Update on Allarco Litigation – Allarco’s Potential Exit Costs in the Federal Court

As I wrote earlier on January 29, 2020,  Allarco is liable to pay costs arising from its discontinuance of its “unusual” (as I described it) Federal Court action. Moreover, Allarco is liable to pay costs of the lengthy motion hearing of January 23, 2020 supported by a reportedly very large amount of documentation in which is sought unsuccessfully to punt on the Federal Court costs issue and kick it over to Alberta or, alternatively. to adjourn or stay the costs matter and a “laundry list” of other requests for relief. As the Case Management Judge Furlanetto noted in an unusually blunt order dated January 27, 2020:

The evidence that the Plaintiff filed on the adjournment motion was lengthy and included five affidavits, including two from experts, the vast majority of which was not relevant to the requested adjournment and related to issues involving the merits of the proceeding. None of the affidavits were previously filed in the proceeding, although one asserted it was in support of a motion for interlocutory injunction, which had never been brought in the proceeding and was not pending before the Court.

As I noted, Allarco has discontinued its Federal Court action and started a new one – including an application for an interlocutory injunction – in the Alberta Court of Queen’s Bench. This is presumably because the Alberta court in theory has a wider jurisdiction to rule on some of the more unusual claims being advanced, such as conspiracy, intentional interference, etc.

Pursuant to the Order of the Case Management Judge, the “4Stores” retailers (as they are being called), have submitted material on February 3, 2020 to substantiate their costs demands. Here is my summary of the bottom line of the amounts they are seeking:

Allarco adjournment etc. motion heard January 23, 2020 – costs sought by 4Stores:                       $74,123.70
Costs following discontinuance sought by 4Stores:	$453,033.03
Total Costs sought by 4Stores in Federal Court as of February 3, 2020:	$527,156.73

Here is the 4Stores complete submission as filed in the Federal Court on February 3, 2020.

Allarco will have until February 13, 2020 to respond and the 4Stores will have until February 18, 2020 to reply.  The Court indicated that “The Defendants’ motion for costs shall thereafter be dealt with based on the written record filed. Should the parties be of the view that additional oral submissions are needed, such request shall be dealt with through case management.”

This is an unusually large amount of costs being sought upon discontinuance at such an early stage of litigation in the Federal Court. That said, this is very “unusual” litigation and the proceedings to date have been very unusual. All the parties are sophisticated, and all the counsel are experienced. So, this is bound to be interesting and potentially important.

I’ll update as soon as I have further useful information.

HPK

PS - May 14, 2020

Here's the Federal Court Docket entry  from May 13, 2020.

Order dated 13-MAY-2020 rendered by Angela Furlanetto, Prothonotary Matter considered without personal appearance The Court's decision is with regard to Motion Doc. No. 19 Result: 1) Defendant Staples Canada awarded costs of $19,700.28; 2) defendant Best Buy Canada awarded costs of $19,978.50; 3)defendant Canada COmputers awarded costs of $2,066.93; 4) defendant London Drugs awarded costs of $17,671.16; 5) Costs shall be paid by plaintiff within 60 days of end of suspension period under 29-APR-2020 Practice Direction (re: Covid-19). Filed on 13-MAY-2020 copies sent to parties entered in J. & O. Book, volume 1453 page(s) 386 - 402 Interlocutory Decision

That's a total of $59,416.87‬ - much less than the total amount sought. I am trying to determine whether there's still more to come and to obtain any written reasons that the Court may have provided. This is not easy at this time due to COVID.

PPS - May 20, 2020

Here's the Court's Order of May 13, 2020 regarding costs. 

Update on Allarco’s “Unusual” Litigation

Here’s an update on the Allarco’s copyright + countless other alleged causes of action and claims against four of Canada’s most prestigious retailers and 50,000 John Doe Customers for selling unspecified devices from unspecified suppliers and somehow infringing copyright in unspecified works and trademark rights in unspecified trademarks, conspiracy, circumvention, stealing, intentional interference, etc., etc., etc…. Here’s my earlier post on how the retailers had predictably attacked Federal Court pleading. Here once again is the Federal Court docket.

Allarco (aka Super Channel) discontinued its lawsuit in the Federal Court on January 6, 2020. Meanwhile, Allarco had started a similar action in the Court of Queen’s Bench in Alberta on December 6, 2019. Here’s that newer Statement of Claim, which adds unspecified John Doe suppliers as defendants and seeks $50,000,000 in damages and has a few other differences from the Federal Court action.

Although this litigation was at an early stage in the Federal Court in terms of procedural steps, the retailers have clearly already been put to considerable trouble and expense and are understandably seeking substantial costs arising on a solicitor and client (i.e. substantial indemnity) basis arising upon the discontinuance. Motions and countermotions were heard on this on January 23, 2020 which resulted in this lengthy and unusually blunt order dated January 27, 2020 which suggests that the retailers will indeed be awarded substantial costs arising from the discontinued Federal Court action.

As the Court correctly noted:

Rule 402 expressly provides that the Defendants are entitled to their costs payable forthwith upon discontinuance. Pursuant to Rule 412 these costs may be assessed upon filing of the notice of discontinuance. The Plaintiff has not displaced this presumption.

Meanwhile, back in Alberta, Allarco had scheduled an injunction hearing on January 22, 2020 – the day before the long-scheduled January 23, 2020 Federal Court hearing mentioned above. That injunction hearing has now been adjourned to May 7 and 8, 2020 and a schedule has been set for cross examinations, etc.

It will be interesting to see what happens in the Alberta Court of Queen’s Bench. While the Alberta court in principle can cast a wider jurisdictional net than the Federal Court in terms of weird causes of action such as conspiracy, intentional interference with business, contractual and economics interests, relations, etc., that won’t make any difference if the underlying facts, particulars, and ultimately the evidence, if it gets that far,  are just not there.

Among the more inexplicable aspects of the first pleading was a reference to s. 420 of the Criminal Code – which refers to buying, receiving, or detaining …”any military stores that are owned by Her Majesty or for which the member, deserter or absentee without leave”. That is now gone from the new pleading. Some of the colourful language in the earlier pleading that reappears in the new one includes: 

59. The actions of the 4Stores constitute a public nuisance in that they encourage a culture of dishonesty and theft within the general public in Canada which is promoted by 4Stores. The 4Stores fashion and promote themselves as industry leaders and educators in the promotion, education, and guidance of Canadians in the electronic devices market while acting to the contrary.60. The actions and omissions of the 4Stores as pleaded herein are high handed and advertently misleading in the pursuit of profit and unreasonably interfere with the public's interest in questions of honesty, conscience and morality and preservation of Canadian Culture., including ethnic and indigenous Canadian culture. As such they merit the award of punitive damages or the maximum level of statutory damages prescribed in the Copyright Act.(highlight added)

I said in my earlier blog that “I can safely say that in nearly four decades of being an intellectual property lawyer, I have never seen a more unusual Statement of Claim.” That may have been an understatement. If anything, I would say that the new Statement of Claim with its addition of the “John Doe Suppliers” as defendants seems even more “unusual”.

Allarco is asking for “costs of this action on a solicitor and client basis, plus GST, or HST, including all disbursements and costs of tracking and communicating with Customers”. Of course, there’s an old adage about "Live by the sword, die by the sword". If this new litigation goes badly for Allarco and Allarco becomes liable for solicitor and client costs, it is not difficult to imagine such costs rather quickly amounting to six or even seven figures.

Meanwhile, let’s keep tabs on how much Allarco will be on the hook for costs to date in the Federal Court, including the costs of its apparently forceful and lengthy but predictably unsuccessful attempt to punt on the Federal Court costs issue and kick it over to Alberta or, alternatively. to adjourn or stay the costs matter and a “laundry list” of other requests for relief. As for Allarco’s motion of January 23, 2020, the Court ordered that “Costs of this motion are awarded to the Defendants in an amount to be fixed and payable forthwith with the remainder of the costs for the action.”

I’ll post more about the forthcoming injunction proceeding and/or other developments when I get copies of the basic publicly filed documents. It would hardly be surprising if the defendant retailers attack this highly “unusual” Alberta Statement of Claim for the similar reasons that they were poised to proceed with in the Federal Court. Indeed, it would be surprising if they do not do so.

It’s too early to speculate about what Allarco will attempt do and what the Court might let it do about the 50,000 John Doe Customers or the now added John Doe Suppliers and how their interests will be represented if things ever get anywhere near that far.

HPK