MARK BLINCH/Reuters
The legal battle between two well-known Bay Street investment funds is heading back to court, and it has become more intense.
The fight started last May when an analyst at distressed debt specialist Catalyst Capital Group Inc. quit to join West Face Capital Inc. Catalyst, run by Newton Glassman, alleges that the low-level employee provided West Face, run by Greg Boland, with critical confidential information about its strategy and operations.
Catalyst argues this is a problem because both funds have business dealings with Canadian wireless companies Wind Mobile and Mobilicity.
The fight first landed in court last fall, where a judge ruled that the analyst could not start working at West Face until December 22 – six months after he left Catalyst.
Catalyst has since filed a new motion, asking for an injunction that would prevent West Face from "participating in the management and/or strategic direction of Wind Mobile" and from participating in the upcoming federal spectrum auction.
The motion centres on West Face's participation in the acquisition of Wind Mobile, which was announced in September. In the filing, Catalyst notes that it originally had an exclusivity agreement with Wind, but the talks ultimately fell through. "Within days," West Face and its partners negotiated the purchase of Wind.
"West Face could not have negotiated the deal… without access to Catalyst's confidential information, which was provided to it by [analyst Brandon] Moyse," Catalyst alleged in court filings.
Catalyst is now trying to prevent private information from being used again. "Armed with Catalyst's confidential information… West Face will be able to help Wind compete unfairly against Mobilicity in the spectrum auction," the investment fund alleged.
"Catalyst Capital's unsubstantiated allegations about West Face are without merit and their claim is being pursued to damage West Face, and not for any proper purpose," a lawyer for West Face wrote in an email. "West Face intends to defend the claim vigorously."
Because Catalyst has not filed an affidavit in court, West Face does not have specific allegations to which it can respond. Catalyst declined to comment.
When Catalyst first took the case to court, it argued that materials sent by the analyst to his new firm during the interview process were "highly sensitive and confidential," according to court documents, and that the partner at West Face who received them circulated the memos to other partners and a vice-president, "understanding that the information was confidential and of the concern associated with its disclosure." (Some of the memos were marked "confidential" and "for internal discussion purposes only.")
Now Catalyst is concerned about the files stored on the analyst's and West Face's electronic devices. In November the judge authorized a review of Mr. Moyse's personal devices, and interim reports, according to Catalyst, have revealed many mentions of important key words, such as "West Face" and "Wind," as well as "Turbine," Catalyst's codename for its potential Wind acquisition.
Catalyst is now asking for an order that also authorizes a forensic search of West Face's computers and mobile devices to see if its confidential information turns up.
However, its motion will be heard on March 19 and bids for the spectrum auction are due in early March. Once they are submitted, the auction quickly unfolds, which means any injunction may be too late.
Editor's Note: An earlier version of this story stated West Face acquired Wind Mobile in September. As noted later in the story, West Face along with its partners negotiated the purchase. West Face was part of a consortium of financial investors that financed the transaction and also included Tennenbaum Capital Partners, LG Capital Investors, Serruya Private Equity, Novus Wireless Communications, and Globalive Capital (the holding company of Wind's founder Anthony Lacavera).
Tim Kiladze