Converse and Starter Defend Breach of Confidence Claim

On March 22, 2004, Converse Canada Inc. and Starter Canada Inc., two former Canadian athletic footwear and apparel companies, along with their principal shareholder, successfully defended a claim brought against them for breach of confidence and breach of fiduciary duty in respect of the start-up of the Converse Canada enterprise in 1999. Until 1999, Converse’s Canadian business had been operated as a division of Converse Inc. in the US. The claims, asserted by a former member of Converse Inc.’s management team in Canada and the corporation he had formed to acquire the division from Converse Inc., alleged that the defendants had misused confidential information obtained through a due diligence process in connection with the propsed sale by Converse Inc. of its Canadian operations to the plaintiff corporation and misappropriated the opportunity to the exclusion of the plaintiffs.

Justice Donald Cameron of the Ontario Superior Court held that the defendants had no liability to the plaintiffs, in part because of the individual plaintiffs’ own conduct in facilitating the transaction. Justice Cameron further held that the plaintiffs had not suffered any damages in any event. Converse Inc. reacquired its Canadian operations in 2002. Justice Cameron’s decision was filed for appeal to the Court of Appeal for Ontario.

Converse Canada Inc. was represented by Eliot Kolers and Leslie Middaugh of Stikeman Elliott LLP. The plaintiffs were represented by Stephen Lamont of Morrison Brown Sosnovitch LLP.