Labatt ruling will make companies more wary of sponsorships

Labatt ruling will make companies more wary of sponsorships
Molson Coors Canada has won this round in its battle with Labatt over beer sponsorship for the NHL. Photo: Molson Coors
Following last week’s ruling in the sponsorship case between two breweries and the National Hockey League, one in-house counsel says she thinks companies will be more careful when entering sponsorship agreements.
In the case of Labatt Brewing Co. Ltd. v. NHL Enterprises Canada, the Court of Appeal ruled in favour of Molson Coors Canada, verifying its $375-million sponsorship deal with the NHL.

For decades, Molson Breweries owned NHL sponsorship rights. Labatt grabbed them in 2007 and, after the appeal ruling, it said in a statement that it will continue to fight the court's decision, announcing new sponsorship deals with three Canadian NHL teams.

Molson appealed the case after the Ontario Superior Court ruled in favour of Labatt’s request for an injunction. Superior Court Justice Frank Newbould ruled Labatt had already reached a binding sponsorship agreement with the NHL and therefore it could not enter a similar agreement with Molson.

The appeal court overruled the injunction citing “procedural unfairness” towards Molson and the NHL.

The appeal ruling stated: “[A]t no time during the application hearing did Labatt assert that a binding sponsorship agreement existed between the parties” and “the application judge did not raise this issue with the NHL or Molson during their submissions.”

Kelly Brown, Molson’s chief legal officer, says her company would have proceeded differently had Labatt argued that it had a binding sponsorship agreement with the NHL.

“Because [Labatt] never argued that a binding agreement was in place . . . neither Molson nor the league actually ever were called upon to make any counter arguments about there not being a binding agreement in place. So we never had the chance to address the issue because it was actually never raised as an issue.”

According to the ruling, the appeal court also accepted the NHL’s submission that “if it had known that the existence of a binding sponsorship agreement between the NHL and Labatt on and after November 12, 2010 was at issue, it would have conducted its defence to Labatt’s application in a very different fashion.”

To demonstrate another instance of “procedural unfairness,” the court made reference to the case of Rodaro v. Royal Bank of Canada. The court said the judge in that case “held that it was both fundamentally unfair and inherently unreliable for a trial judge to make findings against a defendant on the basis of a theory of legal liability not advanced by the claimant.”

As a result of Labatt, Brown predicts companies will be more wary. “I think it probably means that parties entering into negotiations for sponsorship agreements will be more careful in understanding the status of their discussions,” she says.

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