Case Report – Privacy breach as a basis for enjoining customer solicitation?

15 May

On May 3rd, the Ontario Superior Court of Justice dismissed a motion for an injunction to restrain a departing investment advisor from soliciting his former clients. It is notable because plaintiff counsel claimed it would suffer irreparable harm to its reputation because the defendant’s use of its customer list would place it in breach of PIPEDA:

MD does not, however, rely solely upon the number of clients and the value of the assets administered by MD. MD submits the issue is much larger. MD has, in a written document given to each of its clients, committed to hold all personal information “in strict confidence” and has promised “in no event” to release the information “to any third party without” the client’s written permission or an order of a Court requiring its release.

MD’s position is Campbell’s actions place MD in a position where it may have breached that commitment. MD submits such a breach – or even the allegation of breach – damages MD’s reputation and creates an immeasurable risk MD’s clients will lose and potential clients will never have the confidence necessary to entrust management of their finances to MD. That argument found favour in MD Management Ltd. v. Dhut, [2004] B.C.J. No. 764 (S.C.) and a time limited injunction was granted restraining the former IA from communicating directly with anyone who was a client of MD during his tenure.

The Court did not give this argument much, if any, weight given there was no evidence that any of the plaintiff’s clients had filed a PIPEDA complaint. It dismissed the motion on a full application of the RJR MacDonald test.

Departing investment advisor cases are not rare, and given the rather unique relationship between investment advisor, investment firm and client, at least one court (the BCCA in 2007) has recognized a special public interest in allowing departing advisors to contact former clients so they can choose whether move their business. PIPEDA’s strict consent rule does not account for this interest. And though there may be some very good factual disputes about whether a group of clients have implicitly consented to allow a departing advisor to take and use their contact information, there is likely not much to stop an investment firm from strengthening its promises to keep contact information confidential as a means of guarding against an implicit consent argument and better handcuffing its departing advisors.

Timothy William Campbell v. BMO Nesbitt Burns Inc., 2010 ONSC 2315 (CanLII).

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One Response to “Case Report – Privacy breach as a basis for enjoining customer solicitation?”

Trackbacks/Pingbacks

  1. Non-party privacy tips the balance in favour of Anton Piller « All About Information - February 2, 2012

    […] This statement does not make clear why the Court felt the preservation of evidence afforded by an Anton Piller would be privacy-protective. In some circumstances retrieving evidence of misuse might help non-parties mitigate, but perhaps this is really about allowing a plaintiff (and custodian) some assurance that lost personal information has been brought under control (without copies being stashed away). For another case in which an employer attempted to use non-party privacy in enjoining competitive conduct by a departed employee see here. […]

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