Can I Quit And Start Competing: Dispute Born Of Competing Fertility Clinics

• Published date: 22 December 2021
• Subject Matter: Employment and HR, Contract of Employment, Retirement, Superannuation & Pensions, Employee Benefits & Compensation
• Law Firm: Roper Greyell LLP ' Employment and Labour Lawyers
• Author: Ms Katelin Dueck and Mike Hamata

Genesis Fertility Inc. v. Yuzpe 2021 BCCA 420 has it all: intrigue, betrayal and even a "shotgun." In addition, it has some useful takeaways for employers who are navigating employee relations in times of significant organizational change.

Genesis Fertility is all about the facts, so an overview is required for context. Genesis Fertility Centre was operated by a team of physicians practising reproductive medicine in Vancouver: Sonya Kashyap, Abraham Albert Yuzpe, Elizabeth Lynn Taylor and Jason Adolph Hitkari. Their relationship was governed by a shareholders' agreement, which included a "shotgun clause." A shotgun clause is a provision whereby any shareholder can give notice to any other shareholder, requiring the other shareholder to elect either to sell their shares or purchase the shares of the person giving notice.

In November 2012, Yuzpe, Taylor and Hitkari (departing physicians) decided that they could no longer practise with Kashyap. They gave Kashyap notice in accordance with the shotgun clause. Kashyap elected to purchase the shares of the departing physicians. The departing physicians opened a new fertility clinic, Olive Fertility Centre in February 2013.

Dr. Gary Samuel Nakhuda was employed by Genesis. In December 2012, Nakhuda tentatively decided to join the departing physicians at Olive. He participated in the planning of Olive and the hiring of several members of Genesis' staff for Olive, without disclosing his involvement to Kashyap.

Nakhuda joined Olive in June 2013 and subsequently became a shareholder of Olive.

Genesis sued the departing physicians and Nakhuda for breaches of their fiduciary duties, the duty of loyalty and fidelity and the duty of confidence, as well as breaches of Nakhuda's employment contract. A lengthy trial commenced, following which the trial judge found in favour of Genesis against the departing physicians but dismissed Genesis' claims against Nakhuda.

Genesis appealed the judgment. A settlement was reached between Genesis and the departing physicians. The appeal proceeded only on the parts of the judgment dismissing the claims against Nakhuda and awarding him costs of the action.

The issues on appeal were whether the trial judge erred by failing to find that Nakhuda breached his contractual duty of loyalty and fidelity owed as an employee of Genesis. Genesis alleged these duties were breached when Nakhuda signed Olive employment contracts with Genesis employees without informing Genesis and by participating in the...