Date: 20001220
Docket: T-486-98
OTTAWA, ONTARIO, THE 20TH DAY OF DECEMBER, 2000
PRESENT: THE HONOURABLE EDMOND P. BLANCHARD
BETWEEN:
JONATHAN BOUTIQUE POUR HOMMES INC.
Plaintiff
- and -
JAY-GUR INTERNATIONAL INC.
Defendant
REASONS FOR ORDER AND ORDER
[18] Pursuant to Rules 125, 358 to 368 of the Federal Court Rules, 1998 , R.S.C. 1998, SOR/98-106, the defendant is seeking an order to remove the law firm Spiegel Sohmer as solicitors of record for the plaintiff herein.
FACTS
[18] On or about December of 1996, the President of Jay-Gur International Inc., ("Jay-Gur") Jonathan Gurman met with counsel Robert Raich from the law firm of Spiegel Sohmer. During this meeting, Mr. Raich expressed his interest in representing the Gurman family with respect to certain tax planning regarding the company, Jonathan Gurman, Marvin Gurman, and with respect to certain issues relating to their parents' will.
[18] At that meeting, Mr. Jonathan Gurman expressed concern that another member of Mr. Raich's law firm had sent Jay-Gur a cease and desist letter and draft Statement of Claim regarding an alleged trade-mark infringement by Jay-Gur. The claim was made on behalf of the plaintiff, Jonathan Boutiques pour hommes Inc. Mr. Raich assured Mr. Gurman that he would take care of that matter and subsequently undertook that Spiegel Sohmer would not act against Jay-Gur with respect to that matter.
[18] In early 1997, in order to respect its undertaking, Spiegel Sohmer transferred the file relating to the dispute at bar to the firm Leger Robic Richard.
[18] On March 24, 1998, Leger Robic Richard instituted proceedings on this matter in the Federal Court.
[18] Later in 1998, Jonathan Boutiques pour Hommes Inc. became involved in another trade-mark related dispute in which the firm Leger Robic Richard had a conflict of interest.
[18] As a result of this conflict, Leger Robic Richard advised the plaintiff that it could no longer act as counsel in the dispute at bar. The plaintiff then asked M. Richard Levy, who had joined the firm Spiegel Sohmer in June 1997 to take-over the case.
[18] Early in 1999, counsel at Spiegel Sohmer, Robert Raich and Richard Levy decided, after discussing the matter that Levy could accept the mandate. They came to the conclusion that no conflict of interest arose and that they would not discuss any issues relating to the case.
[18] On June 18, 1999, a notice of change of solicitors was received by the Stikeman Elliott firm indicating that Speigel Sohmer had been appointed solicitors of record for the plaintiff, with Mr. Richard Levy acting as counsel with respect to the matter.1
[18] On June 18, 1999, Jay-Gur was advised of this change of solicitors and Jonathan Gurman claims that he may have been aware of the change of solicitors to Spiegel Sohmer.2
[18] On July 19, 2000, counsel for the defendant, Stikeman Elliott, was advised by Jonathan Gurman of Mr. Raich's and Spiegel Sohmer's earlier representation of Jay-Gur and of Mr. Raich's undertaking not to act against Jay-Gur with respect to the trade-mark infringement matter.3
[18] Mr. Raich acted as counsel for Jay-Gur from December 1996 till the summer of 1997. In the exercise of his mandate Mr. Raich had discussions with the defendant's executives and accountant and received confidential information on the defendant's expenses, sales figures, taxation structure and business strategies.
[18] During this mandate, Mr. Raich attended at least one meeting where the agenda listed sales figures, customer lists and business strategies including with respect to the product line featuring the defendant company's registered trademark "JONATHAN G" which is at issue in this litigation.
ISSUE
[18] The main issue is whether the law firm Spiegel Sohmer is in a conflict of interest with respect to its representation of the plaintiff against the defendant, which conflict would cause the firm to be removed as solicitors of record for the plaintiff?
POSITION OF THE PARTIES
Defendant's Position
[18] Essentially, the defendant's position is twofold. Firstly, they submit that since Spiegel Sohmer undertook not to act against Jay-Gur with respect to the dispute at bar, the onus must lie on plaintiff's counsel to establish that such a promise was temporary and its effect would end when the mandate to provide tax advice was completed.
[18] Secondly, notwithstanding the above undertaking, the defendant submits that based upon the Supreme Court decision Macdonald Estates v. Martin4, this Court must decide this matter applying the following test:
| (a) Did the lawyer receive confidential information attributable to a solicitor and client relationship relevant to the matter at hand. |
| (b) Is there a risk that it will be used to the prejudice of the client? |
[18] As for the first part of the test, defendant's position is that Robert Raich received confidential information attributable to a solicitor and client relationship relevant to the matter at hand.
[18] The defendant further contends that Mr. Raich accessed financial information relating to both the company and the Gurman family while giving advice on tax and estate planning, employment and other related financial matters.
[18] Morever, the defendant's motion record shows Mr. Raich was present at at least one meeting at which the Agenda included sales figures, customer lists and business strategies regarding the "JONATHAN G." mark, which mark is the main issue of the trade mark infringement allegations, in this matter.5
[18] The second part of the Macdonald Estates test is whether there is a risk that the confidential information will be used to the prejudice of the client? The position of the defendant is that no measures have been taken (Chinese walls, cones of silence) by the solicitors for the plaintiff, Spiegel Sohmer and as a result confidential information was imparted.
Plaintiff's Position
[18] Counsel for the plaintiff, applying the Macdonald Estates test, submitted that the solicitor-client relationship between defendant and Robert Raich of Spiegel Sohmer was not directly relevant to the trade-mark dispute between the parties at bar.
[18] Counsel for the defendant argued that Robert Raich did not receive any confidential information from the defendant and there is no risk that any dimly remembered information received would be used to the prejudice of the client.
[18] Moreover, counsel for the plaintiff submits that there are several reasons why the second part of the test is not met. Firstly, the information that Mr. Raich may have is only a small portion of the information that the plaintiff would otherwise be entitled to, in any event, from discovery procedures provided for by the Federal Court Rules, 19986.
[18] Secondly, the precautionary measures put in place by Spiegel Sohmer make it impossible that any information obtained by Mr. Raich will be used to the prejudice of defendant7.
[18] Finally, the plaintiff's counsel submitted that the delay of close to 18 months confirms that Mr. Raich's earlier mandate did not give him any information relevant to the matter at hand or information prejudicial to the interest of defendant, otherwise the defendant would have acted much earlier.
ANALYSIS
[18] The main issue is whether the law firm Spiegel Sohmer is in a conflict of interest with respect to its representation of the plaintiff against the defendant such that it ought to be removed as solicitors of record for the plaintiff? Both parties have relied on the test established by the Supreme Court of Canada in the Macdonald Estates decision.
[18] The test is twofold. Firstly, the Court must examine if the lawyer received confidential information attributable to a solicitor and client relationship relevant to the matter at hand. If so, we must go further and determine if there is a risk that it will be used to the prejudice of the client?
| (A) Did Robert Raich receive confidential information attributable to a solicitor and client relationship relevant to the matter at hand. |
[18] The burden lies with counsel for the plaintiff to show that during the prior solicitor client relationship no information was imparted which could be relevant to the matter at hand. As stated by Sopinka J. in the Macdonald Estates decision this could well be a difficult burden to discharge:
| In my opinion, once it is shown by the client that there existed a previous relationship which is sufficiently related to the retainer from which it is sought to remove the solicitor, the court should infer that confidential information was imparted unless the solicitor satisfies the court that no information was imparted which could be relevant. This will be a difficult burden to discharge. Not only must the court's degree of satisfaction be such that it would withstand the scrutiny of the reasonably informed member of the public that no such information passed, but the burden must be discharged without revealing the specifics of the privileged communication.8 |
[18] Having reviewed the written submissions of the plaintiff and the defendant and based on the arguments presented before me, I find that the relationship between Robert Raich and Jonathan Gurman is sufficiently related to the dispute between plaintiff and defendant for the Court to infer that confidential information was imparted.
[18] The next question that must be answered is whether the solicitor [Spiegel Sohmer] can satisfy the Court that no information was imparted which could be relevant.
[18] I find that the plaintiff did not satisfy this Court that the case at bar would withstand the scrutiny of the reasonably informed member of the public that no such information passed. Indeed, the facts demonstrate that during the course of providing legal services, Mr. Raich and other members of Spiegel Sohmer, namely Joel Goldman and Janice Naymark, became privy to confidential information. Mr. Raich attended a meeting on March 7, 2000 in which business strategies were discussed notably with regards to the brand which is alleged to infringe the plaintiff's trade-mark.
[18] For the above reasons, I find that Robert Raich and Spiegel Sohmer received confidential information attributable to a solicitor and client relationship relevant to the matter at hand.
| (B) Is there a risk that the confidential information will be used to the prejudice of the defendant? |
[18] Having accepted that relevant confidential information was obtained by counsel for the plaintiff, I now turn to the second part of the Macdonald Estates decision. Is there a risk that the confidential information will be used to the prejudice of the client? In assessing whether such a risk exist, a strong inference is drawn that lawyers who work together share confidences as stated by Sopinka J.:
| There is, however, a strong inference that lawyers who work together share confidences. In answering this question, the court should therefore draw the inference, unless satisfied on the basis of clear and convincing evidence, that all reasonable measures have been taken to ensure that no disclosure will occur by the "tainted" lawyer to the member or members of the firm who are engaged against the former client. Such reasonable measures would include institutional mechanisms such as Chinese Walls and cones of silence.9 |
[18] The steps taken by Spiegel Sohmer subsequent to the return of the file from Leger Robic Richard to Spiegel Sohmer must be considered. Counsel for the plaintiff claims that the Robert Raich / Jay Gur file was not accessible, since it was being stored at an outside location. However, this did not prevent access to the file by Mr. Raich or by any member of the Spiegel Sohmer firm. Indeed, counsel for the plaintiff admitted in the course of his arguments that no other measures were taken to prevent access of the file by himself or other members of the Spiegel Sohmer firm. In other words, no formal segregation of the file was implemented. Moreover, after having discussed the issue, the only steps taken by counsels Raich and Levy were "self-governing". No measures were taken by counsel Goldman and Naymark nor were any other institutional measures set up by Spiegel Sohmer.
[18] For the above reasons, I find that the measures taken by counsel for the plaintiff Spiegel Sohmer were insufficient. I am simply not satisfied that all reasonable measures were taken by the "tainted" lawyer, Mr. Raich or his firm, Spiegel Sohmer, to ensure that no disclosure would occur. As for the "self-governing" undertakings they are simply not sufficient to meet the burden established by Sopinka J. in the Macdonald Estates decision. Precedence must be given to protect the confidential information:
| In giving precedence to the preservation of the confidentiality of information imparted to a solicitor, the confidence of the public in the integrity of the profession and in the administration of justice will be maintained and strengthened.10 |
[18] As for the position of the plaintiff's counsel that whatever information Mr. Raich may have had would be accessible in any event through discovery proceedings, I find this argument to be untenable. The nature of subject matters discussed notably on the March 7, 2000 meeting may well be privileged information.
Delay in bringing this motion
[18] Counsel for the plaintiff, argued that this motion should be denied because the 18 month delay confirms the defendant's perception that Mr. Raich's mandate did not give him any information relevant to the matter at hand nor information prejudicial to the interest of defendant, otherwise the defendant would have acted on this conflict much earlier.
[18] In the Feherguard Products Ltd. decision, the Federal Court of Appeal addressed the issue and Stone J.A. stated that:
| The respondent submits that the appeal should be dismissed because of the delay which elapsed between the time Mr. Sinnott became employed by Bereskin & Parr and the making of the formal objection in May of 1992. I cannot see how the conflict of interest could be erased because of that delay alone. It may well be that delay or other factors are to be considered in determining the terms upon which a court will order the removal of a solicitor or solicitors from the record, but that is an entirely different matter.11 |
[18] I accept the defendant's arguments and find that the delay cannot cure the conflict of interest. The preservation of the confidentiality of information imparted to a solicitor must be given precedence. However, the delay is not irrelevant. I make mine the view of Stone J.A. in the aforementioned Feherguard decision:
| In the present case, I am of the view that the delay on the part of the respondent in asserting a conflict of interest should not go unnoticed and especially so in light of the substantial additional expenses which the respondent is likely to incur in retaining and instructing new solicitors to prepare for and to conduct the upcoming trial.12 |
[18] I find that the defendant knew of the alleged conflict on June 18, 1999, on the filing of the change of solicitors and should have acted at that time.
[18] I also accept that due to the delay in bringing this motion, the plaintiff will likely incur additional expense should it be required to retain and instruct new solicitors.
[18] For the above reasons, I find the law firm Spiegel Sohmer to be in a conflict of interest in this matter.
[18] The motion is granted.
ORDER
THIS COURT ORDERS that:
| 1. the law firm Spiegel Sohmer be removed as solicitor of record in this action on the grounds of a conflict of interest. |
| 2. the defendant, pay to the plaintiff, forthwith after taxation, its solicitor-client costs incurred from the date Mr. Levy filed his notice of change of solicitors, namely June 18, 1999, up to August 10, 2000 date at which time the present motion was filed; |
| 3. a period of thirty (30) days is allowed to permit the plaintiff to appoint new solicitors of record, and for said solicitors to review the file; |
| 4. the Order of Prothonotary Morneau dated May 16, 2000 establishing a revised timetable for the continued conduct of the within action is revised as follows: |
Matter
Completion of examinations for discovery:
Motions arising from discovery:
Settlement discussions pursuant to Rule 257:
Requisition for pre-trial conference:
Completion date
on or before February 15, 2001.
on or before March 30, 2001.
on or before April 30, 2001.
on or before May 30, 2001.
| 5. No costs are awarded to the defendant. |
Judge
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-486-98
STYLE OF CAUSE: JONATHAN BOUTIQUE POUR HOMMES INC. v. JAY-GUR INTERNATIONAL INC.
PLACE OF HEARING: OTTAWA, ONTARIO
DATE OF HEARING: DECEMBER 7, 2000
REASONS FOR ORDER AND ORDER OF JUSTICE BLANCHARD
DATED: DECEMBER 20, 2000
APPEARANCES:
MR. RICHARD LEVY AND FOR PLAINTIFF
MS. JANET DELL'ORTO
MR. NICHOLAS McHAFFIE FOR DEFENDANT
SOLICITORS OF RECORD:
SPIEGEL SOHMER FOR PLAINTIFF
MONTREAL, QUEBEC
STIKEMAN ELLIOTT FOR DEFENDANT
OTTAWA, ONTARIO
__________________1 Plaintiff's motion record; tab 2, page 3, para. 11.
2 Plaintiff's motion record; tab 2, page 4, para. 12.
3 Plaintiff's motion record; tab 2, page 5, para. 16 and 17.
4 [1990] 3 S.C.R. 1235.
5 Defendant's motion record , Tab 4, page 54 line 25 to p. 55 line 20, and Tab 4 - B.
6 Plaintiff's motion record, p. 11 at paragraph 30.
7 Plaintiff's motion record, p. 11 at paragraph 31.
8 Macdonald Estates v. Martin, supra, note 1 at p. 1260.
9 Id. at p. 1262.
10 Id. at p. 1263.
11 Feherguard Products Ltd. v. Rocky's of B.C. Leisure (C.A.) [1993] 3 C.F. 619 at p. 629.
12 Ibid.