Friday, September 5, 2014

Employer who ransacked employee's home tries and fails to adduce new evidence

There's a new chapter in the ongoing dispute of Irving Shipbuilding Inc. v. Schmidt.  Recall, back in March, I posted this entry about the plaintiff ("ISI") obtaining an Anton Pillar Order ("APO") permitting them to search a former employee's home, but failing to justify the need for it when it came back on for a full hearing.

ISI initially sought leave to appeal, but then decided to take a different tack - so to speak - by bringing a motion to introduce fresh evidence.

ISI contended that the original decision turned on a finding that ISI and Schmidt's new employer (Davie) operated in different sectors of the industry, and thus were not direct competitors.  However, Davie had published documents indicating an intention to move into the sector in which ISI operated, potentially leading to more significant future competition, and in fact in March of this year ISI lost a bid to a company which was subcontracting its work to Davie.

Therefore, ISI argued, the finding that ISI and Davie are not competitors should be revisited.  The Court disagreed.

There were a lot of problems with ISI's position on this motion.  Firstly, much of the 'fresh' evidence would have been available at the time of the original hearing - part of the test for leading fresh evidence is that it could not have been available at the time of the earlier hearing.  (For an excellent example of this, consider the Mehedi case about which I recently posted.)

Secondly, the judge had found that ISI had failed, in originally obtaining the ex parte APO, to provide "full and frank disclosure".  The new evidence had absolutely no bearing on this failure, which in and of itself was fatal.

Thirdly, the judge had dealt with the prospect of future competition in his decision:  These 'new facts' fell squarely into considerations he had already determined did not change the assessment of the facts.  (Incidentally, the reason ISI lost the bid in question was because of the unavailability of its docks at a time required for the contract.  While ISI contended that Schmidt's knowledge put it at a competitive disadvantage, the reality is that, but for the unavailability of its docks, its bid was the most competitive.)

On a more fundamental level, though, it boils down to a misunderstanding by ISI as to the purpose of an Anton Pillar Order:  It is not to prevent future misconduct; it is not to build a case; it is simply to prevent the destruction of evidence.  ISI still had all the records it alleged Schmidt had copied - there was no risk of destruction, which is of primary concern for an APO.  (Yes, but you might say that he would have destroyed the evidence of his possession of such documents.  That's beside the point:  The purpose of the APO is to make sure the smoking gun isn't destroyed, not to be able to catch the defendant red-handed holding the smoking gun.)
In cases such as these, there are two possible types of past misconduct that could justify the issuance of an APO. The actual removal of evidence, often in documentary form and the misuse of that evidence.  In this case, we are dealing in a world of electronic documents.  When Schmidt left his employment with ISI, he removed and retained a number of documents and preserved them on USB sticks or other portable storage devices. Because of its data loss prevention system, ISI had a complete record of everything Schmidt had in his possession.  None of its documents were destroyed.  ISI was in a position to prove exactly what documents Schmidt had allegedly misappropriated. 
(Of course, while arguably irrelevant to the issue of whether or not the APO was improper in the first place, ISI really isn't very sympathetic, when the audit of the materials seized from Schmidt resulted in a fairly clear conclusion that he did not in fact misappropriate documents as ISI alleged.)

A motion to introduce fresh evidence is fairly exceptional, and it simply doesn't seem that there was any basis for it here - it's not clear why ISI wouldn't have led additional evidence of Davie's competitive plans in the earlier hearing, but more importantly there were deep and totally fatal problems with the APO that simply weren't even close to being addressed by the new evidence.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation. If you need legal assistance, please contact him for information on available services and billing.

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