COURT FILE NO.: CV-20-642854-0000
DATE: 20210126
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: PointOne Graphics Inc.
AND:
Matt Roszkowski also known as Matthew Roszkowski, Melanie Heathers and Pumpkinseed Publishing Ltd.
BEFORE: J.T. Akbarali J.
COUNSEL: Ian Klaiman, for the plaintiff
Dennis Tousenard, for the defendants
HEARD: January 20, 2021
ENDORSEMENT
Overview
[1] The plaintiff, PointOne Graphics Inc., employed the defendant, Matt Roszkowski, for about seventeen years, save for one three-week period. Mr. Roszkowski is now working with the defendant Pumpkinseed Publishing Ltd., a company owned by his wife, the defendant Melanie Heathers, which has operated in the same printing industry as PointOne since 2012, and has been PointOne’s customer and competitor.
[2] PointOne commenced an action seeking damages and injunctive relief. On July 6, 2020, Leiper J. made a without prejudice order for an interim interlocutory injunction restraining the defendants from, among other things, soliciting customers of the plaintiff, and from using or disclosing information defined in the order as “confidential information.” The order also set a timetable for this motion to return for argument on the merits following exchanges of further motion material and cross-examinations.
[3] The motion has now returned before me. On this motion, PointOne seeks interim injunctive relief restraining Mr. Roszkowski from competing with PointOne, soliciting PointOne’s customers, interfering in Pointone’s business relationships, or using PointOne’s confidential information.
[4] PointOne argues that Mr. Roszkowski is in breach of a non-solicitation clause arising out of his employment agreement, is in breach of his fiduciary duty, and is in breach of his duty of confidence. It argues that the other defendants should be restrained from aiding Mr. Roszkowski in these breaches of his duties, and from profiting from his breaches of duty.
[5] Mr. Roszkowski argues that there was no valid employment contract between the parties that contained a non-solicitation clause. He denies he was a fiduciary. He also states that the information PointOne claims is its confidential information is neither confidential nor proprietary to PointOne.
[6] Finally, the parties seek a sealing order and a protective order on consent.
The Test for an Injunction
[7] To obtain injunctive relief under s. 101 of the Courts of Justice Act, R.S.O. 1990, c. C. 43, and r. 40 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, a party must satisfy the three-part test established by the Supreme Court of Canada in RJR MacDonald Inc. v. Canada (Attorney-General), 1994 CanLII 117 (SCC), 1994 SCC 117, [1994] 1 S.C.R. 311:
a. Is there a serious question to be tried;
b. Will the moving party suffer irreparable harm if the injunction is not granted;
c. Does the balance of convenience favour granting the injunction?
[8] The parties take different views about the standard that must be met to satisfy the first branch of the test when the injunctive relief sought would impair the ability of the responding party to earn a livelihood.
[9] The plaintiff relies on Pattillo J.’s decision in Van Wagner Communications Co. Canada v. Penex Metropolis Ltd., [2008] O.J. No. 190, (ON SC) at para. 35. There, Pattillo J. found that, on an injunction to enforce a negative covenant, a judge must undertake a preliminary analysis of the strength of the case put forward by the plaintiff to ask whether the case is overwhelming, a strong prima facie case, a prima facie case, or something less. The judge must also undertake a preliminary assessment of the possible defences with a view to estimating the extent to which they reduce the strength of the case initially shown by the plaintiff. If, at the end of the process, the judge concludes that plaintiff has at least a prima facie case, the first branch of the test is satisfied. However, the strength of the plaintiff’s case informs how heavily the second two branches of the test must be weighed. A plaintiff with a strong prima facie case ought to be entitled to an injunction without much regard to the balance of convenience and irreparable harm. If the plaintiff is left with only a prima facie case, more regard needs to be had to the balance of convenience and irreparable harm.
[10] The plaintiff argues that Pattillo J.’s decision has been repeatedly adopted and represents the correct approach. It relies particularly on GDL Solutions Inc. v. Walker, 2012 ONSC 4378, where, at para. 37, the court held that Pattillo J.’s approach reconciles conflicting case law in Ontario, and achieves “a fine balance in addressing competing policy goals of not placing too high a burden on moving parties in interlocutory injunction cases, where legal and factual issues remain unresolved, and maintaining high scrutiny of restrictive covenants”.
[11] The defendants argue that, where the plaintiff seeks to restrict a former employee from competing with, or soliciting customers of, his former employer, the first branch of the test requires the plaintiff to prove a strong prima facie case: Boehmer Box L.P. v. Ellis Packaging Limited, 2007 CanLII 14619 (ON SC) at para. 39. They argue that where restrictive covenants are at issue, courts have adopted the strong prima facie case standard, both where the restriction sought is based on a contract or a common law cause of action: Edgetch HVAC Services Ltd. v. Ubhi, 2016 ONSC 7564, at paras. 26-28, Optilinx Systems Inc. v. Fiberco Solutions Inc., 2014 ONAX 6944, at paras. 6-8.
[12] The cases the defendants rely upon are more recent than those relied upon by the plaintiff. The analysis in those cases indicate that the divergence in the case law was not settled by Pattillo J.’s decision in Van Wagner, although his reasoning clearly found favour with some Ontario courts.
[13] In Edgetch, the court reviewed the divided case law in Ontario, taking note of the GDL case on which the plaintiff herein relies, as well as contra case law. The court concluded that the appropriate standard to apply should be determined having regard to the result of the injunction sought. Justice Chiappetta found, at para. 28, that “it is the result, interfering with an individual’s ability to earn a livelihood, that properly informs the analysis.” She concluded that the higher threshold of a strong prima facie case applies to the first branch of the test where an employer seeks to place restrictions on a person’s ability to engage in their chosen vocation and earn a livelihood.
[14] I accept the decision of Chiappetta J. in Edgetch. Where a person’s ability to earn a livelihood is sought to be enjoined by an injunction, the higher threshold of strong prima facie case applies.
[15] On this motion, PointOne seeks to restrict Mr. Roszkowski’s ability to earn a livelihood by restraining him from soliciting PointOne’s “customers”, which term it does not clearly define, and by enjoining him from accepting work brought to him by PointOne’s “customers”. I thus turn to consider whether PointOne has established a strong prima facie case.
Has PointOne established a strong prima facie case?
[16] PointOne grounds its claim for injunctive relief based on (i) breach of a contractual restrictive covenant; (ii) breach of fiduciary duty, and (iii) breach of the duty of confidence. I consider each of these in turn.
Contractual Restrictive Covenant
[17] The parties signed an employment contract on June 30, 2003, which included recitals acknowledging that Mr. Roszkowski would become aware of “information regarding the customers, activities, techniques, business lists, contacts, products, and financial information of PointOne along with other confidential matters and trade secrets.” It also included the following restrictive covenant:
Upon termination of employment for any reason, the Employee or any entity controlled by the Employee shall not, for a period of one year thereafter, directly or indirectly, as principal, agent, shareholder, partner, contractor or otherwise engage in the same or a similar business to that of PointOne and shall not solicit, engage in, assist or be interested in or be connected with any other person, firm or corporation soliciting any customer of PointOne. The Employee acknowledges that these restrictions are reasonable given the nature of PointOne’s business and the availability to the Employee of employment in areas or fields that are not within these restrictions[^1].
[18] The contract bears a handwritten note that states “renew July 1 2004”, with signatures from Mr. Roszkowski, and Dennis Low, PointOne’s President.
[19] Subsequently, an almost identical contract was signed by Mr. Roszkowski and Mr. Low on behalf of PointOne on August 10, 2004. The only difference in terms related to compensation. On this contract, there is a handwritten note that reads “extended until June 30, 2007, signed by Mr. Roszkowski and a PointOne representative.
[20] The parties’ cross-examinations do not shed light on why the contract extensions were entered into at the time. The last written extension was well over a decade ago, and memories have faded.
[21] On October 12, 2017, Mr. Roszkowski resigned from PointOne, and went to work for a competitor, with the knowledge, and without the objection, of PointOne. However, several weeks later, Mr. Roszkowski returned to work at PointOne, following a meeting with Mr. Low. No new written employment contract was signed.
[22] The parties disagree about the terms under which Mr. Roszkowski returned to work at PointOne. The record discloses that the parties disagree about whether Mr. Roszkowski was given a guaranteed annual commission. PointOne also maintains that Mr. Roszkowski returned to work under the terms of the written contract that expired in 2007, and in particular, the restrictive covenant. Mr. Roszkowski argues that he was not bound by the terms of any restrictive covenant, since the last one he agreed to expired on June 30, 2007. He also notes that PointOne made no objection to him working for a PointOne competitor in 2017, and did not raise any breach of the restrictive covenant with him at that time. He argues he had no reason to believe he was subject to a restrictive covenant after the expiry of the last written contract, and certainly not by his return to PointOne’s employment in 2017.
[23] In considering the strength of PointOne’s claim related to a breach of the restrictive covenant, I note the following. The last written employment contract, by the terms on its face, expired on June 30, 2007. Clearly PointOne knew it could require its employees to sign an employment contract – it had four times sought Mr. Roszkowsi’s signature for that purpose. It failed to renew the employment contract after June 30, 2007. Moreover, it failed to object to Mr. Roszkowski working for a competitor in 2017, and failed to require him to sign a new employment contract when he returned to work for PointOne in 2017.
[24] The general rule is that non-competition clauses in employment contracts will only be enforced in exceptional circumstances: Camino Modular Systems Inc. v. Krandis, 2019 ONSC 7437, at para.17, citing H.L. Staebler Company Ltd. v. Allan et. al., 2008 ONCA 576, (2008) 92 O.R. (3d) 107 (C.A.), at para. 42. When determining whether a restrictive covenant is reasonable, the court considers a variety of factors, including whether there is a proprietary interest entitled to protection, whether the temporal or spatial features of the clause are too broad, and whether the covenant is unenforceable as being against competition generally: Camino, at para. 18, citing J.G. Collins Insurance Agencies v. Elsley, 1978 CanLII 7 (SCC), [1978] 2 S.C.R. 916, at para. 13. Importantly, the court must also consider whether the restrictive covenant is ambiguous: Camino, at para. 19, citing Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6, [2009] 1 S.C.R. 157, at para. 43.
[25] In my view, an implied restrictive covenant, entered into ten years after the last written contract between the parties expired, and after Mr. Roszkowski left his employment with PointOne to work for a competitor, and then was rehired without complaint about his having done so, is more than ambiguous – it is a fiction. As the Supreme Court of Canada held in RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc., 2008 SCC 54, [2008] 3 S.C.R. 79, citing Imperial Sheet Metal v. Landry, 2017 NBCA 51, courts should not be reading restrictive terms into employment contracts when the parties have not bargained for them. In my view, neither should courts read in or imply a restrictive covenant into an employment contract where the parties have bargained for one, and then allowed it to lapse.
[26] PointOne has not established a prima facie case, let alone a strong prima facie case, that there exists an enforceable, contractual restrictive covenant on which it can rely to establish its entitlement to the injunction it seeks.
[27] In view of this conclusion, it is not necessary to address the parties’ other arguments about the alleged restrictive covenant, which included Mr. Roszkowski’s arguments that (i) there was no consideration provided for such a covenant, (ii) the terms of the restrictive covenant were not reasonable because PointOne has not established a proprietary interest entitled to protection, and because the clause is overbroad and ambiguous, (iii) Mr. Roszkowski was constructively dismissed, rendering any such covenant void, and (iv) the non-solicitation clause is not severable from the non-competition clause in any event.
Breach of fiduciary duty
[28] In order to ground its claim for injunctive relief in breach of fiduciary duty, PointOne must first establish that Mr. Roszkowski was a fiduciary.
[29] There are three hallmarks of a fiduciary relationship: (i) the fiduciary has scope for the exercise of some discretion or power; (ii) the fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interest, and (iii) the beneficiary is peculiarly vulnerable to, or at the mercy of, the fiduciary holding the discretion or power: Guzzo v. Randazzo et al., 2015 ONSC 6936, at para. 107, Imperial Sheet Metal, at para. 49.
[30] When considering whether an employee is a fiduciary, the court must consider his actual authority or control over the employer’s operation; fiduciary duties do not arise from an employee’s title: RBC Dominion Securities, at para. 50.
[31] Courts have extended fiduciary duties to lower-level employees where an individual is found to be “key employee,” whose position and responsibilities are essential to the employer’s business, making the employer particularly vulnerable to competition upon that employee’s departure. An employee may be a key employee if he has knowledge of the names, contacts and needs or preferences of clients or suppliers, a direct and trusted relationship with existing and potential customers, access to confidential information, knowledge of pricing, or other duties which show them to be a key person to the corporation: Jardine Lloyd Thompson Canada Inc. v. Harke-Hunt, 2013 ABQB 313, at para. 40.
[32] The notion of a “key employee,” referred to in Jardine, descends from the decision of the Supreme Court of Canada in Canadian Aero Service Ltd. v. O’Malley, (1973), 1973 CanLII 23 (SCC), [1974] S.C.R. 592, 40 D.L.R. (3d) 371 (S.C.C.), at p. 606, where the Court distinguished “top management” from “mere employees”, on the basis that these “key employees” have larger and more exacting duties similar to those owed by a director to a corporate employer. In contrast, the duties owed by mere employees, unless enlarged by contract, consist only of respect for trade secrets and confidentiality of customer lists: Jardine, at para. 38.
[33] Thus, while the factors listed above assist in identifying a key employee, the determination of whether someone is a fiduciary requires not just ticking off those boxes, but considering the employee’s role in the context of the hallmarks of fiduciary relationships.
[34] In this case, Mr. Roszkowski was a long-term sales employee at PointOne. PointOne describes him as a key, senior sales representative. Mr. Roszkowski was responsible for about 20% of PointOne’s annual revenue – a figure that sounds substantial until one realizes that he was one of four or five sales people employed by PointOne at any given time. He was not always PointOne’s leading sales representative, although he was in some years.
[35] Mr. Roszkowski was not involved in the management of PointOne. When PointOne made layoffs in March 2020 as a result of COVID-19, Mr. Roszkowski was not involved in deciding who would be laid off. Rather, Mr. Roszkowski was laid off from PointOne in March 2020, with an estimated recall of May 2020.
[36] In terms of Mr. Roszkowski’s discretion or power, PointOne argues that Mr. Roszkowski had its trust to communicate with customers directly, manage and set quotes and pricing, and manage project timelines and deliverables. It argues that it trusted Mr. Roszkowski to perform these functions independently, in his discretion, with little oversight. It refers to his discretion to set pricing, schedule deliveries and pickups, coordinate production, buy paper, and contract outside services.
[37] The evidence makes clear that the discretion within which Mr. Roszkowsi could operate was limited. He had some authority to set pricing, but only within parameters that had been set by management, which, according to Mr. Roszkowski, were narrow; he could offer discounts of up to 2%, or a couple hundred dollars at most. Sometimes he could get a lower price for a customer by making changes to the raw materials, such as by using a lower cost paper, but if he wanted to offer a discount of more than 2%, he needed the consent of PrintOne’s CEO.
[38] Other tasks pointed to by PointOne hardly seem like hallmarks of fiduciary responsibility, like communicating directly with customers. Every salesperson does that.
[39] Moreover, some of the tasks PointOne describes as being within Mr. Roszkowski’s discretion were not tasks for which he was, or could be, responsible. The record demonstrates that Mr. Roszkowski was often frustrated with PointOne’s ability to acquire paper for printing jobs, which in turn impacted the schedule within which print jobs could be managed. He expressed frustration that he was unable to acquire paper himself, a task that used to be his, but had been allocated to PointOne’s Chief Operating Officer at some point in time. Mr. Roszkowski was not happy with the paper supply issues, which impacted the timing of the jobs for his customers. He had no ability to address the problem apart from complaining to the COO about it.
[40] PointOne also argues that Mr. Roszkowski had intimate knowledge of PointOne’s software pricing program, Print Quotes. Before coming to work for PointOne, Mr. Roszkowski had worked for Print Quotes, and so was familiar with the software. According to PointOne, Mr. Roszkowski, “in the early stages of his employment” – in other words, some seventeen years ago – helped PointOne design and develop estimating and production software, called Print Quotes. It argues that, through Print Quotes, Mr. Roszkowski had access to its confidential information, which it alleges could be used to undercut PointOne’s quotes to its customers.
[41] Mr. Roszkowski’s evidence is that, because he used to work for Print Quotes before moving to PointOne, he assisted PointOne with the conversion to the Print Quotes system when it was initially adopted. He had no role in ongoing maintenance or updating the backend of Print Quotes. Other than at the beginning of his employment, when PointOne was adopting Print Quotes, Mr. Roszkowski has used Print Quotes only as an end user, like all the other sales representatives.
[42] I do not accept that Mr. Roszkowski helped to “design and develop” the software. Print Quotes did that; PointOne purchased the software from Print Quotes. Mr. Roszkowski helped PointOne adopt Print Quotes’ software at the beginning of his employment in 2003, but there is no evidence that he used the software in any way different from the other sales representatives since its initial set-up.
[43] PointOne also argues that Mr. Roszkowski was a key employee with fiduciary duties because he had knowledge of PointOne’s confidential pricing, and a direct and trusted relationship with PointOne’s customers.
[44] With respect to PointOne’s pricing, I have already noted that Mr. Roszkowski was not involved in updating the backend of Print Quotes, so to the extent the software was updated to reflect different pricing variables, like cost of labour or raw materials, which the evidence indicates impacts PointOne’s pricing, there is no evidence Mr. Roszkowski had knowledge of those updates.
[45] Mr. Roszkowski had relationships with some of PointOne’s customers, but the evidence does not establish anything particularly special about those relationships. PointOne’s evidence indicates that it noticed it was not receiving job inquiries from the customers Mr. Roszkowski worked with after Mr. Roszkowski was laid off in March 2020. It subsequently reached out to some of those customers. Not surprisingly, they indicated that their printing needs had been negatively affected by the COVID-19 pandemic. The evidence also indicates that those customers have resumed working with PointOne. There is also evidence that some of the customers have worked with Pumpkinseed, including some as early as late 2019, when Mr. Roszkowski was still a PointOne employee. However relevant this information may be to PointOne’s damages case, it does not rise to the level of establishing a direct and trusted relationship between Mr. Roszkowski and PointOne’s customers to empress Mr. Roszkowski with fiduciary duties.
[46] I also have difficulty with the argument that PointOne is peculiarly vulnerable to Mr. Roszkowski. While he had knowledge of the names of at least some of PointOne’s customers, the evidence is clear that in the printing industry, customers regularly shop jobs around among the thousands of competitors, and that it is in the interests of brokers, who represent many of PointOne’s customers, to be visible and have relationships with many different printers. There are no exclusivity contracts in the printing industry, and there is no evidence of repeat jobs or standing orders, where Mr. Roszkowski’s knowledge of past jobs PointOne had done for a customer might make PointOne peculiarly vulnerable to competition from him. Moreover, the specifications of a customer’s job will change job to job, and are within the knowledge of the customer; that information is the customer’s information that it has shared with the printing companies it has approached for quotes.
[47] PointOne has failed to establish a prima facie case, let alone a strong prima facie case, that Mr. Roszkowski was a fiduciary, or put another way, a key employee empressed with fiduciary duties. Mr. Roszkowski had limited discretion or power in his role as a sales representative at PointOne, The discretion he did have which he could unilaterally exercise was narrow and limited by the parameters established by PointOne’s management. Moreover, there is no evidence to suggest that PointOne was vulnerable to, or at the mercy of, Mr. Roszkowski.
[48] Because I have concluded that PointOne has failed to meet its burden under the first branch of the RJR Macdonald test with respect to its argument that Mr. Roszkowski is a fiduciary, it is not necessary to consider whether an injunction against Ms. Heathers or Pumpkinseed is warranted on the basis that they are knowingly assisting Mr. Roszkowski and participating in his breach of fiduciary duty.
Breach of Confidence
[49] PointOne also argues that it is entitled to the injunctive relief it seeks on the basis of Mr. Roszkowski’s breach of confidence.
[50] In Camino, at para. 56, citing Edac Inc. v. Tullo, 1999 CanLII 14868 (ON SC) at para. 52, the court set out the elements a plaintiff must prove to succeed in a claim for breach of confidence:
a. The information at issue is confidential;
b. The information was misused by the defendant;
c. The plaintiff suffered harm from the misuse.
[51] On a motion for injunctive relief based on misuse of confidential information, the most important question is to identify the factual basis for the claim, and in particular, the claim that the plaintiff has confidential information entitled to protection: Camino, at para. 51.
[52] PointOne describes its confidential information in its factum at para. 17 as (i) its customer list, (ii) its estimating/pricing formula, which is subject to fluctuation based on several factors, including currency rates, costs of raw materials and cost of labour, and (iii) its printing and finishing preferences for customers, the rates its customers are willing to pay, and its business and marketing opportunities.
[53] I will consider each category of alleged confidential information in turn.
[54] First, PointOne argues that its customer list is confidential. The defendants argue that, in the printing industry, customer information is not proprietary.
[55] The evidence discloses that, in the printing industry, there are thousands of competitors. Competitors can also be each other’s customers, if they require assistance from another printer to complete portions of a print job. Printing companies service each other in this way, they service clients directly, and they service brokers, who seek to have many contacts with printers and with end customers, to broker printing deals.
[56] There are no exclusivity agreements in the printing industry. Customers shop their jobs around for multiple quotes. Customers provide the specifications for the job they require done. They are free to provide quotes they have received from one printer to another printer to try to obtain a better price. Customers’ jobs change. There is no evidence on the record before me that PointOne had standing orders or regular jobs from clients.
[57] Because of the nature of the industry, brokers want to be visible and easily identifiable, because they want broad networks. They can be found through web searches. PointOne’s clients include some identified when PointOne purchased a customer list.
[58] In view of this evidence, I conclude that PointOne has failed to prove a strong prima facie case that its customer list is proprietary, confidential information. Much of it is available by searching the internet. Printing is not an industry where brokers or clients are hidden; it is in their interests to be visible and create relationships with multiple printers.
[59] However, because there is evidence that Mr. Roszkowski and Pumpkinseed began working with PointOne’s customers in late 2019 and early 2020, when Pumpkinseed had not done work for those clients before, if I am wrong that the appropriate standard to employ on the first branch of the RJR Macdonald test is a strong prima facie case, I would conclude that PointOne has established a prima facie case that Mr. Roszkowski misued its customer list for the benefit of the defendants.
[60] Second, PointOne claims that Mr. Roszenski misused confidential information consisting of PointOne’s estimating and pricing formula. To some extent, this argument relies on Mr. Roszenski’s familiarity with Print Quotes, which functions like PointOne’s estimating department.
[61] I find that PointOne has failed to make out a strong prima facie case, or even a prima facie case, that Mr. Roszenski misused information about PointOne’s estimating and pricing formula:
a. First, the evidence suggests that Mr. Roszenski was not involved in backend updates to the software, which one presumes would include any changes made to the pricing formula to address fluctuations in the cost of raw materials and labour, or currency changes. I thus have doubts as to whether, as an end user of the software, Mr. Roszenski had access to the estimating and pricing formula, or only the quotes resulting from the application of the formula.
b. Second, even if Mr. Roszenski did have that information, with ongoing changes, including labour costs which would have been in flux during the 2020 year as a result of COVID-19-related layoffs, it is doubtful that he would have had the knowledge to determine how PointOne would price a job throughout 2020.
c. Third, even if Mr. Roszenski could guess at PointOne’s pricing, I have doubts as to how useful that information would have been to him as an employee of Pumpkinseed, and thus, I have doubts as to whether he misused the information. Pumpkinseed works akin to a broker. It has two employees: Mr. Roszenski and Ms. Heathers. It cannot do any of the steps involved in printing a job itself; it must outsource all the steps, and can only broker a price for a client based on the prices it gets from different printers. In contrast, PointOne is a 70,000 square foot facility that offers end to end services to its clients. PointOne has much greater control over the pricing it can offer customers than does Pumpkinseed.
[62] Third, PointOne argues that its confidential information about customer preferences, the prices customers are willing to pay, and its business and marketing opportunities was misused by the defendants.
[63] The only reason PointOne has information about customer preferences is because the customer has provided it. The evidence indicates that customers provide information about their preferences to multiple printers to get quotes for each new job. The evidence also indicates that customer preferences change, depending on the job. Customers seek multiple quotes and decide which printer to use based on a myriad of factors, of which price is only one. Others include reliability, quality, and the speed within which the job can be completed. Because each job is different, it is reasonable to conclude that customers will weigh these factors differently depending on the job.
[64] PointOne provided no specific evidence of the types of business and marketing opportunities that it considers confidential information and that was misused by the defendants.
[65] Based on this record, I conclude that PointOne has failed to establish a strong prima facie case, or a prima facie case, that evidence about its customers’ preferences, rates customers are willing to pay, or its business and marketing opportunities is confidential, or was misused by the defendants.
Conclusion on the First Branch of the Test: Strong Prima Facie Case
[66] Based on the analysis I have undertaken, the plaintiff has failed to establish a strong prima facie case. It follows that I dismiss the plaintiff’s motion for injunctive relief.
[67] However, as I have already noted, if I am wrong that the standard to apply in the first branch of the RJR Macdonald test in this case is a strong prima facie case, but a prima facie case would suffice, I would find that PointOne has established a prima facie case based on misuse of confidential information with respect to the use of its customer list by the defendants. Because I would so find, I will turn to consider the second and third branches of the test for injunctive relief.
Irreparable Harm
[68] PointOne argues that it has established irreparable harm, because the printing industry is highly competitive, making it difficult, if not impossible, to quantify the loss it has suffered, including the loss of its goodwill, as a result of defendants’ misuse of PointOne’s confidential information. It also argues that given the percentage of PointOne’s overall revenue historically generated by Mr. Roszkowski, a significant loss of PointOne’s customer base or revenue to Mr. Roszkowski could cause a liquidity crisis, and could lead PointOne into insolvency.
[69] The defendants argue that irreparable harm must be clear, and not speculative. Where the nature of the damages can be calculated in money, even if difficult, the court should decline to grant an injunction: Les equipements de ferme Curran Ltee/Curran Farm Equipment Ltd. v. John Deere Limited, 2011 ONSC 3791, at para. 16.
[70] The defendants note PointOne’s evidence that it could undertake a comparative year-over-year analysis to quantify the difference between the business it has done with Mr. Roszkowski’s two biggest accounts during and after his employment.
[71] While, in my view, it is likely that PointOne’s damages can be calculated, and evidence about the prospect of its loss of goodwill or possible liquidity crisis is speculative, this branch of the test is made out in view of the presumption of irreparable harm flowing from the misuse of PointOne’s confidential information: 2158124 Ontario Inc. v. Pitton, 2017 ONSC 411, at para. 57.
Balance of Convenience
[72] PointOne states that the balance of convenience favours it, arguing that it has spent resources and money towards developing its customer base and protecting its confidential information. It states that the defendants are free-riding off its hard-earned efforts, and obtained an unfair leap into the marketplace.
[73] PointOne also argues that, in contrast, the defendants have not disclosed sufficient evidence to prove that, if the injunction is granted, they would be incapable of earning a livelihood. It points to various refusals made by the defendants to disclose past financial information for Pumpkinseed, and failure to disclose rental income that the personal defendants receive from rental properties they own. It argues that the court should draw an adverse inference from the defendants’ failure to disclose more evidence about their financial situation.
[74] The defendants argue that the balance of convenience lies in their favour, because they will suffer the greatest harm from granting or refusing to grant the interlocutory injunction. They argue that the loss of a job is a significant factor in the balance of convenience: Camino, at para. 63.
[75] The evidence indicates that PointOne has re-established relationships with the biggest of Mr. Roszkowski’s accounts. It also indicates that PointOne has thousands of competitors, of which Pumpkinseed is only one. Moreover, as I have noted, PointOne has a 70,000 square foot facility from which it can offer end-to-end printing services, while Pumpkinseed acts as a broker, facilitating printing deals, unable to offer any printing services directly.
[76] In these circumstances, I conclude that the balance of convenience favours the defendants.
[77] Thus, even if I am wrong that PointOne needs to establish a strong prima facie case for injunctive relief, I would still deny injunctive relief on the basis that the balance of convenience favours the defendants.
Protective Order and Sealing Order
[78] The plaintiff seeks an order sealing the confidential affidavit of Mr. Low, filed on this motion. It also seeks an order that the parties be subject to a protective order on terms set out in Schedule A to its draft order, filed on the motion. Both these orders are sought without the objection of the defendants, which position is without prejudice to their position on the confidentiality of the information at issue.
[79] The plaintiff argues that the court has the inherent jurisdiction, as well as jurisdiction under s. 137(2) of the Courts of Justice Act and r. 30.11 to grant a protective order restricting production of documents where unlimited production would prejudice a party: BASF Canada Inc. v. Max Auto Supply (1986) Inc., 1999 CarswellOnt 505, (1999) 30 C.P.C. (4th) 23, at para. 15;
[80] The making of a protective order in these circumstances is designed to “strike a balance between the disclosure necessary for the conduct of an action and a party’s bona fide right to protection of confidential and sensitive information”, including where disclosure would allow a competitor to improve its competitive position: BASF, at para. 16, Sweda Farms Ltd. v. Ontario Egg Farmers, 2011 ONSC 1570, 200 A.C.W.S. (3d) 853, at para. 40.
[81] As Kiteley J. stated in Towers, Perrin, Forster & Crosby Inc. v. Cantin, (2000), 2000 CanLII 22695 (ON SC), 50 O.R. (3d) 476 (Ont. S.C.J.), at para. 7:
In determining whether to grant a sealing order a court must engage in a balancing process, where the principle of public access to court proceedings and documents is of fundamental importance ….Courts have identified a number of circumstances in which sealing orders may be appropriate. Those most relevant to this case are where disclosure of the information would cause serious harm or prejudice to the person or party involved, and where the publicity would destroy the very subject-matter of the litigation itself…
[82] In this case, it is a live issue whether the information PointOne asserts to be its confidential information is truly confidential information in which the plaintiff has a proprietary interest. That is one of the questions this litigation will eventually have to answer.
[83] In my view, it is appropriate to seal the confidential affidavit of Mr. Low so as not to destroy the very subject-matter of the litigation itself. It would be non-sensical if, in attempting to protect its alleged confidential information from claimed misuse by a defendant, a plaintiff would have to open it up to the rest of the world.
[84] In my view, the protective order sought, which provides a protocol under which the parties may disclose information for the purposes of the litigation that they also seek to protect on the basis that it is confidential, is appropriate for the same reason.
[85] The limitations the parties seek on the openness of the court file are tailored and appropriate in the circumstances.
Costs
[86] The parties agree that costs of this motion of $25,000, all inclusive, on a partial indemnity scale, are fair and reasonable. However, there are offers which may impact costs. At my suggestion, counsel agreed to provide me with copies of the offers, which I did not review until after I had written my reasons on the merits. Counsel agreed that I would determine whether the costs awarded should be adjusted from $25,000, all inclusive, in view of the offers.
[87] Under s. 131 of the Courts of Justice Act, subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are within the discretion of the court.
[88] Rule 57.01 of the Rules of Civil Procedure sets out the factors for the court to consider in exercising its discretion to award costs. Given the parties’ agreement, the most relevant factor for me to consider are the offers exchanged by the parties under r. 49.
[89] On January 11, 2021, the defendants offered to dismiss the motion with costs payable to them on a partial indemnity basis, with a consent sealing and protective order. The plaintiff also made an offer under which the temporary injunction, granted by Leiper J. on July 6, 2020, would not be extended on a without prejudice basis, the sealing and protective order would proceed on consent, and costs would be payable in the cause.
[90] Had the plaintiff accepted the defendants’ offer at the time it was made, its exposure to costs would have been to partial indemnity costs up to that time. The defendants have thus met or exceeded their offer, and are presumptively entitled to costs on a substantial indemnity scale from that time forward. There is no reason in this case to deviate from that presumption in this case.
[91] Costs must be fair and reasonable, and within the reasonable expectations of the unsuccessful party: Boucher v. Public Accountants Council (Ontario), 2004 CanLII 14579 (ON CA), [2004] O.J. no. 2634 (C.A.). Having reviewed the parties’ bills of costs, I conclude that the plaintiff shall pay $29,000, all inclusive, in costs to the defendants within thirty days. This amount is fair and reasonable having regard to the principle of indemnity, the importance of the issues, the time spent and hourly rates of counsel, each party’s bill of costs, and the parties’ agreement as to what constitutes fair and reasonable costs on a partial indemnity scale.
Summary of Order
[92] The plaintiff’s motion for interim injunctive relief is dismissed.
[93] The confidential affidavit of Dennis Low, sworn June 30, 2020, shall be sealed. For purposes of doing so, having regard to the electronic filing of documents as a result of the COVID-19 pandemic, the plaintiff shall file a new copy of Mr. Low’s affidavit under cover of this endorsement and provide it to the filing office with a request to destroy the copy of Mr. Low’s affidavit contained in the electronic court file that is not under cover of this endorsement. The plaintiff shall also remove the confidential affidavit of Mr. Low from Caselines, and upload a new copy under cover of this endorsement.
[94] The plaintiff has also filed two volumes of a confidential compendium, which were sealed by earlier order of the court. Nothing in this endorsement impacts the order sealing the confidential compendium. However, the plaintiff shall take the same steps described above with respect to sealing Mr. Low’s affidavit with respect to the confidential compendia; that is, refiling them under copy of the order or endorsement ordering their sealing with a request to court staff to delete the original copies filed, and removing the confidential compendia from Caselines, and uploading new copies under cover of the relevant endorsement or order.
[95] The parties shall be subject to a protective order on the terms set out in Schedule A to the draft order filed by the plaintiff on the motion.
[96] The plaintiff shall pay costs of $29,000 all inclusive, to the defendants within thirty days.
J.T. Akbarali J.
Date: January 26, 2021
[^1]: I note that, in relying on this restrictive covenant, PointOne indicated that it relies only on the non-solicitation portion of the clause. It acknowledges that the prohibition against competition, without any geographic boundary, is overly broad and unenforceable. It argues that I should sever that portion of the covenant, and allow the non-solicitation portion of the clause to survive. As will become clear, my analysis does not reach the stage where this argument would have to be considered.