The first round in a court case that has pitted an advisor against two former employers has gone to the one-time employee — sort of.

The Nova Scotia Court of Appeal has ruled that CIBC Wood Gundy must hand over an employment contract put in place when it purchased Merrill Lynch Canada Inc. in 2002. But it’s who that document is being handed over to that is noteworthy.

“The court allowed the document could be relevant, but it must first be reviewed by [the advisor’s] lawyer,” says Dennis James of Patterson Law in Truro, N.S., who represented Merrill Lynch Canada, an interve-nor in the case. “The option of having a lawyer look is unusual.”

This unusual step was taken “because the firms seemed so nervous about what was in this agreement,” says Eric Slone, a lawyer with Gavras Slone Lenehan in Halifax who represented Richard Blackman, the advisor. In such situations, judges usually allow full disclosure or no disclosure. In this case, the judge found middle ground. “The [firms] didn’t want Blackman to see it; only me,” Slone says. “The judge agreed.”

This could open the door for advisors to see the agreements that were put in place regarding their employment when financial companies merge or are acquired. “It could be an important issue for the industry, given the frequency of mergers and acquisitions in the sector,” Slone notes. “There is a tremendous amount of protection for employees when a company changes hands.”

That protection seems to have enveloped Blackman — at least, for now. Blackman, who is suing CIBC for constructive dismissal, had a long career as an advisor, starting with Royal Bank of Canada. In 1998, Blackman moved to Midland Walwyn Capital Inc. and worked out a deal in which he would be treated as a new employee without a book.

“He didn’t anticipate bringing over more than half his clients, and he wanted to be treated as a new broker as a benchmark for gauging his performance,” Slone says.

The statement of claim alleges that the shorter length-of-service designation was favourable to Blackman because employees with longer length-of-service designations were paid less given similar revenue production.

The dominoes then fell. Midland was sold to Merrill in the late 1990s, then Merrill’s retail operations were sold to CIBC and combined with Wood Gundy. Before the final domino tipped over, however, Merrill changed the rules of the game concerning Blackman. “In early 2001, without explanation and without any obvious reason,” Slone says, “it bumped his length of service from three years to 10-plus.”

And the game was on. Blackman sued Merrill; but before the case could be resolved, the retail brokerage was sold to CIBC. “CIBC contended it did not breach contract; Merrill did,” Slone says. “My client contends CIBC had contractual obligations — obligations to employees that came over from Merrill.”

To prove those contractual obligations, Blackman asked to see CIBC’s agreement with Merrill. And all hell broke lose.

“In our view, it’s a confidential commercial document and the courts ought not to step on that confidentiality,” James says.

The firm also argued that the documents were not employment contracts at all and not related to individual employment. “Merrill argued that it is established law that you can’t assign employment contracts without the consent of the employee,” James notes. “The court didn’t take that as absolute.”

The court found that an agreement was probably in place between the two firms respecting continued employment of advisors and other staff. That finding was premised in large part on a document CIBC sent to all Merrill employees during the buyout. It stated: “All employees of Merrill Lynch Canada Inc. who are part of the deal will receive comparable job offers. CIBC and Merrill have worked closely together to ensure that the overall terms and conditions of your employment offer have an equal or greater value to you compared to what you have today.”

The court concluded that whatever agreement was in place could be important — and on point. “CIBC’s position, supported by the intervenor, is that the agreement is irrelevant,” states Justice Thomas Cromwell in his decision. “They submit that the plaintiff is not a party to the agreement and, therefore, it cannot affect his rights. Respectfully, this view of relevance cannot be sustained.”

@page_break@Blackman’s victory is only partial, however. First, his lawyer must review the agreement. If anything of relevance is found, it’s back to court to get the judicial stamp of approval for using the information to prove constructive dismissal. “Even if the agreement is helpful,” Slone says, “we have a long way to go to establish a case.” IE