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jeudi 18 décembre 2014

The Mere Likelihood of Being Required to Testify in an Action is Insufficient to Warrant Being Impleaded as a Party to the Proceedings

By Sarah D. Pinsonnault

The forced intervention of a third party to an action is governed by article 216 C.C.P. which requires, inter alia, that the presence of this party be necessary for “a complete solution of the question involved in the action”. In Istore Inc. c. Paradies Shops, l.l.c., 2014 QCCS 5995, the Impleaded Party (“PeachMac”) succeeded in being removed as a party to the proceedings, as it was revealed that its presence was not necessary to ensure a complete resolution of the dispute between the main parties. The Court found that even if a representative of PeachMac would most likely be called to testify during the trial, this did not render its presence necessary as a party to the action.

Context

The Plaintiff (“iStore”), a licenced Apple retailer looking to expand its business activities into the United States, entered into discussions with the Defendant (“Paradies”), who is also a retailer of these products but primarily conducts its business in US airports. During the course of these talks, confidential and proprietary information was exchanged and a non-disclosure agreement was therefore concluded. These discussions however failed to lead to any commercial agreement between the parties and Paradies ultimately entered into a business relationship with PeachMac, another licenced reseller of Apple products located in the state of Georgia.

iStore claims that Paradies was in breach of the non-disclosure agreement in that it communicated confidential information to PeachMac. In light of this, iStore instituted a motion for the issuance of an interlocutory and permanent injunction, both against Paradies and iStore, to not only prevent Paradies from using this confidential information, but to also enjoin Paradies from enforcing any agreement concluded with PeachMac that involves the use of this information.

Paradies and PeachMac both responded with motions for declinatory exception, in large part because the alleged breach of contract occurred in the state of Georgia, thus depriving Quebec courts of any jurisdiction over the matter pursuant to article 3148 C.C.Q.

PeachMac also sought to be removed from the action because, contrary to what is prescribed at article 216 C.C.P., it argued that its presence was not necessary for a complete solution of the matter in dispute.

Decision

Firstly, with regard to PeachMac’s motion, the presiding judge, Superior Court Justice Thomas M. Davis, was of the opinion that of all the connecting factors established in article 3148 C.C.Q., only the "damage suffered in Quebec" factor found at paragraph (3) merited consideration. However, in citing extracts from the Infineon Technologies AG v. Option consommateurs, 2013 SCC 59 decision, he reminded us that when the damage is in the form of a simple recording of loss in the records of the plaintiff’s patrimony, which happens to be located in Quebec, this is insufficient to confer jurisdiction. Instead, one must look to see if the situs of the actual bodily, moral or material damage resulting from the immediate and direct fault of the other party occurred in Quebec.

In the case at bar, the presumable damage to be suffered by iStore would be the loss of potential sales of its products in US airports due to Paradies alleged breach of contract:

“[31] The damages, which are “the immediate and direct consequence of the debtor’s default” will be suffered in the United States, although they might be accounted for in Quebec, as the business opportunity about which the protected information was exchanged was solely a United States opportunity.
[…]        
[39] In the present matter, as the Court has stated, the loss of the business opportunity will occur in the United States. The actual damages, if any, will be suffered in the United States, though accounted for in Quebec.” (reference omitted)
Consequently, on this issue, Justice Davis concluded as follows:

“[40] Therefore, the Court concludes that none of the factors set out in article 3148 C.C.Q. are present and that the courts of Quebec have no jurisdiction over PeachMac on the basis of article 3148.”
Secondly, regarding the forced impleading of PeachMac, Justice Davis agreed that its presence was not necessary to ensure a complete resolution of the dispute between iStore and Paradies:

“[47] The dispute relates to the breach of the [non-disclosure] agreement, to which PeachMac in not a party. While it is quite likely that PeachMac representatives will be required to testify, this does not lead to the conclusion that its presence as a party is required.
[48] Even recognizing the power of the Quebec courts to issue injunctions which are extra-territorial in scope, the Court maintains this view. iStore has not asked for any direct relief against PeachMac. There are conclusions, which stand to affect PeachMac indirectly:
• ORDER Paradies to terminate all discussions and/or agreements with all competitors of iStore pertaining to any arrangements similar to the proposed arrangement between Paradies and iStore;
• ORDER Paradies not to enforce any Agreement entered into with PeachMac that involves the use of Plaintiff confidential information.

However, these conclusions do not lead to PeachMac’s presence being required as an impleaded party, only as a witness. It will have to explain its role and that evidence will no doubt be useful to this Court in its disposition of the matter, but PeachMac need not be required to assume the burden of being a party to play the appropriate role in the dispute between iStore and Paradies.” (reference omitted; emphasis added) 
PeachMac’s motion for declinatory exception was therefore granted in that Quebec courts were found to have no jurisdiction over PeachMac with regard to iStore’s motion.

To read this decision in its entirety, along with the other issues addressed therein, click here

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