CP lawyer says CN client information no longer being used to win customers

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Canadian Pacific Railway Ltd.'s lawyer says it was wrong for its employees to have made off with client information while they worked at rival Canadian National Railway Co., but the information is no longer being used to win customers.

Robert Harrison, who is defending CP in a lawsuit filed by CN over the alleged corporate spying, argued against a CN bid for a court-appointed monitor and an injunction that would prevent CP from using the corporate secrets to solicit the business of CN's clients.

"CP has admitted its employees took and used confidential information. CP has admitted that was wrong," Mr. Harrison told Justice Glenn Hainey of the Ontario Superior Court on Tuesday.

CN sued CP after learning a salesman at CN's container shipping business named Greg Shnerer downloaded information on hundreds of clients shortly before quitting to take a job at CP in July. CN also says another former employee in the same Greater Toronto Area office, Derek Ackford, did the same almost a year ago.

CN alleges CP gained market share from the information, and has violated an undertaking it made in August by continuing to using the information to solicit CN's clients. "They took the information, they used it it, and were apparently successful with it," Monique Jilesen, a lawyer representing CN, told the court.

"Mr. Shnerer circulated that list among account managers who reported to him and others, including executives," Ms. Jilesen said. CN alleges that Keith Creel, CP's president and chief operating officer, sent a text message to Mr. Ackford okaying the use of the CN client lists, which include freight rates and contract expiration dates.

CP has not filed a defence in the lawsuit. The hearing Monday was held so Justice Hainey could begin hearing arguments over the monitor and the injunction.

Ms. Jilesen argued that the measures are needed because CP had already violated an agreement it made before the court in August to collect and preserve all documents and employee laptops in question, and to tell its entire sales staff to stop using CN's confidential client information.

"We can't be assured the information is not being used," she said. "The alternative is I will cross-examine their staff every week."

CP's Mr. Harrison said the collection of CN information within CP's computer network is "ongoing" and not complete. He agreed that not all CP sales staff had received the message to halt using the CN information, but said the impact was small. He argued that the imposition of a monitor over the company's affairs and an injunction preventing it from contacting clients, many of which are served by both freight carriers, was unfair.

"If you're under a non-solicitation order, you're not in business," Mr. Harrison said.

Both Mr. Shnerer and Mr. Ackford remain CP employees, but are suspended, the court was told. CN is also suing Mr. Shnerer.

Mr. Shnerer's lawyer Jeffrey Leon argued that any injunction on using the CN information was unenforceable, and would make it hard for Mr. Shnerer to return to work at CP or elsewhere in the shipping business.

"He has acknowledged he ought not to have done what he did. He has turned over everything he has," Mr. Leon said. "Here's a low-level employee who at one point had access to information but now only has what he has in his head."

Justice Hainey will resume hearing the matter later in October.

Inside the court documents

Court documents filed by Canadian National Railway Co. provide an inside look at what the railway alleges was the widespread use of stolen confidential customer information by its arch-rival, Canadian Pacific Railway Co.

CN alleges that two former employees downloaded thousands of confidential CN documents before bolting to CP, providing their new employer with information on the rates CN charged customers and the dates contracts were up for renewal. CN also alleges that CP failed to stop its staff from using the information, even after agreeing not to.

The allegations have not been proved in court. The details in the allegations come from e-mails and CP company documents that the railway handed over to lawyers for CN as part of the court battle CN has launched alleging it is the victim of corporate espionage.

"Here you go, Stan," writes one former CN account manager who switched to CP, Derek Ackford, in an April, 2015, e-mail to his new colleagues that includes a list of CN clients. "All accounts over $5-million and a few just under that are worthwhile attacking."

Greg Shnerer, another former CN employee who moved to CP in July, had allegedly used an external hard drive to download various CN documents before he left, among them pricing information, volume and revenue numbers, contract expiry dates and transportation agreements for key CN clients such as Toys "R" Us and Loblaw.

A document compiled from the information that became known as the "CN Target List," CN alleges, was extremely valuable to CP, which even hired a new team of account managers, internally referred to as "hunters," to go after CN business, the document alleges.

In July, just days after he left CN to start his new job at CP, Mr. Shnerer, the documents allege, told the CP account manager pitching PPG Industries Inc., which makes glass, insulation and other products, about the expiry date of the company's contract with CN. CN rate information, the company alleges, also prompted CP to change the rate it offered the company.

"We should value the information from Greg's inside knowledge," a thankful CP marketing analyst writes in an e-mail to Mr. Shnerer and other CP staff.

CP also allegedly used CN's "confidential rate information" to prepare a pitch for household products maker Reckitt & Colman Canada Inc., used CN's "detention time fees" to prepare a proposal for beverage maker Ocean Spray Cranberries Inc., and used information on CN's "allotment time" for Toys "R" Us to compete for business from the big-box toy retailer.

The inside information clearly gave CP an advantage, CN argues in its court filing: "In the past, CP would have to make their 'best guess' on how to respond to customer feedback and whether to adjust their rates. Now, CP knows the exact rates offered by CN. 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."

Jeff Gray