On appeal of apparent countersuit against U.S. Federal Trade Commission by Canadian individual and corporations charged with fraudulent "cramming" of U.S. consumers, Ontario Court of Appeal rules that notice of proceeding to serve FTC failed to comply with Canadian State Immunity Act
By way of limited background to the Ontario Court of Appeal's laconic opinion below, the Update presents excerpts from an FTC press release issued on June 22, 2005. "In July 2004, the Federal Trade Commission charged a group of Canadian defendants, that is Canada Inc., d/b/a Pinacle, Canada Inc, d/b/a M.D.S.C. Publishing and Terrence Croteau, with scamming small businesses and charities in the United States out of millions of dollars by billing them for business directory services they did not order or authorize, in violation of federal law. The FTC charged that the defendants refused consumers' requests to cancel the services, and used an in-house collections department to harass consumers whose accounts allegedly were past-due."
"An [Illinois federal court] ... granted the FTC's request for a Temporary Restraining Order and Preliminary Injunction in the case, barring the illegal practices and freezing the defendants' assets. ... On May 19, 2005, the Judge ... entered a final judgment in the Commission's case that permanently bans Croteau and his two companies from the business directory operation, bars deceptive or misleading claims, prohibits the defendants from trying to collect payment for listings in any business directory, bars them from selling or sharing their "customer' lists and orders them to give up $2,931,568 in ill-gotten gains, including $55,083.76 that had previously been deposited into the Court's Registry."
Presumably in response to the FTC's actions, Croteau and his companies applied to an Ontario court of first instance for leave to serve the respondent FTC so as to seek some unspecified remedy. The judge held that applicant's service of notice of the application against the FTC was proper under the [Canadian] State Immunity Act (SIA ), R.S.C. 1985, c. S-18. The FTC appealed to the Ontario Court of Appeal mainly claiming error in this holding. That Court agrees with the FTC and allows the appeal.
"In our view, even if the letter enclosing the March 15, 2005 certificate delivered by the Department of Foreign Affairs and International Trade (the certificate) was not properly before the court, the certificate itself was admissible in evidence under Section 14 of the SIA. Moreover, assuming that the statement in the certificate that the respondent is an integral part of the government of the United States exceeded the scope of Section 14 of the SIA, we conclude that there was no evidence in the record before the trial judge capable of supporting a finding that the respondent was an "agency of a foreign state' within the meaning of Section 2 of the SIA. Accordingly, a finding that the respondent was properly served in accordance with Section 9(3) of the SIA was not available."
"In particular, the 90th Anniversary Symposium paper filed by the [applicants] was downloaded from the [applicant's] internet website and did not meet the requirements of rule 39 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Further, the statement by the [applicant] (in a Request for International Judicial Assistance filed in another proceeding) indicating that the FTC is "an independent agency of the United States government that is responsible for consumer protection matters' is equivocal on the issue of whether the FTC is an "agency of a foreign state' within the meaning of Section 2 of the SIA."
"Before this court, the [applicants] sought to support the finding that the [FTC] is an agency of a foreign state by pointing out that the [FTC] can sue and be sued in its own name and by filing extracts from four sections of the [FTC's] constating statute (the "FTC statute') that the [applicants] assert establish the [FTC's] independence from the United States government."
"The extract from the section of the FTC statute relating to the [FTC's] ability to sue establishes only that it can sue and be sued in its own name in certain circumstances. Moreover, it appears that, in some instances, the Attorney General on behalf of the [FTC] may sue or defend. In any event, in our view, the fact that the [FTC] may be able to sue and be sued in its own name is not conclusive on the central issue of whether the [FTC] is a "legal entity that is an organ of the foreign state but that is separate from the foreign state'."
"Finally, we note that the FTC statute is a foreign statute and that no opinion evidence was filed to support the applicants' interpretation of that act. On our review of the extracts from the sections of the FTC statute relied on by the [applicants], they do not establish that the [FTC] is an agency of a foreign state within the meaning of Section 2 of the SIA. In the result, we are not satisfied that the [applicants] met the onus of proving that the [FTC] was properly served in accordance with Section 9(3) of the SIA . The application judge's finding that service was proper must therefore be set aside." [¶¶ 2-6]
Alternatively, the Court of Appeal finds that it must set aside the application because the applicants had moved for judgment without allowing the statutory period of sixty days to pass after service as demanded by Section 10 of the SIA.
Citation: Croteau v. Federal Trade Commission, 2006 A.C.W.S.J. 124; 144 A.C.W.S. (3d) 1099 (Ont. Ct. App. January 19, 2006). Historical material from FTC Press Release derived from U.S. Federal News, HT Media Ltd., Washington, D. C. filed Wednesday, June 22, 2005, at 12:25 AM EST.
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