Balancing Competing Interests in Injunction Cases

In the decision of the Ontario Superior Court of Justice (Commercial List) in Corona Packaging Inc. v. Singh et al., released on May 7, 2012, the Court was faced with the balancing of competing interests between companies battling an injunction motion.  The unusual difficulty in this case was the very real possibility that the party losing the injunction motion might well go right out of business.

In almost every case, the Court must make this extremely important decision (and one that has a good chance of ending the litigation one way or another) on something less than the complete factual record.

An injunction can be an extremely effective way of bringing a dispute to a rapid conclusion.  While interlocutory injunctions are typically sought at a very early stage in litigation, a significant number of disputes conclude by settlement or otherwise shortly after an injunction motion has been either won or lost.  Because such motions are typically argued without the full benefit of the exchange of all of the documents and evidence in the possession of each party, and the taking of evidence from witnesses as our trial procedures are designed to do, injunction motions are sometimes decided based on a cursory review of evidence and a great deal of gut feeling on the part of the motions court judge.  This can result in both significant risk and uncertainly where the stakes are high.

In this case, the Defendants were former employees of the Plaintiff, Corona Packaging Inc. Corona’s major customer was a New Jersey-based company, Guest Supply Inc., which provided 44% of Corona’s business.

The individual Defendants left their employment with Corona after five or six years.  Their employment contracts with Corona had included terms requiring them to maintain confidentiality of proprietary corporate information and an obligation not to compete with Corona after leaving its employ. 

Following their resignation from their employment with Corona, it appears that a newly-formed company named Aura Packaging Inc. managed to acquire the business of Guest.  Evidence was led as to the individual Defendants having removed confidential information from the electronic records of Corona, and also demonstrating that Aura appeared to be in possession of that information. 

Corona sought an injunction to prevent Aura from completing its contract with Guest or in any other way competing with Corona through the use of allegedly stolen information. 

The Court was satisfied that there had been wrongdoing.  However, the test for an injunction also requires a review and a balancing of the competing interests of the parties.  Simply put, the Court must ask itself which party is likely to suffer more if the injunction is (or is not) granted. 

This is a particularly important consideration because in almost every case, the Court must make this extremely important decision (and one that has a good chance of ending the litigation one way or another) on something less than the complete factual record.  It must be kept in mind that these decisions are intended, by and large, to freeze the situation and maintain the status quo until the dispute can be heard by a trial judge many months or perhaps years later. 

In this case, Corona demonstrated that Guest was a significant customer and that it would be badly damaged if the injunction was not granted.  Aura, on the other hand, was already partway through the fulfillment of its contract with Guest when the motion was heard.  Its position was that if it were not permitted to complete that contract and be free to enter into new contracts with Guest, it would go out of business. 

This difficult decision was resolved by the trial judge in favour of the granting of an injunction.  He was satisfied that Corona had invested significant time and resources in creating the confidential information that had been misappropriated, and furthermore, that Aura could not have been able to enter into a contract with Guest but for the utilization of that information.  The judge also observed that, in accordance with the usual requirements on injunction motions, Corona had undertaken to abide by any court Order concerning damages in the event that it turned out that the Order should not have been made.

For Aura, of course, an undertaking as to damages of this nature could well turn out to be a less than satisfactory methodology to address its position.  If one were to assume that on a full review of all of the evidence, the Defendants (including Aura) could demonstrate that there had been no impropriety so that the injunction ought not to have been granted, the owners of Aura would be left with the task of quantifying their damages and hoping to be able to collect them from Corona.  In this case, the motions court judge seems to have been satisfied that the outcome of the case was a foregone conclusion and that the Defendants basically had no hope of succeeding (although he did not explicitly say so).  In any other circumstances, however, one ought not to assume that a motions court judge will grant an injunction where its effect might well be to put out of business a company whose liability has not been established at a trial.

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