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Tort Law - Spoliation (intentional destruction of evidence) - Elements of tort

Thursday, September 15, 2016 @ 8:00 PM  

Action by Catalyst Capital Group (Catalyst) against West Face Captial (West Face) for an accounting of profits and damages for misuse of confidential information regarding WIND Mobile (WIND). Catalyst and West Face were investment-management firms that competed in the chase for WIND. Catalyst was a bidder for WIND, and had an exclusive right to negotiate a purchase. When Catalyst failed to conclude a purchase because it insisted on a clause providing it with a way out of the deal if government concessions did not materialize, West Face and its consortium partners acquired an indirect interest in WIND on September 16, 2014, based on an enterprise value of $300 million. Moyse was an analyst for Catalyst for two years ending in May 2014. He subsequently worked for West Face for less than four weeks in the summer of 2014. Catalyst alleged Moyse gave West Face confidential information about Catalyst’s bid strategy for WIND that West Face used to structure its bid for WIND. The consortium later sold WIND to Shaw Communications for $1.6 billion. Catalyst sought an accounting from West Face for its profits as well as damages for spoliation from Moyse and West Face. Catalyst’s senior partner gave evidence about Moyse’s intimate knowledge of Catalyst’s efforts to acquire WIND on terms it could accept. He claimed Moyse was involved in major decisions with respect to the bid for WIND and negotiations with the government contemporaneous to it. Moyse denied that his role in the WIND bid was anything more than performing research and producing a PowerPoint presentation based on information provided to Moyse by Catalyst senior partners. He admitted that, prior to leaving his position with Catalyst, he sent confidential Catalyst information about unrelated deals to West Face in support of his application for a position working there. Moyse admitted deleting the email containing the confidential information to West Face when he thought better of it. West Face officers testified they hired Moyse despite this error in judgment because he had no malicious intent. After Moyse left Catalyst and joined West Face, the companies communicated about confidentiality issues, and a confidentiality wall was erected at West Face with respect to WIND and Moyse. Moyse was placed on indefinite leave from work at West Face amid legal proceedings by Catalyst to enforce a non-compete clause in his employment contract with Catalyst. He never returned to work at West Face. His substantive work for West Face was limited to performing preliminary analyses on several potential investments that had nothing to do with WIND. Prior to submitting his personal computer for examination in the present action, Moyse deleted his browsing history. He claimed he did not want his use of adult websites to become a matter of public record. He had already deleted the contents of his Catalyst Blackberry device when he returned it after leaving his employment.

HELD: Action dismissed. Catalyst witnesses exaggerated the role Moyse had with respect to the WIND bid. There was no reason to reject evidence from West Face witnesses that they never discussed WIND with Moyse. The fact that West Face took pains to ensure that Moyse respected his obligations of confidentiality to Catalyst, including setting up the confidentiality wall with respect to WIND, was contrary to the notion that West Face was interested in acquiring information regarding Catalyst’s WIND bid from Moyse. Consortium partners also provided compelling evidence that they had no information about any offer made by Catalyst to acquire WIND during the period of exclusivity. The winning bid by the consortium was not the sole work of West Face. The dealings the consortium had with government regulators were of a completely different character than those Catalyst had. Catalyst’s assertion that the West Face WIND bid was based on confidential information acquired from Moyse required a finding that multiple witnesses were giving false testimony, which the court was not prepared to make. The court also accepted Moyse’s explanation for deleting his internet browsing history. He did not do so in an attempt to destroy relevant evidence, precluding any finding of spoliation. It was reasonable for Moyse to have wiped clean his Blackberry device prior to returning it to Catalyst. Emails he made from the Catalyst server would remain on the company records in any event.