Once again there is the temptation to ignore this entirely. Certainly, the plaintiff’s willingness to litigate against parties contractually connected with the Ottawa RapidZ, should have been enough of an incentive. However – and as many of you know, professional baseball in Ottawa is something both near and dear to my heart, and this is something which could not pass without comment.
To begin, it is somewhat surprising that the news that Zip.ca (aka Momentous) is suing the Can-Am League, Miles Wolff , The City of Ottawa, Deep Fly (aka our good friend, Bruce) and others has not yet been reported by the media. Even though it’s not a story about your Ottawa Senators, by any standard it’s newsworthy. My only guess is that the reporter down at the courthouse has missed Zip’s Statement of Claim (SOC) - which, I should add, is a matter of public record.
The Coles notes version of the claim?
The plaintiffs claim as against all defendants other than the defendant Bruce
Murdoch:(r) damages for intentional misrepresentation, intentional interference with contractual relations, civil conspiracy and breach of contract in the amount of $3,000,000 or such other amount as may be proved at trial;
(s) punitive damages in the amount of $500,000;
(t) pre-judgment and post-judgment interest on all amounts plus all applicable goods and services tax;
(u) legal costs on a substantial indemnity basis plus all applicable goods and services tax; and
(v) such further and other relief as may be advised.
Bruce, if found liable, is only on the hook for $125,000 – a <cough> pittance.
For those of you who enjoy Oliver Stone movies, you’ll find the conspiracy theories which riddle this SOC riveting.
31. It was known to Wolff and the City that Momentous would be the primary source of financial support to Rapidz Baseball and would fund the baseball club and its operations. It was also known to Wolff and the City, contrary to representations made by each to the plaintiffs, that the operation and management of a baseball club at the Stadium was, based on the experience of the Ottawa Lynx, a losing proposition. In fact, the City, known to Wolff, was in litigation with the Ottawa Lynx over the responsibility for losses at the Stadium. (emphasis added)
Got that? I would suppose that the Court is meant to accept the following propositions -
a) baseball in Ottawa is, in fact, “a losing proposition”.
b) Miles Wolff and The City knew this to be the case and,
c) lied, misrepresented this fact to Momentous.
But wait, there’s more.
33. In the 2008 season, Momentous funded the baseball club and its operations to the extent of some $1 million. In addition, Momentous loaned personnel and equipment to Rapidz Baseball while continuing to carry them on its payroll and inventory. During the course of the 2008 season, Rapidz Baseball incurred an indebtedness in excess of $1.4 million.
34. The likelihood of operational costs leading to a deficit in this range was known to the City and Wolff, but was not disclosed by either of them to the plaintiffs.
At the risk of being sued for libel, slander or both, in my opinion these claims are risible – “howlers”, if you will. This is not to say that I don’t believe that Momentous managed (or mis-managed) to lose $1.4 million dollars; given what I saw out on Coventry Road last year, I’m somewhat surprised the loss wasn’t larger. What I have difficulty with is the allegation that Miles and The City both knew that this was in fact an expected financial outcome for the 2008 season, and that they kept this from Momentous. Let us accept for the moment that these various claims are true. The question left begging then is this: If he “knew“ that baseball in Ottawa was a “losing proposition” in excess of $1 million dollars, why did Miles Wolff try so hard to bring the Can-Am League here in the first place?
The SOC continues,
40. The plaintiffs were surprised by the magnitude of the operational costs and losses Rapidz Baseball incurred. They realised, by the magnitude of the losses, that the representations and warranties made by Wolff and joined in by the City were patently false. To overcome the effect of this breach, the plaintiffs sought the agreed upon negotiation with the City of a long term lease at commercially reasonable rates.
41. Rapidz Baseball commenced discussions with the City towards this end. These discussions culminated in a meeting with the City on Friday, September 5, 2008. At this meeting, the City disclosed for the first time that it would not support a lease longer than 5 years, and that, given its assessment of the commercial value of the Stadium property (at approximately $20 million), the City was looking for a return from the Stadium following the 2009 season in a range closer to 5% of that value, which equated to a rent increase from $108,000 to over $1,000,000, or 1000%.
See, ’cause that’s what I would have done upon discovering that I’d been lied to, err…. been the victim of “patently false” statements – I’d turn around and enter into negotiations WITH THE PARTY THAT I BELIEVE LIED TO ME.
The other suggestion found throughout the Momentous claim is that Miles Wolff and The City made false representations to them, designed “to induce” them to buy the team (paragraph 36). Bold accusations, which essentially boil down to Momentous claiming that they were duped into buying the team and that Miles Wolff, the City and others were responsible for their losses. But what does the agreement that they entered into say? Did they get any of these representations in writing? And if not, why?
Obviously, there’s much more yet to come on this issue, but for now I’ll leave you with my very un-objective “take” on this. I wasn’t party to the negotiations concerning the sale of the team, so I have no knowledge of what transpired there. In my view, many of the allegations in the SOC simply don’t add up, nor do they square with some of the people I’ve come to know; at the end of the day, Miles is a sophisticated businessman - a lover of baseball, but a businessman still. He would not have come back for the 2009 season if he believed that losses of $1 million or more were inevitable. The narrative that makes more sense to me is that Miles, like Ray Pecor and Howard Darwin before him, believes in this market – as maddening as it may be. This is why he battled so hard to be here in 2007, and why he’s battling so hard for the Voyageurs now.
If it wasn’t obvious, right out of the gate, the Voyageurs are paddling against a hard current. As this litigation makes clear, the baseball club was forced to choose a new name; Momentous wouldn’t permit the use of RapidS. Add to this the task of organizing a new front office staff, battling the unwanted – undeserved, association with the bankruptcy and reputation of the Zip/Momentous regime, now topped off with this lawsuit.
If nothing else, I hope this post gives some context for what’s been going on with the team and how difficult this claim is making things. Around here, it’s done nothing but harden the resolve and determination to see this team succeed – for 2009 and beyond. As usual, there is more to come.
*** UPDATE ***
Here’s the SOC. I’ve had to “translate” the scanned copy to Word which has resulted in some typos where Word misidentified a letter.
————————————————————————————————————–
Court File NoflV
ONTARIO
SUPERIOR COURT OF JUSTICE
MOMENTOUS .CA CORPORATION,
RAPIDZ SPORTS AND ENTERTAINMENT INC.,
RAPIDZ BASEBALL CLUB INC. and ZIP.CA INC.
Plaintiffs
- and -
OTTAWA, CANADIAN AMERICAN ASSOCIATION OF PROFESSIONAL BASEBALL, LTD., iNSIDE THE PARK, LLC, MILES WOLFF, GREG LOCKARD,
DAN MOUSHON, and BRUCE MURDOCH
Defendants
STATEMENT OF CLAIM
TO THE DEFENDANTS
A LEGAL PROCEEDING HAS BEEN COMMENCED AGAINST YOU by the plaintiff. The claim made against you is set out in the following pages.
IF YOU WISH TO DEFEND THIS PROCEEDING, you or an Ontario lawyer acting for you must prepare a statement of defence in Form 1 8A prescribed by the Rules of Civil Procedure, serve it on the plaintiffs lawyer or, where the plaintiff does not have a lawyer, serve it on the plaintiff, and file it, with proof of service in this court office, WITHIN TWENTY DAYS after this statement of claim is served on you, if you are served in Ontario.
If you are served in another province or territory of Canada or in the United States of America, the period for serving and filing your statement of defence is forty days. If you are served outside Canada and the United States of America, the period is sixty days.
Instead of serving and filing a statement of defence, you may serve and file a notice of intent to defend in Form I SB prescribed by the Rules of Civil Procedure. This will entitle you to ten more days within which to serve and file your statement of defence.
IF YOU FAIL TO DEFEND THIS PROCEEDING, JUDGMENT MAY BE GIVEN AGAINST YOU IN YOUR ABSENCE AND WITHOUT FURTHER NOTICE TO
RCP-E I 4A (July I, 2007)
2.
YOU. IF YOU WISH TO DEFEND THIS PROCEEDING BUT ARE UNABLE TO
PAY LEGAL FEES, LEGAL AID MAY BE AVAILABLE TO YOU BY
CONTACTING A LOCAL LEGAL AID OFFICE.
Date: January 26, 2009 Issued by:
Ioca1 Registrar
161 Elgin Street
Ottawa, Ontario
K2P2K1
TO: City of Ottawa
110 Laurier Avenue
Ottawa, Ontario K1P IJ1
AND TO: Canadian American Association Of Professional Baseball, Ltd. 1415 Hwy 54 West, Suite 210
Durham, North Carolina, USA 27707
AND TO: Inside The Park, LLC
1415 Hwy 54 West, Suite 210
Durham, NC, USA 27707
AND TO: Miles Wolff
AND TO: Greg Lockard
AND TO: Dan Moushon
do Burlington Baseball Club
1450 Graham St.
Burlington, NC USA 27217-4340
AND TO: Bruce Murdoch
RCP-E 14A (July I, 2007)
3.
CLAIM
The plaintiffs claim as against all defendants other than the defendant Bruce
Murdoch:
(a) a declaration that the defendant Canadian American Association of Professional Baseball, Ltd (the “League”) intentionally and wrongfully denied the request by the plaintiff Rapidz Baseball Club Inc. (“Rapidz Baseball”) for voluntary withdrawal from the League, in contravention of the League’s own Bylaws (as referred to below);
(b) a declaration that Rapidz Baseball did not violate the League’s Affiliation Agreement (as referred to below) by failing to field a team for the 2009 season;
(c) a declaration that the membership of Rapidz Baseball in the League was knowingly and illegally terminated by the League in contravention of the League’s own Bylaws;
(d) an order quashing the decisions of the League made on and in reference to the meeting of September 29, 2008 referred to herein;
(e) a declaration that the certification by the defendant Dan Moushon (“Moushon”), as President of the League, and Greg Lockard (“Lockard”), as Chairman of the League, that the League was drawing on the Letter of Credit referred to herein “pursuant to the authority granted in its Bylaws” was known to each of them to be false and unsustainable in fact or law;
RCP-E 14A (July I, 2007)
4.
(f) an order requiring the League to account for and to return the funds it received from the Royal Bank of Canada as well as any interest and costs assessed thereon to the plaintiff Momentous.ca Corporation (“Momentous”);
(g) a declaration that the defendants City of Ottawa (the “City”), Miles Wolff
(“Wolff’), the League, Inside the Park, LLC, (“Park LLC”), Moushon and
Lockard acted in collusion and are directly responsible for the circumstances of
indebtedness and purported default on the part of the plaintiffs outlined herein;
(h) in particular, a declaration that the City, Wolff, the League, Park LLC, Moushon and Lockard are directly responsible for the circumstances of indebtedness and purported default arising out of the guarantee by Wolff to the City for rent at the Stadium (all as referred to herein) and are by their conduct disentitled from benefiting from or acting in relation to that guarantee, including a declaration that any payment made pursuant to that guarantee cannot trigger or support any indemnification obligation of the plaintiffs Zip.ca Inc. (“Zip”) and Rapidz Baseball to Wolff under the “Stadium Guarantee” referred to herein;
(i) in the alternative, for the same grounds as (h), a declaration that Zip and Rapidz Baseball are released from the Stadium Guarantee;
) a declaration that the City, Wolff, the League, Park LLC, Moushon and Lockard are liable to Zip and Rapidz Baseball for any damages incurred by them in connection with the guarantee referred to herein as the “Lynx Guarantee”;
RCP-E 14A (July 1, 2007)
5.
(k) in the alternative, for the same grounds as (j), a declaration that Zip and Rapidz Baseball are released from the Lynx Guarantee.
(1) a declaration that the City, Wolff, the League, Park LLC, Moushon and Lockard, are liable to Momentous for any damages it incurs in connection with the guarantee referred to herein as the “Shareholder Guarantee”;
(m) in the alternative, for the same grounds as (1), a declaration that Momentous is released from the Shareholder Guarantee;
(ii) an ex parte, interim, interlocutory and final injunction restraining the City, Wolff and the League from benefitting directly or indirectly from the forfeiture of the Letter of Credit referred to herein, until the trial of this action or other determination of this Court;
(o) a declaration that Wolff and the League filed a Motion and two Complaints in North Carolina, as detailed below, knowing them to properly fall under the jurisdiction of this Court, with the intention of gaining a juridical advantage to which they are not entitled; and a declaration that this Court has jurisdiction over the subject matters of those North Carolina proceedings;
(p) a declaration that the actions of Wolff in directing the activities of Ottawa Professional Baseball Inc. (“OPBI”) are oppressive, or unfairly prejudicial to, or unfairly disregard the interests of the plaintiff Rapidz Sports and Entertainment Inc. (“Rapidz Sports”), together with an order for appropriate relief pursuant to the provisions of Section 248 of the Business Corporations Act of Ontario;
RCP-E 14A (July I, 2007)
6.
(q) a declaration that in the circumstances pleaded herein Wolff owed a fiduciary or other duty to the plaintiffs;
(r) damages for intentional misrepresentation, intentional interference with contractual relations, civil conspiracy and breach of contract in the amount of $3,000,000 or such other amount as may be proved at trial;
(s) punitive damages in the amount of $500,000;
(t) pre-judgment and post-judgment interest on all amounts plus all applicable goods and services tax;
(u) legal costs on a substantial indemnity basis plus all applicable goods and services tax; and
(v) such further and other relief as may be advised.
2. As against the defendant Bruce Murdoch (“Murdoch”), the League and Wolff in relation to trade-mark violations, the plaintiff Rapidz Baseball further claims:
(a) a declaration that Murdoch filed two trademark applications with the motive of defeating the interests of Rapidz Baseball and advancing the interests of Wolff and the League, intentionally and falsely certifying that he had continuously used the marks from a date certain;
(b) a declaration that Wolff and Murdoch are liable to Rapidz Baseball for breach of section 7(b) of the Trade-marks Act and for passing off;
(c) general damages in the amount of $100,000;
RCP-E 14A (July I, 2007)
7.
(d) punitive damages in the amount of $25,000;
(e) pre-judgment and post-judgment interest on all amounts plus all applicable goods and services tax;
(f) legal costs on a substantial indemnity basis plus all applicable goods and services tax; and
(g) such further and other relief as may be advised.
The Parties
3. Momentous is an Ontario corporation having its head office in the Province of
Ontario and carrying on business in Ontario and elsewhere.
4. Rapidz Baseball is an Ontario corporation having its head office in the Province of Ontario and carrying on business in Ontario and elsewhere.
5. Zip is a Canadian corporation having its head office in the Province of Ontario and carrying on business in Ontario and elsewhere.
6. Rapidz Sports is an Ontario corporation
7. The City is an Ontario municipal corporation.
8. The League is a North Carolina nonstock, nonprofit corporation chartered under the North Carolina Nonprofit Corporation Act and carries on the business of the Can-Am Baseball League.
9. Moushon is President of the League, and resides in Burlington, North Carolina.
RCP-E 14A (July 1, 2007)
8.
10. Lockard is a director and Chairman of the League, and resides in Roseland, New Jersey.
II. Wolff is a resident of North Carolina and is a director and the Commissioner of the League.
12. Murdoch is associated with Wolff and/or the League and resides in Ottawa.
13. Park, LLC is a North Carolina limited liability company owned equally by each of the members of the League. At material times Park LLC owned a membership in the League with the right to play professional baseball in the League at a municipal stadium owned by the City located at 300 Coventry Road in Ottawa (the “Stadium”) which membership was leased to Ottawa Pro Baseball Inc. (“OPBI”).
eIevant Entities
14. The following entities and relationships were known to the City, Wolff, Park, LLC, the League, Moushon and Lockard at material times.
15. OPBI is an Ontario corporation having its head office in the province of Ontario which at all material times carried on the business of a baseball club.
16. Rapidz Sports is and was at material times a 49% owner of OPBI. At material
times Momentous was the owner of Rapidz Sports. Wolff is and was at material times a
51% owner of OPBL
17. Pursuant to the transaction referred to below, Rapidz Baseball became the exclusive manager of the business of OPBI and the assignee of all transferable assets of OPBL Rapidz Baseball became at material times a baseball club playing baseball as a
RCP-E 14A (July 1,2007)
9.
member of the League. At all material times Rapidz Sports was the owner of Rapidz Baseball.
18. The Ottawa Lynx was a minor league baseball team that competed in the Triple-A International League from 1993 to 2007 and played its home games at the Stadium.
The Transaction
19. The following transactions and relationships designed to return a baseball club to
Ottawa and the Stadium in 2008, following difficulties between the Ottawa Lynx and the
City, were orchestrated by the City and Wolff (“the Transaction”).
20. Through a web of interlocking agreements supported by mutual covenants to which the City was a party, all of which will be made more particular at trial, including a Letter Agreement dated May 6, 2008, OPBI assigned all of its transferable assets, and delegated all the management rights associated with its membership in the League, as leased from Park LLC, to Rapidz Baseball. Other transferred assets included all accounts receivables of OPBI, right and title to the name Ottawa Rapidz, all equipment and inventory of OPBI, and all goodwill associated with OPBI’s business. Rapidz Baseball was appointed and authorized to act as exclusive manager of all baseball and other operations that OPBI conducted or was authorized to conduct, including all of the business of the team. Rapidz Baseball assumed and agreed to pay and satisfy all liabilities of OPBI and all obligations to be performed by OPBI under any contracts other than certain contracts which were excluded, which excluded contracts included a Stadium Operations Agreement comprised of the Operations and Maintenance Agreement with the City dated August 13, 1992 as amended, and subject to a Partial Assignment Agreement
RCP-E 14A (July 1,2007)
10.
among Ottawa Lynx, the City and OPBI dated March 2008, and a Lynx Equipment License Agreement dated February 28, 2008 between OPBI and the Ottawa Lynx.
21. Corollary to the Transaction, on May 19, 2008 Rapidz Baseball signed a League
Affiliation Agreement (the “Affiliation Agreement”) with the League, Park LLC and
OPBI agreeing to be bound by the league agreements including the September 27, 2006-
Fourth Restatement of the Bylaws of the League (the “Bylaws”).
22. As part of the Transaction, Rapidz Baseball accordingly agreed to pay all amounts payable by OPBI pursuant to the Stadium Operations Agreement and the Lynx Equipment Licence Agreement.
23. As pleaded, the City was a party to each of the agreements comprising the Transaction andlor was fully knowledgeable as to their terms.
Guarantees and Indemnities
24. The City either participated in or had actual knowledge of the following guarantees and indemnities.
25. On January 17, 2008 Wolff entered into a personal guarantee to the City under which he guaranteed all obligations, liabilities and indebtedness of OPBI to the City for the payment of rent for the 2008 and 2009 seasons at the Stadium, to a maximum of $216,000, all in accordance with the provisions of the Operations and Maintenance Agreement which governed play by the Ottawa Lynx at the Stadium. The Operations and Maintenance Agreement provided that when baseball was in play the City, in addition to
RCP-E 14A (July 1, 2007)
11.
receiving rent, was entitled to a 5% surcharge on ticket sales and a 5% surcharge on parking.
26. By virtue of this prior contractual relationship, Wolff and the City were motivated to find a new owner of the baseball club owned by OPBI (at this time Wolff was the sole owner of OPBI) to play at the Stadium for the 2008 and 2009 seasons, failing which the Stadium would be empty and Wolff would be liable to the City on his guarantee.
27. In consideration of the mutual covenants set out in the agreements and in reliance on certain express representations made by the City and Wolff to the plaintiffs, Rapidz Baseball and Zip jointly and severally agreed to indemnify Wolff up to a maximum amount of $216,000 for all payments which Wolff may be required to make, or as determined by a court of law to be payable by Wolff to the City (“the Stadium Guarantee”).
28. In addition, Wolff had guaranteed certain obligations under the Lynx Equipment License, again prior to the involvement of the plaintiffs. In consideration of the mutual covenants set out in the agreements and in reliance on certain express representations made by the City and Wolff to the plaintiffs, Rapidz Baseball and Zip jointly and severally agreed to indemnify Wolff up to a maximum of $100,000 for amounts actually paid by Wolff or determined by a court to be payable (“the Lynx Guarantee”).
29. In consideration of the mutual covenants set out in the agreements and in reliance on certain express representations made by the City and Wolff to the plaintiffs, Momentous guaranteed repayment to Wolff of a shareholders loan owed to Wolff by OPBI which obligation was transferred to Rapidz Baseball (“the Shareholder
RCP-E 14A (July 1,2007)
12.
Guarantee”). At the time of pleading that loan purportedly stands at $83,000 although the supporting documentation is not clear whether the opening balance of the loan was $100,000 or $110,000.
30. Bylaws of the League require the member (OPBI) to post a $200,000 irrevocable standby Letter of Credit as security for the obligations of the member. In consideration of the mutual covenants set out in the agreements and in reliance on certain express representations made by the City and Wolff to the plaintiffs, Rapidz Baseball posted a qualifying Letter of Credit extended by the Royal Bank of Canada on the credit of Momentous, in order to satisfy this requirement. This Letter of Credit supported the obligations of OPBI to the League. Given Wolff’s relationship with the League, his ownership of the Ottawa membership in the League through Park LLC, and his ownership in OPBI the lessee of the Ottawa membership, this Letter of Credit in effect supported Wolff’s obligations to the City under his guarantee.
31. It was known to Wolff and the City that Momentous would be the primary source of financial support to Rapidz Baseball and would fund the baseball club and its operations. It was also known to Wolff and the City, contrary to representations made by each to the plaintiffs, that the operation and management of a baseball club at the Stadium was, based on the experience of the Ottawa Lynx, a losing proposition. In fact, the City, known to Wolff, was in litigation with the Ottawa Lynx over the responsibility for losses at the Stadium.
RCP-E 14A (July 1, 2007)
13.
The Stadium
32. In the course of the 2008 season, the baseball club known as the Ottawa Rapidz and operated by Rapidz Baseball played its home games at the Stadium located at 300 Coventry Road, Ottawa and owned by the City. As pleaded herein, Rapidz Baseball did so pursuant to the various agreements entered into. Pursuant to the agreements referred to, the rental payments for use of the Stadium, payable to the City, were known to be $108,000 for each of 2008 and 2009. For that reason, the obligations of Rapidz Baseball and Zip to indemnify Wolff for the Stadium Guarantee was limited to a maximum of $216,000 (two seasons rental of the Stadium), matching the cap on Wolff’s obligations to the City under his guarantee.
33. In the 2008 season, Momentous funded the baseball club and its operations to the extent of some $1 million. In addition, Momentous loaned personnel and equipment to Rapidz Baseball while continuing to carry them on its payroll and inventory. During the course of the 2008 season, Rapidz Baseball incurred an indebtedness in excess of $1.4 million.
34. The likelihood of operational costs leading to a deficit in this range was known to the City and Wolff, but was not disclosed by either of them to the plaintiffs.
Representations and Warranties
35. Throughout the negotiations leading to agreement and closing of the Transaction Wolff and the City made the following representations and warranties to the plaintiffs, knowing them to be false:
RCP-E 14A (July 1,2007)
14.
(a) the City represented and warranted to the plaintiffs that it would in good faith enter into a long term commercially reasonable lease with Rapidz Baseball at the Stadium, commencing following the 2009 season. The City made this representation and warranty to the plaintiffs, knowing it to be unattainable and therefore false, because it (and Wolff) knew that without a long term commercially reasonable lease Rapidz Baseball could not survive beyond the 2009 season (and potentially the 2008 season) and because the plaintiffs had expressed to the City and Wolff that they would not enter into the Transaction without it;
(b) Wolff knew of this representation and warranty by the City and knew it was false; and
(c) Wolff represented to the plaintiffs that Rapidz Baseball would incur losses in the 2008 season in the range of $200,000 but not appreciably beyond that range. Wolff (and the City) knew this representation and warranty to be false. Wolff made this representation, joined in by the City, because the plaintiffs had expressed to the City and Wolff that they would not enter into the Transaction without it.
36. These representations are representations and warranties at law and are enforceable against the City and Wolff, as well as against the League, on whose behalf Wolff was also acting. They were made by Wolff and the City to induce the plaintiffs to enter into the Transaction.
RCP-E 14A (July 1,2007)
15.
37. The plaintiffs entered into the various obligations as part of the Transaction solely on the strength of these representations and warranties made by the City and Wolff. But for these representations and warranties the plaintiffs would not have entered into the Transaction and the related guarantees and indemnities referred to.
38. The plaintiffs relied upon these representations and warranties to their detriment.
Demise of the Rapidz
39. Rapidz Baseball fielded a team and completed the 2008 season.
40. The plaintiffs were surprised by the magnitude of the operational costs and losses Rapidz Baseball incurred. They realised, by the magnitude of the losses, that the representations and warranties made by Wolff and joined in by the City were patently false. To overcome the effect of this breach, the plaintiffs sought the agreed upon negotiation with the City of a long term lease at commercially reasonable rates.
41. Rapidz Baseball commenced discussions with the City towards this end. These discussions culminated in a meeting with the City on Friday, September 5, 2008. At this meeting, the City disclosed for the first time that it would not support a lease longer than 5 years, and that, given its assessment of the commercial value of the Stadium property (at approximately $20 million), the City was looking for a return from the Stadium following the 2009 season in a range closer to 5% of that value, which equated to a rent increase from $108,000 to over $1,000,000, or 1000%.
42. The City knew that this declaration of its true intentions would be fatal to Rapidz Baseball. While the City’s precise motivation was unknown to the plaintiffs, they plead
RCP-E 14A (July J, 2007)
16.
and the fact is that the City had for some time pursued alternative plans for realising on the commercial value of the Stadium as real estate, including the razing of the Stadium and sale of the land.
43. In declaring its true intentions, the City was indifferent to the fact that it was interfering with the contractual obligations of Rapidz Baseball to the League (supported by the Letter of Credit referred to above), and that it was actively initiating the collapse of the interlocking guarantees and indemnities in the transaction.
Consequences to the Plaintiffs
44. The following conduct and consequences directly flowed from the wrongful and intentional conduct of the City and Wolff, including breach of representation and warranty. From at least September 5, 2008 the City, Wolff, Park LLC, the League, Moushon and Lockard were party to a civil conspiracy intended to enforce the guarantees and Letter of Credit referred to herein to the detriment of Rapidz Baseball, Rapidz Sports, Momentous and Zip, knowing that they were not entitled in fact or at law to do so:
(a) flowing from the declaration by the City of its true intentions, Rapidz Baseball could not support a second season at the level of losses represented by the 2008 season without the long term lease, and Momentous could not continue to underwrite the baseball club at such levels without commercially reasonable terms;
(b) Rapidz Baseball was required to issue a Notice of Intention to make a
Proposal to its creditors under the Bankruptcy And Insolvency Act (Canada)
(“NOl”). Rapidz Baseball put the City on notice to this effect in writing on
RCP-E 14A (July I, 2007)
17.
September 11, 2008, looking to the City to fulfill its representations and warranties. The City intentionally failed to respond to this notice until after the NOl was filed. At time of pleading Rapidz Baseball must present a Proposal to its creditors on or before March 3, 2009;
(c) on September 19, 2008 Rapidz Baseball made application to the League for voluntary withdrawal based on financial hardship which it was entitled to do under the applicable rules. This application was intended to be heard at the annual meeting of the League’s Board of Directors scheduled for September 29, 2008. A voluntary withdrawal would release the Letter of Credit;
(d) on September 22, 2008 and knowingly contrary to its ByLaws, the League filed a Notice of Charges against Rapidz Baseball seeking to terminate its membership for failing to field a team for play in the 2009 season based on the application for voluntary withdrawal. Such a finding would have the effect of forfeiture of the Letter of Credit. This was the intention of the League;
(e) at the time of the September 29, 2008 meeting, Wolff, the League, Moushon arid Lockard were represented by the same attorney, Paul Hendrick, and were in a clear conflict of interest. Prior to the September 29, 2008 meeting Wolff, the League, Moushon and Lockard had predetermined and contrived the outcome. At the meeting the application by Rapidz Baseball for voluntary withdrawal was summarily refused and, acting contrary to its own formal rules and procedures, the League wrongfully terminated the membership of Rapidz Baseball. As detailed below the League would later characterize this action as an
RCP-E 14A (July 1,2007)
18.
“arbitration award” and seek court approval in North Carolina in an attempt to mask its intentional failure to act pursuant to the authority granted by its own Bylaws;
(f) in so doing, the League declared the Letter of Credit extended on the credit of Momentous forfeited;
(g) Rapidz Baseball appealed this determination by the League. This appeal was summarily dismissed without a hearing;
(h) by letter dated November 11, 2008 Wolff made demand on Momentous pursuant to the Shareholder Guarantee;
(i) shortly thereafter, the City appointed a security company to take possession of the Stadium which security company advised the Ottawa Rapidz that it could no longer access the Stadium because it filed the NOl;
(j) on December 1, 2008 Wolff wrongfully and unilaterally purported to cause OPBI to approve and enter into a parking agreement with the RCMP for the Stadium whereby Wolff estimated that OPBI would receive at least $70,000 to be applied to the 2008 rental payment due to the City;
(k) as a condition for its approval of the parking agreement with the RCMP and for use of the Stadium in 2009, Wolff consented to and was complicit in a demand by the City on December 3, 2008 under his guarantee;
RCP-E 14A (July I, 2007)
19.
(1) on December 5, 2008 Wolff purportedly paid the 2008 rental payment to the City in the amount of $108,000 pursuant to his guarantee;
(m) on December 12, 2008 Wolff then made demand upon Zip pursuant to the Stadium Guarantee without any reference to or accounting for the parking agreement with the RCMP, and otherwise contrary to law;
(n) Wolff remains exposed on the Lynx Equipment Licence;
(o) Zip and Rapidz Baseball remain exposed to Wolff under the Lynx Guarantee;
(p) on December 19, 2008 Wolff issued a Complaint in North Carolina against Momentous for breach of its agreement to indemnify’ his shareholder loan to OPBI seeking judgment in the amount of $83,330, which Complaint was served on January 5, 2009;
(q) on December 19, 2008 the League issued a Motion in North Carolina to confirm an “arbitration award” and seeking an order directing entry of judgment against Rapidz Baseball, OPBI, and Rob Hall and Sheath O’Connor in their respective capacities as directors of Rapidz Baseball. Specifically, the League sought to confirm its decisions of September 29, 2008 inter alia to deny the Ottawa Rapidz request for voluntary withdrawal from the League on the basis of financial hardship; to terminate the membership of the Ottawa Rapidz in the League; and, to confirm that the League had the right to draw down in full on the Letter of Credit;
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20.
(r) on December 19, 2008 Wolff issued a Complaint in North Carolina against Zip for purported breach of the Stadium Guarantee seeking judgment in the amount of $108,000, which Complaint was served on January 5, 2009;
(s) Mr. Hendricks was the attorney on all of these filings;
(t) without waiting for the results of its own motion to confirm its right to draw down in full on the Letter of Credit, the League presented the Letter of Credit to the Royal Bank of Canada for payment in full on December 23, 2008. The certification for this draw down on the Letter of Credit was given by Moushon and Lockard, both of whom personally appeared before a Notary Public on November 13 and 14, 2008 respectively for this purpose. This certification by these defendants to the Royal Bank of Canada that the Letter of Credit was being drawn on “pursuant to the authority granted in the Bylaws of the League”, was known to both Moushon and Lockard to be false;
(u) Momentous has incurred losses which it has no realistic likelihood of recovering;
(v) the goodwill of OPBI, Rapidz Baseball, Rapidz Sports, Zip and Momentous has been irrevocably damaged; and
(w) Rapidz Baseball and Momentous lost the opportunity to recoup their losses and the commercial opportunity to benefit from the long term profitability of the baseball club.
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45. Accordingly, the plaintiffs say that the defendants are liable to the plaintiffs for all losses, including contingent liabilities, sustained by them.
46. The City cannot benefit from its own misconduct by making demand against Wolff and realizing on the Wolff guarantee to the City, knowing that will trigger a presumed entitlement on the part of Wolff to seek to recover as against Rapidz Baseball and Zip on the Stadium Guarantee. The City cannot benefit from its own misconduct, in ‘which Wolff is in any event complicit.
47. The City and Wolff cannot benefit directly or indirectly from a forfeiture of the Letter of Credit to the League. The League and Moushon and Lockard have knowingly acted in contravention of League Bylaws and the presumed forfeiture is invalid, wrongful, and premature. Wolff is implicated in this wrongful forfeiture. Injunctive relief is accordingly reasonable in the circumstances.
48. Subsequent to the meeting of September 5, 2008 the City, Wolff and the League engaged in discussions aimed at entering into an agreement between the City and OPBI for use of the stadium. Wolff has excluded Rapidz Sports from these discussions.
49. In particular, the City, Wolff, Park LLC and the League have sought to negotiate the return of baseball to the Stadium. In so doing, the City, Wolff, Park LLC and the League have conspired to cause the forfeiture of the Letter of Credit and enforcement of the obligations secured by guarantee, knowing that they were not entitled to do so, to assist in the financing of this new venture.
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22.
50. In excluding Rapidz Sports from the activities of OPBJ, in which Rapidz Sports is
a shareholder, and in using OPBI to further his own interests rather than the interests of
OPBI, Wolff s actions were oppressive, unfairly prejudicial to and in disregard of Rapidz
Sports interests as a shareholder.
Trade-Marks
51. Consistent with these efforts, Wolff and the League have, knowingly and wrongfully used, and continue to use, trade-marks owned by and associated with Rapidz Baseball, in particular the marks OTTAWA RAPIDS and RAPIDS. The League has announced plans to operate a team in Ottawa under the name Ottawa Rapids Baseball Club and these marks.
52. Through their wrongful use of the trade-marks OTTAWA RAPIDS and RAPIDS and their use of the name Ottawa Rapids Baseball Club, Wolff and the League have falsely misrepresented to the public in Ottawa and elsewhere an association with their proposed team and Rapidz Baseball. The false misrepresentation has caused damage to Rapidz Baseball including to the trade-marks owned by Rapidz Baseball and the goodwill associated therewith, and will likely continue to cause such damage unless restrained by this court.
53. These activities constitute a passing off pursuant to section 7(b) of the Trademarks Act and at common law, and are intended to have caused additional harm to the plaintiffs.
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54. Complicit with these activities by Wolff and the League, and in support of them, on December 5, 2008 and December 31, 2008 Murdoch filed trade-mark applications respecting the marks “OTTAWA RAPIDS/LES RAPIDES d’ OTTAWA” and RAPIDS and RAPIDES logos respectively. In the trade-mark applications, Murdoch claimed that he had made continuous use of these marks since February 14, 2008, knowing this to be untrue.
55. Wolff and the League have also knowingly interfered with and appropriated domain names the property of Rapidz Baseball, including http:
//www.ottawarapidsbaseball.com and http ://ottawarapidsbaseball.ca. causing further damage to Rapidz Baseball.
Joinder of Claims and Parties
56. The plaintiffs plead and rely upon rules 5.01 and 5.02(2) of the Ontario Rules of Civil Procedure to join their claims against the named defendants on the ground that the claims for relief against the defendants arise out of the same transactions and occurrences; there are common questions of fact and law; damage and loss has been caused to the plaintiffs by the defendants and the joiner of the claims will promote the convenient administration of justice.
57. Further, the plaintiffs plead and rely upon rule 5.03(1) to join their claims against the named defendants as each and every named defendant is a person or party whose presence is necessary to enable the court to adjudicate effectively and completely on the issues in a proceeding.
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Jurisdiction
58. Wolff agreed in writing that his January 17, 2008 personal guarantee to the City would be governed by and construed in accordance with the laws of the Ontario and that “all disputes, controversy and claims arising out of or in connection with or in relation to [the guarantee shall be submitted to and be subject to the jurisdiction of the courts of the Province of Ontario … which shall have exclusive jurisdiction … the parties irrevocably attorn to the jurisdiction of such courts..
59. Furthermore the plaintiffs and Wolff both in his personal capacity and representing the League, and Park LLC agreed in the Letter Agreement of May 6, 2008 that the Stadium Guarantee, the Lynx Guarantee, the Shareholder Guarantee and the Letter of Credit posted by Rapidz Baseball on the credit of Momentous to support the obligations of OPBI to the League would be “governed by the laws of the Province of Ontario” and they further agreed that “each party irrevocably submits to the non- exclusive jurisdiction of the courts of Ottawa, Ontario with respect to any matter arising hereunder or relating thereto.”
60. This court accordingly has jurisdiction over the matters pleaded herein and consequently over the subject matter pleaded in the two Complaints and the Motion issued in North Carolina.
61. Zip, Rapidz Baseball, Rapidz Sports and Momentous therefore claim the relief set out in paragraph 1 herein.
62. The conduct of the defendants other than Murdoch was intentional and known to them to be in breach of their obligations under the Transaction. The defendants acted
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with ulterior motives which they knew were inconsistent with representations to, and contractual obligations to, Zip, Rapidz Baseball, Rapidz Sports and Momentous. The conduct of the defendants cannot be condoned, as a matter of public policy. Accordingly, Zip, Rapidz Baseball, Rapidz Sports and Momentous claim punitive damages as set forth in paragraph 1.
63. The defendants intentionally initiated an interlocking sequence of indebtedness, all to the risk and jeopardy of Zip, Rapidz Baseball, Rapidz Sports and Momentous. Zip, Rapidz Baseball, Rapidz Sports and Momentous accordingly seek the declaratory and injunctive relief, including ex parte, interim and interlocutory relief referred to in paragraph 1 herein.
64. The conduct of Murdoch was intentional. The false certification of an application for trade-mark under statute cannot be condoned as a matter of public policy. Rapidz Baseball accordingly claims the punitive damages referred to in paragraph 2 herein.
January 26, 2009 FRASER MILNER CASGRAIN LLP
Barristers and Solicitors
1420 — 99 Bank Street
OTTAWA ON K1P 1H4
K. Scott McLean
LSUC# 16455G
Tel: (613) 783-9600
Tel: (613) 783-9665 (direct)
Fax: (613)783-9690
Lawyers for the Plaintiffs
RCP-E 14A (July I, 2007)
MOMENTOUS.CA CORPORATION and CITY OF OTTAWA and others Court File No: O
others and Defendants
Plaintiffs ‘13 ‘I’d’
ONTARIO
SUPERIOR COURT OF JUSTICE
Proceeding commenced at OTTAWA
STATEMENT OF CLAIM
Fraser Milner Casgrain LLP
1420—99 Bank Street
Ottawa, Ontario, Canada KIP 1H4
K. Scott McLean
LSUC # 16455G
Tel: (613) 783-9600
Tel: (613) 783-9665 (direct)
Fax: (613) 783-9690
_____ Lawyers for the Plaintiffs
