, in Illinois. In addition, … Rule 45 of the Federal Rules of Civil Procedure, facilitates the movement of witnesses and evidence between states. The location of the witnesses and evidence thus makes a trial in Illinois more convenient than a trial in Ontario.”
31. “The same can be said of the location of the parties. While no single jurisdiction is home to a majority of the parties, it is significant that nine of the eleven parties, including Plaintiff, reside in the U.S. Indeed, Plaintiff is currently incarcerated in Florida. Moreover, owing to his criminal convictions and the fact that he [has] abandoned his Canadian citizenship, Plaintiff will not [even] be able to enter Canada without the special permission of the Minister of Citizenship and Immigration … once he has finished serving his sentence.”
“It may be, however, that a writ of habeas corpus ad testificandum could allow Plaintiff to participate in person in a trial held in the U.S.; otherwise, Plaintiff would have to participate through video conferencing. As for the eight Defendants who reside in the U.S., they are spread between different states, but it does not appear that financial considerations would impede the ability of any of them to participate in a trial in Illinois.”
32. “In the companion case of Banro Corp. v. Éditions Écosociété Inc., 2012 SCC 18 (S.C.C.), I discuss the implications of choice-of-law in the context of multistate defamation claims. Without resolving the issue, I note that there is some question as to whether the lex loci delicti rule, according to which the applicable law is that of the place where the tort occurred, ought to be abandoned in favour of an approach based on the location of the most harm to reputation. I need not address this issue here as, even under the alternative approach examined in Éditions Écosociété, the applicable law is that of Ontario.”
33. “Indeed, this case is somewhat unique in that Plaintiff has undertaken not to bring any libel action in any other jurisdiction, and has limited his claim to damages to his reputation in Ontario. As a result, only harm resulting from publication in Ontario need be considered. The evidence establishing Plaintiff’s reputation in Ontario is significant.”
“As the motion judge found, while Plaintiff is no longer ordinarily resident in Ontario, he spent most of his adult life in Ontario, first established his reputation as a businessman in Ontario, is a member of the Order of Canada, the Canadian Business Hall of Fame and the Canadian Press Hall of Fame, and is the subject of five books written by Toronto-area authors.”
“Plaintiff’s close family also lives in Ontario. Plaintiff’s undertaking and the evidence of his reputation in Ontario therefore suggest that, under the ‘most substantial harm to reputation’ approach discussed in Éditions Écosociété, Ontario law should be applied to the libel actions. Alternatively, as the alleged tort of defamation was committed in Ontario, under lex loci delicti, Ontario law would also apply. In the circumstances, the applicable law factor supports proceedings in Ontario.”
34. “The Illinois and Delaware civil actions [do] raise concerns about a multiplicity of legal proceedings. The motion[s] judge accepted that neither of those actions involves a libel claim. He also accepted, however, that the focus of the trial of the libel actions will be the truth of what was said in the allegedly defamatory statements, which would also appear to be the very substance of the Delaware and Illinois civil actions.”
“Many of the same transactions that will need to be proven through intensive litigation in the course of the Delaware and Illinois civil actions will likely also need to be proven in the libel actions. The differing form of these actions should not be emphasized at the expense of their substance. This suggests that there may be a risk of conflicting judgments, a consideration that favours the Illinois court as a more appropriate forum.”
35. “Plaintiff appears to concede that an Ontario judgment would be unenforceable in the U.S. He contends, however, that this factor should have no bearing on the forum non conveniens analysis because the lack of an actual malice requirement in Canadian defamation law affords him a legitimate juridical advantage.”
“As discussed above, juridical advantage should not weigh too heavily in the forum non conveniens analysis. This caution is especially significant in a case such as this, where the American actual malice requirement reflects a deeply rooted and distinctive legal tradition that this Court has declined to adopt (Hill v. Church of Scientology of Toronto,  2 S.C.R. 1130 (S.C.C.), at para. 137), but which comity requires we respect in foreign jurisdictions.”
“Moreover, even if this advantage to Plaintiff were taken into account, it would have to be balanced against the corresponding—and very significant—juridical disadvantage that the Defendants would face if the trial were to proceed in Ontario. As a result, the fact remains that an Ontario judgment would be enforceable against only one of the ten Defendants. On balance, this is an indication that an Illinois court may be a more appropriate forum for the actions to be heard in than an Ontario court.”
36. “This Court observed in Club Resorts that, in addition to seeking to assure the efficacy of the litigation process, the doctrine of forum non conveniens also seeks to assure fairness to both parties. The courts below agreed that the balance of fairness favours litigation in Ontario because it would be unfair to prevent Plaintiff from suing in the community in which his reputation was established, whereas there would be no unfairness to the Defendants if the actions were to proceed in Ontario because it would have been reasonably foreseeable to them that posting the impugned statements on the internet and targeting the Canadian media would cause damage to Plaintiff’s reputation in Ontario.”
“I would agree, although I would also emphasize that the question of whether a ‘targeting’ approach should be adopted in Canadian law does not arise on this appeal. …[T]he importance of permitting a plaintiff to sue for defamation in the locality where he enjoys his reputation has long been recognized in Canadian defamation law. Given the importance of his reputation in Ontario, this factor weighs heavily in favour of Plaintiff.”
37. “In the end, some of the factors relevant to the forum non conveniens analysis favour the Illinois court, while others favour the Ontario court. The forum non conveniens analysis does not require that all the factors point to a single forum or involve a simple numerical tallying up of the relevant factors. … [I]t does require, however, that one forum ultimately emerge as clearly more appropriate. The party raising forum non conveniens has the burden of showing that his or her forum is clearly more appropriate. Also, the decision not to exercise jurisdiction and to stay an action based on forum non conveniens is a discretionary one.”
“As stated in Club Resorts, the discretion exercised by a motion judge in the forum non conveniens analysis ‘will be entitled to deference from higher courts, absent an error of law or a clear and serious error in the determination of relevant facts’ (para. 112). In the absence of such an error, it is not the role of this Court to interfere with the motion judge’s exercise of his discretion.”
38. “Considering the combined effect of the relevant facts, and in particular the weight of the alleged harm to Plaintiff’s reputation in Ontario, and giving due deference to the motion judge’s decision, as I must, I conclude that an Illinois court does not emerge as a clearly more appropriate forum than an Ontario court for the trial of the libel actions brought against the Defendants by Plaintiff. Accordingly, I would dismiss the appeal with costs.” [Since the other six Justices concur, the appeal is dismissed.]
Citation: Black v. Breeden, et. al., 2012 CarswellOnt 4272; 2012 SCC 19 (Sup. Ct. Can. 2012).
*** Richard Kranitz, attorney in Wisconsin
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Richard Kranitz is an experienced attorney and business consultant in the areas of corporate, securities and tax planning for corporations, partnerships, joint ventures, limited liability companies, multi-unit enterprises, and a variety of different non-profit entities. In addition, he has counseled their owners and executives in compensation planning, estate plans, and asset protection.