Court prohibits ex-employee from continued solicitation of his former employer’s customers
After 14 years Jonathan Soberman resigned from his position as general manager with KJA Consultants Inc. He provided his employer with one month’s notice to be effective Sept. 30, 2001.
KJA was concerned about Mr. Soberman’s impending departure. Mr. Soberman was a key employee with considerable client contact. He had intimate knowledge of and personal relationships with KJA’s customers. He was also familiar with KJA’s internal working such as pricing and overhead. There was no obvious replacement for Mr. Soberman and this left KJA in a vulnerable position.
Upon receiving his notice of resignation, KJA’s lawyer wrote to Mr. Soberman explaining to him in detailed terms what was expected of him as a departing employee with a fiduciary responsibility. Mr. Soberman was advised that he should not contact any customers of KJA for a period of 12 months after the end of his employment with KJA.
Immediately upon leaving KJA, Mr. Soberman sent out a mailing to KJA’s customers stating that he had left KJA and started his own elevator-consulting firm. It was clear that his new firm was offering the same services offered by KJA. Mr. Soberman encouraged KJA’s customers to contact him if he could “be of assistance.” Not only were these letters sent to KJA’s customers but there were personally addressed to individuals within those companies. Of the over 300 letters sent 24 were hand-delivered by Mr. Soberman.
Upon learning of Mr. Soberman’s actions, KJA brought a motion seeking an interlocutory injunction against Mr. Soberman from soliciting its customers, from using confidential information and from conducting any business with KJA’s customers, arguing that Mr. Soberman was in breach of his fiduciary duty to KJA.
In defending against the motion, Mr. Soberman argued that his behaviour was “passive” rather than “direct.” He argued that simply sending a letter does not constitute solicitation without an accompanying act such as a telephone call.
The Court did not agree. It held that what Mr. Soberman did was clearly a direct solicitation of KJA’s customers in order to obtain their business. He contacted KJA’s customers, targeted specific people in the companies and personally visited some of them. He was in breach of the fiduciary duty that was owed to KJA. He knew that it would be perceived as such by KJA, particularly in light of KJA’s solicitor’s letter to Mr. Soberman prior to his departure.
The Court held that the 12-month period of non-solicitation imposed by KJA was reasonable given that Mr. Soberman was in a senior management position reporting only to the president.
The Court held that KJA had demonstrated a strong prima facie case for an injunction. The type of harm that KJA sustained as a result of Mr. Soberman’s breach of his fiduciary obligation was irreparable and could not be compensated for by damages.
As a result of his breach, Mr. Soberman now had the opportunity to nurture a relationship with those clients, possibly resulting in KJA losing them as clients permanently. However it would not be appropriate to restrain him from completing work he had already undertaken for those clients as that would interfere with third-party rights.
The Court granted the injunction against Mr. Soberman from doing any additional work for those clients for a period of 12 months from completion of current contracts. The order also prohibited Mr. Soberman for a period of 12 months from performing services for any of KJA’s clients that he had contacted who had not yet retained his services. Finally the order prohibited Mr. Soberman from soliciting customers and from using confidential information for period of 18 months after his employment with KJA ceased.
Mr. Soberman remained free to advertise his services generally, to attend trade shows and to take on any work from companies that were not customers of KJA. He could also do work for KJA customers whom he had not solicited previously provided that they came to him on their own accord.
For more information:
• KJA Consultants Inc. v. Soberman, Ontario Superior Court of Justice, Docket No. 01-CV-220635CM, Feb. 11/02.
KJA was concerned about Mr. Soberman’s impending departure. Mr. Soberman was a key employee with considerable client contact. He had intimate knowledge of and personal relationships with KJA’s customers. He was also familiar with KJA’s internal working such as pricing and overhead. There was no obvious replacement for Mr. Soberman and this left KJA in a vulnerable position.
Upon receiving his notice of resignation, KJA’s lawyer wrote to Mr. Soberman explaining to him in detailed terms what was expected of him as a departing employee with a fiduciary responsibility. Mr. Soberman was advised that he should not contact any customers of KJA for a period of 12 months after the end of his employment with KJA.
Immediately upon leaving KJA, Mr. Soberman sent out a mailing to KJA’s customers stating that he had left KJA and started his own elevator-consulting firm. It was clear that his new firm was offering the same services offered by KJA. Mr. Soberman encouraged KJA’s customers to contact him if he could “be of assistance.” Not only were these letters sent to KJA’s customers but there were personally addressed to individuals within those companies. Of the over 300 letters sent 24 were hand-delivered by Mr. Soberman.
Upon learning of Mr. Soberman’s actions, KJA brought a motion seeking an interlocutory injunction against Mr. Soberman from soliciting its customers, from using confidential information and from conducting any business with KJA’s customers, arguing that Mr. Soberman was in breach of his fiduciary duty to KJA.
In defending against the motion, Mr. Soberman argued that his behaviour was “passive” rather than “direct.” He argued that simply sending a letter does not constitute solicitation without an accompanying act such as a telephone call.
The Court did not agree. It held that what Mr. Soberman did was clearly a direct solicitation of KJA’s customers in order to obtain their business. He contacted KJA’s customers, targeted specific people in the companies and personally visited some of them. He was in breach of the fiduciary duty that was owed to KJA. He knew that it would be perceived as such by KJA, particularly in light of KJA’s solicitor’s letter to Mr. Soberman prior to his departure.
The Court held that the 12-month period of non-solicitation imposed by KJA was reasonable given that Mr. Soberman was in a senior management position reporting only to the president.
The Court held that KJA had demonstrated a strong prima facie case for an injunction. The type of harm that KJA sustained as a result of Mr. Soberman’s breach of his fiduciary obligation was irreparable and could not be compensated for by damages.
As a result of his breach, Mr. Soberman now had the opportunity to nurture a relationship with those clients, possibly resulting in KJA losing them as clients permanently. However it would not be appropriate to restrain him from completing work he had already undertaken for those clients as that would interfere with third-party rights.
The Court granted the injunction against Mr. Soberman from doing any additional work for those clients for a period of 12 months from completion of current contracts. The order also prohibited Mr. Soberman for a period of 12 months from performing services for any of KJA’s clients that he had contacted who had not yet retained his services. Finally the order prohibited Mr. Soberman from soliciting customers and from using confidential information for period of 18 months after his employment with KJA ceased.
Mr. Soberman remained free to advertise his services generally, to attend trade shows and to take on any work from companies that were not customers of KJA. He could also do work for KJA customers whom he had not solicited previously provided that they came to him on their own accord.
For more information:
• KJA Consultants Inc. v. Soberman, Ontario Superior Court of Justice, Docket No. 01-CV-220635CM, Feb. 11/02.
