Cassels Brock Wins Rare Cost Award Against Law Firm

Published: 05/30/2012

By John P. McGowan, Anne-Marie Naccarato

Cassels Brock recently won a complicated motion to remove opposing counsel for conflict of interest in a wrongful dismissal matter. In doing so, Cassels Brock obtained an extremely rare cost award against the plaintiff’s law firm on a substantial indemnity basis. John McGowan and Anne-Marie Naccarato represented the defendant with the assistance of articling student Stephen Hutchison.

In November 2010, the defendant terminated the employment of its Vice-President of Communications. In December 2010, the plaintiff’s law firm served the defendant with a statement of claim for wrongful dismissal for $6.3 million. However, at the same time, another lawyer at the plaintiff’s law firm was already acting for the defendant on mediating serious internal workplace conflicts.

Despite the obvious conflict of interest, the plaintiff’s law firm repeatedly refused to remove itself from the record claiming, without any evidentiary foundation, that the mediation work was not “legal work” and that its own lawyer was not truly a member of the firm. The defendant was forced to bring a motion to remove the plaintiff’s law firm from the record. In his decision dated January 12, 2012, Justice Thomas ruled that the position of the plaintiff’s law firm was “untenable,” “doomed to fail” and that it should have recognized the conflict of interest immediately and withdrawn accordingly.

In a rare step, Justice Thomas ordered the plaintiff’s law firm (and not the plaintiff) to pay the defendant’s costs on a substantial indemnity basis in the amount of $65,500. In coming to this amount, Justice Thomas ruled that the plaintiff’s law firm failed to provide the plaintiff with proper disclosure about the true nature of its work for the defendant, such that she could not make an informed decision to instruct her lawyer to oppose the motion. Moreover, the plaintiff’s law firm “failed to come to grips with their responsibility” to recognize the conflict of interest, advise their client, and withdraw accordingly. The “intransigence” of the plaintiff’s law firm caused the defendants to incur substantial costs in preparation for the motion against which the plaintiff’s law firm had “no arguable case.”

This case demonstrates the serious risk a law firm assumes when it neglects its professional obligation to identify conflicts of interest, and puts its desire to cling to a lucrative case ahead of its duty of loyalty to its client.