Monday, September 28, 2015

Court of Appeal Finds Judicial Bias in Bizarre Child Custody Case


In a recent decision (Clayson-Martin v. Martin, 20015 ONCA 596), the Court of Appeal for Ontario overturned a family trial judge’s decision on the basis of a reasonable apprehension of bias.

 

The case involved a custody and access dispute over children aged 10 and 7.  At trial, the judge granted the wife sole custody of the children.  The wife appealed that decision because it provided for the children to have generous access to the husband.  The wife submitted that access should have been terminated because the husband tried to kill her.  The case garnered some notoriety in the news because of the alleged attempted murder.  The couple separated as a result of an incident which occurred while they were on vacation in Jamaica.  Each party alleged that at the end of the vacation, while they were on a deserted road from which the husband had wanted to photograph their hotel, the other attacked with a knife. 

 

The marriage was in trouble in 2010.  The wife wanted to separate from the husband.  He persuaded her to go on one last trip with him to Jamaica for a week in December to try to save the marriage.

 

After leaving the hotel on December 23, 2010, the husband drove the wife to a secluded road where on the wife’s evidence, he slit her throat, forced her into the vehicle after she attempted to flee, strangled her and then drove 17 kilometres before she was able to jump from the moving vehicle and escape.  She was taken to a hospital by a passerby.   

 

On the husband’s evidence, he testified that the wife attacked him with a knife.  He assumed, although he did not see, that she sustained a wound on her neck by her own hand when he, in self-defence, pushed her hand bearing the knife away from him.  This story differs from the one he told Jamaican police at the time of the incident.  At that time he said that his wife was injured by a Jamaican man who had attempted to rob the couple. 

 

Surprisingly, the trial judge concluded that he could not find on a balance of probabilities that the husband had attacked the wife and that if anything, the evidence “tilts in the opposite direction”.  He was not prepared to make a finding either way. 

 

Before the Court of Appeal, the wife’s counsel began her argument by outlining the facts that were not in dispute:  

 

  1. the wife suffered a knife wound to her throat, 10 cm in length extending from ear to ear, and which caused profuse bleeding;
  2. there were only two people present at the time, the wife and the husband;
  3. the wife suffered a deep cut to her thumb;
  4. the husband suffered no knife injuries;
  5. the husband forcibly carried the wife back to the car, shoved her in the driver’s side and held her as he drove from the scene;
  6. the husband drove for 10 kilometres with the wife bleeding profusely and did not stop once to get help;
  7. the husband also drove into a dirt road during this time;
  8. the wife was observed to have her feet dangling out of the car and screaming for help;
  9. the wife either jumped, was pushed, or slipped out of the moving car;
  10. the husband, after the wife exited the car, continued to drive, leaving the wife with her throat slit by the side of the road;
  11. the husband did not stop or use his cell phone to get help;
  12. the husband repeatedly told police that a big Jamaican man had attached them, slit the wife’s throat and fought with them;
  13. the husband admitted that the story he told police involving a Jamaican man was a complete fabrication;
  14. his stated reason for telling this lie was to protect his wife from being charged with his attempted murder;
  15. the husband maintained this lie even after he was arrested and charged with attempted murder of his wife;
  16. the wife’s version of what occurred has been consistent throughout:  “my husband slit my throat”.    

 

There were several grounds of dispute including that the trial judge’s conduct during the trial raised a reasonable apprehension of bias. 

On that issue, the Court of Appeal found as follows: 

“The test for bias is well settled – would a reasonable and informed person viewing the matter realistically and practically and having thought it through, conclude that the judge, consciously or unconsciously would not decide fairly.”

 

The objective of the test is to ensure not only the reality, but also the appearance of a fair and adjudicated process.  The court found that the trial judge did not analyse the evidence that came from an independent witness that collaborated the wife’s version of the event.  Instead he rejected the entirety of this evidence because of a minor inconsistency – an inconsistency by which he was also mistaken in the detail.  The trial judge was dismissive of expert evidence which supported the wife’s version of the events.  Again, he focused on a minor inconsistency. 

 

The trial judge was extremely critical of the wife’s evidence, which was troubling in contrast to the generosity with which he treated inconsistency in the husband’s evidence.  While the wife’s inconsistencies were all emphasised, the significant and material inconsistencies in the husband’s evidence were ignored.  This suggested an uneven treatment of the evidence and amounts to an error of law.

 

When questioning witnesses himself, the trial judge appeared to be filling holes in the husband’s testimony. 

 

The trial judge was extremely rude and disruptive of the wife’s counsel. 

In the end, the court found that the trial judge committed several reversible errors.  The trial judge relied on inadmissible hearsay evidence that permeated his entire credibility analysis.  He treated the evidence of the parties unevenly in a way that gave rise to a reasonable apprehension of bias and amounted to an error in law.   Lastly, he failed to consider the full range of factors effecting the best interest of the children which also constituted a reversible error.  As a result of these and other errors, the court set the decision aside and ordered a new trial. 

Regards,

Blair

 

Thursday, September 24, 2015

Avon Settles Bribery Related Class Action


 

Avon Products Inc. (“Avon”) recently settled a class action lawsuit brought against the beauty products company and two former executives concerning Avon’s compliance with the US Foreign Corrupt Practices Act (“FCPA”).  Avon settled the lawsuit despite the fact that the US District Court for the Southern District of New York (“Court”) had granted a motion to dismiss the lawsuit.  In the action, certain of the company's shareholders had alleged that Avon and its former executives had issued materially false and misleading statements concerning Avon’s compliance with the FCPA by concealing that the company had given bribes to Chinese government officials by various means, including providing lavish gifts and paying travel expenses improperly.

 

In 2008, Avon publicly announced that it had received allegations of potential FCPA violations in connection with its business in China and that it had disclosed such information to the US Department of Justice (“DOJ”) and the US Securities and Exchange Commission (“SEC”).  That initial press release was the first in a series of public statements by Avon relating to the potential FCPA violations and after each announcement, Avon’s stock price fell.  The class action claimed that Avon had artificially inflated its stock price by intentionally misleading shareholders about the company’s compliance with the FCPA.  The shareholders alleged that the defendants knew that Chinese officials were being bribed years before the company publicly disclosed it in 2008.  The action also alleged that Avon embraced a corporate culture that was “actively hostile” to effective oversight and hid its dependence on corrupt activities to boost their sales revenue. 

 

In December of 2014, the DOJ and SEC levied fines of $135 million to Avon for violating the FCPA - $68 million was paid to settle the DOJ’s criminal investigation and $67 million was paid to settle the SEC’s civil investigation.  As part of the settlement, Avon was also required to retain an independent monitor to review its FCPA compliance program for a period of 18 months, followed by an additional 18 months of self-reporting on its ongoing compliance efforts

 

Shareholder litigation is a common occurrence following or during FCPA investigations of public companies – both securities class actions and shareholder derivative actions.  In a derivative action shareholders file suit against members of the board of directors or corporate officers on behalf of the corporation itself for a wrong the corporation has suffered. 

The Court dismissed the action on the grounds that the plaintiffs had failed to demonstrate that Avon made any false statements regarding the use of bribes.  The Court held that in order to survive the motion to dismiss, the shareholders were subject to “heightened pleading requirements” but had failed to plead facts that were sufficient to demonstrate that Avon’s officers had met the intent to deceive Avon’s shareholders or the intent to report misleading statements regarding Avon’s business successes in China before or after 2008 when the company reported that it had become aware of the allegations. 

 

Under the heightened pleading requirements for securities fraud complaints, shareholders must plead sufficient facts with enough particularity to constitute fraud and plead with particularity facts that demonstrate a strong inference that Avon and its officers and directors intended to deceive their shareholders or were severely reckless. 

 

The Court found that Avon’s statements in its ethics policies regarding its high standards for ethics did not constitute fraud.  It found that these general statements of the company’s commitments to high standards of business ethics were not materially misleading to shareholders finding that the statements were mere “puffery” or generalizations regarding Avon’s integrity upon which reasonable investors would not rely.

  

The Court held that bare assertions about executives of Avon having information adverse to the disclosed filings were not sufficient to demonstrate that they were actually aware of alleged bribes paid to Chinese officials.  The shareholders merely alleged that executives “should have been aware” of the bribes.  The Court held that such facts were too conclusory and lacked sufficient detail to demonstrate intent to mislead. 

 

After 2008, the mere fact that Avon received a whistle-blower report regarding potential violations did not demonstrate that the company and its directors knew the allegations to be true.  They were permitted to conduct an internal investigation before announcing that the company received a report of a potential FCPA violations.

 

The Court also held that the plaintiffs failed to allege particularized facts showing that the company misled investors with regard to its internal investigation or compliance procedures.
 

When Avon first learned about potential FCPA problems in China through an internal audit report, it consulted an outside law firm but did not carry out a thorough investigation.  Instead, it simply directed that internal control measures be instituted at its subsidiary.  However, no such measures were taken and there was no follow up on the compliance initiatives.  The full-blown internal investigation only took place a few years later after a new CEO received a whistle-blower letter.  By this time, much of the damage had been done. 

Settlement of the class action came at a time when Avon had moved to dismiss an amended complaint filed by the shareholders' lawyers

Regards,

Blair   

Tuesday, September 8, 2015

Supreme Court Permits Enforcement Proceedings Against Chevron


In closing another chapter in what has been a very long story, the Supreme Court of Canada ruled unanimously that forty-seven Ecuadorian villagers can proceed with their Ontario lawsuit against Chevron Corporation (“Chevron”) and Chevron Canada Limited (“Chevron Canada”) to recognize and enforce a U.S. $9.51 million judgment that they obtained against Chevron in the courts of Ecuador.

 

This writer has written about this case before. After the plaintiffs commenced an action in the Ontario Superior Court, Chevron moved to permanently stay the action on the basis that the Ontario Court had no jurisdiction to hear the matter. The motion judge ruled in the villagers’ favour with respect to the issue of jurisdiction. However, the judge exercised the court’s power to stay the proceedings on its own motion on the basis that pursuing a recognition and enforcement proceeding against Chevron in Ontario, where Chevron claimed it had no assets, would be futile and a waste of time and resources.

 

The Ontario Court of Appeal reversed that decision, holding that the Ontario courts need not erect additional obstacles  to the villagers' 27 year fight against Chevron and its predecessor Texaco Oil.  The action had been brought in Ecuador as a result of extensive environmental pollution that had disrupted the lives and jeopardized the futures of approximately 30,000 Ecuadorian indigenous villagers.  The plaintiffs' attempts to obtain compensation had been met with obstacles and roadblocks by Chevron the entire way.

 

The Supreme Court of Canada agreed. Justice Gascon, writing for the unanimous court, held that in order to recognize and enforce a foreign judgment, the only prerequisite is that the foreign court have a real and substantial connection with the litigants or with the subject matter of the dispute or that the traditional bases of jurisdiction were satisfied.

 

Canadian courts have never required that there be a real and substantial connection between the defendant or the action and the enforcing court for jurisdiction to exist in recognition and enforcement proceedings. The Supreme Court held that an unambiguous statement  that a real and substantial connection was not necessary would have the benefit of providing a fixed, clear and predictable rule, and would help to avoid needless and wasteful jurisdictional inquiries.

 

The Court held that there were two considerations of principle that support the view that a real and substantial connection test should not be extended to an enforcing court. Firstly, in an action for recognition and enforcement, the only purpose of the action is to allow a pre-existing obligation to be fulfilled. As the enforcing court is not creating a new substantive obligation, there can be no concern that the parties are situated elsewhere or that the facts underlying the dispute are properly addressed in another court. Each jurisdiction has an equal interest in the obligation resulting from the foreign judgement and no concern about territorial overreach could emerge.

 

The Court held that it must be remembered that the notion of comity has consistently been found to underlie Canadian recognition and enforcement law. The need to acknowledge and show respect for the legal action of other states has remained one of comity’s core components and militates in favour of recognition and enforcement. No unfairness results to judgment debtors from having to defend against recognition and enforcement proceedings – through their own behaviour and illegal non-compliance, they have made themselves a subject of outstanding obligations, so they may be called upon to answer for their debts in various jurisdictions.

 

The court held that requiring any defendant to be present or to have assets in the enforcing jurisdiction would only undermine order and fairness. In today’s globalized world and electronic age, to require that a judgment creditor wait until the foreign debtor is present or has assets in the province before a court can find that it has jurisdiction in recognition and enforcement proceedings would be to turn a blind eye to current economic reality.

 

Secondly, the court held that finding that there is no requirement of a real and substantial connection between the defendant or the action and the enforcing court is also supported by the choices made by the Ontario legislature, all other common-law provinces and territories, Quebec, other international common-law jurisdictions and most Canadian conflict of laws scholars.

 

In this case, the motion judge had correctly found jurisdiction with respect to both Chevron and Chevron Canada. The establishment of jurisdiction did not mean that the plaintiffs would necessarily succeed in having the Ecuadorian judgment recognized and enforced. It did nothing more than afford the Plaintiffs the opportunity to seek recognition and enforcement in Ontario. Chevron and Chevron Canada could use the available procedural tools to defend against the plaintiffs’ allegations.

The case will continue and will continue to be hard fought.

Regards,

Blair