In a recent Ontario case about the proper forum for a dispute involving both American and Canadian parties, the court opined that previous legal approaches regarding competing forums were now “all but obsolete” in the era of virtual hearings.
Parties Dispute Location of Litigation
In 2009, a Chicago, Illinois-based company, entered into a Development Agent Agreement (the “DAA”) with a Houston, Texas-based company, to develop franchises in Texas.
The Houston company subsequently claimed breach of the DAA and unjust enrichment.
The DAA contained an arbitration clause that required disputes between the parties to be submitted for arbitration in the city where the Chicago company had its business address, which was identified as Chicago.
However, the Houston company included the Chicago company’s parent company in its lawsuit. The parent company was an Ontario corporation.
As such, the Houston company argued that the litigation should be conducted in Toronto.
In response, the Chicago company and its Ontario parent corporation moved for a stay of proceedings. They argued that the DAA’s arbitration clause required the matter to be arbitrated in the United States and not litigated in Canada, and that the claims were so intimately intertwined that they must be arbitrated together.
Court Considers Use of Virtual Hearings in Its Determination
The court observed that in their submission on the proper forum for litigation, both parties were essentially accusing each other of insisting on a location that would be of inconvenience to the other.
The court then explained that in TELUS Communications Inc. v. Wellman, the Supreme Court of Canada had confirmed that the factors to be considered in granting or refusing a stay of arbitral proceedings included the forum non conveniens-type analysis of whether the forum/venue identified in the arbitral agreement is unfair or impractical for one or another of the parties.
In assessing whether either party in the present case was insisting on an “unfair or impractical” forum, the court asked counsel for both parties whether the hearing itself would be online. Counsel responded that they presumed so since the pandemic had moved most proceedings of this nature to a digital forum.
As a result, the court then opined:
“If hearings are held by videoconference, documents filed in digital form, and witnesses examined from remote locations, what is left of any challenge based on the unfairness or impracticality of any given forum? To ask the question is to answer it. [The Chicago company] may have a miniature post office box or an entire office tower in Chicago, and witnesses or documents may be located in Canada’s Northwest Territories or in the deep south of the United States, and no location would be any more or less convenient than another….
It is by now an obvious point, but it bears repeating that a digital-based adjudicative system with a videoconference hearing is as distant and as nearby as the World Wide Web. With this in mind, the considerable legal learning that has gone into contests of competing forums over the years is now all but obsolete. Judges cannot say forum non conveniens we hardly knew you, but they can now say farewell to what was until recently a familiar doctrinal presence in the courthouse.
And what is true for forum non conveniens is equally true for the access to justice approach to the arbitration question. Chicago and Toronto are all on the same cyber street. They are accessed in the identical way with a voice command or the click of a finger. No one venue is more or less unfair or impractical than another”.
Ultimately, the court held that the arbitration provision in the DAA was valid and enforceable and granted the Chicago company and Ontario parent corporation’s motion for a stay of proceedings.
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Over the lifetime of any business, disputes are bound to arise. While such disputes may be inevitable, effectively managing them and limiting your risk is the key to the continued growth and success of your business.
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