The case of the day is Momentous.ca v. Canadian American Association of Professional Baseball, Ltd., 2012 SCC 9. HT to Stephen Pitel and Antonin Pribetic for bringing the case to light.
The decision doesn’t explain the underlying dispute, but Ajit Singh has a good summary. The dispute arose out of a failed attempt to bring professional baseball back to Ottawa. After the new Ottawa Rapidz failed to make a go of it, the team’s owners applied to the Can-Am League for a voluntary withdrawal, but the League denied its request and terminated the team’s membership and drew on the team’s $200,000 letter of credit. The team’s owners sued.
The agreements between the team and the league had an arbitration and forum selection clause—not set out in the decision—that provided for arbitration of disputes and that provided that the parties consented to the personal jurisdiction of the North Carolina courts. (It’s not clear from Singh’s summary or the decision whether the the choice of forum clause was an exclusive clause, or whether the parties simply agreed to waive the defense of want of personal jurisdiction if either decided to proceed in North Carolina. Given the decision, I assume it had to be an exclusive clause).
The League appeared in the action and served their statement of defense, and then moved to dismiss on the grounds that the litigation was barred by the arbitration and forum selection clauses. The court held that dismissal was appropriate even though the motion to dismiss was brought after the League had answered the complaint. In other words, there is no rule that such a motion is per se improper if brought after the statement of defense.
I cannot really evaluate the merits of the decision, as it is involves questions of Canadian law. Antonin’s post criticizes the decision as a triumph of form over substance and suggests, I think, that a defendant that files a statement of defense instead of an immediate defense either has waived the argument based on the forum selection and arbitration clauses or is estopped to assert them. Stephen’s post is friendlier to the outcome, noting a consensus among commentators that the case is rightly decided but questioning whether it is well-reasoned.
For comparison, I think that in the US this case would be relatively straightforward. Exclusive choice-of-court clauses are generally held not to divest courts of their jurisdiction; motions to dismiss are generally treated as motions based on venue or other considerations. So under Rule 12 of the Federal Rules of Civil Procedure, the argument must be raised in a pre-answer motion, or at the latest, in the answer, else it is waived. Even if it is waived in the answer, it must be argued in a timely way—a court will likely deem it waived if the defendant waits to long to seek dismissal.