Home Featured Ontario court dismisses $20 million lawsuit against Lerners LLP from former clients it represented in wrongful dismissal claim

Ontario court dismisses $20 million lawsuit against Lerners LLP from former clients it represented in wrongful dismissal claim

by HR Law Canada

The Ontario Superior Court of Justice has granted summary judgment in favour of a group of lawyers at Lerners LLP and the firm, along with a principal at Cambridge Mercantile Corporation, dismissing a $20 million lawsuit brought against them by two former clients.

The plaintiffs — S.G. and W.K. — alleged breach of contract, breach of fiduciary duty, and negligence linked to a previously settled wrongful dismissal claim involving Cambridge.

The plaintiffs accused the defendants of colluding with Cambridge’s principals to settle the wrongful dismissal claim for less than its potential worth, supposedly to avoid exposing the principals’ “religious transgressions.” They alleged that one of the lawyers at Lerners was friends with one of the principals at Cambridge.

The breach of fiduciary duty claim was based on the premise that one of the principals of Cambridge was Jewish, and that he worked with the law firm to sabotage the plaintiffs’ interests to “avoid having them embarrassed in the Jewish community.”

The court found insufficient evidence supporting these claims, particularly the alleged conspiracy to undermine S.G.’s case.

“The mere fact that (one of the lawyers) and (one of the employer’s principals) share a religious faith is insufficient to establish a conflict of interest or breach of fiduciary duty as the plaintiffs have alleged in this proceeding,” the court said.

The court noted the evidence of the alleged conflict of interest was “based entirely on hearsay.” It was a bald assertion that the lawyer had attended parties with the principal, an accusation that was categorically denied. Even if it was true, it would “not give rise to a substantial risk of of a materially adverse impact,” the court said.

$500,000 settlement in 2016

The lawsuit’s origins trace back to S.G.’s employment at Cambridge, a foreign exchange company. Her wrongful dismissal and the subsequent legal actions revolved around complex employment agreements and Cambridge’s operations during Jewish holidays.

During the initial wrongful dismissal proceedings, both S.G. and W.K. were represented by J.S., a partner at Lerners LLP. They settled the case in 2016 via mediation for $500,000 — far less than the $6 million originally sought for unpaid dividends among other claims.

“The settlement was reasonable in light of the many risks or uncertainties with their case,” the judge stated, highlighting the calculated risks taken based on the statute-barred claims and potential for Cambridge’s successful counterclaim.

‘Simply not credible’

In the wake of the settlement, S.G. and W.K. expressed dissatisfaction, leading to the current lawsuit alleging that their lawyers had prioritized Cambridge’s interests over theirs due to undisclosed religious affiliations — a claim the court rejected as baseless.

“Taking everything into consideration, I find that the Plaintiffs various assertions on this are self-serving, baseless and simply not credible,” it said.

It noted the defendants kept S.G. and W.K. closely apprised of every step in the wrongful dismissal action, and the plaintiffs “reviewed and approved the very documents which they now complain about, being the statement of claim and the mediation brief in the Cambridge Action.”

The parties have been given directions regarding the submission of costs, should they fail to reach an agreement independently.

For more information, see Gayle v. Cambridge Mercantile Corp, 2024 ONSC 1792 (CanLII).

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