Volume II

Issue : 21: November 4, 2004

• U.S. and Antigua Break Off Settlement Talks in Internet Gambling Dispute
• New U.S. Federal Appeals Court Ruling on DMCA and Printer Cartridge Chips
• Report Concludes Cease and Desist Letters Under DMCA Abused
• Employers Collection of Biometric Information Not Contravention of PIPEDA
• Ontario Court Decision Shows Potential Problems with Enforcing Non-Solicitation Covenants
• UK Courts Address Jurisdiction in Internet Libel Cases
• Austrian Supreme Court Awards Costs in ICANN UDRP Case
• Ontario Enacts New Health Privacy Legislation
• North Carolina Man Sentenced to Nine Years for Sending Spam

Home > Volume II > Issue 21: November 4, 2004 > Ontario Court Decision Shows Potential Problems with Enforcing Non-Solicitation Covenants

Ontario Court Decision Shows Potential Problems with Enforcing Non-Solicitation Covenants

A recent decision of the Ontario Superior Court of Justice highlights some of the practical difficulties in enforcing non-solicitation covenants and employee confidentiality in highly competitive industries. The plaintiff in the case (an integrated marketing company) alleged that the defendant, Marie Whalen ("Whalen"), a former employee, had taken a list of the plaintiff's clients shortly before her employment ended. The plaintiff further alleged that Whalen provided the client list to the corporate defendant, a competitor of the plaintiff and Whalen's current employer, for the purpose of soliciting the plaintiff's clients. The plaintiff then brought a motion for an interlocutory injunction restraining both defendants from soliciting the plaintiff's clients on the grounds that Whalen had breached a non-solicitation covenant signed by her and/or on the basis that she had breached her common-law obligation not to use confidential information of the plaintiff. The non-solicitation covenant provided that Whalen would not solicit the plaintiff's clients for a period of one year after her employment.

Dawson J. denied the plaintiff's motion on both grounds. On the first ground, Dawson J. noted the evidence established that the clients of the plaintiff and the corporate defendant are not in any way exclusive, and that they often shopped the market, routinely obtained quotes from various competing businesses, and seldom signed long-term contracts. Dawson J. then concluded that in such circumstances the non-solicitation covenant was in effect a non-competition covenant since Whalen's ability to work in the industry was substantially curtailed. Moreover, Dawson J. held that enforcement of the clause would have the effect of preventing Whalen from engaging in the type of work she was involved with at the plaintiff for any other employer in competition with the plaintiff. In sum, the plaintiff had failed to demonstrate a strong prima facie case that the non-solicitation covenant was enforceable.

On the second ground, Dawson J. found the evidence established that the identity and contact information of clients of the plaintiff was not confidential information and thus there was no evidence that Whalen breached her common-law duty to the plaintiff.

For a copy of the decision, visit:
http://www.canlii.org/on/cas/onsc/2004/2004onsc12364.html