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Lack of Full Disclosure: Special Costs in Failed Anton Piller Order

In recent years, employers have increasingly sought and obtained Anton Piller Orders (“APO”) where a departing employee leaves with confidential information. The strategy is often extremely effective: the employer recovers the confidential information and obtains significant leverage in the litigation, usually prompting settlement. While effective, APOs are not for the uninitiated – the Courts have referred to this remedy as one of the “nuclear weapons” of litigation. Employers and their counsel must exercise extreme caution when using APOs.

The British Columbia Supreme Court’s recent decision in Pierce v Jivraj, 2014 BCSC 926 represents a warning for employers and their counsel in seeking an APO. In that case, the Court ordered special costs personally against the plaintiff’s counsel for failure to meet the high burden of full disclosure in the APO application.

The action originated as a defamation suit by Mr. Pierce against Mr. Jivraj. Mr. Pierce alleged that Mr. Jivraj improperly published statements that various securities exchange commissions had imposed regulatory sanctions against Mr. Pierce for ‘ill-gotten gains’ from stock manipulation. Mr. Pierce brought an ex parte application for an APO to preserve evidence on Mr. Jivraj’s personal computer relating to the defamation suit. At the ex parte hearing, the Court made inquiries of Mr. Pierce’s counsel concerning regulatory sanctions and fines against Mr. Pierce. Counsel was “evasive at best” concerning these inquiries. The Court granted the APO, directing a search of Mr. Jivraj’s personal residence and seizure of his computer.

In fact, Mr. Pierce had been subject to three regulatory sanctions, and was ordered to disgorge “ill-gotten” profits of over $9 million. On a motion by Mr. Jivraj, the Court set aside the APO on the basis that the merits for granting an APO were not met, in light of the new evidence regarding Mr. Pierce’s reputation: Pierce v Jivraj, 2013 BCSC 1850. Further, the Court found that it would have set aside the APO for Mr. Pierce’s complete failure to provide full and frank disclosure of the prior regulatory sanctions.

Mr. Jivraj brought a motion for special costs against Mr. Pierce and his counsel for the material non-disclosure: Pierce v Jivraj, 2014 BCSC 926. In finding counsel personally liable for special costs, the Court concluded that an APO “requires ‘fastidious’ disclosure and to be ‘profoundly fair’ in presenting facts. Neither occurred here.” The Court was particularly concerned that the APO involved entry into a personal residence.

APOs are serious and significant remedies. This decision represents an important reminder of the high standards of complete disclosure of all objectively material facts in applying for an APO.  Employers and their counsel must include all possible material facts as part of the evidence, particularly where the Order will direct a search of a personal residence. The APO is no doubt a nuclear weapon, and employers and their counsel must take care in its use.

Please feel free to contact Jordan Deering of our Fraud, Corruption & Asset Recovery Group directly if you would like to discuss the application of this decision in your particular circumstances.

Case Information

Pierce v Jivraj, 2014 BCSC 926: http://www.canlii.org/en/bc/bcsc/doc/2014/2014bcsc926/2014bcsc926.pdf

Lack of Full Disclosure: Special Costs in Failed Anton Piller Order

Former Employee’s Facebook Post about Settlement Breached Confidentiality Provision in Settlement Agreement: Tribunal Reduced Employee’s Monetary Award

Trish-Ann Tremblay had entered into a settlement agreement with her former employer, 1168531 Ontario Inc., on September 13, 2011, with respect to the Human Rights Application she had filed against 1168531 Ontario Inc.. The settlement agreement contained a standard confidentiality provision requiring parties to maintain the confidentiality of the terms of the Minutes of Settlement.

The next day after the mediation, Ms. Amy Lalonde, manager with the Respondent Company, was informed by a colleague that Ms. Tremblay had posted messages on Facebook about the mediation and settlement. In fact, the first message was posted during the mediation session itself:

“Sitting in court now and _______ is feeding them a bunch of bull shit. I don’t care but I’m not leaving here without my money…lol”.

After the Minutes of Settlement were signed, Ms. Tremblay posted the next message as follows:

“Well court is done didn’t get what I wanted but I still walked away with some…”

Shortly thereafter Ms. Tremblay posted the following message:

“Well my mother always said something is better than nothing…thank you so much saphir for coming today…”

While Ms. Tremblay argued that there was no proof that she was talking about the Respondents as she did not mention them by name, the Tribunal held that it was clear from the date of the postings and the comments made that she was referring to the mediation. The Tribunal found that Ms. Tremblay had breached the confidentiality provision of the Minutes of Settlement. However, the Tribunal found that the Respondent Company had also breached the Minutes of Settlement by not paying Ms. Tremblay the settlement amount.

The Tribunal ultimately ordered that the amount owing to Ms. Tremblay under the settlement agreement be reduced by $1,000. In determining the appropriate remedy, the Tribunal took into account that Ms. Tremblay did not disclose the amount of the monetary settlement in her Facebook posts. The Tribunal also considered the relatively public nature of Facebook, especially in the small community in which the applicant and respondent company resided.

When mediating issues of a sensitive nature, employers should consider including confidentiality provisions in settlement agreements that specifically prohibit disclosing terms of settlement on social media sites, including Facebook, Twitter, LinkedIn, etc.

Tremblay v. 1168531 Ontario Inc., 2012 HRTO 1939 (CanLII)

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Former Employee’s Facebook Post about Settlement Breached Confidentiality Provision in Settlement Agreement: Tribunal Reduced Employee’s Monetary Award

Canada’s Highest Court Rules on Employee Privacy Rights over Work Computer

This article was written by Andrea Raso Amer and Eric Sherbine.

In R. v. Cole, 2012 SCC 53, the Supreme Court of Canada held that a warrantless search and seizure by police of a teacher’s employer‐issued computer containing sexually explicit images of a female student were in violation of the teacher’s rights under the Canadian Charter of Rights and Freedoms. In a time when employers are increasingly allowing (either explicitly or implicitly) employees to use employer‐issued laptop computers, smart phones, and other digital devices for their own personal use, this decision, as summarized below, offers a number of important lessons.

Click here to read more.

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Canada’s Highest Court Rules on Employee Privacy Rights over Work Computer

What constitutes consideration to uphold an agreement?

In the recent decision of Downey v. Ecore International Inc., the Ontario Court of Appeal found that a confidentiality agreement signed by a consultant on his first day of work was not void for lack of consideration.

Paul Downey entered into discussions with Ecore in 1999 for employment with the company.  One of the key terms of his employment was to be the signing of a confidentiality agreement, due to the nature of Ecore’s business and Downey’s position.  He then asked whether he could instead provide services to Ecore as a consultant through his company CSR Industries Inc., as it would be more advantageous from a tax perspective, and a consulting agreement was subsequently executed between Ecore and CSR.  Although Downey was not a signatory to the consulting agreement, he was described within it as a “Key Person of the Consultant”.  A couple of weeks later, on the first day of work, Downey executed a confidentiality agreement in favour of Ecore, in his personal capacity.

In 2011 Downey commenced an action against Ecore on the basis that it allegedly owed him compensation for his assignment to the company of inventions he had created.  In response, the consulting agreement was terminated.  A central question in the resulting jurisdictional motion was whether or not the confidentiality agreement signed by Downey was invalid due to a lack of consideration.  The initial motions judge determined that it was indeed invalid, as it was CSR rather than Downey who was a party to the related consulting agreement and deriving compensation as a result of the arrangement.

The Court of Appeal had a different view of the matter.  Simply put, it found that the confidentiality agreement formed part of a single transaction between Ecore, Downey and CSR, constituted by both the consulting agreement and the confidentiality agreement.  It came to that conclusion upon a review of each agreement, as well as the evidence of initial employment discussions between Ecore and Downey.  When looking at the totality of the evidence of the intentions of the parties as well as an interpretation of the agreements, the court found that the true business reality of the relationship emerged.

Importantly, the court also decided that the company’s grant of permission to Downey to access Ecore’s proprietary information in order to perform services under the consulting agreement, had been independent consideration for signing the agreement. In that respect, the court noted that the “Background” preamble to the agreement stated:

“Employee will be granted access to confidential and proprietary information of the Company as part of his employment.  Employee is entering into this Agreement to grant to the Company protections regarding the Company’s proprietary information.  The parties of [sic] this Agreement agree and intend to be legally bound by the covenants as set forth in this Agreement.”

The court stated that,” The mutual promises contained in this provision constitute a quid pro quo that formed the basis for the Confidentiality Agreement: Downey would be granted access to Ecore’s Proprietary Information, which was necessary to allow him to perform the Services under the Consulting Agreement, and the information so disclosed would be subject to confidentiality protections in favour of Ecore.”

Downey v. Ecore International Inc., http://canlii.ca/t/frz4j

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What constitutes consideration to uphold an agreement?

My Friends are Your Friends? U.S. Court Rules that an Employer’s MySpace “Friends” List Can be a Trade Secret

In a decision that may one day be cited by Canadian courts on the extent of an employer’s rights over its social media properties, the United States District Court for Colorado has ruled that an employer’s MySpace Profile and “Friends” list can qualify as trade secrets.

In Christou et al. v. Beatport LLC et al., Regas Christou sued former employee turned rival nightclub owner, Bradley Roulier, for, amongst other things, theft of trade secrets. In particular, Christou alleged that Roulier had misappropriated the login information for the MySpace profiles of Christou’s nightclubs as well as their corresponding MySpace “Friends” lists.

Following a motion brought by Roulier to dismiss Christou’s trade secrets claim, the Court ruled that Christou had alleged sufficient facts to allow the claim to proceed. In so doing, the Court accepted Christou’s argument that the “Friends” list was more than a list of names; rather it was closer to a database of contact information:

“The names themselves, readily available to the public, are not the important factor. The ancillary information connected to those names cannot be obtained from public directories and is not readily ascertainable from outside sources, and thus this militates in favor of trade secret classification.”

In addition, having secured the MySpace profiles of his various nightclubs through web profile logins and passwords and expended some amount of money, time and resources into developing the list of “Friends”, Christou further bolstered the viability of his trade secret claim at this early stage in proceedings.

While this case dealt only with MySpace and therefore did not address other commonly used social media websites such as LinkedIn or Facebook, it nonetheless demonstrates the steps that employers should take to protect the social media accounts that have been registered on behalf of the company. In those circumstances, employers should be careful to limit access to the company’s social media profiles to only those employees who are responsible for establishing and advancing the company’s on-line presence. There is no reason for every employee to have access to the company’s on-line accounts. In addition, employers should also amend their policies and contracts to clearly indicate that the ownership of the contacts listed on these social media accounts rests with the employer.

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My Friends are Your Friends? U.S. Court Rules that an Employer’s MySpace “Friends” List Can be a Trade Secret