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Court Blasts Private Equity Firm Over ‘Abuse of Process’

Newton Glassman’s Catalyst Capital Group has lost another round in its contentious legal battle with rival investment firm West Face Capital.

The long-running legal feud between Canadian alternative investment firms Catalyst Capital Group and West Face Capital took a new turn this week, when the Ontario Court of Appeals upheld an earlier ruling against Catalyst in one of the lawsuits. 

Justice Glenn Hainey ruled last year that Catalyst’s C$1.3 billion ($968 million) lawsuit against West Face over the acquisition and subsequent sale of Canadian wireless carrier Wind Mobile was “an abuse of process” because it was similar in nature to a previous lawsuit that Catalyst had filed against West Face and Brandon Moyse, a former Catalyst employee who quit to work for the rival firm. 

Catalyst accused Moyse of passing on confidential details to West Face about Catalyst’s Wind Mobile negotiations, enabling a consortium of buyers led by West Face to win a bid to buy the wireless carrier’s assets for C$300 million. It later sold the assets for C$1.6 billion. 

A judge ruled in West Face’s favor in the Moyse case in an August 2016 decision. Catalyst lost a subsequent appeal in 2018. 

That case spawned a flurry of other legal actions. Catalyst has filed four lawsuits against West Face to date, and West Face in turn filed a counterclaim against Catalyst in December 2017. 

In its application for leave to appeal the May 2016 lawsuit, Catalyst argued that the judge who initially ruled against it erred in stating that the lawsuit was too similar to the Moyse suit. But in a decision handed down on Thursday, the Ontario Court of Appeals upheld last year’s dismissal of the lawsuit, writing that Catalyst’s behavior “exhibits classic signs of re-litigation.”

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West Face hailed the decision in a statement on Thursday.

“Over the past five years, Catalyst has launched a total of four vexatious and meritless lawsuits against West Face,” the firm said in the statement. “West Face believes that each of the cases is unfounded and, with today's decision, two of the cases have been dismissed in court and upheld on appeal.”

Added West Face chief executive Greg Boland in the statement, “This decision is yet another independent confirmation of lack of merit to the serial litigation being pursued by Catalyst against West Face for almost five years.”

In its own statement, Catalyst expressed disappointment in the decision and said it is considering other legal avenues.

“We are extremely disappointed by the decision of the Court of Appeal for Ontario, which has effectively allowed the defendants to utilize the court process to avoid any discovery or examination in relation to the very serious allegations in the claim that confidential information was misused and that the exclusivity agreement between Catalyst and VimpelCom in relation to WIND Mobile was breached,” Catalyst said in a statement to Institutional Investor. “Catalyst is considering its legal options.”

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