Istore Inc. c. Paradies Shops, l.l.c.						2014 QCCS 5995
J.D. 2836    SUPERIOR COURT
CANADA
PROVINCE OF QUÉBEC
DISTRICT OF			MONTREAL
N° :		500-17-082710-149
DATE :	December 11, 2014
______________________________________________________________________
PRESIDING :				THE HONORABLE	THOMAS M. DAVIS, J.S.C.
______________________________________________________________________
iSTORE INC.
Plaintiff
vs.
THE PARADIES SHOPS, LLC
Defendant
-and-
PEACHMAC AIRPORTS, LLC.
Impleaded Party
______________________________________________________________________
JUDGMENT ON A DECLINATORY EXCEPTION
______________________________________________________________________

INTRODUCTION

[1]            Do the courts of Quebec have jurisdiction to hear a dispute related to communication of confidential information in breach of a non-disclosure agreement, where the breach occurred in the state of Georgia?

[2]            Does the answer remain the same where the parties to the agreement have elected Quebec as the appropriate forum?

[3]            Do the Quebec courts have jurisdiction over the beneficiary of the confidential information where the information was received in Georgia?

THE CONTEXT

[4]            iStore Inc. (iStore) is a designer, licensor and retailer of electronic devices, principally Apple products. Looking to expand its business reach into the United States, it entered into discussions with The Paradies Shops, LLC (Paradies), itself a retailer of similar products, principally in airports in the United States.

[5]            For the purposes of these discussions, iStore and Paradies entered into a nondisclosure agreement (the NDA) on October 31, 2013, the purpose of which was to govern the exchange of confidential and/or proprietary information between the parties.

[6]            It stipulates that the parties submit to the jurisdiction of the Québec courts for all disputes arising out of the agreement and further agree that the NDA shall be interpreted according to Quebec law.

[7]            The parties exchanged certain commercial information with a view to entering into a commercial agreement. iStore made a proposal to Paradies on December 12, 2013, but no agreement was concluded.

[8]            Rather, Paradies entered into a business arrangement with another licensed reseller of Apple products, the impleaded party, PeachMac Airports, LLC (PeachMac). Like iStore, PeachMac is a licensed Apple retailer, but, unlike iStore, its focus is less on business in Airports.

[9]            iStore alleges that Paradies used confidential information obtained from iStore to approach PeachMac and conclude their agreement. It seeks an interlocutory and permanent injunction, not only to stop Paradies from using the information, but also to enjoin it from enforcing any agreement entered into with PeachMac that involves the use of any confidential information obtained from iStore.

[10]         iStore has, therefore, impleaded PeachMac.

[11]         Although for different reasons, both Paradies and PeachMac take the position that Quebec is not the appropriate jurisdiction to hear the dispute between the parties.

PEACHMAC’S POSITION

[12]         PeachMac seeks to be removed as an impleaded party, raising several grounds. They are set out in its motion as follows:

·        Plaintiff does not allege any fact or legal relation that could give Quebec authorities jurisdiction over PeachMac with respect to the subject-matter contemplated by the Motion;

·        PeachMac does not have any property, establishments, employees nor activities in the Province of Quebec, Canada;

·        PeachMac did not commit any fault or injurious act in the Province of Quebec, Canada;

·        PeachMac did not cause any damages suffered in the Province of Quebec, Canada;

·        PeachMac is not party to any contracts with iStore which create obligations to be performed in the Province of Quebec, Canada;

·        In fact, PeachMac does not have any contracts with iStore;

·        PeachMac is not a party to the NDA, Exhibit P-1;

·        PeachMac never submitted, in any manner, to the jurisdiction of Quebec authorities;

·        There is no allegation as to PeachMac’s bad faith, or its knowledge of the existence and/or content of the NDA along with receipt of confidential information.

[13]         PeachMac also alleges that the doctrine of forum non conveniens should apply, as the courts of Georgia are much better placed to resolve the dispute.

[14]         It further alleges that its presence is not necessary to permit a complete solution of the matter.

[15]         Finally, PeachMac posits that as against it the suit is unfounded in law, even if the facts alleged are true.

PARADIES’ POSITION

[16]         Paradies’ only argument against the Quebec courts assuming jurisdiction is that the Court should apply the doctrine of forum non conveniens, as the Georgia courts are better positioned to decide the dispute.

iSTORE’S POSITION

[17]         As regards Paradies, iStore states that the parties’ agreement to submit to the jurisdiction of the Quebec courts and that the NDA be interpreted in accordance with the laws of Quebec decides the question. Forum non conveniens will not operate in such a situation to remove the jurisdiction of the courts of Quebec.

[18]         Its position towards PeachMac is more nuanced.

[19]         It argues that as it has suffered damages in Quebec, the courts of Quebec have jurisdiction.

[20]         In addition, given that PeachMac is a party to the conduct impugned in its introductory motion, its presence is necessary to assure a complete resolution of the dispute.

DISCUSSION

PeachMac as an impleaded party

[21]         The first question which the Court must ask is whether or not any of the factors set out in article 3148 of the Civil Code of Quebec give the Quebec courts jurisdiction over PeachMac.

[22]         The only possible link with Quebec might be found at paragraph 3 of the article, that damage was suffered in Quebec.

[23]         The link is somewhat tenuous. One must remember that the disputed contract is not between iStore and PeachMac. Nor are iStore and PeachMac in a situation, at least in respect of relationship between the two of them, where an injurious act occurred in Quebec or where a contractual obligation, was to be performed in Quebec.

[24]         However, iStore argues that it has suffered damage in Quebec. Is that the case, or was its damage merely recorded in Quebec?

[25]         The distinction was discussed by the Supreme Court of Canada in Infineon Technologies AG v. Option consommateurs, where the Court stated:

[46]     Quebecor Printing, a case the appellants rely on, should not be read so broadly as to systematically exclude a purely economic loss as a type of damage to which art. 3148(3) applies. Rather, that case indicates that where financial damage is merely recorded in Quebec, that fact is not sufficient to ground jurisdiction under art. 3148(3). To satisfy the requirement of art. 3148(3), the damage must be suffered in Quebec. As Kasirer J.A. explained in the judgment of the Court of Appeal in the case at bar, there is a distinction between damage that is substantially suffered in Quebec and damage that is simply recorded in Quebec on the basis of the location of the plaintiff’s patrimony:

[Préjudice] is to be distinguished from the “dommage/damage” that is the subjective consequence of the injury relevant to the measure of reparation needed to make good the loss. As a result, in specifying “damage was suffered in Québec/un préjudice y a été subi” as the relevant connecting factor, article 3148(3) seeks to identify the substantive situs of the “bodily, moral or material injury which is the immediate and direct consequence of the debtor’s default” (article 1607 C.C.Q.) and not the situs of the patrimony in which the consequence of that injury is recorded. [para. 65][1]

[26]         In the present matter, there is no allegation that PeachMac had any idea of the existence of the NDA or of its content. On the face of the record as it is now constituted, it entered into a business relationship with Paradies, which was made possible due to its own licence agreement with Apple and its own expertise in selling Apple products. Therefore, apart from the damage caused by the alleged illegal disclosure of confidential information to PeachMac, which, on the face of the record, is solely the fault of Paradies, the principal damage suffered by iStore is the loss of the opportunity to partner with Paradies to exploit retail locations in the United States.

[27]         There are, however, some similarities between this matter and the Infineon Technologies matter. Both cases involve a contract apparently entered into in Quebec. In both cases the plaintiffs seek redress from a foreign third party, not bound by any contract.

[28]         In Infineon Technologies the contract was viewed as a juridical fact, which was relevant in determining where Ms. Cloutier suffered the extra-contractual damages that she was seeking from the defendants. As the Supreme Court stated: “The resulting economic damage did not merely have a remote effect on Ms. Cloutier’s patrimony in Quebec; rather, she suffered it in Quebec upon entering into the contract in that province, and this brought her claim within the scope of art. 3148(3).”[2]

[29]         Can the same be said for iStore?

[30]         In the Court’s view, it cannot. Ms. Cloutier’s damages were a direct result of the price agreed to in the contract being too high as a result of the extra-contractual fault of the foreign third party. In the present matter, iStore did not suffer a financial loss upon entering into the contract with Paradies, but rather as a result of the breach of same by Paradies.

[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,[3] as the business opportunity about which the protected information was exchanged was solely a United States opportunity.

[32]         It might also be said that in the Infineon Technologies case, the price fixing admitted to by the third parties had a direct incidence on the contract that Ms. Cloutier concluded with Dell. In the present matter, the fault of PachMac, if any, had no incidence on the NDA concluded between iStore and Paradies.

[33]         iStore, however, invites the Court to consider the matter of Transat Tours Canada inc. v. Impulsora Turistica de Occidente, s.a. de c.v.,[4] where it was recognized that the Superior Court is competent to issue injunctive relief, even when the effect of the order will be solely extraterritorial in scope.

[34]         One of the conclusions of the demand was for order against the impleaded party MyTravel “… to take knowledge of the judgment rendered herein and to be bound therewith.”

[35]         Both the Quebec Court of Appeal and the Supreme Court of Canada acknowledged that the presence of the MyTravel, was appropriate. Although it had no contractual arrangement with Transat Tours, it had participated in the alleged breach of contract by Impulsora Turistica. In addition, it had assets in Quebec, and like Transat Tours was selling vacation packages to Quebec residents.

[36]         There are also several similarities between the present matter and the Transat Tours matter. Both involve a Quebec company seeking to do business with a foreign company, whose business proposal is thwarted when the foreign company decides to do business with a third-party domiciled outside of Quebec.

[37]         The Court is, however, of the view that the present matter is fundamentally different from the Transat Tours matter. In the latter, the motions judge, Justice Emery had recognized that the patrimony of Transat was in Quebec and that damages, although not alleged, would have been suffered in Quebec. The Court of Appeal agreed with this conclusion.

[38]         Transat was in the business of selling vacation packages to Quebec residents. Therefore, to the extent that the alleged contract with MyTravel was in breach of the defendant Tresor’s obligations and inhibited Transat’s ability to sell vacation packages, there can be little doubt that the damage would have been suffered in Quebec. This is all the more the case given that both Transat and MyTravel were selling to the Quebec public.

[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.

[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.

[41]         However, does the absence of these factors preclude iStore from impleading PeachMac on the basis that its presence is necessary to ensure a complete resolution of the dispute?

[42]         In this context, the Court must also consider article 3139 C.C.Q., which gives the Court jurisdiction to rule on an incidental demand where it is competent on the principal demand. For reasons, which will be discussed below, the Court is certainly competent to hear the principal demand, so this article is relevant.

[43]         In the matter of GreCon Dimter inc. v. J. R. Normand inc. the Supreme Court of Canada recognizes that “[w]here a Quebec authority has jurisdiction to rule on a principal demand, art. 3139 C.C.Q. essentially extends its jurisdiction to an incidental demand or a cross demand.” [5] It adds, however, that the article “must be interpreted narrowly so as not to indirectly enlarge the international jurisdiction of the Quebec authority contrary to the specific provisions relating to the definition of its jurisdiction and the general principles that underlie that jurisdiction.”[6] Article 3139 C.C.Q. “is a permissive provision that is procedural in nature, and the principles underlying it must be placed in their proper perspective in relation to the fundamental principles of private international law:  the autonomy of the parties and the legal certainty of international transactions.”[7]

[44]         While the Supreme Court was discussing the impact of article 3139 C.C.Q. in the context of an action in guaranty, in Commentaires sur le Code civil du Québec (DCQ), Gérard Goldstein opines that article 3139 C.C.Q. extends to a forced intervention, as in the present matter.[8]

[45]         How should the Court apply the discretion which the article affords it in the present situation?

[46]         The Court is of the view that the presence of PeachMac is not necessary to insure a complete resolution of the dispute between the principal parties.

[47]         The dispute relates to the breach of the NDA 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. [9]

[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.

[49]         The Court is also of the view that PeachMac’s obligations in the present matter likely fall to be determined in accordance with the law of the forum which applies to its contract with Paradies, in all probability Georgia.

[50]         In the event PeachMac is at fault by being privy to confidential information communicated by Paradies in breach of the NDA, the information was not communicated here. It appears to have been communicated in Georgia and, if so, PeachMac’s fault was committed in Georgia. As PeachMac is not a party to the NDA, any sanction for such fault appears to be a matter for the courts of that state to decide in accordance with Georgia law.

[51]         Therefore, the Court is of the view that PeachMac’s declinatory exception is well founded.

[52]         Given this conclusion, it is unnecessary to discuss the issue of forum non conveniens as it relates to PeachMac. Nor is it necessary to discuss the final ground raised by PeachMac invoking article 165(4) C.C.P.

PARADIES AND FORUM NON CONVENIENS

[53]         The Court sees no reason to exclude the competence of the Quebec courts in relation to Paradies.

[54]         In the GreCon Dimter matter, the Supreme Court of Canada recognized that article 3148 C.C.Q. “attaches considerable importance to the principle of the autonomy of the parties”.[10] While the Supreme Court’s discussion was principally in relation to the second paragraph of article 3148 C.C.Q., the Court sees no reason why the same reasoning should not apply when the parties have agreed that Quebec is the exclusive forum to decide their disputes. This is all the more the case given sub-paragraph 5 of the first paragraph of article 3148 C.C.Q.

[55]         The Court will nonetheless consider whether the doctrine of forum non conveniens should apply.

[56]         Looking first at the factors set out in Oppenheim forfait GMBH v. Lexus Maritime Inc.[11]

THE RESIDENCE OF THE PARTIES

[57]         Some of the witnesses are here, some are in Georgia.

THE LOCATION OF THE PROOF

[58]         The same can be said for the principal elements of the proof. While some may be in Georgia, iStore possesses many of them here.

THE FORMATION OF THE CONTRACT AND THE LOCATION OF THE  ASSETS OF THE DEFENDANT

[59]         While the record does not allow a precise determination of where Paradies accepted the NDA, it appears likely that it was accepted in Georgia. Its execution was in Georgia, as that is the headquarters of Paradies. The confidential information was received there and the obligation not to divulge it should have been respected there.

THE EXISTENCE OF A FOREIGN PROCEEDING

[60]         No foreign action has been instituted.

THE LAW APPLICABLE TO THE DISPUTE AND THE BENEFIT TO THE PLAINTIFF OF PROCEEDING IN QUEBEC

[61]         The parties have chosen that the NDA be governed by Quebec law and that any dispute be submitted to the Quebec courts.

[62]         There is no doubt that iStore will be advantaged if the matter proceeds in Quebec.

 

 

THE INTERESTS OF JUSTICE AND THE INTERESTS OF THE PARTIES

[63]         The interests of justice will be better served if the matter proceeds in Quebec. Why should iStore be required to prove Quebec law in the Georgia courts? Deferral of the matter to the Georgia courts will only lead to increased costs, and more importantly further delay.

[64]         This requirement to prove the law of Quebec if the matter were to proceed in Georgia is also an element which militates toward the interests of Paradies being better served if the matter proceeds here. Moreover, given the potential number of Quebec witnesses, from a cost perspective, it should not be unduly disadvantaged if the matter is heard by the Quebec courts.

THE NEED TO EXEMPLIFY THE JUDGEMENT

[65]         Finally the judgment of this Court will need to be exemplified in Georgia, but that is not a bar to the matter proceeding here. Even if the scope of any injunction will be purely extra-territorial, one can presume that it will be respected in the United States.[12]

[66]         The Court concludes that the factors present do not lead to “une impression nette tendant vers un seul et même forum étranger”.[13] In short, they are insufficient for a determination that the state of Georgia is better placed to hear this matter.

[67]         Finally, Paradies has demonstrated no exceptional reason for the Quebec courts to decline jurisdiction.[14]

[68]         FOR THESE REASONS, THE COURT:

[69]         GRANTS the Motion for Declinatory Exception presented by PeachMac Airports LLC;

[70]         DECLINES  jurisdiction with regards to the Plaintiff’s Motion for the Issuance of an Interlocutory Injunction and Introductory Motion for the Issuance of a Permanent Injunction as against PeachMac Airports LLC;

[71]         THE WHOLE WITH COSTS.

 

 

 

[72]         DISMISSES Defendant The Paradies Shops, LLC’s Motion for Declinatory Exception;

[73]         WITH COSTS TO FOLLOW SUIT.

 

_______________________

THOMAS M. DAVIS, J.S.C.

Mtre Michel Ménard

Lapointe Rosenstein Marchand Melançon

Attorney for the Plaintiff

Mtre Philippe Laverdière

Sylvestre & Associés

Attorney for the Defendant

Mtre Jeremy Wisniewski

BDBL Avocats inc.

Attorney for the impleaded party