The Second Opinion: Non-Parties May Be Bound by a Forum Selection Clause
Can a party that has not signed an agreement containing a forum selection clause nevertheless be bound by it? The Ontario Court of Appeal addressed this question in Aldo Group Inc. v. Moneris Solutions Corporation, 2013 ONCA 725. The Court in Aldo contemplated the application of forum selection clauses to third parties in limited circumstances.
The salient facts of the decision in Aldo are as follows. MasterCard entered into a license agreement with a Bank, allowing the Bank to issue credit cards (the “License Agreement”). The License Agreement contained a forum selection clause identifying New York as the chosen forum for adjudicating disputes. The Bank entered into an agreement with Moneris Solutions Corporation (“Moneris”) to allow Moneris to process the Bank’s credit credit transactions (the “Processing Agreement”). The Processing Agreement also contained a forum selection clause in favour of New York. Moneris then entered into a Merchant Agreement with Aldo Group Inc. (“Aldo”). The Merchant Agreement had a forum selection clause in favour of Ontario.
Aldo was a victim of hacking, resulting in a number of allegedly fraudulent transactions. MasterCard debited the Bank for these transactions. The Bank, in turn, passed on its liability to Aldo, as it was alleged that Aldo had breached a number of its security obligations. Aldo then commenced an action in Ontario against both MasterCard and Moneris. Its claims sounded in tort and in restitution, but not in contract. MasterCard sought to stay the Ontario proceeding in favour of New York, relying upon the contractual forum selection clauses to which Aldo was not a party. The motion judge dismissed the stay motion.
On appeal, the Court of Appeal ruled that Aldo’s claims were not “essentially” contractual in nature. Nor had Aldo artificially manipulated its causes of action in order to circumvent the forum selection clauses. Moreover, the Court ruled that Aldo was not pursuing a subrogation claim – it was alleging harm “in its own right”. The Court then went on to canvass U.S. jurisprudence which has extended the application of forum clauses to non-parties that are “closely related” to a dispute:
The ‘closely related’ doctrine operates to bind non-signatories to a forum selection clause where they are so closely related to the dispute that it is foreseeable that they would become bound by the clause. A non-party is ‘closely related to a dispute if its interests are completely derivative of and directly related to, if not predicated upon, the signatory party’s interests or conduct.
The Court ultimately concluded that Aldo did not meet this test. Although the Court stated that it was “unnecessary” to determine whether the “close related” doctrine should be imported into Canadian law, it nevertheless acknowledged that the doctrine had been “sensibly applied” in the U.S. and that “the U.S. experience suggests that there may well be circumstances in which an Ontario court would seek to apply the ‘closely related’ doctrine to a non-signatory”.
These comments may signal a judicial willingness to extend the reach of forum selection clauses beyond parties and their privies to “strangers” who are entangled in a multi-party dispute.
The McCarthy Tétrault Opinions Group consists of members of the firm’s litigation department whose practices focus on written advocacy and the provision of strategic advice and opinions in the context of complex business disputes and transactions. The members of the Opinions Group are Anthony Alexander, Martin Boodman, Brandon Kain, Hovsep Afarian and Kirsten Thompson.
Aldo Group Inc. v. Moneris Solutions Corporation 2013 ONCA 725 attornment “closely related” doctrine forum selection clauses jurisdiction non-party non-signatory Privy stay subrogation successor