Former employee used information to lure key customers away

KJA Consultants Inc. v. Soberman (2002), 17 C.C.E.L. (3d) 261 (O.S.C.)

Soberman had spent his entire career working for KJA and was in a senior management position reporting only to the president when he left the company. The court found that Soberman played a key role in KJA’s business and therefore owed a clear fiduciary duty to his employer.

This fiduciary duty prohibited him from competing with KJA unfairly and from using confidential information regarding KJA’s customers and business practices for his own profit. When Soberman resigned, he was advised by KJA’s solicitors that he was under a duty not to contact any of KJA’s customers for a 12-month period following his last day of employment. The court found this 12-month period for non-solicitation was reasonable because if Soberman had been dismissed without cause, he would have been entitled to reasonable notice in the range of 12 to 16 months.

Soberman did not comply with the letter from KJA’s solicitors with respect to the non-solicitation of its customers and proceeded to send letters to key individuals from KJA’s client base in an effort to attract business. These acts were found to constitute direct solicitation of KJA’s customers and were held to be a clear breach of the fiduciary duties owed by Soberman to KJA.

The court found the type of harm which would result to KJA from Soberman’s breach of his fiduciary obligations was not compensable by way of damages. The potential harm in terms of loss of goodwill and potential loss of market share required protection by way of injunctive relief since damages alone would be inadequate.

Nonetheless the court found it could not prevent Soberman from completing any outstanding work for the former KJA customers he had already solicited since such an award would affect the rights of third parties. But once any remaining work was finished, Soberman was prohibited from conducting further business with such customers for a period of one year.

Furthermore, the court held he could not solicit any KJA customers for 18 months following his last day of employment.

Latest stories