Archive for the ‘litigation’ Category

Whytock and Quintanilla, “The New Multipolarity in Transnational Litigation: Foreign Courts, Foreign Judgments, and Foreign Law”

July 20, 2011

Christopher A. Whytock (University of California, Irvine, School of Law) and Marcus S. Quintanilla (O’Melveny & Myers LLP) have posted “The New Multipolarity in Transnational Litigation: Foreign Courts, Foreign Judgments, and Foreign Law”, Southwestern Journal of International Law, forthcoming. The abstract reads:

Conventional wisdom suggests that the transnational litigation system is essentially unipolar, or perhaps bipolar, with the United States and the United Kingdom acting as the leading providers of courts and law for transnational disputes. Our overarching conjecture is that this unipolar (or bipolar) era – if it ever existed at all – has passed, and that transnational litigation is entering an era of ever increasing multipolarity. If this intuition is correct, then it will be increasingly important for U.S. judges and lawyers to be comfortable handling a wide range of conflict-of-laws problems, and prepared to consult closely with their colleagues abroad.

In this Article – based on our remarks at the International Law Weekend-West Conference held at Southwestern Law School in February 2011 – we develop three aspects of this conjecture, corresponding to three dimensions of the new multipolarity in transnational litigation. In Part I, we discuss the growing relative importance of non-U.S. forums for transnational litigation. In Part II, we highlight the potential proliferation of foreign judgments brought to the United States for recognition or enforcement. And in Part III, we consider the pervasiveness of foreign law issues that are likely to confront U.S. judges and lawyers, and the accompanying challenges of making determinations of foreign law in the wake of the Seventh Circuit Court of Appeals’ recent decision in Bodum USA, Inc. v. La Cafetière, Inc.

A .pdf copy of the article may be downloaded from SSRN here.

Susan Brown on “Governing Law Clauses: Jurisdiction, An Evolving Area of Law in Ontario (2011 Update)”

June 23, 2011

Susan Brown of Fraser Milner Casgrain LLP provides a thorough analysis of the current state of the law of jurisdiction in Ontario in Governing Law Clauses: Jurisdiction, An Evolving Area of  Law in Ontario (2011 Update).

The updated paper (originally presented at the  2010 CCLA Solicitors Conference) discusses, inter alia, the Court of Appeal for Ontario decisions in Van Breda v. Village Resorts Limited, 2010 ONCA 84 and Corporation v. Canadian American Association of Professional Baseball Ltd., 2010 ONCA 722 (CanLII), 2010 ONCA 722, 103 O.R. (3d) 467, both of which have wended their way to the Supreme Court of Canada.

I commend Brown’s article to civil and commercial litigators,corporate counsel,  legal academics and law students.

Related articles

Fox v. Vice: SCOTUS rules plaintiff must pay fees for frivolous claims only

June 6, 2011

I’ve written about the Anglo-Canadian “Loser Pays” Rule for costs indemnification here and here.

The American Rule is considered by Maureen Cosgrove at Jurist-Paper Chase who reports on “Supreme Court rules party must pay fees for frivolous claims alone”  discussing today’s decision in Fox v. Vice  , 563 U. S. ____ (2011) (U.S.S.C.).

Fox claimed that he was the victim of dirty tricks during his successful campaign to become the police chief of Vinton, La., and filed a state-court suit against Vice, the incumbent chief, and the town.  Fox’s suit asserted both state-law claims, including defamation, and federal civil rights claims under 42 U. S. C.§1983, including interference with Fox’s right to seek public office. Vice removed the case to federal court based on the §1983 claims. Following discovery, Vice moved for summary judgment on the federal claims, which Fox conceded were invalid.

The District Court dismissed the frivolous claims with prejudice and remanded the remaining claims to state court, noting that Vice’s attorneys’ work could be useful in the state-court proceedings. Vice then asked the federal court for attorney’s fees under §1988, submitting attorney billing records (dockets) estimating time spent on the entire suit, without distinguishing time spent between the dismissed federal claims and the remnant state claims. The court granted the motion on the ground that Fox’s federal claims were frivolous, awarding Fox all of his attorneys’ fees in the suit. Although the state-law allegations had not been found frivolous, the court did not require Vice to parse out the work the attorneys had done on both sets of claims and declined to reduce the fee award to account for the remaining state-law claims, noting that both sides had focused on the deemed frivolous §1983 claims.

The Fifth Circuit affirmed, rejecting Fox’s argument that each individual claim in a suit must be held to be frivolous for the defendant to recover any fees, and agreeing with the District Court that the litigation had focused on the frivolous federal claims.

Writing for the unanimous Court, Kagan, J.  notes,

Our legal system generally requires each party to bearhis own litigation expenses, including attorney’s fees, re-gardless whether he wins or loses. Indeed, this principle is so firmly entrenched that it is known as the “American Rule.” See Alyeska Pipeline Service Co. v. Wilderness Society, 421 U. S. 240, 247 (1975). But Congress hasauthorized courts to deviate from this background rule incertain types of cases by shifting fees from one party toanother. See Burlington v. Dague, 505 U. S. 557, 562 (1992) (listing federal fee-shifting provisions). (at 5)

Justice Kagan adds,

” But the presence of these unsuccessful claims does not immunize a defendant against paying for the attorney’s fees that the plaintiff reasonably incurred in remedying a breach of his civil rights.

Analogous principles indicate that a defendant may deserve fees even if not all the plaintiff’s claims were frivolous. In this context, §1988 serves to relieve a defendant of expenses attributable to frivolous charges. The plaintiff acted wrongly in leveling such allegations, and the court may shift to him the reasonable costs that thoseclaims imposed on his adversary. See Christiansburg, 434 U. S., at 420–421. That remains true when the plaintiff’s suit also includes non-frivolous claims. The defendant, of course, is not entitled to any fees arising from these non-frivolous charges. See ibid. But the presence of reasonable allegations in a suit does not immunize the plaintiff against paying for the fees that his frivolous claims imposed. (at 7)

The District Court and Fifth Circuit decisions were reversed and remanded to the District court to apply the “but for” rule for fee-shifting.

Speaking of frivolous lawsuits, (albeit only involving state-law defamation, intentional infliction of emotional harm and intentional interference with contractual relations claims), Eric Turkewitz in his Affidavit  in the Rakofsky v. The Internet litigation has deposed that:

Not an April Fool’s Joke: Bogus Court Order Enforcing Arbitrator’s Mareva Injunction Overturned

April 1, 2011

The Ontario court decision in Farah v. Sauvageau Holdings Inc., 2011 ONSC 1819 (CanLII) per Perell, J. has the makings of a great April Fool’s Day joke. The lesson is don’t believe everything you read,  including what appears to be a court order.

The motion involved an application to set aside a Mareva injunction granted by an arbitrator in arbitral proceedings. The respondents brought a motion to recuse the arbitrator and to set aside a Mareva injunction granted purportedly pursuant to the Arbitration Act, 1991, S.O. 1991, c. A.17.

The problem? Arbitrators do not have the power to grant injunctive relief against non-signatories to the arbitration agreement. As Perell, J. observes

[63]   In my opinion, there is nothing in the Arbitration Act, 1991 that empowers arbitrators to grant Mareva injunctions or for that matter to appoint receivers, grant Anton Pillar orders, or grant Norwich orders. Granting an interlocutory injunction that requires financial institutions to prevent the removal of monies and assets and to disclose and deliver up records and report to a litigant, is not an order in which the arbitrator is ruling on the scope of the arbitration agreement or on the scope of his or her jurisdiction; it is an order in which the arbitrator purports to enjoin or direct the conduct of strangers to the agreement to arbitrate who are not bound by the jurisdiction of the arbitral tribunal.

[73]   None of Sauvageau Holdings’ arguments are adequate to prove that arbitrators have the same jurisdiction as judges of the Superior Court. I conclude that while Mr. Montgomery had the jurisdiction to make an injunctive order or arbitral award against Mr. Farah and Ms. Mosharbash as parties to the agreement to arbitrate, he did not have the jurisdiction to grant a Mareva injunction effecting persons who did not sign the agreement to arbitrate.

Apparently, Sauvageau Holdings filed the interim Mareva injunction in the Superior Court in Newmarket without notice to either Farah and third party affected by the arbitrator’s order and had the court staff issue and enter the order. Justice Perell held that this was “improper” and noted that to enforce an arbitral award (including an interim order), a party must make an application under s. 50 of the Arbitrations Act, 1991 on notice to all affected parties.

On December 5, 2010, Sauvageau Holdings served new statements of claim (alleging fraudulent conspiracy and fraudulent conveyances between Farah and Mosharabash) and a copy of the arbitral-Mareva injunction order.

On December 15, 2010, Farah and Mosharbash brought a motion to have the arbitrator, The Honorable Mr. Montgomery recuse himself and for an order setting aside the Mareva injunction. At the hearing on December 15, 2010, they presented very little evidence to rebut the material filed by Sauvageau Holdings and rather relied on a short affidavit from a law clerk employed by their lawyer. The arbitrator dismissed the motion and continued the Mareva injunction. Sauvageau Holdings then sent copies of what Justice Perell describes as a “bogus Order of the Superior Court” to major banks, other financial institutions, Farah’s employer and his real estate agent, and Mosharbash’s father, further noting:

[43]  For present purposes, I need not go into the details, but the recipients responded to the bogus Mareva injunction order as if the order was a lawful order of the Superior Court. Mr. Farah and Ms. Mosharbash have been unable to deposit cheques, including Mr. Farah’s paycheck and the family’s child tax benefit cheques. Mr. Farah was temporarily dismissed from his employment as a restaurant cook because his employer was disturbed by having to deal with the bogus order.

In the end, the court dismissed the motion to disqualify the arbitrator without costs and the applicant’s motion to enforce the Mareva injunction pursuant to s. 50 of the Arbitrations Act, 1991 without costs. Perell, J. did grant judgment to Sauvageau Holdings in the fraudulent conveyance action without costs and granted a Mareva injunction against Farah without costs, but dismissed the motion for a Mareva injunction Mosharbash with the matter of costs to be determined.

Does any one else think that an arbitrator exceeding his or her jurisdiction should have been argued as an alternative ground for recusal? (h/t Igor Ellyn, Q.C. via Twitter: @EllenLawLLP )

Erik S. Knutsen on "The Cost of Costs: The Unfortunate Deterrence of Everyday Civil Litigation"

August 31, 2010
Erik S. Knutsen (Queen’s University Faculty of Law) doesn’t like costs. Specifically, he doesn’t much care for Canada’s “loser pays” costs regime in civil litigation. In his article, “The Cost of Costs: The Unfortunate Deterrence of Everyday Civil Litigation in CanadaQueen’s Law Journal, forthcoming (available on SSRN) Professor Knutsen proposes a “two-track” costs regime to address perceived unpredictability and unfairness in fee-shifting impacting both plaintiffs and defendants. It is a lengthy article but well worth reading. Here is the abstract:
Costs today play a disproportionate role in many civil litigation decisions in Canada because of the inherent unpredictability built into the current overly complex costs system. Canada’s civil litigation system utilizes a fee shifting regime whereby an unsuccessful litigant must pay a proportion of the successful litigant’s legal fees. This costs system is designed to regulate litigation behaviour by deterring unmeritorious cases, by indemnifying successful litigants, by fostering efficient lawyer behaviour, by promoting settlement of disputes, and by ensuring access to the civil litigation system so that the cost of litigating is not out of reach for litigants. In today’s economy, however, the system is trying to do too much, and with too much at stake. The original system was put in place at a time when litigation costs were very often in reasonable proportion to the amount in dispute. Presently, the cost to litigate can quickly eclipse the value of what is at stake in the dispute. A summary judgment motion, for example, may cost upwards of the cost of a family vehicle for the average Canadian. In the minds of litigants and lawyers, unpredictable issues of legal costs often replace issues of substance at the heart of a litigated dispute. While the cost of civil litigation to an individual litigant has certainly increased over time, the increase is not due solely to the cost a litigant pays his or her own lawyer. An increase in the overall cost of litigation thus means an additional increase in costs the loser in a case must pay to the successful litigant, as well as to the loser’s own lawyer. If the loser is an average, middle-income earning Canadian litigating a standard contract or injury dispute, such a loss can be economically impossible to bear. Litigation costs through fee shifting have thus become a fundamental driving force in the Canadian civil litigation.

Courts in Canada exercise wide discretion in assessing costs through fee shifting and costs awards have become unpredictable as a result. This has led to an inability of litigants to ex ante predict their exposure to adverse cost awards. Risk averse litigants, especially those middle income Canadians with some financial exposure such as a house to lose, tend to shy away from the civil litigation system. This is how concern for costs can often eclipse the substantive rights being asserted in a particular case. Everyday litigants who are non-corporate individuals whose litigation costs are not covered by insurance cannot easily defray the financial burden of an adverse cost award. They are most likely to have cost concerns weigh heavily in the decision to advance a claim at all. However, should costs be driving litigation results? Should costs be driving access to the civil litigation system, particularly for the everyday litigants in Canada who have a house or modest savings to potentially lose?

Part I of this Article details how Canada’s fee shifting costs regime operates in a fashion to create a complex and unpredictable litigation dynamic. The Article explains the myriad of variables informing how legal costs are calculated in Canada and how lawyers, clients, and courts have difficulty in estimating financial exposure to such costs. In addition to the fee shifting system, the amount a litigant must pay her own lawyer plus Canada’s pre-trial settlement cost incentives also play large roles in how costs affect litigation decision-making in Canada. Part II of the Article attempts to define the everyday Canadian litigant who is most negatively affected by the current costs system because of an inability to internalize a negative costs award. The everyday litigant is in the most precarious position of potential litigants because costs drive a myriad of access to justice concerns for that group. Part III critically evaluates the costs landscape in Canada and concludes that costs, not the substantive legal claims of the litigants, are disproportionately driving the civil litigation system in Canada for everyday Canadian litigants. In short, costs have subsumed the substance of much Canadian litigation. This leads to not only over-deterrence of litigation in the name of settlement but to concerns about the ability of average Canadians to access the civil justice system for. Part IV evaluates possible fee regime models with an eye to informing modifications to Canada’s fee system. It recommends that Canada’s fee regime be reformed to allow for a hybrid, two-track approach. As a default, courts should adopt a one-sided pro-plaintiff fee shifting system as long as the defendant in litigation is able to somehow defray adverse cost awards through assets or insurance. If both plaintiff and defendant are litigants who cannot reasonably defray the cost of costs, a more American-style costs system of no fee shifting should govern. Settlement incentives should not be based on actual costs to litigate but instead should be a 10% uplift on final damages awarded at trial or settled. Part V concludes.

Professor Knutsen certainly identifies a number of systemic problems within the current costs regimes in various Canadian provincial jurisdictions. I am not thoroughly persuaded, however, that the “loser pays” costs regime is all to blame. Cost indemnification remains an important component to access to justice. (or justice of access). Both plaintiffs with meritorious claims and defendants facing unmeritorious claims have a prima facie entitlement to recovering the costs of legal representation. This offers a financial incentive to settling claims due to the potential adverse cost consequences built into offers to settle (e.g. Rule 49 of the Ontario Rules of Civil Procedure).  There is a reason, after all, why most civil cases settle (some studies suggest up to 95%). Risk aversion is endemic to human behaviour. Similarly, defendants who are forced to defend a claim have other means at their disposal: summary judgment. The recent amendments to the Ontario Rules of Civil Procedure under Rule 21 now empower motion judges to weigh evidence, assess credibility and order summary trials to narrow the issues, where necessary. One factor that the article does not address is that corporate litigants are able to claim legal expenses for tax purposes. Perhaps individual litigants should have the same privilege.
Is creating a two-tiered costs regime the correct legislative response to the disturbing increase in self-represented (pro se) litigants  and reduced access to justice?  Will following the American no  fee-shifting approach mean we are throwing the baby out with the bath water? 

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