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Case #078D – Costco Wholesale Corporation v. TicketOps Corporation
March 15, 2023

ONTARIO – Arbitration – Superior Court of Justice (“SCJ”) recognizes and enforces international arbitral awards. The grounds to oppose recognition and enforcement of arbitral awards are set out in the New York Convention and Model Law which have been adopted by the International Commercial Arbitration Act (ICAA). A summary procedure does not deny a party natural justice or the ability to present its case.

ONTARIO – Enforcement of Foreign Judgment – Ontario SCJ recognizes and enforces foreign judgments. The recognizing court’s function is not to evaluate the underlying claim and is more facilitative once it has been established that the foreign judgement is from a court of competent jurisdiction, final, and for a definite amount, and that the foreign court has properly assumed jurisdiction.

Costco Wholesale Corporation v. TicketOps Corporation
2023 ONSC 573 (January 23, 2023)
ONSC (Vermette J.)

Costco Wholesale Corporation (“Costco”) sought an order recognizing and enforcing three international arbitral awards and two US judgments. TicketOps sought an order converting Costco’s application into an action. (para. 1) For the reasons summarized below, Justice Vermette granted Costco’s motion to recognize and enforce the awards and dismissed TicketOp’s application.

Background and Facts

Costco and TicketOps entered into a Master Tickets and Program Agreement (“MTA”), which attached an Amended and Restated Ticket/Gift Card Program Agreement (“TPA”) and Hosting Agreement. The two attached agreements are defined in the MTA as “Supplemental Agreements”. The governing law of the MTA is the laws of Washington State.

Pursuant to these agreements, Costco members would order an event ticket from Costco and TicketOps would deliver an electronic ticket to the member. (para. 8).

The MTA contained an arbitration clause, which directed a twoday arbitration by the American Arbitration Association at Seattle. and that the arbitration award may be enforced in any court having jurisdiction. (para. 7)

At the beginning of the pandemic, Costco paid TicketOps as usual. TicketOps then stopped paying its suppliers and stopped payment on cheques sent to suppliers. Costco then stopped making payments to TicketOps. (para. 9)

On April 23, 2020, Costco commenced an arbitration seeking repayment of funds it paid to TicketOps, which Costco described as its agent, that TicketOps was to pay to third parties and repayment of refunds TicketOpsreceived. (para. 10)

The Arbitrator and the Awards

Before being appointed, the Arbitrator was required to complete an Arbitrator Oath Form, which asked whether the Arbitrator had had any professional or social relationships with counsel for any party in the proceeding or the firms for which they worked. The Arbitrator answered yes with an explanation. The Arbitrator had a prior professional relationship with Costco’s US law firm 20 years before this arbitration. (para.13)

The Arbitrator made two procedural orders on motions TicketOps made. The Arbitrator did not find that the two day hearing limit made the arbitration agreement unconscionable or that TicketOps was entitled to depose a witness. (paras.14-15)

The hearing took place for two days virtually. Prior to the hearing, witness statements were exchanged, pre-deposition examination transcripts, and exhibits were filed, and submissions were exchanged and filed with the Tribunal.

On April 19, 2021, the Arbitrator released a Partial Final Award. Costco was successful in its claims and TicketOps’ counterclaims were dismissed. The Arbitrator found that the TPA created an agency relationship between the parties and that TicketOps was required to pay the suppliers and not keep the Costco payments for its own use. (paras.19-20) The Partial Final Award did not contain an exact amount TicketOps was to pay to Costco. (para. 21)

A Second Partial Award was made clarifying that the Arbitrator can only rule on claims submitted to arbitration by the parties and that no claims were submitted regarding the relationship between Costco and the Suppliers, who were not parties to the arbitration. The Second Partial Award also clarified that the amount of the Partial Final Award would be reduced by the amounts of judgments obtained by Costco Wholesale Canada Ltd (not a party to the arbitration). (para. 23)

On July 23, 2021, the Arbitrator released a Final Award that incorporated the terms of the Partial Final Award and Second Partial Final Award and addressed Costco’s entitlement to costs and interest. (para. 24)

Attacks on the Awards in US Courts

TicketOps made a court application in Washington State to vacate the Awards. On September 9, 2021, the US District Court denied TicketOps’ petition and granted Costco’s petition to confirm the Awards. The US District Court held that the Arbitrator repeatedly attempted to avoid duplicative recovery by Costco, that the public policy defence failed, that there was a strong public policy favouring the confirmation of foreign arbitral awards, and that none of the grounds to vacate an award as set out in the New York Convention were proven. (para. 27)

On April 18, 2022, TicketOps’s CEO discovered that the Arbitrator and US counsel for Costco were Facebook friends, which had not been referenced in the Arbitrator Oath Form. (para. 30)

TicketOps appealed the decision of the US District Court. The Ninth Circuit Court of Appeal (“Appeal Court”) held that the earlier decision did not violate any public policy against duplicative liability. The appellate court also held that TicketOps failed to establish how laws that promote efficient litigation and reduce parties’ risk of duplicative liability offend basic notions of justice and morality. (para.31)

As a result of the US Court proceedings, Costco had a judgment against TicketOps for $16,597,764.66.

Recognition and Enforcement of International Foreign Awards

Justice Vermette first reviewed the law regarding enforcement of arbitral awards.

In Ontario, foreign arbitral awards are enforceable through the International Commercial Arbitration Act, 2017, S.O. 2017, c. 2, Sched. 5 (“ICAA”). The ICAA provides that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“Convention”) has been adopted in Schedule 1 to the ICAA. The ICAA also provides that the Model Law on International Commercial Arbitration (“Model Law”) is adopted in Schedule 2 to the ICAA. (para. 39)

Vermette J. held that both the Model Law and the Convention applied becuase the parties carried on business in different countries (s. 6(1), ICCA) and the Awards were made in the US (Articles 1(1) and 1(3)(a)). (para. 39)

Article 36 of the Convention restricts the ability of national courts to interfere with international arbitration proceedings and sets out the grounds when recognition and enforcement of an arbitral award can be refused. (para. 44) The grounds are to be construed narrowly as set out in Popack v. Lipszyc2018 ONCA 635 (para. 45)

The grounds for refusing to recognize and enforce an international arbitral award are also set out in Article 34 (1) of the Model Law and are essentially the same as Article 36 of the Convention.

To justify setting aside an award for reasons of fairness or natural justice, the conduct of the tribunal must be “be sufficiently serious to offend our most basic notions of morality and justice.” To set aside an award for violations of due process under the Model Law, the Tribunal’s conduct must be “so serious it cannot be condoned under Ontario law.” (para. 46) Vermette J. referred to Consolidated Contractors Group S.A.L. (Offshore) v. Ambatovy Minerals S.A.2017 ONCA 939 at para. 65 (“Consolidated Contractors”); application for leave to appeal dismissed: 2018 CanLII 99661 (S.C.C.).

Vermette J. also referred to Nelson v. The Government of the United Mexican States 2022 ONSC 1193 where the Court set out factors that establish when a party has been unable to present its case. (para. 47) (See also ABC Case #039D)

Recognition and Enforcement of International Foreign Judgments

Justice Vermette also reviewed the following law on the enforcement of foreign judgments:

  • The purpose of the process of recognizing and enforcing a foreign judgment is to allow a pre-existing judgment to be fulfilled, based on the obligation created by the foreign judgment. The Ontario court is not to evaluate the underlying claim; its role is facilitative. See Chevron Corp. v. Yaiguaje2015 SCC 42. (para. 48)
  • Canadian courts have adopted a liberal approach to the recognition and enforcement of foreign awards. As set out in Swing Inc. v. Elta Golf Inc.2006 SCC 52, the court requires proof that the judgment is: (1) rendered by a court of competent jurisdiction; final; and for a definite sum of money.
  • The Court will assess whether the foreign court has properly assumed jurisdiction and if it has a real and substantial connection with the litigants or the subject matter of the dispute. (para. 49) See Tracy v. Iran (Information and Security),2017 ONCA 549
  • Once the applicant has established the above elements, the burden shifts to the objecting party to establish whether it has one of the defences to the recognition of a foreign judgment: fraud, policy, or lack of natural justice as set out in Beals v. Saldanha2003 SCC 72 (“Beals”). ( para. 50)

Vermette J. applied the above framework in her analysis. (para. 65)


Was TicketOps denied natural justice? (Model Law Article 36(1)(a)(iii))

TicketOps argued that it was unable to present its case to the Arbitrator because:

(a) the arbitration agreement provided for only two days of hearings;

(b) the suppliers were not a party to the agreement to arbitrate;

(c) it was unable to depose a witness; and

(d) the Arbitrator had a Facebook relationship with Costco’s US lawyer.

Vermette J. held that none of the fairness grounds were “sufficiently serious to offend our most basic notions of morality and justice” and were not contrary to Canadian notions of fundamental justice. (para. 76). She further held that TicketOps failed to establish that it was unable to present its case.

Pursuant to Article 36(1)(a)(i) of the Model Law, a party resisting enforcement of an international arbitral award on the ground that the arbitration agreement is not valid must prove the arbitration agreement is not valid under the law to which the agreement is subject. (para. 79)

Vermette J. held that the absence of the third suppliers as parties to the arbitration did not make the arbitration agreement invalid. Similarly, being denied the opportunity to depose one witness when it deposed nine other witnesses did not prevent TicketOps from presenting its case.

TicketOps fully participated in the arbitration proceeding, was able to fully present its case and was a party to the arbitration agreement. Vermette J. held that both parties were subject to the same rules and restrictions and had the opportunity to present evidence, examine and cross examine witnesses, offer exhibits, object and make legal arguments and thus, the two-day hearing did not offend Canadian notions of fundamental justice. (para. 80-81)

Ontario Courts should not find that a party to an international arbitration is unable to present its case where the arbitration does not resemble a trial in Ontario wherife it does not offend Canadian notions of fundamental justice . (para. 82)

Allegation of Bias against the Arbitrator

Vermette J. referred to Jacob Securities Inc. v Typhoon Capital B.V.2016 ONSC 604, which held that the test for reasonable apprehension of bias is: “What would an informed person, viewing the matter realistically and practically – and having thought the matter through – conclude? Would the person think that it is more likely than not that the decision-maker, whether consciously or unconsciously, would not decide fairly?” (para. 87)

TicketOps did not object to the disclosure of the prior relationship with Costco’s US Counsel in the Arbitrator Oath Form. Vermette J. referenced DeMaria v Law Society of Saskatchewan2015 SKCA 106 in which the SKCA found “that in today’s world, a reasonable and informed person would place little or no weight on the fact that two persons are ‘friends’ on Facebook.”(para.88)

Were the Awards contrary to Ontario public policy (Model law Article 36 (1)(b)(ii))?

The motion judge found that TicketOps failed to establish that the enforcement of the Awards would be contrary to public policy because it failed to identify any Washington law that was contrary to the Ontario view of basic morality. (para. 93)

Vermette J. held TicketOps’ argument regarding double jeopardy failed to establish that the Awards were contrary to Ontario public policy. The Arbitrator included the Duplicate Recovery Clause in his Awards to address the issue of duplicate recovery/double jeopardy. Further, as pointed out by the Ninth Circuit Court of Appeal, TicketOps had many legal options to address a double jeopardy situation. In these circumstances, the Awards were not contrary to the Ontario view of basic morality. (para. 96)

About Us

Arbitration & Business Cases is a blog created by Igor Ellyn and Robin Dodokin in September 2021. Kathryn Manning joined us in October 2022. Our intention is to provide timely, concise summaries and commentary of Ontario and Canadian case law on arbitration and business matters.


Igor Ellyn,
416-540-6611 | 416-365-3750

Robin Dodokin,
FCIArb., Q.Arb., LL.M, Q.Med.

Kathryn J. Manning,