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CP Rail settles lawsuit with rival CN for $25-million

A CP Rail car at the Canadian Pacific Aberdeen Yard in Hamilton, Ontario on Oct. 20, 2014.

Peter Power/The Globe and Mail

Canadian Pacific Railway Ltd. has paid $25-million to rival Canadian National Railway Co. to settle a lawsuit over CPR's attempt to win customers by using turncoat employees and pilfered client lists.

CN, Canada's largest railway, filed the lawsuit in August, 2015, after discovering a salesman at its container shipping headquarters near Toronto shared customer information with CPR and then quit to work for the Calgary-based freight hauler. CN soon learned another salesman had done the same thing months earlier.

Details of the settlement are confidential, but CN won some assurances its work force and customer information will be protected from "aggressive behaviours" to lure their staff. CPR is prohibited from hiring certain CN employees until the end of 2018.

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"Those things are mechanisms to prevent poaching or to minimize the risk of poaching," Luc Jobin, CN's chief executive officer, said on a conference call with analysts last month to discuss the company's financial results. (The companies revealed the settlement in their quarterly reports in late October.)

The case shone a light on CPR's competitive culture, and ensnared CPR's president and operating chief, Keith Creel, whom CN alleged encouraged his underlings to use the confidential CN information. CPR called the allegations against Mr. Creel and other senior managers an attempt to "smear" their reputations. In pretrial court appearances last year, lawyers for CPR admitted the company's employees had taken and used the client information, but said the actions were regrettable and did not represent how the company conducts business.

The corporate secrets at the heart of the case included customer contract prices and expiration dates, and other valuable information protected by employment agreements with CN.

CN's statement of claim alleged the two salesmen, Greg Shnerer and Derek Ackford, with the encouragement of their CPR bosses, used the customer information to create a list of CN customers to "attack." Companies, including Toys "R" Us Inc. and Loblaw Cos. Ltd., were assigned to a team of so-called hunters who would solicit their business.

"In the past, [CPR] would have to make their 'best guess' on how to respond to customer feedback and whether to adjust their rates. Now, [CPR] knows the exact rates offered by CN," CN said in court documents. "Not only is this harmful to CN, but the ability of clients to leverage competition between the railways … has been significantly reduced if not entirely eliminated."

As it prepared a case against CPR, CN uncovered texts between Mr. Creel and Mr. Ackford. "I was going to ask you, Keith, what can I provide and can't provide to my team? To be specific, I have a list of potential customers with renewals expiring in 2015 with competition. I'm unsure what my restrictions are or just go?"

Mr. Creel replies: "No restrictions. It's a competitive world. Free market."

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At stake were millions of dollars in moving cargo boxes from ship to rail to truck, a fast-growing business serving the consumer goods and manufacturing sector.

CPR suspended both salesmen soon after the lawsuit was filed, and two vice-presidents were reassigned. According to his LinkedIn profile, Mr. Shnerer now works for a trucking company in Milton, Ont. Mr. Ackford's CPR employment ends this month, according to his LinkedIn page. Neither responded to requests for comment on Tuesday. CPR would not comment on the case.

Mr. Creel, himself a former CN employee, is in line to be the next CEO of CPR, replacing Hunter Harrison, who led CN for six years ending in 2009.

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