In that case, the court found the lawyers staging the takeover breached their duties of loyalty and good faith by: (a) contacting clients for their own purposes to induce them to leave the firm while they were still employed; (b) quitting without notice; (c) taking client files without the firm’s knowledge and permission; (d) using the client files after their departure for the purpose of contacting clients of the firm with a view to inducing them to switch to the new firm; and (e) depriving the firm of the opportunity to inform its clients of the defendants’ departure, of the options available to the clients and of the consequences of the various options.
The court ultimately ordered that, within five months, Chorney and the other employees involved had to pay Sokoloff Lawyers the disbursements on all transferred files, along with at least 25 per cent of the final fees upon settlement of the transferred files.
This case serves as a warning to both employers and employees with respect to transition of practices. These circumstances are not unique to the legal world and can apply to dental and accounting practices, or the transfer of, for example, investment advisers or insurance brokers. Or perhaps, even more broadly within the business world.
Accordingly, an employee who has significant contact with an employer’s clients is wise to provide their employer with reasonable notice of their departure before moving, attempting to move a book of business elsewhere or to start their own shop. Injunction motions can be costly for all parties involved and may result in a public airing of dirty laundry — which I am sure Sokoloff Lawyers and its former associates would have wished they had avoided.
But remember, existing employees of all stations have a duty of fidelity to their employers and cannot solicit clients while still employed or do anything else which damages their client’s interests. Failing to abide by those obligations can have calamitous consequences.
