National legal recruitment company ZSA has filed a lawsuit claiming its former vice president breached an employment contract after leaving to work for a competitor.
The company’s statement of claim includes allegations that Carolyn Berger - who now works for legal recruitment firm Marsden International Ltd. - violated contractual and fiduciary duties by, among other things, “soliciting ZSA’s clients” in Toronto, purging her work e-mail before leaving, and taking confidential phone account information. Marsden is also named as a defendant.
ZSA is seeking $750,000 from each of Berger and Marsden International.
Berger and Marsden International deny the allegations, and have filed a statement of defence and counterclaim.
Berger alleges that ZSA has not paid her for work she did before leaving, and owes her funds through its yearly shareholder distribution.
None of the allegations from either side have been proven in court.
“It’s impossible to know how the courts will find in any matter, but I’m prepared to test it,” ZSA president Christopher Sweeney tells Law Times. “I feel very strongly that a contract is a contract.”
Berger and Marsden’s lawyer, Ricketts Harris LLP partner Gary Luftspring, says Berger will not comment on the lawsuit.
“It’s an ordinary lawsuit of the type that if you look at the law these days the plaintiff’s going to have a great deal of difficulty,” says Luftspring.
ZSA’s claim seeks an injunction that, among other things, prevents Berger from doing business with ZSA clients; calls for “an accounting from the defendants of all revenue earned by any of them resulting from a breach of Berger’s non-competition, non-solicitation, and non-disclosure agreements, and/or a breach of her fiduciary duties to the plaintiff”; $750,000 in damages from Berger; $750,000 in damages from Marsden; and $150,000 for “aggravated damages and/or punitive damages.”
Berger worked for ZSA as vice president and director of support services and law firm management from 2001 to 2009, according to the claim. She resigned in May.
It says that Berger “was the face” of the company’s operations in recruitment of non-lawyer staff. It alleges that she “was one of the few employees granted shares in ZSA,” and in her last year with the company earned over $550,000 in bonuses and commissions.
ZSA accuses Berger of breaching “contractual and fiduciary duties” in various ways. The claim includes a list of allegations, such as the following:
• That Berger accepted a job with Marsden “in which she agreed to compete directly with ZSA” before resigning;
• she “purged from ZSA’s system approximately six months of her e-mail correspondence with ZSA’s clients and candidates”;
• she “misappropriated from ZSA’s IT department ZSA’s confidential account number for its Bell Mobility account,” and “used the misappropriated account number to cause Bell Mobility and/or Rogers Wireless to transfer the cellular telephone number belonging to ZSA into her own name”; and
• that “Marsden is liable for inducing breach of contract and knowing assistance with breach of fiduciary duties.”
It states that ZSA needs a “full accounting” of Marsden’s work in the area of legal recruitment in Canada.
Berger and Marsden have issued a statement of defence and counterclaim, in which they deny ZSA’s allegations.
“It is the position of the defendants that the non-competition and non-solicitation provisions are void and unenforceable as being contrary to public policy and that Carolyn has not used or disclosed any confidential information,” reads the statement.
It says that Berger is responsible for recruitment of practising lawyers at Marsden, “something she was not allowed to do at ZSA.” It goes on to suggest that she has not, and will not, disclose any confidential information of ZSA.
It later suggests, “It would be perverse to try to say there was a legitimate proprietary interest in preventing an employee from doing something for a competitor which they did not do at ZSA.”
The statement also says ZSA’s suggestion that Berger was a “key management employee” is “absurd.”
“She was not a fiduciary and owed no fiduciary duties to ZSA,” reads the statement.
Berger also suggests in the statement that she felt compelled to resign, as her request to be permitted to recruit practising lawyers was rejected, and it was “the only market that was at all active given the economic downturn.”
The statement adds that, “In addition, her decision was facilitated because the environment at ZSA had become intolerably toxic because of the escapades, increasingly public travails, and aggressive behaviour of Sweeney over the last two years.”
Berger denies the allegation regarding the deletion of e-mails, and says she used the cell phone number before arriving at ZSA, and accuses ZSA of wrongly taking hold of the number.
“This allegation, just like the allegations regarding the cell phone number, is but a further desperate attempt by ZSA to try to embarrass Carolyn,” reads the statement.
Berger and Marsden argue that ZSA’s claim for punitive damages “is unfounded in fact and as a matter of law and has been made for the sole purpose of trying to intimidate the defendants.”
Berger claims that ZSA owes her about $30,000 for placements “made and closed” while she was at the company. She also claims she is owed $80,000 in yearly distributions as a shareholder.