Epiar Inc. Plaintiff (Respondent) - v. -, 2012 ABQB 94

Court of Queen ’ s Bench of Alberta Citation: Epiar Inc. v. Rainier Capital Management, L.P., 2012 ABQB 94 Date: 20120208 Docket: 1103 19404 Registry: Edmonton Between: Epiar Inc. Plaintiff (Respondent) - and - Rainier Capital Management, L.P. Defendant (Applicant) - and - Shift.Com Inc., Shift, L.L.C., William (Shawn) Hill, and Johnny Allie Defendants (not parties to application) _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Eric F. Macklin _______________________________________________________ I. Introduction [ 1 ] Applications to adjourn applications are usually simple and straightforward. This one, not so much.

[ 2 ] The Plaintiff, Epiar Inc. ( “ Epiar ” ), is to apply on February 28, 2012 for a declaration that the Court of Queen ’ s Bench of Alberta has jurisdiction over the subject matter of the action (jurisdiction simpliciter ) and declaring that Alberta is the most convenient forum for the hearing of the action ( forum conveniens ) ( “ Epiar ’ s Application ” ). [ 3 ] The Defendant, Rainier Capital Management, L.P. ( “ Rainier ” ), applies for an Order adjourning or temporarily staying that application. A parallel action is ongoing in Texas ( “ the Texas Action ” ).

Epiar is a Defendant in the Texas Action and is bringing a Motion to Dismiss the action, in part asserting that the Texas Court lacks jurisdiction over Epiar ( “ Epiar ’ s Motion ” ). Rainier argues that if Epiar ’ s Motion in Texas is unsuccessful, Epiar ’ s Application in Alberta will be unnecessary. [ 4 ] The only evidence before the Court on this application is an Affidavit sworn by Danny Lovell, the Senior Vice President for Rainier. The facts recited below are considered true solely for the purpose of this application for an adjournment or temporary stay of Epiar ’ s Application. II.

Background Facts [ 5 ] Rainier is a corporation registered pursuant to the laws of the State of Texas. It has no operations, nor does it carry on any business, in the Province of Alberta. [ 6 ] In July 2011, Danny Lovell became involved in an investigation and tracing of funds allegedly embezzled and misappropriated by one Johnny Allie, a former Senior Controller for Rainier. Lovell determined that Allie misappropriated from Rainier the sum of $1,331,526.97 which was sent to Epiar, Ken Jurina and Bob Vaasjo for the alleged purchase of Epiar by Shift, LLC ( “ Shift ” ).

Rainier has no affiliation or relationship whatsoever with Shift. [ 7 ] Payments to Epiar, Jurina and Vaasjo were made through accounts belonging to Rainier and its affiliated investment fund entities. They were made without the knowledge or consent of Rainier. [ 8 ] RFAR Group, LLC ( “ RFAR ” ) is a company that was created by the principals of Rainier for the purpose of tracking and recovering the funds embezzled by Allie. RFAR was assigned all of Rainier ’ s recovery rights for the unauthorized withdrawal of funds by Allie from financial accounts owned by Rainier and its affiliated investment fund entities.

One of those entities is Preferred Income Fund V, LP. [ 9 ] On November 8, 2011, RFAR filed an Original Petition in Texas against Epiar, Jurina and Vaasjo for money had and received, unjust enrichment, constructive trust and disgorgement, and fraudulent transfer. Epiar and Jurina were served with the Petition on November 21, 2011. [ 10 ] On December 8, 2011, Epiar filed a Statement of Claim in the Court of Queen ’ s Bench of Alberta naming Shift.Com Inc., Shift, Rainier, William (Shawn) Hill, and Allie as Defendants ( “ the Alberta Action ” ).

The Statement of Claim alleges that Epiar was approached on behalf of Shift, Allie and Hill indicating that they were interested in acquiring an interest in Epiar. It alleges that an Option Agreement was entered into between Epiar and Shift and ultimately Epiar received payments totalling over one million dollars. It then alleges that Epiar was advised by representatives of Rainier that Allie had embezzled funds from Rainier which were provided to Epiar.

The Alberta Action refers to the Texas Action and contests the allegations by RFAR against Epiar in that action. [ 11 ] Epiar ’ s Application, now returnable on February 28, 2012, was filed concurrently with the Statement of Claim in Alberta. As mentioned above, Epiar seeks an Order declaring that the Alberta Court has jurisdiction simpliciter over the action and that Alberta is the forum conveniens . [ 12 ] On December 16, 2011, Epiar and Jurina filed a Motion to Dismiss and Brief in Support in the Texas Court asserting that the

Texas Action should be dismissed, in part because that Court lacks personal jurisdiction over the Canadian Defendants. In the Motion,Epiar and Jurina put forward extensive written argument in support of their position. In their

Summary of Argument at p 2, they state: Further, Epiar has filed suit in Edmonton, Alberta, Canada. As such, Epiar respectfully asks the Court to dismiss the Plaintiff’s Petitionfiled against it with prejudice so that this matter may be properly litigated in a Canadian Court. Further, in summarizing their position, Epiar and Jurina state at p 22: In sum, Epiar’s contacts with Texas are insufficient to support general jurisdiction over it. Its contacts with Texas related to thecontroversy at issue are insufficient to support specific jurisdiction.

As such, because this Court lacks personal jurisdiction over Epiar,the Court should dismiss Plaintiff’s Petition with prejudice and without apology. [13] In the Texas Court, the Motion to Dismiss is dealt with by way of written argument only. Epiar and Jurina’s submission onthe Motion to Dismiss and Brief in Support was filed on December 16, 2011. RFAR was required to file a Response to the Motion toDismiss by January 23, 2012.

In the event that Epiar and Jurina wish to reply to RFAR’s response, they must do so by February 9, 2012.The Court is then expected to rule on the Motion to Dismiss. [14] Rainier seeks an adjournment or temporary stay of Epiar’s Application until the Texas Court renders its decision. Rainiersubmits that if the Motion to Dismiss filed in the Texas Court by Epiar and Jurina is successful, there will be no need to conduct a forumconveniens analysis in Alberta; by default, Alberta will be the jurisdiction of choice for an action it will commence in Alberta.

Epiaropposes the application for an adjournment and asks that this Court proceed to determine the issues of jurisdiction and forum conveniens. III. Issue [15] The sole issue to be decided at this time is whether Epiar’s Application should be adjourned or stayed pending the decision ofthe Texas Court. IV. Discussion [16] While the Texas Action and the Alberta Action involve a number of different parties and allegations, they are related.

Theevidence before the Court on this application by Rainier confirms the close relationship between Rainier and RFAR such that, for thepurposes of this application, I consider them to be one and the same. Further, on comparing the Original Petition filed in Texas with theStatement of Claim filed in Alberta, it is evident that the funds Epiar acknowledges having received in the Alberta Action are the samefunds RFAR alleges were embezzled in the Texas Action. [17] It is important to note that Epiar refers in the Alberta Action to its dispute with Rainier and the Texas Action.

In particular, itdenies any knowledge that the funds provided to it had been embezzled from Rainier and further contests the jurisdiction of the TexasCourt to hear the matters set out in the Texas Action.

It also seeks a declaration that the Texas Action is an “improper action brought foran ulterior or improper purpose”, and an injunction enjoining the Defendants from filing or pursuing legal claims in Texas or elsewhere. [18] In Amchem Products Inc v British Columbia (Workers’ Compensation Board), (SCC), [1993] 1 SCR 897,[1993] SCJ No 34, the Court considered the rules of private international law relating to forum non-conveniens and anti-suit injunctionsin the context of an appeal from the grant of an interlocutory injunction by a domestic Court restraining tort proceedings in a foreignCourt (Texas).

The issue considered was whether an anti-suit injunction issued in British Columbia to prevent the plaintiffs frompursuing their action against the defendants in Texas should be set aside. In doing so, the Court stated: 22 The courts have developed two forms of remedy to control the choice of forum by the parties. The first and more conventionaldevice is a stay of proceedings. This enables the court of the forum selected by the plaintiff (the domestic forum) to stay the action at therequest of the defendant if persuaded that the case should be tried elsewhere.

The second is the anti-suit injunction, a more aggressive

remedy, which may be granted by the domestic court at the request of a defendant or defendants, actual or potential, in a foreign suit. In the usual situation the plaintiff in the domestic court moves to restrain the defendant or defendants from launching or continuing a proceeding in the courts of another jurisdiction. .. [ 19 ] In essence, Epiar is concurrently seeking the two forms of remedy identified in Amchem . While it is not asking for a stay of proceedings from the Texas Court, it is asking that the action itself be dismissed.

It is doing so, in part, on the basis that the matter should be tried in Alberta. While Epiar ’ s Texas Motion remains to be decided, Epiar ’ s Application has been filed in Alberta for a declaration as to jurisdiction simpliciter and forum conveniens . Though the Alberta Action seeks an injunction enjoining Rainier from filing or pursuing legal claims in Texas, Epiar ’ s Application ostensibly seeks only a declaration. However, success for Epiar in its application may have the ultimate effect of restraining Rainier (or RFAR) from continuing the proceedings in the Texas Court.

In other words, while the Epiar application is not framed as an anti-suit injunction application, its effect may be the same (see McCann v CP Ships Ltd , 2008 CarswellOnt 2970 (Sup Ct J) ). [ 20 ] The Court in Amchem considered the timing of an anti-suit injunction and stated: 51 ...In order to resort to this special remedy consonant with the principles of comity, it is preferable that the decision of the foreign court not be pre-empted until a proceeding has been launched in that court and the applicant for an injunction in the domestic court has sought from the foreign court a stay or other termination of the foreign proceedings and failed. 52 If the foreign court stays or dismisses the action there, the problem is solved.

If not, the domestic court must proceed to entertain the application for an injunction but only if it is alleged to be the most appropriate forum and is potentially an appropriate forum... [ 21 ] Epiar is seeking the Declaratory rulings of jurisdiction and forum conveniens while it is concurrently seeking a “ termination of the foreign proceedings ” in Texas. As emphasized in Amchem , and considering the principles of comity, it is preferable that the decision by the Texas Court not be pre-empted.

It is only in the event that the Texas Court dismisses or stays Epiar ’ s Motion that the Alberta Court should proceed to consider Epiar ’ s Application. [ 22 ] After further consideration of the applicable principles, the Court in Amchem stated: 56 The result of the application of these principles is that when a foreign court assumes jurisdiction on a basis that generally conforms to our rule of private international law relating to the forum non conveniens , that decision will be respected and a Canadian court will not purport to make the decision for the foreign court.

The policy of our courts with respect to comity demands no less. If, however, a foreign court assumes jurisdiction on a basis that is inconsistent with our rules of private international law and an injustice results to a litigant or “ would-be ” litigant in our courts, then the assumption of jurisdiction is inequitable and the party invoking the foreign jurisdiction can be restrained.

The foreign court, not having, itself, observed the rules of comity, cannot expect its decision to be respected on the basis of comity. [ 23 ] Epiar argues that a determination by the Texas Court that it has jurisdiction and is the forum conveniens would be fatal to its application to the Alberta Court. This is not so. First, as outlined above, the Alberta Court may take jurisdiction if the Texas Court assumes jurisdiction on a basis inconsistent with our rules of private international law.

Further, a foreign court ’ s prior assertion of jurisdiction is not considered as an overriding or determinative factor in the forum non conveniens analysis ( Teck Cominco Metals Ltd v Lloyd's Underwriters , 2009 SCC 11 at para 29 ). That is, the first decision on forum non conveniens may be relevant, but it may ultimately have little bearing on a decision by the court of a different jurisdiction as to where an action would be most conveniently or appropriately heard.

The decision by the Texas Court will not necessarily be the final determination on the issue of forum conveniens . [ 24 ] There are also cases where both the foreign and domestic courts refused to decline jurisdiction. That is, neither forum is clearly more appropriate than the other. In such an event, the parties might litigate in parallel proceedings in both jurisdictions.

The issue as to which court ’ s judgment will ultimately bind the parties will then likely be determined by which court renders the first final judgment ( Amchem at para 29). [ 25 ] Accordingly, Epiar will be entitled to proceed with its Application in the event that its Motion to Dismiss is unsuccessful.

Importantly, however, it may not be necessary to proceed with the Epiar Application at all if it is successful in the Texas Motion. In my view there is no reason for Epiar ’ s Application to proceed on February 28, 2012 and if the Texas Court issues its decision before February 28, 2012, the issue may be moot by then. [ 26 ] Epiar argues that Rainier is essentially bringing its application under Rule 3.68 of the Alberta Rules of Court and has failed to bring itself within the parameters of the Rule. Rule 3.68 provides: 3.68(1) If the circumstances warrant and a condition under subrule (2) applies, the Court may order one or more of the following: ... (

d) that an action, an application or a proceeding be stayed.

(2) The conditions for the order are one or more of the following: (

a) the Court has no jurisdiction; (

b) a commencement document or pleading discloses no reasonable claim or defence to a claim; (

c) a commencement document or pleading is frivolous, irrelevant or improper; (

d) a commencement document or pleading constitutes an abuse of process; (

e) an irregularity in a commencement document or pleading is so prejudicial to the claim that it is sufficient to defeat the claim. [ 27 ] Rule 3.68(1) is contained in

Part 3 Division 5 of the Rules of Court . The information note at the beginning of

Part 3 states that the Rules in this part deal “ with what happens if there are significant deficiencies in a claim or pleading... ” . Division 5 is titled “ Significant Deficiencies in Claims ” and Rule 3.68(1) is the first rule under the heading “ Court Options to Deal With Significant Deficiencies ” . This application for an adjournment or temporary stay by Rainier of Epiar ’ s Application does not relate to an allegation of any significant deficiency in the Epiar claim. It is not being sought on the basis that the Court has no jurisdiction nor does it relate to a commencement document or pleading.

It is simply being sought on the basis that it is premature and may ultimately prove unnecessary. [ 28 ] The applicable rules to consider on this application are the foundational rules in

Part 1 of the Rules. Rule 1.4 provides: 1.4(1) To implement and advance the purpose and intention of these rules described in rule 1.2 ... the Court may, subject to any specific provision of these rules, make any order with respect to practice or procedure, or both, in an action, application or proceeding before the Court.

(2) Without limiting subrule (1), and in addition to any specific authority the Court has under these rules, the Court may, unless specifically limited by these rules, do one or more of the following: ... (

h) adjourn or stay all or any part of an action, application or proceeding, extend the time for doing anything in the proceeding, or stay the effect of a judgment or order ...

[ 29 ] Rule 1.2 provides, in part: 1.2

(1) The purpose of these rules is to provide a means by which claims can be fairly and justly resolved in or by a court process in a timely and cost-effective way.

(2) In particular, these rules are intended to be used (

a) to identify the real issues in dispute, (

b) to facilitate the quickest means of resolving a claim at the least expense ... [ 30 ] As stated earlier, if Epiar ’ s Motion is successful, Rainier (or RFAR) will pursue its claim against Epiar in Alberta. In that event, it will be unnecessary for the Epiar Application to proceed and there will be significant savings in both time and cost to the parties. In the event that Epiar ’ s Motion is unsuccessful, it will still have the option of pursuing its application in Alberta for a declaration that the Alberta Court has jurisdiction simpliciter and is the forum conveniens .

It may also seek an injunction enjoining Rainier from pursuing its claim in Texas. In any case, a determination by the Texas Court may also result in a clear identification of the facts relevant to the issues of jurisdiction and forum conveniens . V. Conclusion [ 31 ] The application for an adjournment or temporary stay of Epiar ’ s Application is granted.

However, in the event that no decision is rendered by the Texas Court on Epiar ’ s Motion within three months of the date by which the last written submissions are made to that Court, then Epiar will be entitled to seek direction from this Court for the rescheduling of its application. Heard on the 2 nd day of February 2012. Dated at the City of Edmonton, Alberta this 8 th day of February 2012. Eric F. Macklin J.C.Q.B.A. Appearances: Carmen Plante Nigel Forster Bishop & McKenzie, LLP

for the Plaintiff (Respondent) Mark Morrison Blake Cassels & Graydon, LLP for the Defendant (Applicant) Rainier Capital Management, L.P.