ProSwing Inc., the U.S. company that owns the ubiquitous "Trident" trademark for golf clubs, thought it had scored a hole-in-one when Elta Golf Inc., an Ontario company, consented in an Ohio court to an injunction restraining it from offering its "Rident" clubs to U.S. and Canadian consumers from its Canada-based Web site.
But when ProSwing tried to enforce the injunction in Canada, the hole-in-one turned out to be more of a bogey.
Although Canadian courts have long enforced foreign monetary awards, they have refused to enforce non-monetary foreign judgments unless an enabling international treaty exists. In a decisive nod to the business realities of globalization, however, the Supreme Court of Canada ruled in November that it was time for a change.
"Before ProSwing v. Elta, it was virtually impossible to enforce foreign intellectual property and Internet-related judgments, which commonly involve injunctions," says Scott Turton, a sole practitioner in Toronto who represented Elta in the lower court proceedings.
Still, although ProSwing won the battle, it lost the war. Even though the entire seven-member panel of the court agreed to extend enforcement jurisdiction to non-monetary orders, a thin
4?? 1/2 3 majority refused to enforce the contempt order at the heart of ProSwing. The majority reasoned that the order was unclear as to whether the Ohio court intended its orders be enforced in Canada, where the courts had not specifically ruled on ProSwing's rights to the "Trident" trademark.
The result is more confusion than clarification as to when Canadian courts will enforce foreign judgments.
"The Supreme Court of Canada has opened the door to enforcement of non-monetary orders, but they've left a lot of stairs to climb," says Malcolm Ruby, a litigation partner at Gowling Lafleur Henderson's Toronto office.
Canadian courts have generally enforced judgments from nations with credible legal systems unless they were penal, involved a class action or awarded relief other than fixed damages. The growth of cross-border commerce, however, meant the exceptions eclipsed the rule.
Some observers believed the Supreme Court of Canada's December 2003 judgment in Beals v. Saldhana, which strictly limited the ability of Canadian courts to reject American judgments, had introduced reasonable certainty into the arena.
But the optimism lasted just seven months. In June 2004 the Ontario Court of Appeal refused to enforce the Ohio District Court order prohibiting Elta from selling clubs that infringe ProSwing's "Trident" mark.
While ProSwing's appeal to the Supreme Court of Canada was pending, the mess got worse. In February 2005, the Ontario Court of Appeal refused to rubber stamp a U.S. class action settlement in Currie v. McDonald's Restaurants of Canada. Instead, the court allowed a Canadian class action to proceed against the burger chain despite an American settlement that bound Canadian class members. The ruling meant that U.S. or Canadian companies seeking an end to litigation by settling in an American court had no assurance that they could avoid further exposure in Canada.
So when it emerged that the Supreme Court had ruled in ProSwing that the time had come for Canadian courts to enforce non-monetary foreign judgments, the initial reaction from business lawyers was positive.
"Businesses don't want to relitigate cases in different jurisdictions, and ProSwing is a definite step in that direction," says Barry Leon, a partner with Torys. "Canadian courts will still examine incoming judgments, but there's now a much broader range of foreign orders that they will be open to enforcing."
Ray Leach, a partner at Siskind Cromarty Ivey & Dowler and ProSwing's attorney, agrees.
"There will certainly be more cases that seek to enforce cross-border judgments, and ProSwing will be helpful in dealing with them," he says.
But some are worried it won't be helpful enough.
The difficulty, oddly enough, lies in both the majority and minority rulings. Judges on both sides of the decision concluded that Canadian courts couldn't enforce a non-monetary judgment without considering the clarity and specificity of the foreign order--but neither the majority nor the minority provided a bright-line test for lower courts to follow.
"It's unfortunate that the court didn't give more specific guidance as to when enforcement is appropriate in non-monetary cases," Leach says.
Clarity and specificity, the majority reasoned, were necessary to ensure that Canadian defendants knew what they were required to do and were not exposed to unforeseen obligations. Judges also had to consider whether enforcement was the least burdensome remedy for the Canadian justice system.
"Comity [the principle of international law that nations will recognize each other's executive, legislative and judicial acts] does not require receiving courts to extend greater judicial assistance to foreign litigants than it does to its own litigants, and the discretion that underlies equitable orders can be exercised by Canadian courts when deciding whether or not to enforce one," wrote Justice Marie Deschamps for the majority.
A civil contempt order such as the one at issue in ProSwing exposed defendants to criminal sanctions, including imprisonment in Canada, Deschamps observed. This gave the American order a penal effect that precluded Canadian courts from enforcing it. She also noted that enforcement of the American order might give ProSwing trademark rights it had not established internationally.
"Extraterritoriality and comity cannot serve as a substitute for a lack of worldwide trade protection," Deschamps wrote. But Chief Justice Beverley McLachlin disagreed.
Writing for the minority, McLachlin reasoned that contempt orders from U.S. courts were different from such orders in Canada, and were not penal. She saw no lack of clarity in the U.S. orders and concluded that they did not unduly burden the Canadian justice system.
The upshot is that the diverging views leave it unclear whether parties with claims against Canadian entities should sue in the U.S. and follow up with Canadian enforcement proceedings or institute parallel Canadian and U.S. proceedings at the outset.
"Enforcement of non-monetary foreign judgments will still be difficult in practice," Ruby says. "ProSwing is grudging about when Canadian courts will actually enforce a specific order."