Law Times

Law timeS • September 17, 2012 context of the violation of a non-solicitation covenant contained in the employment contract of an investment adviser. Th e court discussed the eff ects of violating a non-solic- itation and non-competition covenant and off ered helpful observations with regards to the irreparable harm and balance of conve- nience components of the test. In this case, adviser Randy Voldeng I resigned from Edwards Jones to join RBC Dominion Securities Inc. Voldeng' ployment contract prohibited him from soliciting sales to or from any of Edward Jones' customers for six months aſt er his departure. Prior to his resignation, Voldeng e-mailed a number of his clients informing of his departure and advising that he would call them "personally in the next few days to answer any questions and address any concerns you may have. s em- month aſt er he leſt , accounts valued at ap- proximately $20.2 million had transferred to RBC. Edwards Jones then obtained an interlocutory injunction that prohibited Voldeng from initiating any contact with any former client for six months. On ap- peal, the court held the prohibition was too broad and overruled it. " One Court offers helpful guidance on non-solicitation covenants COMMENT n its recent decision in Edward Jones v. Voldeng, of Appeal considered the test for grant- ing an interlocutory injunction in the the British Columbia Court pealed on a number of grounds, chief among them that the chambers judge erred in fi nding that the injury to Edwards Jones constituted irreparable harm. Relying on its decision in Voldeng successfully ap- Labour Pains Onkea Interactive Ltd. v. Smith, the court observed that irrepa- rable harm comes in two types: harm that cannot be quantifi ed in monetary terms, such as per- manent market loss or damage to reputation, and harm that cannot be compensated, such as the inability to collect damages. Th e chambers judge accepted that the a non-solicitation covenant in the employment contract of an investment adviser gener- ally are calculable because the industry is regulated heavily, the court stated. "Th e value of the portfolio of a departing cli- ent is known, as is the return to the brokerage fi rm of manag- ing that portfolio. " Chsherbinin Nikolay case fell within the fi rst category and con- cluded that B.C. law diff ers from Ontario in that in the western province, "damages may not be an adequate remedy for a breach of a non-solicitation covenant on the basis that it would be extremely diffi cult for the plain- tiff s to separate damages for loss of business caused by the breach from those resulting from normal, fair competition." On appeal, Voldeng successfully con- non-competition covenant, the court ob- served that it usually would not be possible to tell whether business is lost to the new employer as a result of legitimate or illegiti- mate competition. Th erefore, such damages generally constitute irreparable harm. Turning to the balance of convenience In contrasting the eff ect of violating a tended that the harm fl owing from the violation of non-solicitation covenants diff ers from breaches of non-competi- tion covenants. Th e appeal court agreed. "Th e damages that fl ow from a breach of question, the court favoured Voldeng when it noted that "in the context of a non- solicitation covenant, the interests of an individual investment adviser and his or her clients oſt en tips the balance of conve- nience in favour of the investment adviser. In fact, interlocutory injunction may cause ir- reparable harm to Voldeng because, "if the court suggested that an " termined that Edwards Jones was able to calculate its loss, the court concluded that the solicitation did not constitute irreparable harm. " Having de- his conduct were found to be proper, it would not be possible to determine which of his clients would have shiſt ed to RBC if he had been able to inform them of his new contact particulars." Having accepted that the interests of third parties should be taken into consideration when assess- ing the balance of convenience, the court stated: "Arguably, any contact with former clients is solicitation, but this court has made it clear that in certain relationships, some such conduct is not only proper, but is desirable. the proposition that nobody owns clients. I must sound a note of caution about " Th is conclusion fi ts well with Voldeng, however. It should not be taken as establishing a special "investment ad- viser" category of relationship to which the general principles governing the grant of an interlocutory injunction would not apply. While the interests of the clients of investment advisers are a legitimate factor to take into account, it is but one question in the overall context of the injunction analysis. It should not be considered as unique to that relationship because there are many other situations in which similar interests may be relevant. LT Nikolay Chsherbinin is an employment lawyer in Toronto. He can be reached at 416- 907-2587, nc@nclaw.ca or nclaw.ca. BY WILLIAM TRUDELL For Law Times tions — such as our courts — open new sessions with renewed energy and mandates for change. Perhaps this should also apply to the Law Society of T Upper Canada in its responsibility as our regulator as we move into another fall and a return to work. Th ere' law society with the chief executive offi cer now fi rmly in place, a new treasurer, and revamped committees with new benchers taking on fresh responsibilities. More- over, there' s a remarkable opportunity for change at the law society as it grows bigger, more expensive to run, and, in many ways, becomes a stranger to its members. Th e expenditures on professional regulation are stag- s an acute need for new approaches at our gering. In 2006, the fi gure was $13.3 million. In 2011, it increased to $21.2 million. Th e 2011 annual report notes expenses increased by $1.2 million from 2010-11. Th e 2011 budget envisaged these expenses increasing A lawyer's call for a fairer, more transparent law society u SPEAKER'S CORNER Not only individuals, but governments and institu- he end of summer for many in our pro- fession marks a new beginning with fresh ideas, new approaches, and oſt en a resolve to do things diff erently. thereby able to avoid a lengthy discipline process, the cost savings in investigations, prosecution, and bench- ers' time would be signifi cant. Indeed, one mortgage fraud prosecution averted by early intervention and assistance could likely pay for this project for a year. I envision this offi cer performing another function: representing the members' interests at the proceedings authorization committee. While the law society promotes and insists on the transparency of its processes for the public, internal transparency is oſt en missing. In fact, there' tative before the proceedings authorization committee for any licensee. Th e committee represents the fi rst time benchers are involved in the discipline process and are able to review the fi ndings and recommendations from the professional regulation department aſt er an investiga- tion is complete. Oſt entimes, the committee authorizes a more serious allegation than the investigation supports. If the licensee has representation, counsel may try s no represen- for the year in response to the increasing number and complexity of complaints and the requirement for addi- tional resources in the investigations and complaints resolution areas. Th is is a fantastic sum of money that we can no longer aff ord. Th ese fi gures could decrease signifi cantly through new approaches to discipline. Th ere are many potential changes that would help. I have a number of suggestions. First, we need a member' sort of mentor in residence. I suggest a pilot project set- ting aside approximately $250,000 to set up this offi ce. Create the position of mentor in residence and then s representative or some hire a retired judge, a retired senior member of the bar or a former bencher. Provide infrastructure support and allow the person to be a catalyst as a mentor clothed with confi dentiality when necessary. If the profession knew there was such an offi ce, I suggest that some people in trouble might reach out and receive guidance before their world collapses with the consequent risk to clients. Licensees could turn to experts, mentors or counsel in the profession who could assist and intervene when necessary. If one troubled licensee accessed this service and was to make written submissions to the committee through the process. Currently, there' tee will receive them and not edit them. Th e committee is akin to a grand jury. But the licensee s no assurance the commit- never gets to see what the law society sends to the com- mittee or its representations to it. Th e reputational and fi nancial consequences of a committee authorization are enormous, yet the licensee has no participatory rights in the process and there' society to account if the committee is misinformed. If the law society doesn't put in place greater procedural rights leading up to the committee authorization, the courts will soon demand them and, I suspect, the public perception of the LSUC's ability to govern itself will suff er. Second, the law society should provide duty coun- s no mechanism to hold the law sel. Th e number of unrepresented licensees who appear before hearing panels is embarrassing. Many people can't aff ord it. Others are too ashamed to ask for help. Th e law society relies on volunteer duty counsel, both for proceedings management conferences and hearings. Why can we not take a portion of the profes- sional regulation expenditures and hire duty counsel? I believe the cost savings would be enormous. It' obvious that many lawyers need help. Permanent duty counsel could provide it. s www.lawtimesnews.com PAGE 7 Th ird, the law society needs to be frank and clear with its members under investigation. It's time that in discipline proceedings. Th e LSUC should also rec- ommend consulting counsel in the letter itself and not bury the suggestion in an enclosed pamphlet. Many people have asked for this simple clarifi cation for several years. Th e law society still resists it. If licens- ees under investigation know what' likely seek help and the savings would be demonstrative. Fourth, we need to examine summary proceedings. Th e law society oſt en institutes summary hearings for failing to respond to an investigator's requests. Th is s at stake, they'll fast-track provision can result in a professional mis- conduct record and oſt en a suspension. Th at' penalty that may result from a substantive prosecution. Th is is unfair. Th ere are many reasons other than wilful refusal to engage for a licensee's failure to co-operate. If the letter encourages people to seek counsel, many s the same the letter sent out by the investigations department announcing that a licensee is under investigation clearly indicate that the investigation could result of them will do so. Many people suff er from collapsed health, depression, denial, emotional problems, and fear. Some people from diff erent cultural backgrounds don't understand the consequences. Th eir law society should encourage them to seek help and thereby give them a chance before prosecuting them for a failure to respond and imposing a record with no pardon. Th e last point raises the question about the need for a review process for a pardon or a record suspension. Why should licensees not have an opportunity to purge their discipline record aſt er a period of time? Surely, our profession should encourage and recognize rehabilita- tion and off er some review of the fi nding of professional misconduct or conduct unbecoming. Th e justice system makes remarkable eff orts at front- end management, focused prosecutions, and mediation to control spiralling costs. Th e law society investigative pro- cess doesn't refl ect that trend. Th ere seems to be a culture of rigidity that results in expensive and unnecessary pros- ecutions with careers destroyed by agonizing delays and public dissemination of allegations long before a fi nding. Moreover, the fi nancial waste is unnecessary. We can do so much better. A new season is upon us. So why not try some new approaches? LT William Trudell is a Toronto lawyer and chairman of the Canadian Council of Criminal Defence Lawyers.

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