Cho v Twin Cities Power-Canada ULC, 2016 ABQB 437

Court of Queen’s Bench of Alberta Citation: Cho v Twin Cities Power-Canada ULC, 2016 ABQB 437 Date: 20160803 Docket: 1101 01630 Registry: Calgary Between: Allan Cho, Jason Vaccaro and Jason Brown Plaintiffs Defendants by Counterclaim - and - Twin Cities Power-Canada, U.L.C. (currently known as Twin Cities Power-Canada Ltd.), Twin Cities Power, L.L.C., Twin Cities Power Holdings, L.L.C., Twin Cities Power Services, L.L.C., Twin Cities Energy, L.L.C. and Timothy Krieger Defendants Plaintiffs by Counterclaim - and - _______________________________________________________ Memorandum of Oral Decision of the Honourable Madam Justice B.L.

Rawlins _______________________________________________________ [ 1 ] The plaintiff Allan Cho has applied for security for costs against the defendants pursuant to Rule 4.22. The considerations of the Court are set out in that Rule. My determination today is whether the facts of this case are such that the defendants should post security. [ 2 ] In this case, I find the plaintiff’s application must succeed.

I agree this lawsuit will be costly for all parties and it is unfortunate that it continues because of a relatively simple mathematical calculation of the plaintiff’s bonus. [ 3 ] I agree in part with the defendants’ assertion that the counterclaim is essentially their defence to the plaintiff’s claim. In

determining what is owed to the plaintiff, the determination of the net profit has to be made. The defendants assert that the number has to be adjusted downward because the defendants were required to disgorge their net profits to FERC for market manipulation, which they say was the result solely of Mr. Cho and others in their employ. [ 4 ] The defendants bolster their case by pointing to the monies that Mr. Cho paid to FERC and the future conditions of non- employment in the FERC agreement, at the conclusion of the FERC investigation. [ 5 ] I acknowledge that Mr.

Cho has accepted no finding of liability in the FERC agreement. [ 6 ] The problem that I have is the timing of the defendants’ actions. At the time of Mr. Cho’s termination on February 1 st , 2011, the defendants assert that Mr. Cho was terminated for cause. Whether there was cause can be the subject of this lawsuit and whether Mr. Cho is entitled to any severance or damages. What is clear is that the defendants were not aware of any FERC investigations, according to the affidavit of Ms. Staska, until October 12, 2011, approximately eight months later.

It would appear the defendants could have made a simple calculation of what was owing to the plaintiff under the contract as of the date of termination. They did not. Why not? Because the plaintiff attempted to get those funds himself ostensibly, it is argued, by misrepresentation to the bank very soon after his termination. [ 7 ] More than one judicial decision has been rendered against the plaintiff for his actions in this regard.

By the time these actions of the plaintiff was reversed by our court system, knowledge of the FERC investigation became known to the defendants, which of course added a whole new defence for them. [ 8 ] I cannot say either party acted appropriately in this regard as to where we are today. The defendants should have paid Mr. Cho his bonus when they terminated him. It was a calculation easily made. Mr. Cho should not have attempted to pre-take his bonus at the bank. The difference between these two actions is what caused the problems we now face. I have to say the fault lies with the plaintiff.

Had he consulted any of the lawyers in the room before me today, a simple exchange of letters may have resulted in a calculation which was rightfully owed to Mr. Cho without any reduction in net profit. The action of Mr.

Cho took away the main topic, in other words, “what am I owed under contract on termination?” to “am I entitled to take money directly from the bank in the manner in which I did.” This involved months of lawsuits and appeals. [ 9 ] While this information may be interesting from a historical point of view in this case, it is not the evidence required to determine whether security for costs should be posted.

While I agree it is rare that defendants are required to post security for costs, in this case I am satisfied that the size of the counterclaim far exceeds any determination of the bonus accrued to the plaintiff, if any, plus an incidental claim for damages which seems somewhat overblown. I agree the counterclaim is in large part the defence to the calculation of the bonus, but it is not clear at what point in time the reduction applies.

I agree with the plaintiff’s counsel in the ordinary course, had the defendants paid the bonus on the date of termination, the defendants would in all likelihood have had to sue the plaintiff here or in Minnesota to recover what the defendant would assert is the result of the FERC investigation and the disgorgement of the defendants’ monies to FERC as a result of the plaintiff’s actions. It would have been the same lawsuit, but the roles would have been reversed.

The interesting aspect of this is it is very likely this Court would have awarded security for costs against the Twin Cities as plaintiff in that particular case because of the specific fact that they have no assets in this jurisdiction as one of the factors to look at. [ 10 ] If a counterclaim is essentially a defence to the main action, then in most cases security for costs against a defendant, even when outside the jurisdiction, should rarely be ordered.

However, if the counterclaim far exceeds a defence to the main action, security for costs may be warranted because, as the plaintiff argued, the counterclaim represents the bulk of the trial time and its incidental costs. [ 11 ] Here, questioning is almost complete and despite the defendants counterclaimed $10 million, in additional questioning by me to defendants’ counsel in the presence of plaintiff’s counsel, that amount the defendants concede far exceeds what they are claiming and that the counterclaim is basically their defence to the calculation of net profit plus costs associated with the court proceeding in which Mr.

Cho was named and paid a non-liability cost. [ 12 ] Having said that, I still agree with plaintiff’s counsel that there are no assets of the defendants in Canada and it appears the defendants have done some reorganization, apparently as a result of a reduction in profit, all coincidentally after these lawsuits have been commenced. [ 13 ] The defendants have already failed to pay a judgment for this Court of Mr. Vaccaro, another plaintiff similarly charged with market manipulation, which further substantiates the concerns for non-payment to the plaintiff(

s) should he be successful. [ 14 ] In the result, I direct security for costs in the amount of $100,000 and costs of this application in the cause. Heard on the 12 th day of July, 2016. Delivered orally the 12 th day of July, 2016. Dated at the City of Calgary, Alberta this 3 rd day of August, 2016. B.L. Rawlins J.C.Q.B.A.

Appearances: Peter R.S. Leveque For Allan Cho the Plaintiff/Defendant by Counterclaim Zul Verjee, Q.C. and Megan A. Klein For Jason Vaccaro and Jason Brown the Plaintiffs/Defendants by Counterclaim Robb Beeman and Jennifer Biernaskie for the Defendants/Plaintiffs by Counterclaim