Clayburn Industries Ltd. and Clayburn Refractories, Ltd. v. Recor Services, Inc.

Lawsuit Timeline

January, 1992:
Clayburn attempts to forge a relationship with Didier Säurebau, a German company that supplied refractory acid-resistant tiles and mortars to Recor, in order to gain access to Didier Säurebau's technology. Didier rebuffed Clayburn because Didier already had Canadian representation through a sister company and because Didier had representation in North America through Recor. The Managing Director of Didier Säurebau responded to Clayburn Refractories President John Ekels on January 22, 1992:

"…in the past Didier Säurebau has given production know-how to Didier companies only…We have to maintain this company policy also in the future.

We have been training the 'refractory man', J. Nothman, on corrosion engineering for many years, made a sales agreement with Recor Services in 1986/1987, and supplied a certain quantity of acid resistant material to Recor's construction sites in the pulp and paper industry in the North/Western USA….the relationship between Recor Service and our company is very close, and therefore, we decided to offer the production license for certain mortars to Recor, of course, under the assumption that Mr. Nothman would remain the owner of Recor."

April 21, 1992:
President Ekels of Clayburn initiates negotiations to purchase Recor. In a letter he wrote: "…the issue that we are struggling with is that of the role or non-role of Didier."

It is obvious that Clayburn's interest in acquiring Recor was to obtain our access to Didier. The negotiations fizzled out when Ekels left Clayburn.

October, 12, 1993:
Craig Schoen, a Clayburn employee, tells Recor's President Mark Ryan that he wants to work for Recor and expand Recor into Canada. Schoen had previously contacted Jerry Jones at Recor to request information about corrosion technology, because Clayburn had become involved in installing and servicing corrosion-resisting materials. Some customers filed lawsuits against Clayburn, and Clayburn needed technical information to help fight the lawsuits. Jones had my approval to talk to Clayburn representatives, as long as he didn't give specific information regarding Didier technology or material specifications.

October 19, 1993:
Ryan and I have a courtesy meeting with Schoen, at which I tell Schoen that Recor is not currently interested in expanding into Canada. I make it clear that if and when Recor decided to expand into Canada, I would not engage in hiring talks with Schoen until after Schoen had resigned from Clayburn, and under no circumstances should Schoen bring with him as much as a scratch pad belonging to Clayburn.

December 7, 1993:
(Unbeknownst to me), Ryan agrees to an employment contract with Schoen. Ryan had been negotiating with Schoen behind my back, and he received a signed contract from Schoen on December 29.

December 31, 1993:
Schoen submits a letter of resignation to Clayburn. The effective date was January 3, 1994.

January 3, 1994:
Schoen comes to work for Recor. I was (mistakenly) under the impression that Schoen had quit Clayburn before he negotiated a contract with Recor.

January 19, 1994:
Clayburn's lawyers send a letter to Schoen advising him that they believe he's violated his confidentiality agreement with Clayburn.

January 27, 1994:
Clayburn's lawyers send me a letter, warning that they'll hold Recor vicariously liable for damages that Clayburn suffers as a result of Schoen's breaches. Our Canadian lawyer, P.J. Keighley, assures me the suit is frivolous and will be laughed out of court.

February 3, 1994:
Recor receives a summons to appear at the Supreme Court of British Columbia, Vancouver.

February, 9, 1995:
In a letter, new President Don Harris of Clayburn offers to buy Recor. More than a year had passed since we received our summons, and Clayburn was still actively pursuing its lawsuit against Recor. Harris wrote: "We wish to indicate our sincere interest in pursuing a course of action, the goal of which is to acquire RECOR SERVICES INC." During a telephone conversation, Harris told me if we sold Recor to Clayburn, the lawsuit would disappear.

May 23, 1995:
In a letter Harris offers $150,000 for Recor and asks that five "key" Recor employees be employed with Clayburn after the sale, including Jerry Jones, Mark Ryan and myself. (Clayburn did not want Schoen back under any circumstances: Harris told me if Schoen hadn't quit, they would have fired him.) Harris also asked that Recor "…provide Clayburn with full access to employees and records of Recor, that are required to permit completion of their due diligence."

July 6, 1995:
In a letter Harris offers $450,000 for Recor and asks that the same five "key" employees be employed with Clayburn after the sale. He wrote: "The senior employees of Recor, their knowledge, their experience, and their continued efforts are essential to the future success of the company."

August 10, 1995:
In a letter Mark Ryan sends a counteroffer to Clayburn requesting a purchase price of $1,400,000 for Recor. One of the terms and conditions is that, "All litigation between CLAYBURN and RECOR and RECOR EMPLOYEES will be dismissed prior to the process of due diligence."

September 25, 1995:
In a letter Harris counters with an offer of $500,000. Harris writes: "If we do not have a letter of understanding prior to October 6th, it is our intent to discontinue discussions and pursue another alternative." Clayburn and Recor did not reach an agreement by this date and Clayburn continued its lawsuit against Recor. (The "other alternative" turned out to be Clayburn raiding the entire Canadian management team of Premier Refractories in Ontario so Clayburn could expand into Eastern Canada.)

November, 24, 1997:
The trial begins at the Supreme Court of British Columbia. A few weeks before the start of trial, Schoen decided to change his testimony and be a witness for Clayburn, probably because Recor had fired Schoen when we discovered he'd been submitting false expense account claims.) Recor had to find another lawyer mid-trial because Keighley decided to represent Schoen, and therefore could no longer represent Recor.

January 16, 1998:
The trial ends.

December 3, 1998:
Justice Burnyeat submits his ruling. He finds that "Recor is vicariously liable for the activities of both Mr. Schoen and Mr. Piper….even if it had no knowledge of the 'illegality of the acts' of Messrs. Schoen and Piper..." Burnyeat awarded Clayburn $450,000 plus special costs.

May 1999:
Clayburn agrees to settle with Recor in the amount of $175,000. An audit of Recor revealed that Schoen had lost so much money for Recor that Recor did not have the resources to pay the judgment. If Recor filed for bankruptcy, Clayburn would receive nothing. As tempted as I was to see Clayburn get stung, I offered to pay the $175,000 out of my own pocket (with a note from Recor to pay me back), because I did not want to see innocent Recor employees lose their jobs.

June, 1999:
Recor completes satisfaction of judgment.

Click here for my analysis of Burnyeat's unfair ruling.