Every business, including small ones, can end up at trial
Everyone knows that lawsuits are expensive. I’ve written about the costs of lawsuits here. When I meet clients, we often discuss in general terms the costs related to lawsuits and the importance of planning properly to avoid them. Or, on the other end of the spectrum, when clients consult me with a legal problem, I often encourage settlement to avoid the costs and stress of lawsuits.
However, every now and then, a case goes to trial. These cases don’t alway involve big multi-nationals or large corporations. Sometimes, they involve small businesses. In this week’s article, I decided to pick a reported case that features small businesses.
Carson International Inc. v. Biggar et al.
In 2010, Justice Martin of the Manitoba court of Queen’s Bench published his decision following a trial between Can Am RV and Mr. Biggar a long time employee turned competitor.
Michael Carson owned Can Am RV which operated as an RV rental dealer and eventually a dealership selling RV equipment. Justice Martin provides much more background in the decision. Mr. Carson employed Mr. Biggar initially as a service technician and then in sales. Mr. Biggar started working for Can Am RV in 1984 and moved into sales in 1986. He worked for Can Am for 22 years.
Over the years, as the dealership expended, Mr. Biggar’s role did not. Eventually, he reported to a manager rather than Mr. Carson. In the period leading up to 2005, Mr. Biggar’s sales diminished. Eventually, feeling like he was being “pushed out” he resigned. Mr. Carson and the manager readily accepted his resignation.
Mr. Biggar went on to start a competing business. Mr. Biggar had maintained a good relationship with customers while at Can Am and some decided to follow him. He also managed to acquire the rights to exclusively sell a line formerly sold by Can Am.
Eventually Mr. Carson decided to sue Mr.Biggar stating that Mr. Biggar was a key employee and owed Can Am a fiduciary duty (Meaning that Mr. Biggar had key company information that was so sensitive, that he would prejudice Can Am by competing). In addition to breaching he fiduciary duty, Mr Carson claimed that he stole documents, solicited customers and suppliers, and used confidential information in doing so. He went on to claim that Can Am’s revenues were negatively impacted. Can Am requested that the court award all the profits made by Mr. Biggar to Can Am. In all Can Am claimed $1.1 million.
Not surprisingly, Mr. Biggar rejected those claims. Before I continue with the case, I want to point out that Mr. Carson likely did not come up with all of this on his own. His lawyers, would have reviewed the facts and applied them to legal principles. The lawyers would have arrived at the claimed damages as well. While this may seem outrageous to some, lawyers must cover all the bases. A judge will not award anything if not asked for to begin with. This is why we cast the net as wide as we can. Lawyers would rather have a judge quickly dismiss a point, rather than risk “leaving money on the table”.
I can’t determine how long the trial lasted from the decision, but Justice Martin observed that a “number of witnesses” testified at trial. From this I can estimate that the trial lasted at least 3 days and may have lasted up to a week or more. Trial days begin at 10 am. They break for lunch for 2 hours from noon to 2 pm and resume until 4 to 4:30 pm. Which allows for 4 to 4.5 hours of sitting time. During that time, lawyers and judges must deal with the administrative details of that particular case, direct and cross-examine witnesses, and conclude with legal arguments on how the law should apply to the facts uncovered during testimony.
I won’t go into the legal details of the decision, because I want to focus on the experience of going to trial. In this case, Mr. Carson and Mr. Biggar provided key testimony. The manager also provided important testimony, although, Justice Martin relied more heavily on Mr. Carson and Biggar. Justice Martin observed the following:
“Ultimately to the extent there is a dispute regarding most material facts, it boils down to consideration of the evidence of Mr. Carson and Mr. Biggar, both of whom at times were testy during cross-examination and resisted agreeing to statements that each may have thought harmful to his position. Further, while Mr. Carson displayed animus toward Mr. Biggar, Mr. Biggar oddly enough, despite the litigation, did not appear to be holding any ill will but rather indirectly demonstrated respect for Mr. Carson. Neither Mr. Carson’s nor Mr. Biggar’s actions or testimony are beyond reproach.”
The judge also added the following shortly after:
“Conversely, overall, I found Mr. Carson’s testimony to lack reliability and, in some respects, credibility… Ultimately, I am not impressed with Mr. Carson as a witness.”
From this I can infer that both Mr. Carson and Mr. Biggar testified for some time. I would expect that each witness took the better part of a full day, if not more. They both provided considerable background information such as when Can Am started the business and how Mr. Biggar stared working for them.
The judge also referenced the “testiness” of the witnesses under cross-examination. The process of cross-examination can be gruelling. Lawyers are well prepared. They comb over all documents to find discrepancies that they will put to a witness. If witnesses are not able to explain those discrepancies, lawyers will dig in even further. The judge makes several references to Mr. Carson’s testimony. Justice Martin referenced the following examples:
“For example, Mr. Carson says Mr. Biggar was a fiduciary or key employee yet did nothing to attempt to retain him. He says Can Am lost the Georgie Boy class A recreational motor vehicle line when in fact it was offered back to him and he declined it. He says Mr. Biggar covertly solicited Can Am’s customers but says he would have done the same thing.”
While Mr. Carson’s business may have been fairly profitable earlier on, the evidence paints a different picture in the early 2000’s. Mr. Biggar had only started his new business. A week long trial would have cost each party anywhere from $20,000.00 to $50,000.00. Because Mr. Carson lost his case, he would be responsible for some (quite small actually) costs to offset Mr. Biggar’s legal bills. Include the lost productivity by spending a week in court rather than selling RVs. Finally, from the judge’s comments, we can tell the trial exacted an emotional toll on the participants.
This case was not particularly egregious. Family law trials can be considerably worse. So next time you plan on doing something that will affect your legal rights, make sure you spend the time needed to get promises in writing, and that your lawyer, at the very least reviews them.
Philippe Richer is President of TLR Law Group. TLR has been located in the St. Boniface neighbourhood, in Winnipeg, since 1996. The office serves the middle class and small business within the province. With a focus on estates, wills, real estate, and corporate law, he leads his team in providing accessible legal services. Philippe also authored the business law course for the Knowledge Bureau and instructed the français juridique class at the faculty of Law at the University of Manitoba.