Articles & Media

The Case of the $2.2-million Severance


By Jeff Gray
The Globe and Mail

Almost a decade ago, Kurt Soost, a high-flying Calgary stock broker with $145-million worth of business at his fingertips, was called to a meeting with his bosses at the city’s Westin Hotel. The news from his superiors at Merrill Lynch Canada Inc. was not good.

Mr. Soost was handed a letter of termination for allegedly breaking the brokerage firm’s rules, and told not to return to his office. His clients were transferred to other financial advisers and his reputation in Calgary’s close-knit financial scene was left in tatters, with “vicious rumours flying around the office,” a court was later told.

According to testimony from a manager with TD Evergreen, whom Mr. Soost approached for a new job soon afterward, the ordeal had taken its toll on the then 35-year-old, who looked as if “he had been dragged through a knothole.”

Ever since, Mr. Soost has been engaged in a high-stakes legal battle against his former employer. Last October, he finally appeared to have won big. In a ruling that surprised many employment lawyers, a judge of the Alberta Court of Queen’s Bench ruled Mr. Soost had been wrongfully dismissed, and he was awarded $2.2-million in compensation.

Late last month, the Alberta Court of Appeal cut this down to $600,000 – about a year’s pay – the latest ruling in what some employment lawyers say is a sign courts are showing more sympathy for employers.

Mr. Soost, now 44 and the head of a Calgary-based “niche investment banking firm,” has no plans to give up his fight. He has told his lawyers he wants them to seek leave to appeal his case to the Supreme Court of Canada, a move some observers see as a long shot.

“It’s myself against Merrill Lynch,” he said in an interview from his Calgary office. “It is a David-and-Goliath situation. It is a long road to fight such a big and significant corporation.”

The axe came down at a meeting in May, 2001, after Mr. Soost’s bosses raised concerns over his participation in private placements without the required documentation or go-ahead from Merrill Lynch, as well as his large position in a speculative biotech stock.

In his October, 2009, ruling, Mr. Justice Scott Brooker said there was “confusion” about Merrill Lynch’s rules in the Calgary branch, and that they were not evenly enforced. Mr. Soost’s behaviour, the judge ruled, did not justify his firing.

Judge Brooker scolded Merrill Lynch, saying that the brokerage knew, or should have known, that firing a financial adviser like Mr. Soost with cause would be “mortally wounding” to his career.

Citing a 2008 Supreme Court of Canada judgment, Keays v. Honda Canada, in which an employee with chronic fatigue syndrome was awarded damages for mental suffering, Judge Brooker said Mr. Soost was entitled not just to $600,000 for the 12 months’ notice he deserved, but another $1.6-million in compensation for the loss of his clients and their goodwill.

Merrill Lynch appealed the $1.6-million payment, which was seen in employment law circles as a warning to employers. Last month, a three-judge panel of the Alberta Court of Appeal threw the $1.6-million out, saying it has “no basis in law.”

The ruling, written by Mr. Justice Jean Côté, pointed out that Merrill Lynch had not been proven to have shown “bad faith” in its treatment of Mr. Soost, who had still violated his employer’s rules.

To allow such a damage award for his dismissal to stand would create, the judge wrote, a “slacker’s charter.” Employers would simply dismiss problem employees without cause, paying them off with cash in lieu of notice in order to avoid a court battle that could result in a hefty penalty for dismissing someone for reasons later deemed unworthy by a judge, the ruling said.

Employment lawyers have been watching the case closely. Jamie Flanagan, an employment lawyer in Calgary with McLennan Ross LLP who represents employers, said he was “shocked” at the initial $1.6-million award, and pleased at the appeal court’s reversal: “There shouldn’t be those kinds of handcuffs on employers if they honestly believe that the conduct was sufficient to justify dismissal.”

He said courts used to simply top up the required notice periods if employees who successfully fought a dismissal for cause could show their employer engaged in bad behaviour, such as making false allegations against them. But the Supreme Court of Canada, in that Honda ruling, said extra damages could only be awarded when the employee could also prove actual losses caused by the employer’s bad behaviour, Mr. Flanagan said.

Lawyer Stuart Rudner of Miller Thomson LLP in Toronto, who represented an intervenor in the Honda case, said the Soost appeal ruling was more evidence that courts were shifting away from favouring employees in these cases.

“There are a number of [recent] cases, Supreme Court and appeal courts, that seemed to suggest the pendulum was swinging back toward the employer’s side,” Mr. Rudner said.

Mr. Soost’s lawyer, Kevin McGuigan of Calgary-based McGuigan Nelson LLP, said he knows he faces a tough road in convincing the Supreme Court to hear his client’s case: “We would readily acknowledge that we have some work ahead of us.”

Merrill Lynch Canada’s lead lawyer on the appeal was Frank Foran of Borden Ladner Gervais LLP in Calgary. Lawyer Julie Hopkins, who worked with Mr. Foran on the case, said she was surprised at the attention it has received: “I didn’t realize that people were following it quite as closely as they are.”

A spokeswoman for Merrill Lynch could not be reached for comment.

The man at the centre of the case said the marathon fight has convinced him the legal system is dysfunctional. “It is my opinion that the legal system is badly broken,” Mr. Soost said. “My view is, I’ve gone through this process for nine years. Where I stand today is extremely frustrating and disappointing.”

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