Action to be in Ontario

Factor of compensation plan clause specifying Massachusetts as proper jurisdiction outweighed

EMC Corporation, located in Hopkinton, Mass., is the parent company to EMC Corporation of Canada. When Dave Butchart was hired in January 1994 to work as a sales representative for EMC, he was hired by EMC Corporation of Canada. He worked in the Mississauga, Ont., office and reported to persons located in the Mississauga office. He was paid in Canadian dollars. When Mr. Butchart was terminated in December 1999, it was by the area sales manager for the company in Ontario. The only reference to the parent U.S. company was his employment letter which was on the letterhead of the U.S. company.

Mr. Butchart brought an action for wrongful dismissal in the Ontario Superior Court of Justice against the Canadian company. In his action, he claimed salary, commission earnings, bonus and the right to exercise stock options (or damages in lieu) during the period of reasonable notice. EMC admitted that it did not have just cause for Mr. Butchart’s termination.

EMC brought a motion before a master seeking to have Mr. Butchart’s action stayed on the grounds that Massachusetts was the more appropriate forum in which to bring the action. After hearing the motion, the master ordered that the issues of the commissions owing and the stock option plan should be heard in a Massachusetts court and that the issue of damages for wrongful dismissal be heard in an Ontario court.

With respect to the issue of commissions, the master relied on the company’s compensation plan, which governed entitlement to sales commissions. This document contained a jurisdiction clause that stated that Massachusetts was the exclusive forum for resolving disputes relating to the plan. Mr. Butchart did not sign any document that contained the jurisdiction clause of the compensation plan. The plan itself was 56-page book covering many categories of sales personnel. Rather, Mr. Butchart signed yearly goal acknowledgement forms, which were one-page documents setting out his name and sales goals for the year. At the bottom of these forms was an acknowledgement signed by Mr. Butchart that he had received a copy of the plan.

Although Mr. Butchart acknowledged that he was shown a copy of the compensation plan, he gave evidence that he was only allowed to review it for a few minutes. He was told that he had no choice but to sign the goal acknowledgement forms. At no time was it brought to his attention that signing the goal acknowledgement forms would result in his compensation being governed by the laws of Massachusetts.

With respect to the stock option plan, the master relied on the fact that it had been executed in the United States and also on the fact that the shares of the U.S. parent company and witnesses relating to the interpretation of the plan were located in the United States.

The master ordered that the wrongful dismissal portion be heard in an Ontario court based on a number of factors. These factors included the fact that Mr. Butchart’s employment was in Ontario, with a Canadian company who paid him in Canadian dollars. Additionally, Massachusetts did not recognize the concept of reasonable notice where there is no cause for termination. Mr. Butchart appealed the Master’s decision to the Ontario Divisional Court.

The Divisional Court held that the master erred in finding that the jurisdiction clause in the compensation plan outweighed all other factors regarding the proper forum. It further held that the master erred in separating out the damages issues from the wrongful dismissal portion. It held that the commission and stock option rights were but two of the components to the wrongful dismissal claim. Any requirement to consider Massachusetts’ law could be done by calling expert witnesses on their law.

In determining the most appropriate forum, the test is whether there is clearly a more appropriate jurisdiction in which the case should be tried than the domestic forum as chosen by the party bringing the action. A court must consider all factors which are relevant to this decision, such as location where contract was signed, location of witnesses, location of evidence, etc. In this case, the master placed conclusive weight on one of the factors – the jurisdiction clause in a document not signed by Mr. Butchart. More consideration should have been made with respect to the other factors.

The Court held that the appeal was allowed and that all of Mr. Butchart’s claim should be heard in an Ontario court.

For more information:

Butchart v. EMC Corp. of Canada, Ontario Divisional Court, Docket No. Toronto 729/00, June 22/01.

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