In his Nov. 26 ruling in Wendy Sokoloff Professional Corporation et al. v. Chorney et al Justice William Chalmers gave former Sokoloff Lawyers associate Savannah Chorney five months to reimburse her old firm more than $1.4 million in outstanding disbursements for the 220 clients that came with her following their ugly breakup. Chorney wanted to pay the disbursements back when each file resolved, but the judge disagreed:
“I am of the view that it is unfair for the Plaintiffs to be responsible for the cost and risk of carrying the disbursements on the transferred files until the file resolves,” Justice Chalmers wrote, concluding that the five-month window would be long enough for Chorney’s new firm, Chorney Injury Lawyers, to obtain financing.
The interlocutory injunction also barred Sokoloff from reaching out to former clients who had transferred their files, while Chorney is prohibited from initiating communication with the roughly 200 Brampton office clients that have so far remained with Sokoloff.
In addition, the judge ordered that half of the legal fees on transferred files should be split equally between Sokoloff and Chorney on settlement, with the remaining 50 per cent held in a segregated trust account pending determination of each firm’s entitlement the funds.
According to court documents, Toronto-based Sokoloff Lawyers’ expansion to Brampton back in 2014 became a speedy success after principal Wendy Sokoloff recruited Chorney from another plaintiff-side outfit to launch the satellite office.
Although Sokoloff paid all expenses associated with the Brampton operations, Chorney’s professional corporation was named on the office lease, while the associate collected a cut of legal fees on settled files that rose to 40 per cent between 2017 and 2021.
However, as the office thrived — it generated $5.5 million in revenue for 2020, resulting in compensation to Chorney of $2.17 million — relations between principal and associate deteriorated, culminating on the Friday before the Thanksgiving holiday weekend.
“[Chroney] closed the office at 1 p.m. on Friday, October 8, 2021. She instructed the employees to leave their computers on without password protection. She arranged for the locks to be changed and for the Sokoloff Lawyers sign to be removed,” wrote Justice Chalmers. “On Monday, October 11, 2021 at 7:29 p.m., Ms. Chorney sent an e-mail to Wendy Sokoloff and advised her that she was resigning her employment with Sokoloff Lawyers to start her own firm. She also advised that lawyer, Melissa Macleod and four clerks … would be joining her. She stated that she intended to operate her new firm (Chorney Injury Lawyers) out of the same premises.”
The parties disagreed over whether their compensation agreement continued after February 2021, but Chorney told the court she had “no choice” except to act when Sokoloff withheld payments allegedly due under their fee-splitting arrangement and negotiations broke down over a proposed partnership.
Chorney has launched a separate $10-million claim in damages against Sokoloff alleging breach of contract and unjust enrichment arising out of the claimed missed payments. That claim is unproven and no defence has yet been filed.
In an affidavit filed with the court for the injunction motion, Chorney said that she had complied with the Law Society of Ontario’s guidelines for departing lawyers by presenting clients with three options: staying with Sokoloff, moving with Chorney, or retaining new counsel, although she admitted she had not approached Sokoloff about the possibility of a joint letter because of the poor state of their relationship.
However, Justice Chalmers was unconvinced by Chorney’s insistence that she “conducted herself appropriately in her departure,” calling that characterization a “substantial understatement” as he described her “planned and deliberate operation to take over the Brampton office.”
Granting Sokoloff’s motion, the judge placed her firm’s ongoing financing of disbursements at the heart of his assessment that there were a number of serious issues to be tried, that Sokoloff could suffer irreparable harm and that the balance of convenience favoured granting an injunction.
“Chorney Injury Lawyers is now competing directly with Sokoloff Lawyers in the Brampton market. However, the two firms are not on an equal playing field,” Justice Chalmers wrote. “Instead of the Defendants obtaining bank financing to pay for the upfront cost of disbursements, the Defendants seek to have Sokoloff Lawyers take on the role of a bank to finance the new firm. …There is no valid reason for the Defendants to ask that Sokoloff Lawyers finance their new firm instead of obtaining their own financing.”
Jonathan Lisus, who acted for Sokoloff on the motion, said his client was “gratified and relieved” by the ruling.
“It was an awful set of circumstances over the Thanksgiving weekend, so she was very pleased that the Superior Court recognized the need to deal with it quickly and definitively,” said Lisus, a partner at Toronto litigation boutique Lax O’Sullivan Lisus Gottlieb. “There are very real obligations of loyalty and good faith that counsel need to be faithful to; and that have real practical implications for the way we conduct ourselves; in leaving law firms and setting up new ones.”
Kris Borg-Olivier, who acted for Chorney, declined an opportunity to comment.
Tanya Walker, lawyer
“They should be trying their hardest to have a happy divorce and see what they can work out on their own. Even if litigation starts, see what you can do to resolve the matter in a friendly way,” said Walker, a certified specialist in civil litigation and the principal at Walker Law in Toronto. “Reading between the lines, the judge here seems to think they should have worked things out a little more and not done the midnight run.”
Still, James Cook, a partner in the dispute resolution group at Gardiner Roberts LLP says the competitive nature of the personal injury field means it probably won’t be the last time a departing lawyer ends up in court after taking matters into their own hands.
“In an ideal world, you would have a peaceful transition, but it rarely happens,” he said. “I can see the temptation from the employee side to look at it as a calculated risk. Yes, you might get sued, but the potential upside is huge.”
Although injunctions involving lawyers and their former law firms are rare, Cook says the circumstances of this case are reminiscent of ones in which he has acted, involving investment advisers leaving their brokerages without notice.
“If you do give notice that you’re leaving, the reality is that the employer will not be letting you back in the office because you’re in a fight right away over who gets to keep the clients,” he says. “That’s the tension in these cases.”