COURT FILE NO.: CV-18-00597979 DATE: 20200122 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: EVERTZ TECHNOLOGIES LIMITED and EVERTZ MICROSYSTEMS LIMITED, Plaintiffs AND: LAWO AG, LAWO HOLDING AG, LAWO INC., LAWO GROUP USA INC., LAWO CORP., PROVIDIUS CORP., TONY ZARE (a/k/a ANTHONY ZAREZADEQAN), AYMAN AL KHATIB, JACKSON WIEGMAN and ALBERT FAUST, Defendants
BEFORE: Cavanagh J.
COUNSEL: Kyle R. Taylor and Annie (Qurrat-ul-ain) Tayyab, for the Plaintiffs Martin Brandsma, for the Defendants, Providius Corp, Tony Zare, Ayman Al Khatib and Jackson Wiegman Laurent Massam, for the Defendants, Lawo AG, Lawo Holding AG, Lawo Inc., Lawo Group USA Inc., Lawo Corp and Albert Faust
HEARD: November 27, 2019
ENDORSEMENT
Introduction and procedural background
[1] The defendants, who are represented in two groups by two sets of counsel, bring a joint motion to strike out the amended statement of claim in this action, without leave to amend, and for an order dismissing the action.
[2] Before this motion was brought, the defendants had brought motions to strike out the statement of claim. I heard these motions on February 13, 2019. I released my decision on those motions on February 28, 2019: 2019 ONSC 1355 and made an order striking out the statement of claim, with leave to amend.
[3] The plaintiffs amended the statement of claim on March 26, 2019 pursuant to my order and it was served that day.
[4] The defendants sent requests to inspect documents from the amended statement of claim dated April 3 and April 4, 2019. There followed negotiations concerning the terms of a confidentiality order to apply to documents, which were not successful.
[5] The plaintiffs provided copies of emails and attachments referenced in paragraph 100 of the amended statement of claim and requested delivery of the defendants’ statements of defence.
[6] The plaintiffs sent formal responses to the request to admit dated August 16, 2019. In their responses, the plaintiffs advised that the references in paragraphs 92, 94-99, and 104-109 of the amended statement of claim are not to specific documents, but, rather, to the type of documents and information that the plaintiffs believe the defendants improperly took from them.
[7] This motion was then brought.
Analysis
[8] In my earlier decision, I set out general principles applicable to pleadings and then addressed whether the statement of claim (as supplemented by particulars) contains sufficient material facts to meet the minimum level of material fact disclosure to plead the causes of action based upon alleged misappropriation and misuse of the plaintiffs’ confidential information. At paragraph 33 of my decision, I concluded that the descriptions of categories of confidential information in paragraph 100 of the statement of claim are too vague and general to satisfy the minimum requirement for pleading material facts to support a claim for breach of confidence.
[9] At paragraph 34 of my decision, I held that the pleading in paragraph 92 of the statement of claim of how the defendants allegedly misused of the alleged confidential information is insufficient because it does not inform each defendant of the acts that the plaintiffs allege the defendant took to misuse the plaintiffs’ confidential information. At paragraph 35 of my decision, I held that the particulars provided by the plaintiffs in the November 23, 2018 letter from their counsel, at least in the way the information was provided in the letter, provided insufficient material facts that would allow the defendants to know the confidential information that each defendant is alleged to have misappropriated, or the acts taken by each defendant to misuse the confidential information.
[10] In the amended statement of claim, at paragraph 92, the plaintiffs plead the confidential information that the defendants allegedly misappropriated and misused. This paragraph describes 23 categories of information such as “preliminary manuals”, “customer databases”, “parts and product databases”, “source code, binary files, and decompilable forms of confidential product software”, and “mechanical specifications and drawings”. Each such category, as pleaded, has a short description.
[11] In paragraphs 94 through 99 of the amended statement of claim, the plaintiffs plead the confidential information that each defendant is alleged to have taken by listing specific categories of alleged confidential information.
[12] In paragraphs 104 through 109 of the amended statement of claim, the plaintiffs plead allegations of how each defendant misused the alleged confidential information. The amended statement of claim contains specific allegations with respect to each of the 23 types of confidential information pleaded in paragraph 92, and the allegations are made with respect to each defendant.
[13] In paragraph 100 of the amended statement of claim, the plaintiffs plead 22 instances of alleged misappropriation of confidential information by reference to emails. With respect to each email, the plaintiffs plead the type or category of confidential information that was allegedly taken by reference to one or more of the types described in paragraph 92.
[14] The amended statement of claim removes terms such as “including but limited to” and “includes”, which appeared in the statement of claim.
[15] In Active Operation Management (AOM) NA Inc. v. Reveal Group Operations Management Ltd., [2013] O.J. No. 6019, the court decided a motion by the defendants to strike out certain paragraphs of the statement of claim in an action for breach of copyright, misappropriation of trade secrets, interference with contractual relations, unjust enrichment and misappropriation of goodwill. In his decision addressing the pleaded claims for misappropriation of trade secrets, interference with contractual relations, and unjust enrichment, Master MacLeod (as he then was) confirmed at paragraph 21 that parties are to plead the material facts on which they rely but not the evidence to prove those facts. He observed that under our system, a plaintiff is under no obligation to plead only facts for which it has evidence and that it is perfectly legitimate to plead a fact that the plaintiff hopes to be able to prove following discovery. Master MacLeod declined to strike out the paragraphs which were challenged, noting that if the pleaded and unproven allegations are true, then the defendant would be well aware what was copied and misappropriated.
[16] In Areva NP GmbH v. Atomic Energy of Canada Ltd., [2009] O.J. No. 4372, the defendant moved to strike portions of the plaintiff’s further amended statement of claim or to require the plaintiff to provide particulars. In its action, the plaintiff claimed that the defendant had misused patented and unpatented aspects of its cleaning technology and sought injunctive relief and damages. The defendant argued that the statement of claim did not provide the minimum level of material fact disclosure, so the defendant did not know the case it had to meet. Master Muir noted that the plaintiff had identified the technology at issue, described the aspects of the technology which were trade secrets, identified other trade secrets relating to proprietary systems and processes, and provided particulars regarding the alleged improper use and disclosure of trade secrets. Master Muir expressed at paragraph 35 that he was mindful that the determination of the minimum level of material fact disclosure will vary depending on the type of action and pleading under review, and he accepted that where a plaintiff’s claim is based on an alleged violation of trade secrets, there must be a high level of specificity.
[17] The defendants submit that by basing their claims on “categories” or “types” of information, rather than particular pieces of information, the amended statement of claim is defective for the same reason that the statement of claim was defective. The defendants submit that the plaintiffs have still failed to meet the minimum level of material fact disclosure that is sufficient to properly plead causes of action based upon alleged misappropriation and misuse of confidential information.
[18] I disagree with the defendants’ submissions in this regard. In paragraph 91 of the amended statement of claim, the plaintiffs identified the particular products to which the confidential information they allege was stolen and misused related. In paragraph 92, the plaintiffs described with particularity the types of confidential information they allege the defendants stole and misused. The descriptions of the types of alleged confidential are much more specific than the descriptions in paragraph 91 of the original statement of claim. The plaintiffs are not required to plead the evidence by which they intend to prove their pleaded allegations, and they are entitled to plead facts they hope to be able to prove after discovery. The defendants would know from the amended statement of claim the information they are alleged to have misappropriated and misused.
[19] The defendants submit that the allegations with respect to each defendant of misappropriation of confidential information consist of repeated allegations using the same language which are too vague and speculative to meet the minimum level of material fact disclosure needed to plead causes of action founded on misappropriation and misuse of confidential information. The defendants point to their requests to inspect documents and the plaintiffs’ responses in which they state that the references in paragraphs 92, 94-99, and 104-109 are not to specific documents, but to the type of documents and information that the plaintiffs believe the defendants improperly took from them.
[20] I disagree that the amended statement of claim is deficient in this respect. With respect to each defendant, the plaintiffs have pleaded the types of confidential information each defendant is alleged to have misappropriated and misused. These categories are repeated with respect to each defendant. The categories and types of confidential information which each defendants is alleged to have misappropriated and misused are particular. They not too vague or general that each defendant would not know what is alleged. The plaintiffs are not required to plead evidence upon which they rely. They are entitled to plead facts which they hope to be able to prove after discovery, provided the facts pleaded meet the minimum level of disclosure with respect to each defendant.
[21] The defendants submits that the plaintiffs do not allege in the amended statement of claim that the information in the 22 emails pleaded in paragraph 100 of the amended statement of claim comprises any part of the confidential information that is identified in paragraph 92 of the amended statement of claim. The defendants submit that the plaintiffs do not plead in the amended statement of claim that any of the alleged information referred to in paragraph 100 (which reference the emails) were actually used by any of the defendants to create, market, or distribute any of the defendants’ products.
[22] I disagree with the defendants’ submissions in this respect. Paragraph 100 of the amended statement of claim begins with the statement “[t]he specific instances of when the defendants physically removed confidential information from Evertz that Evertz has been able to uncover to date were:”. The plaintiffs then plead particulars of the emails in 22 sub-paragraphs. Each sub-paragraph states that the information was “stolen” and was “confidential information” and describes the alleged confidential information by reference to one or more categories or types of confidential information pleaded in paragraph 92. In paragraphs 104-109 of the amended statement of claim, the plaintiffs state how each defendant allegedly misused the alleged confidential information. These pleadings satisfy the minimum level of disclosure of material facts which is necessary.
[23] I am satisfied that the amended statement of claim addresses the deficiencies in the statement of claim which I identified in my previous decision.
Disposition
[24] For these reasons, the defendants’ motion is dismissed.
[25] If the parties are unable to agree on costs, the plaintiffs may make written submissions within 20 days. The defendants may make written responding submissions within 20 days thereafter. The plaintiffs may make brief reply submissions, if so advised, within 5 days thereafter.