Top Commercial Decisions Of 2022

• Published date: 16 March 2023
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
• Law Firm: Borden Ladner Gervais LLP
• Author: Mr Pierre Gemson, Kirsten Crain, Bethany Keeshan (Summer Student), Laura M. Wagner, Katia-Maria Medina, Hunter Parsons, Nikhil Pandey, Karen A. Salmon, Glenn Gibson, Philippe Boisvert, Shereen Khalfan and Briggs Larguinho

2022 was a significant year for commercial decisions. These cases all represent important decisions and key takeaways for corporations. BLG lawyers contributed to many notable cases and decisions. Our commercial litigators are the experts here to help you understand the impact these decisions could have on your business in 2023 and beyond. From a significant arbitration case to commercial contracts and international commercial decisions, our team of experienced commercial litigators monitor these decisions to keep clients informed of key developments.

Federal court endorses competence-competence principle: General Entertainment and Music Inc. v. Gold Line Telemanagement Inc.,2022 FC 418

(Pierre N. Gemson and Glenn Gibson)

Introduction

In General Entertainment and Music Inc. v. Gold Line Telemanagement Inc., 2022 FC 418, the Federal Court provided guidance on the legal test that applies when a party seeks to enforce an arbitration clause. This decision is notable because arbitration related matters are much less common in the Federal Court than the provincial courts, and it provides guidance to parties on the applicable framework where a party is seeking a stay.

What you need to know

• Gold Line Telemanagement Inc. (Gold Line) appealed a decision of an Associate Judge dismissing its motion to stay in favor of arbitration General Entertainment and Music Inc's (GEM) action for copyright infringement.
• The primary issue before the court was whether the proceedings could be stayed in favour of arbitration in Bermuda.
• The Federal Court allowed the appeal. The case management judge's refusal to stay the proceedings in favour of arbitration was based on an incorrect error of law.

Background

GEM, incorporated in Canada in 2015, broadcasted television programs in the Farsi language to customers through subscription satellite services. GEM owned the copyright of the programs. Until 2017, the GEM group of companies were operated primarily through an entity called GEMCO, which was the predecessor-in-title to certain assets now owned by GEM. GEM asserted that it was not the corporate successor of GEMCO and it that had not assumed GEMCO's contractual obligations.

Under the Content Acquisition and Licensing Agreement (Agreement), the Licensor, GEM, gave Ava, a contracting entity based in Bermuda that sourced content for Gold Line, its parent company, the right to offer its content. Gold Line provided some of their over-the-top media services through GLWiZ, which was a global IP platform owned and run by GLWiZ Inc, a subsidiary of Gold Line. The Agreement contained an arbitration clause that describes "General Entertainment Media", but did not specify whether it was referring GEMCO, the GEM group of companies generally, or another entity.

The applicable test to stay proceedings in favour of arbitration

The primary issue before the court was whether the Federal Court proceeding could be stayed in favour of arbitration in Bermuda.

While there is a federal Commercial Arbitration Act (the CAA), its scope is narrower than the Federal Court's subject matter jurisdiction. The CAA applies only to actions involving the federal Crown, and maritime and admiralty law matters. It does not apply to other claims that can be brought in the Federal Court, such as claims under intellectual property statutes.

Without directly acknowledging the scope of the CCA, the Court referred to the United Nations Foreign Arbitral Awards Convention Act, RSC 1985, c 16 (UNFAACA) which incorporates into Canadian law the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). The Court confirmed that Article II.3 of the New York Convention requires the Court to refer the matter to arbitration unless they found that the arbitration agreement was "null and void, inoperative or incapable of being performed."

The Court held so long as the "the dispute potentially falls within the arbitration clause; it must be referred to arbitration." This is consistent with the competence-competence principle and leading Supreme Court of Canada jurisprudence, including Dell Computer Corp v Union des consommateurs, 2007 SCC 34, which has consistently confirmed that arbitrators are competent to their own jurisdiction.

When an arbitration clause exists, the Federal Court held that any challenges to the jurisdiction of the arbitrator must first be referred to the arbitrator, subject to two exceptions:

1. when the challenge to the arbitrator's jurisdiction concerns a question of law alone, or
2. when there is a question of mixed law and fact, the question of fact only entails a superficial examination of the documentary proof in record and the challenge is not a delaying tactic or prejudice to the recourse of arbitration.

The Federal Court also clarified that the case management judge erred in relying on the Supreme Court of Canada's decision in Z.I. Pompey Industrie v ECU-Line N.V., 2003 SCC 27 when deciding whether to enforce the arbitration clause. That case holds that where a forum selection clause binds the parties, a court must enforce it unless the plaintiff can show sufficiently "strong cause" to support the conclusion that it would not be reasonable or just in the circumstances to require the plaintiff to adhere to the terms of the clause. Unlike a forum selection clause case, where there is a valid arbitration agreement, the court has no discretion not to stay the proceedings.

A party cannot escape arbitration by alleging termination of the contract

The Federal Court also confirmed that a party cannot escape arbitration by alleging termination of the contract containing the arbitration clause. The doctrine of separability considers an arbitration clause to be "autonomous and juridically independent from the main contract in which it is contained". The Court held that even if the Agreement had been validly terminated, it would not detract from the Court's duty to systematically refer the parties to arbitration.

Key takeaways

This decision makes clear that a stay of proceedings in favour of arbitration is mandatory in Federal Court even if the CAA does not apply. Further, a party cannot escape arbitration by alleging termination of the contract containing the arbitration clause. This decision is under appeal although a hearing of the appeal has not been scheduled at the time of this writing.

Federal Court partially stays class action in favour of arbitration: Difederico v. Amazon.Com, Inc., 2022 FC 1256

(Pierre N. Gemson and Glenn Gibson)

Introduction

In Difederico v. Amazon.Com, Inc., 2022 FC 1256, the Federal Court granted a motion by Amazon (defined below) to stay in favour of arbitration certain claims of a class actions representative plaintiffs under section 45 of the Competition Act, RSC 1985, c C-34 that are covered by an arbitration clause. This decision is notable for three reasons. First, it is one of a small number of decisions by the Federal Court that has considered the enforceability of an arbitration clause in the context of a class action. Second, the judgement interpreted the meaning of "commercial legal relationship" within the meaning of the UNFAACA. Third, it is the first decision of the Federal Court to consider the exception to competence-competence principle. This decision is articulated by the Supreme Court of Canada in Uber Technologies Inc v. Heller, 2020 SCC 16, that a bona fide challenge to arbitral jurisdiction can be decided by a court rather than being referred to the arbitrator if referral would make it impossible for a party to arbitrate or for the challenge to be resolved. Third, it is the first decision of the Federal Court to consider the exception to competence-competence principle articulated by the Supreme Court of Canada in Uber Technologies Inc v. Heller, 2020 SCC 16, that a bona fide challenge to arbitral jurisdiction can be decided by a court rather than being referred to the arbitrator if referral would make it impossible for a party to arbitrate or for the challenge to be resolved.

BLG (Subrata Bhattacharjee, Caitlin Sainsbury, Pierre N. Gemson) acted for the Amazon defendants.

What you need to know

• The proposed class action alleges that certain competitive pricing provisions in Amazon's agreements with third-party sellers in its stores constitute a criminal price fixing agreement contrary to section 45 of the Competition Act. The claim alleged over $12 billion in damages on behalf of classes who purchased products that were allegedly subject to price-fixing on the Amazon.ca, Amazon.com (defined below) and other e-commerce stores.
• The defendants moved to stay claims for purchases in Amazon's stores in favour of arbitration. As decided, the motion covered on representative plaintiff's claims for purchases on Amazon.ca because an arbitration clause applicable to purchases on Amazon.com was removed before the motion was decided.
• The Federal Court granted the stay and referred the representative plaintiffs' proposed claims for purchases on Amazon.ca to arbitration.

Background

The representative plaintiff, Ms. Difederico, filed the proposed class action against Amazon.com, Inc, (Amazon.com) Amazon.com.ca, Inc, (Amazon.ca), Amazon.com Services LLC, Amazon Services International, Inc, and Amazon Services Contracts, Inc (collectively, Amazon). Ms. Difederico had accounts with Amazon.ca and Amazon.com and purchased products through each of these accounts. In 2016, she created her account on Amazon.ca and by June 23, 2021 had placed over 285 orders with Amazon.ca for various products. Ms. Difederico continued to place orders after the underlying action was commenced and the stay motion was filed.

The arbitration clause for Amazon.com was removed in May 2021. Accordingly, Amazon amended its motion and requested to stay only Ms. Difederico's proposed claims relating to her purchases on Amazon.ca.

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