THE CANADIAN EMPLOYEE COMPETITION BLOG

GG & HH Inc v 2306084 Alberta Ltd, 2022 ABQB 58

The Alberta Court of Queen’s Bench declines to extend an injunction prohibiting departed pharmacists from contacting the applicant’s patients. While accepting as plausible the pharmacists’ explanation that they relied solely on memory, personal records and community networks to contact patients, the court cautions that use of confidential patient histories to solicit the patients may amount to a breach of confidence.

A recent Alberta decision concerning competing pharmacies offers a more nuanced take on whether soliciting former clients based on memory or personal records amounts to a breach of confidence.

In GG & HH Inc v. 2306084 Alberta Ltd, 2022 ABQB 58, the Court addressed strong circumstantial evidence of unlawful activity by three former employees of a Calgary pharmacy who attracted the patronage of their former patients after opening competing pharmacies.

The respondents in the litigation are two pharmacists, spouses of each other, and a pharmacy assistant who were each formerly employed by the applicant at its flagship Martindale pharmacy in Calgary. Two numbered companies that own the competing pharmacies are also respondents.

One of the competing pharmacies opened in Linden, Alberta, in 2018. A second opened in July 2021, directly across the street from the Martindale pharmacy. The record showed that two of the three individual respondents either are owners in the companies operating the pharmacies or work there.

After learning of the pending opening of the competing Martindale pharmacy, the applicant obtained an interim injunction in June 2021 restraining use by the defendants of patient information or from otherwise soliciting the business of persons known to be the applicant’s former or current patients. At the time, the Court left open the possibility of a review of the injunction’s terms, as the Respondents had not had a full opportunity to respond to the application.

The parties returned to Court, with the applicant seeking to extend the interim injunction pending trial.

The record showed strong circumstantial evidence of unlawful activity. Amongst other things, the Linden pharmacy, despite its distance from Calgary, had attracted 79 patients of the applicant’s Martindale pharmacy. Subsequently, several hundred patients from the applicant’s Martindale pharmacy became patients at the competing pharmacy across the street. Notably, these included 157 patients in the group that produced its top revenue.

There were no restrictive covenants in place. Nor did the individual respondents have fiduciary duties that would prevent them from soliciting clients. The applicants nonetheless sought an extension of the injunction preventing contact with the clients on the basis that the respondents were using confidential information to contact patients.

The applicant established that it held detailed information about its patients’ pharmaceutical needs and insurance coverage. It sought an inference that its patients would not have gone to the Linden pharmacy or the new Martindale pharmacy if not for the widespread use of that detailed patient information by its ex-employees.

The respondents denied using any confidential information and argued that the law does not prohibit employees from soliciting customers from memory or from notes in personal diaries.

In a helpful analysis of the law in this area, the Court disagreed with the respondents’ assertion that the authorities create such a “bright line.”

Information Carried Away “in an Employee’s Head” May Still be Confidential

First, the mere fact that information is carried away by an employee in their head does eliminate, in and of itself, the possibility of the information being confidential.

The Court relied on Monarch Messenger Services Ltd. v. Houlding, 1984 CanLII 1315 (ABQB). There, the defendant made improper use of confidential information by contacting two of the plaintiff’s customers, of whom he had a memory, where he was “familiar with the special needs of these two companies and had developed a personal relationship with the individuals within those companies who were responsible for employing messenger services. He was familiar with the rates charged by Monarch to these companies.” (at para. 16 of Monarch)

The Court observed that Monarch has received mixed treatment. The B.C. Court of Appeal, in Barton Insurance Brokers Ltd. v. Irwin et. al., 1999 BCCA 73, declined to follow Monarch, holding that employees are entitled to solicit customers from memory and from reference to the telephone directory.

However, a close reading of Monarch suggests the Court was concerned with more than simply the solicitation of customers from memory, as it found that the defendant had improperly made use of his knowledge of the rates Monarch charged the customers and other confidential business information about the customers, beyond simply contact information.

The Court in GG & HH left open the possibility that solicitation of former patients from memory could amount to breach of confidence, if used in conjunction with confidential patient information such as medication needs and insurance coverage. Health care information, it noted, “is highly personal and often considered sensitive by the patient…trust can be eroded where patients are brought into these types of commercial disputes involving departing professionals who are contacting strangers to inform them of another health care provider.” (at para. 144)

Employee’s Intention is Key in Assessing Use of Contact Information Maintained in Personal Records

Second, the fact that the contact information may be contained in personal records maintained by the employee, such as a personal diary or a list of contacts in one’s personal phone, should not be determinative.

In this case, there was evidence before the Court that the respondents had innocently recorded some patients’ contact information on their phone in the course of their work. However, the Court left open the possibility of a different finding if there was evidence the respondents had “intentionally acquired information to advance their own business.” (at para. 142)

A Reassessment of the Treatment of Client Contact Information?

The decision in GG & HH  relies on a 2018 decision from Ontario, Overseas Insurance Brokers Corporation v. Ko, 2018 ONSC 4612, which also declined to draw a bright line between employers’ client lists and contact information created from employees’ memory or personal records.

Moving forward, litigants arguing whether a misuse of confidential information has taken place have room to advance a contextual approach that considers factors such as the reasons the personal records were kept, whether the client information utilized goes beyond contact details, whether the information was memorized and whether the employer communicated the information in circumstances where the obligation of confidence arises.