Two former top executives at Royal Aviation Inc. said yesterday they plan to sue Canada 3000 Inc., alleging it sullied their reputations and breached contractual obligations in relation to the March merger of the two airlines.
Michel Leblanc, Royal's former chairman and chief executive officer, and former chief financial officer Roland Blais said yesterday they plan to launch a suit on Monday in Quebec Superior Court seeking $30-million in damages against Canada 3000.
The suit is in response to allegations in a Canada 3000 lawsuit, filed last month, that Mr. Leblanc and Mr. Blais overstated Royal's financial position in the days leading up to the merger, thus inducing Canada 3000 to pay more for Royal than it should have.
In a statement of claim, Toronto-based Canada 3000 seeks $40-million in damages for "fraud, negligence, breach of contract, conspiracy" and fraudulent or negligent misrepresentation of Montreal-based Royal's financial statements and records. The company is also seeking $5-million in punitive damages.
Canada 3000 alleges that Mr. Leblanc, Mr. Blais and Groupe Royal Aviation Inc., a holding company controlled by Mr. Leblanc, conspired to overstate Royal's pretax profit and profit projections by $20.2-million for the third and fourth quarters of fiscal 2001.
None of the allegations have been proved in court.
Mr. Leblanc, who was to be deputy chairman of the newly merged company, left suddenly in June and then he and Mr. Blais were later hit with the suit.
Yesterday, Mr. Leblanc said he was fired by Canada 3000 for no good reason and that the company -- now Canada's second-biggest airline -- simply wanted to get rid of him once the merger was a done deal.
"This was a hostile takeover camouflaged as a friendly merger," he said in an interview.
Canada 3000 needed to get him onside because he was Royal's controlling shareholder, he said.
He also dismissed Canada 3000's allegations that Royal's finances were overstated. He said he was never given a chance to explain the financial results.
"It would be unthinkable to allow such groundless attacks on our [Mr. Leblanc's and Mr. Blais']reputation to go unanswered," Mr. Leblanc said in a statement. "We cannot tolerate having our co-shareholders making all kinds of allegations against us. Canada 3000's statements about us are causing grievous damage.
"I must point out that in the steps leading up to the transaction, Royal fulfilled all its obligations and produced financial statements drawn up in accordance with generally accepted accounting principles and consistent with those from previous years."
Canada 3000 spokeswoman Angela Saclamacis said yesterday: "The matter is before the courts and we have no further comment."
Mr. Leblanc said he will seek $14.2-million for negligence, breach of contract and misrepresentation; $5-million for damages to his reputation; $5-million in exemplary damages for illegal and intentional infringement on his right to liberty, privacy and reputation; and $2-million for breach of employment contact.
Mr. Blais is seeking $2-million for damages to reputation; $2-million for exemplary damages; and $200,000 for breach of employment contract.
Bertrand Marotte