Why this case matters

“In the age of Zoom, is any forum more non conveniens than another?”

This was the opening line in the decision in Kore Meals LLC v. Freshii Development LLC, in which the Ontario Superior Court of Justice was tasked with deciding whether to stay a Court proceeding brought in Ontario in favour of an arbitration seated in Chicago, Illinois.

When granting the stay, Justice Morgan held that in a world of digital-based adjudicative systems with videoconference hearings, the answer to that question is an emphatic “no”.

The underlying facts

The defendant, Freshii Development LLC (“Freshii Development”), entered into a Development Agent Agreement (the “DAA”) with the plaintiff, Kore Meals LLC (“Kore”), to develop Freshii franchises in Texas.

The DAA contained an arbitration clause that required that disputes between the parties proceed by arbitration in the city where Freshii Development has its business address. Freshii Development’s business address was listed as Chicago, Illinois.

A dispute arose and Kore commenced an action in Ontario. Kore named Freshii Development and its parent company, Freshii Inc., as defendants.

The defendants sought to stay that action in favour of arbitration.

The Court orders that the action be stayed in favour of arbitration

The Court determined that the test for staying a proceeding in the face of an arbitration clause is a relatively low one, and that the governing principle is deference to the mechanism provided for by the parties. The Court considered the test for whether a stay is appropriate, focusing on the fifth and final factor, namely whether there are grounds on which the Court should refuse to stay the action.

The plaintiff argued that Freshii Development did not actually carry on business in Chicago, and that it merely had a PO box at a UPS store in the city. The defendant pointed out that the terms of the DAA were clear, and that the arbitration was to be seated in the place where Freshii Development’s business address was located.

The plaintiff argued that the Court should consider convenience factors for the parties and issues of access to justice. The Court accepted that the Supreme Court of Canada’s decision in TELUS Communications Inc. v. Wellman provided that a forum non conveniens-type analysis can be undertaken by the court when considering whether the place of the arbitration is unfair or impractical for one or another of the parties.

At the hearing of the motion, Justice Morgan asked the parties whether the arbitration would be held virtually. Counsel indicated that they presumed it would be, since the pandemic has moved most proceedings to a digital forum.

Justice Morgan held that the fact that the hearing was to be conducted virtually undermined the majority of the forum non conveniens factors. The argument that an action should not be stayed in favour of arbitration due to issues of inconvenience or access to justice have effectively been rendered moot in this digital age.

In reaching this determination, Justice Morgan offered some additional insights:

“Freshii Developments may have a miniature post office box or an entire office tower in Chicago, and witnesses or documents may be located in Canada’s Northwest Territories or in the deep south of the United States, and no location would be any more or less convenient than another.” [para. 29]

“It is by now an obvious point, but it bears repeating that a digital-based adjudicative system with a videoconference hearing is as distant and as nearby as the World Wide Web. With this in mind, the considerable legal learning that has gone into contests of competing forums over the years is now all but obsolete. Judges cannot say forum non conveniens we hardly knew you, but they can now say farewell to what was until recently a familiar doctrinal presence in the courthouse.” [para. 31]

“And what is true for forum non conveniens is equally true for the access to justice approach to the arbitration question. Chicago and Toronto are all on the same cyber street. They are accessed in the identical way with a voice command or the click of a finger. No one venue is more or less unfair or impractical than another.” [para. 32]

Is this goodbye to the doctrine of forum non conveniens considerations in stay motions?

There is no doubt that the global pandemic has accelerated the adoption and overall use of remote technologies in arbitrations, as well as in matters proceeding before the courts.

Witnesses are examined virtually across jurisdictional lines, materials are filed electronically from the comfort of practitioners’ homes, and hearings take place on virtual platforms with the parties, witnesses, and arbitral tribunal all in different time zones.

The question remains whether these practices, which were borne out of necessity when travel and gathering restrictions were thrust upon us by the pandemic, will remain once those restrictions are lifted.

When those restrictions are gone, and parties are able to argue hearings in person, will the forum non conveniens-type analysis creep back into the stay proceeding analysis, or has the “Age of Zoom” irrevocably changed the test? As those restrictions are slowly but surely being lifted, we will soon find out.