Case of the Day: Contacare Inc. v. CIBA Vision Corp.

Thank you to Antonin Pribetic of the Trial Warrior Blog for bringing the case of the day, Contacare Inc. v. CIBA Vision Corp. (Ont. Super. Ct. 2011), to light. I would like to give Antonin a laurel and a hardy handshake, as this is the latest in a series of Canadian cases, or US cases with Canadian implications, that he has brought to my attention. Today’s case is particularly interesting because it is the first case of the day in which a party has sought recognition of a foreign judgment as a prelude to raising the defense of res judicata, rather than as a prelude to enforcement of the foreign court’s award of damages, i.e., in which the party seeks recognition but not enforcement of the foreign judgment.

The case of the day arises out of a licensing agreement between Contacare, a Canadian corporation with offices in Toronto, and CIBA, a Delaware corporation. Under the agreement, which was governed by New York law, Contacare licensed its contact lens technology know-how to CIBA, which was to commercialize it and pay royalties to Contacare. Contacare sued CIBA in New York, alleging that CIBA had failed to develop the technology and thus had paid no royalties. The Supreme Court granted CIBA’s motion for summary judgment on the grounds that the license was non-exclusive, and thus that under New York law, CIBA had no duty to commercialize the technology, and that despite the affidavit of an attorney, who lacked personal knowledge and who was not qualified to give an expert opinion, the products that CIBA sold were not within the scope of the license and thus no royalties were due. The court also rejected a claim of fraud. Contacare appealed, but the Appellate Division affirmed, and the Court of Appeals denied leave to appeal.

After exhausting its appeals in New York, Contacare sued CIBA in Ontario, alleging breach of the license agreement for failure to pay royalties and for fraud in the inducement. CIBA moved to dismiss on the the grounds that the New York judgment was entitled to recognition and, once recognized, was res judicata, and that the Ontario action was an abuse of process. The Ontario Superior Court granted the motion. The judge applied the test of Beals v. Saldanha, [2003] 3 S.C.R. 416, which makes “lack of natural justice” a defense to enforcement of a foreign judgment. (This seems a rough analogue of due process of law). The claim was that New York’s summary judgment procedure worked a denial of natural justice, but Ontario, like New York, has a summary procedure for cases that do not present triable issues.

Pribetic points out that in Beals, the defendant was resisting enforcement of the foreign judgment, and he says that the defense of natural justice is applicable only when a defendant wishes to resist enforcement, not when a plaintiff wishes to resist recognition. In such cases, he says, the ordinary principles of res judicata apply. I defer to him, of course, on these questions of Canadian law. I would assume that whatever the proper doctrinal label, a Canadian court would refuse to give preclusive effect to a foreign judgment that plainly fell short of minimum due process standards, whether the party seeking recognition was the plaintiff or the defendant.

Just by way of comparison with US law, under § 4(c)(8) of the Uniform Foreign-Country Money Judgments Recognition Act, a court need not recognize a foreign judgment if the foreign proceeding leading to the judgment “was not compatible with the requirements of due process of law.” This provision protects plaintiffs as well as defendants. So if A. sues B. in a foreign country, and the court denies A. a fair hearing and rules in favor of B., the US court need not recognize the judgment.

In any event, it seems clear that the Ontario case was rightly decided. Contacare essentially sought a do-over in its home court, contrary to the ordinary principles of res judicata.


4 responses to “Case of the Day: Contacare Inc. v. CIBA Vision Corp.”

  1. Antonin I. Pribetic

    Ted, thanks for the laurel and hardy handshake and in the spirit of reciprocity and comity, may I return the kind commendations.

    With respect to the distinction I make between recognition and enforcement in relation to the impeachment defences set forth in Beals v. Saldanha, it is noteworthy that the genesis of these common law defences is the decision of Henry, J. of the Ontario Superior Court of Justice in Four Embarcadero Center Venture v. Kalen (1988), 65 O.R. (2d) 551 (Ont. Gen. Div.) which was an action to enforce a California money judgment in Ontario.

    The peculiar aspect of the Contacare decision is that the defendant, CIBA, did not appear to have counterclaimed for the declaratory relief of recognition of the foreign judgment. Rather, CIBA seems to have defended the action relying on the Ontario Rules of Civil Procedure; namely, R.21.01(1)(b), as disclosing no reasonable cause of action, being, res judicata; or, alternatively, to dismiss or permanently stay the action as an abuse of process pursuant to R. 21.01(3)(d); or, in the further alternative, to dismiss or permanently stay the action on the ground that the Ontario court lacked jurisdiction simpliciter (personal and subject-matter jurisdiction). In the latter case, lack of jurisdiction simpliciter is non-sensical, since CIBA moved for recognition of the New York State judgment which required the Ontario court to assert subject-matter jurisdiction over the parties, with the issue of personal jurisdiction rendered moot by virtue of Contacare suing in Ontario and CIBA defending the action on the merits.

    I agree that the defence of lack of natural justice (or its American corollary, lack of due process) always factors into the equation when dealing with conflict of laws analysis. The problem, as you can readily surmise, is that these are “defences” (or “defenses”).

    It is also arguable that the other impeachment defences of fraud and public policy have no relevance in the recognition context, insofar as the plaintiff’s choice to sue in the foreign jurisdiction presupposes that the plaintiff knew what to expect in the foreign jurisdiction and is stuck with the adverse judgment.

    Under Canadian common law for foreign judgment enforcement proceedings, two types of fraud are distinguished: fraud going to jurisdiction (or jurisdictional fraud) and fraud going to the merits (or merit-based fraud).

    Justice Major, writing for the majority of the Supreme Court of Canada in Beals v. Saldanha, 2003 SCC 72, [2003] 3 S.C.R. 416 (S.C.C.) previously eschewed the traditional distinctions between “intrinsic” and “extrinsic” fraud, suggesting that:

    “It is simpler to say that fraud going to jurisdiction can always be raised before a domestic court to challenge the judgment. On the other hand, the merits of a foreign judgment can be challenged for fraud only where the allegations are new and not the subject of prior adjudication. Where material facts not previously discoverable arise that potentially challenge the evidence that was before the foreign court, the domestic court can decline recognition of the judgment.” (at para. 51).

    You will note that Justice Major uses the phrase “recognition of the judgment” in the above quote. In the end, the result in Contacare is correct, even at the expense of conceptual clarity.

  2. Thanks, Antonin, for the comment. You raise an interesting point about whether someone in CIBA’s shoes ought to counterclaim for recognition of the judgment, or whether it is enough to raise res judicata as an affirmative defense. In US practice, my off-the-cuff answer would be that it is enough to plead the defense without asserting a counterclaim. Proving that the foreign judgment is entitled to recognition is just part of the burden you carry in proving the defense. But as I say, that’s an off-the-cuff answer.

    I will waive in your general direction as I drive past Toronto this weekend–I’ll be on my way from Boston to Newmarket.

    1. Antonin I. Pribetic

      Let me know next time you’re in Toronto so we can meet for lunch. Best, A.

      1. Thanks, and likewise when you’re in Boston.

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