Employer Blows Itself Up Using Hardball Litigation Tactics

It is often tempting for a party in litigation to treat the lawsuit as a “war” on the other side. This can mean employing bad faith tactics such as frivolous motions to drive up the cost of litigation, failing to comply with orders in a timely manner and, if the party is the defendant, deliberately attempting to delay the action from proceeding to trial.

An employer, with its greater financial resources, may be tempted to use these type of tactics to attempt force a former employee to discontinue the litigation and accept a very poor settlement. Although this type of strategy may succeed if the former employee is timid, it will almost certainly backfire if the employee is prepared to take the issue to trial. The employer may be forced to pay a punitive cost award (ie. substantial indemnity costs) that reflects the vast majority of the former employee’s legal costs and, in extreme cases, an award of punitive damages. Judges are well aware of the power imbalance between most employers and employees and normally do not take kindly to a large corporation beating up on an average “Joe” (or “Jill”) who has a mortgage to pay and a family to support.

The cost endorsement in Tossonian v. Cynphany Diamonds, 2015 ONSC 766 is an example of an employer with a good wrongful dismissal case ultimately shooting itself in the foot as a result of the litigation tactics it employed. The main issue before the court was whether the plaintiff had a fixed-term 5-year employment contract with the defendant. The plaintiff claimed $174,382.73 in damages (the difference between what the plaintiff would have earned during the balance of the five-year contract which he asserted he had and what he actually earned and was projected to earn during that period) and moral damages for bad faith dismissal in the amount of $23,280.00.

After a 7 day trial, Mr. Justice Graeme Mew found that the terms of employment were not governed by a 5 year fixed term employment contract. He awarded the plaintiff $13,520 representing two months’ notice of termination of employment. The paltry award is well within the $25,000 jurisdiction of the small claims court and placed the plaintiff at risk of being denied his costs for the action, despite his victory, because he had brought the action to the wrong court.

The defendant asked the court to order the plaintiff to pay its costs. The judge rejected the defendant’s arguments and awarded the plaintiff $88,450.98 in costs, an amount over 6 times greater than the actual judgment. He found that it had not been unreasonable for the plaintiff to commence litigation in Superior Court. The plaintiff had a real argument that he had a fixed term employment contract. The controlling mind of the defendant had drafted two documents that stated that the employment contract was for a fixed 5-year term in order to assist the plaintiff to get a mortgage. In other words, the owner of the defendant had tried to assist the plaintiff by preparing documents designed to mislead the mortgage company to get a mortgage.

When awarding costs, the judge was very critical of the litigation tactics that the defendant had employed writing “the defendant seems to have played hardball throughout the litigation.” In particular, the judge criticized:

 

    • the defendant’s significant non-compliance with the directions given at the pre-trial conference;

 

    • the fact that the defendant had brought a motion for security for costs even though the plaintiff lives in British Columbia, a reciprocating jurisdiction under the Reciprocal Enforcement of Judgments Act, R.S.O. 1990, c. R. 5.; and

 

    • the defendant’s conduct during the course of the trial. In this regard, the judge wrote:

 

at the opening of trial, for example, the defendant moved for the issuance of an inter-provincial summons to witness directed at the plaintiff’s wife (a resident of British Columbia). When that motion was denied, the defendant sought, and was refused, an adjournment. There were then a steady flow of largely unmeritorious evidentiary and procedural objections which ultimately resulted in what was listed as a four to five day trial taking seven days. While the defendant will no doubt say some of these tactics were ultimately vindicated by the result (which turned, to some degree, on the evidence of a witness who was summoned shortly before the sixth day of trial) the defendant has to take a significant share of the responsibility for the length of the trial and, as a result, the expense that was incurred.

Reviewing the facts, there appears to be no valid reason for the defendant’s litigation tactics (even allowing for the fact that bad faith litigation tactics occasionally work). The defendant, obviously, had a great case. The major issue in dispute was relatively narrow – whether the plaintiff had a fixed term employment contract. The defendant’s choice of tactics not only placed it a risk of being ordered to pay a punitive cost award but would have also significantly increased its own legal costs. Rather than declaring war on the plaintiff, a more rational litigation strategy would have considered serving a formal offer to settle at an early stage in the litigation to protect its costs and place pressure on the plaintiff to settle. If the offer was not accepted, the focus of the litigation should have been to ensure that it would be able to put its best foot forward when attempting to convince the judge that the plaintiff did not have a fixed term contract for 5 years.

The only winners in this case were the lawyers.