SUPERIOR COURT OF JUSTICE – ONTARIO
COMMERCIAL LIST
COURT FILE NO.: CV-15-11075-00CL
DATE: 20151207
RE: CANADIAN NATIONAL RAILWAY COMPANY, Plaintiff
AND:
CANADIAN PACIFIC RAILWAY COMPANY, CANADIAN PACIFIC RAILWAY LIMITED and GREG SHNERER, Defendants
BEFORE: Justice Hainey
COUNSEL:
Monique Jilesen and Nadia Campion, for the Plaintiff
R.S. Harrison, Steven Rosenhek, Brad Moore, and Christopher Rae, for the Defendants Canadian Pacific Railway Company and Canadian Pacific Railway Limited
Jeffrey Leon and Ranjan Agarwal, for the Defendant Greg Shnerer
HEARD: October 6, 28 and November 9, 2015
ENDORSEMENT
Background
[1] The Plaintiff, Canadian National Railway Company (“CN”), seeks interlocutory injunctive relief against the Defendants, Canadian Pacific Railway Company and Canadian Pacific Railway Limited (together “CP”), and Greg Shnerer, appointing an independent monitor and prohibiting CP and Mr. Shnerer from using CN’s confidential information and soliciting certain CN clients.
[2] The parties agree that an interlocutory injunction should be issued preserving all of CN’s confidential documents in CP’s possession, prohibiting the use by CP of CN’s confidential information and restricting CP’s right to solicit certain CN clients.
[3] With the court’s assistance, counsel have drafted an order providing for this relief, which is attached to this Endorsement (the “Order”). CN’s confidential information referred to in this Endorsement is more fully described in paragraph 1 of the Order.
[4] The only issue that I must decide on this motion is whether an independent and impartial officer of the court should be appointed to monitor the non-use and non-solicitation provisions of the Order, and to conduct the preservation, search and isolation functions provided for in the Order.
Facts
[5] CN and CP are both Class I railways. They are both involved in the transportation of freight in intermodal containers, using multiple modes of transportation (“Intermodal Shipping”). CN and CP are direct competitors in Intermodal Shipping. There are no other competitors.
[6] Derek Ackford joined CN in 2007. He was a National Account Manager in CN’s Intermodal Shipping group until his resignation on September 12, 2014, when he joined CP as Director of Sales in CP’s Merchandise and Carloads Unit. In April 2015, CP promoted Mr. Ackford to Managing Director in its Intermodal Shipping group.
[7] Mr. Shnerer was hired by CN in 2007 as a Dispatch Supervisor for CN’s Canadian Ground Operations. In 2010, he was promoted to the position of Account Manager in CN’s Domestic Intermodal Sales group. He remained in that position until his resignation on July 3, 2015. He then joined CP as Director, Regional Sales and New Business in CP’s Intermodal Shipping group.
[8] Shortly before their resignations from CN, Mr. Ackford and Mr. Shnerer each downloaded confidential and commercially sensitive CN information from CN’s computer network onto personal external hard drives. They took this information with them to CP to use in their new positions to compete with CN.
[9] Beginning in April 2015, Mr. Ackford began actively disseminating CN’s confidential information throughout CP’s Intermodal Shipping group in order to target CN customers. Among other things, he circulated a CN customer list disclosing CN’s client revenues, volumes and contract expiry dates.
[10] In July 2015, when Mr. Shnerer joined CP, he brought with him, among other things, an updated CN customer list that he had downloaded the day before he resigned from CN.
[11] Mr. Shnerer and Mr. Ackford circulated the updated CN customer list, as well as other CN confidential information, throughout CP’s Intermodal Shipping group. They reformatted the CN customer list and labelled it the “CN Target List”. They circulated the list to CP account managers with instructions to solicit CN customers using CN’s confidential information.
[12] CN’s confidential information, including the CN Target List, was also circulated to certain of CP’s executive officers including Jacqueline Coyle, Vice-President of Intermodal Sales and Marketing, Timothy Marsh, Senior Vice-President of Sales and Marketing, and Keith Creel, the President and Chief Operating Officer. These executive officers took no steps to identify the source of CN’s confidential information.
[13] CP employees accessed and viewed CN’s confidential information that was circulated within CP by Mr. Shnerer and Mr. Ackford to successfully solicit CN’s clients.
[14] On August 14, 2015, following CN’s delivery of injunction materials, the parties appeared before Newbould J., at which time CP gave an undertaking to the court not to use CN’s confidential information (the “Undertaking”). It also undertook to collect and preserve all confidential and proprietary documents belonging to CN.
[15] The Undertaking provides, in part, as follows:
The Defendants undertake to immediately preserve all confidential and/or proprietary documents, records and information in their power, possession or control … pertaining in any way to the business of the Plaintiff and accessed removed or obtained by the Defendant Greg Shnerer (“Shnerer”) directly or indirectly from Canadian National Railway Company.
The Defendants undertake not to use any documents, electronic or hardcopy that may have been obtained by the Defendant, Shnerer, from CN relating to CN customers, except for the purpose of this litigation, until further Order of this court.
[16] The parties dispute the extent to which CP has complied with its obligations pursuant to the Undertaking. CN’s and CP’s respective versions of these facts are set out below.
Positions of the Parties
CN’s Position
[17] CN submits that CP has not complied with its obligations pursuant to the Undertaking. It argues that the appointment of a monitor is the only way that the court and CN can be assured that CP will comply with its obligations under the Order to locate and preserve all of CN’s confidential documents and abstain from using CN’s confidential information or soliciting its clients. CN relies upon the following examples of CP’s non-compliance with the Undertaking in support of its position:
• Ms. Coyle’s initial direction not to use CN’s confidential information was only given orally to her direct reports, one of whom was Mr. Ackford. This direction was given on August 15, 2015; the day after the Undertaking was given.
• Ms. Coyle relied upon her direct reports to advise all other CP staff of their obligation to comply with the Undertaking and not use CN’s confidential information;
• A number of CP staff did not understand her directive, and appear to have failed to comply with it. It was not until September 15, 2015, a month after the Undertaking was given, that Ms. Coyle sent a clear written direction to CP staff not to use any of CN’s confidential information;
• CP’s initial production to CN of over 16,000 documents on September 4, 2015 was incomplete. Among the documents that were not included were the cover e-mails for the CN Target List circulated by Mr. Ackford and Mr. Shnerer. A further attendance before Newbould J. was required at which time he ordered CP to produce to CN the cover e-mails and other documents relating to communications between Mr. Ackford and Mr. Shnerer; and
• CP’s forensic investigation has not been sufficiently complete to determine whether other confidential information was and may continue to be available to CP employees. CN submits that its confidential information may still be available to CP’s employees.
[18] According to CN, these examples, together with other examples of CP’s non-compliance with the Undertaking, make it unlikely that CP will comply with the Order. For this reason, CN submits that the appointment of a monitor is necessary to ensure that CP complies with the Order.
CP’s Position
[19] CP opposes the appointment of a monitor on the ground that it is not necessary because CP can be trusted to comply with its obligations under the Order. CP argues that the appointment of a monitor would be a significant and unnecessary intrusion into CP’s business affairs.
[20] According to CP, to the extent there may have been shortcomings with its initial compliance with the Undertaking, it has taken appropriate remedial steps and is now in compliance with its obligations pursuant to the Undertaking. Further, it submits that it can be trusted to comply with the Order particularly because a breach of the Order could result in a finding of contempt of court. CP maintains that the court’s contempt power is sufficient to ensure that CP’s employees will comply with the Order, and that the appointment of a monitor is, therefore, unnecessary.
Analysis
[21] I agree with CN that there were shortcomings in the manner in which CP initially complied with its Undertaking. Ms. Coyle’s oral directive to her direct reports was insufficient to ensure that all of CP’s employees complied with CP’s obligation not to use CN’s confidential information. Further, it was not appropriate for Ms. Coyle to rely on Mr. Ackford to ensure that CP’s employees complied with the Undertaking. It also appears that CP’s initial production of documents was not complete.
[22] However, I am of the view that CP has now remedied these shortcomings for the following reasons:
• CP has engaged two independent forensic advisors to carry out an extensive document search to locate and preserve any CN confidential documents in the possession of CP. This search is ongoing. To date, CP has conducted a computer-assisted search of over 5,000,000 documents and has reviewed approximately 50,000 documents. It has produced over 17,000 documents to CN;
• CP has suspended Mr. Ackford and Mr. Shnerer. Ms. Coyle has been replaced and Mr. Marsh has been re-assigned. CP has moved a number of the employees who had reported to Mr. Shnerer out of its Intermodal Shipping group to ensure that none of CN’s confidential information is used by any of CP’s Intermodal Shipping group employees; and
• On September 14, 2015, Ms. Coyle issued a clear written directive to all CP employees involved in Intermodal Shipping prohibiting any use of CN’s confidential information. I am satisfied that all relevant CP employees working in the Intermodal Shipping area have been made aware of their obligation not to use CN’s confidential information.
[23] In my view, CN’s proposed order appointing a monitor is too intrusive and would unduly interfere with the conduct of CP’s legitimate business affairs. CN’s proposed order would give the monitor very broad powers to investigate and monitor CP’s business on an ongoing basis. I consider the following proposed powers of the monitor to be too intrusive:
• The monitor would be empowered to conduct interviews of CP’s employees at the monitor’s discretion to search for CN’s confidential information and to determine what use has been made of it by CP’s employees;
• The monitor would have complete access to all of CP’s premises, books, records and electronic data to carry out its duties;
• CP’s employees would be required to cooperate fully with the monitor and participate in any meetings or interviews requested by the monitor;
• CP would be required to provide the monitor with a list of all of its intermodal sales proposals and detailed information about each new intermodal shipping contract;
• The monitor would provide detailed reports to the court regarding its monitoring activities; and
• CP would be required to pay for all of the costs of the monitor’s services.
[24] I find that these proposed powers of the monitor would unduly intrude into CP’s business affairs. They are not necessary. In my view, CP’s initial failure to comply strictly with all aspects of the Undertaking was the result of a lack of due diligence on the part of CP and not because CP was deliberately ignoring its obligations. The more recent steps that CP has taken to comply with the Undertaking satisfy me that its employees will respect their obligations under the Order. To insert what would essentially constitute a “policing” function into CP’s day-to-day business is not warranted in the circumstances of this case.
[25] Moreover, I am of the view that the contempt power of this court will have a salutary effect on CP’s employees. Under the terms of the Order all CP’s employees involved with the pricing, sales or marketing of CP’s domestic intermodal business will be provided with a copy of the Order and must confirm in writing that they have received a copy of the Order.
[26] As a further precaution I order that all of CP’s employees referred to in paragraph 13 of the Order must also be provided with a copy of my Endorsement so that they will be made aware that they risk being found in contempt of court, with the possibility of incarceration, if they breach the Order. There is no evidence before me to suggest that any of CP’s employees would deliberately breach an order of this court particularly in the face of a possible finding of contempt of court. As I have already indicated, I find that any previous non-compliance with the Undertaking by CP’s employees was not deliberate.
[27] I am satisfied that this approach adequately protects CN and makes it highly unlikely that the Order will be breached.
Conclusion
[28] For the reasons I have outlined, I decline to appoint a monitor.
[29] I urge counsel to settle the issue of costs. If they cannot, they may schedule a 9:30 a.m. appointment before me to deal with costs.
HAINEY J.
Date: December 7, 2015