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.


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