An Ontario court has ruled in favour of discount brokerage, TD Waterhouse Canada Inc., which was seeking an injunction requiring a data services firm to hand over the client data that it has maintained for the firm — and not for the $460 million fee that the data firm was seeking for the job.
According to the decision from the Ontario Superior Court of Justice, TD Waterhouse contracted Electronic Imaging Systems Corp. (EIS) in 2007 for various services, including archiving confidential data.
This year, after the existing contract expired in mid-May, TD terminated its agreement and sought the return of its data, which includes over 180 million records — a process that EIS said would cost over $460 million, based on the $2.50 fee to restore documents under the terms of their contract.
The court noted that there’s no dispute that TD owns the data. The question is what the contract requires it to pay for the return of that data in the event that the contract between the firms is terminated.
“Either TD Waterhouse must pay EIS over $460 million for the return of its own data, or EIS must undertake the complex task of restoring the outstanding data to TD Waterhouse for no consideration. Neither result is commercially reasonable,” the court noted.
According to the decision, TD paid EIS a total of about $65 million for its services over the past eight years, and it argued that now paying $460 million to recover its data isn’t reasonable. And, the brokerage firm previously paid EIS about 15¢ per record for a mass transfer of data that was required after National Bank of Canada acquired TD Waterhouse’s institutional services business.
However, EIS said that it only agreed to that discount given the firms’ ongoing business relationship, and that it “took a financial hit” as a result. The firm also argued that returning the data will be a massive undertaking.
“EIS says that it will take years, not months, to complete this repatriation to TD Waterhouse,” the court noted — adding that when the firms first started working together neither side contemplated that EIS would end up storing 180 million records for TD.
“Similar to TD Waterhouse’s argument of commercial absurdity, EIS submits that it would be commercially absurd for EIS to agree to store TD Waterhouse’s data for more than 17 years and undertake the process of repatriating that data to TD Waterhouse for no consideration,” the court said.
Ultimately, the court concluded that EIS must return the data, and that the $2.50 fee for each record doesn’t apply to that process.
“In my view, the ‘document restore’ fee that was included in the agreement was contemplated for day-to-day requests by TD Waterhouse for archived data, not for the mass migration on termination of the agreement,” the court said.
Instead, the court ruled that EIS should be compensated on a “quantum meruit” basis — the reasonable market value of the task.
To that end, it granted TD an injunction requiring EIS to return the data, with the condition that TD be required to pay EIS for its services, “based on commercially reasonable daily rates for the services rendered.”
“TD Waterhouse is entitled to the return of the TD data. However, EIS is entitled to commercially reasonable compensation for the significant work it will have to undertake to return the TD data,” the court concluded.