The battle for control of Rogers Communications Inc., which is coming to a head in a B.C. court Monday, has involved an ever-increasing number of lawyers as players in the corporate drama cycle their way through law firms because of potential conflicts of interest.
The B.C. Supreme Court hearing is expected to decide if Edward Rogers can dictate who is on, and off, the board of Canada’s largest cellphone and cable company, founded by his father. Rogers is on its second law firm in as many weeks.
Rogers’s first set of advisers, at Fasken Martineau DuMoulin LLP, were replaced by Goodmans LLP in late October, an unusual shift for a company in the midst of a court battle. The two firms declined to comment on the switch.
Hiring Goodmans triggered another legal challenge last week, as lawyers for Edward Rogers flagged a new potential conflict. In court filings, they pointed out Goodmans is now representing both the company and chief executive Joe Natale, who Mr. Rogers unsuccessfully attempted to fire in late September, setting off an increasingly bitter feud. Goodmans responded by saying both the CEO and the company signed off on the firm as Fasken’s replacement, eliminating the issue.
Legal experts say the conflicts laid bare at Rogers, which play out against a backdrop of consolidation in corporate Canada, highlight the barriers to mergers among major law firms and strengthen the business case for specialized legal boutiques.
Rogers’s court filings now list dozens of lawyers at different firms, including a number of boutiques. Conference calls on company issues can ring up more than $50,000 an hour in legal fees. In one court filing, Edward Rogers requests the company pay his legal costs.
“Situations like Rogers create unique conflicts,” said lawyer Gavin MacKenzie at MacKenzie Barristers, an expert in legal ethics. Mr. MacKenzie is a former head of a regulatory body for lawyers as treasurer of the Law Society of Ontario.
“You have a public company, where everyone was previously rowing in one direction, suddenly breaking down into constituencies that have very different goals, creating significant challenges for their lawyers,” he said.
Last Friday, court filings show three members of the Rogers family – Loretta Rogers, widow of the founder, and two of her daughters, Melinda and Martha – attacked perceived conflicts at Torys LLP. The corporate law firm has overseen the clan’s affairs for decades and works for the Rogers Control Trust, an entity that controls 97.5 per cent of the company’s voting shares. In the 1960s, newly graduated law student Ted Rogers articled at Torys before moving into radio and cable.
Loretta Rogers, Melinda Rogers-Hixon and Martha Rogers all wanted to drop Torys after the firm did the bidding of a majority of the 10 individuals overseeing the Rogers trust, including trust chair Edward Rogers. In an e-mail, Martha Rogers told Torys partner Richard Willoughby: “You’ve lost the legal capacity to act due to your conflicts of interest and blatant lack of independence.”
Court filings show Mr. Willoughby responded to all three by explaining that the firm would continue to counsel the “balance of members” of the Rogers trust, while those with different interests should consider hiring their own lawyers.
The Rogers family is taking that advice. Edward Rogers hired boutique law firms Lax O’Sullivan Lisus Gottlieb LLP in Toronto and Vancouver-based McEwan Cooper Dennis LLP. Melinda Rogers-Hixon is using Norton Rose Fulbright Canada LLP. And Stikeman Elliott LLP is advising five independent Rogers directors, a group Edward Rogers is attempting to replace in Monday’s court hearing.
A series of Supreme Court of Canada decisions over the past three decades raised the bar on a law firm’s duty to its clients. In a 2013 decision on a case involving Canadian National Railway Co., the top court said a law firm cannot act for a client whose interests oppose another client, even in unrelated matters, unless both sides consent.
“Lawyers are required to avoid conflicts of interest, or even what a reasonable person would regard as creating an appearance of a conflict of interest,” said Jeffrey MacIntosh, a law professor at the University of Toronto. “Big law firms are particularly challenged in this respect, since they have so many clients that conflicts become almost inevitable.”
Potential client conflicts are a “significant issue” for approximately a dozen major Canadian law firms as they consider mergers or expansion, Mr. MacKenzie said. He said there are a shrinking number of corporate customers in most economic sectors – finance, telecom, manufacturing and resources – so bringing together large firms will inevitably mean losing clients to conflicts.
A number of small firms with central roles in the Rogers leadership struggle, including Lax O’Sullivan Lisus Gottlieb, trace their roots to litigators who left major firms in part to avoid conflicts. Partners at the boutique used to work at Goodmans and McCarthy Tétrault. Mr. MacKenzie said as courts raised the bar on a lawyer’s duty to its clients, they ensured a steady stream of work will go to boutique firms with proven practitioners.
As Canadian law firms built national and global practices – Fasken has offices in seven cities across the country, plus in Britain, China and South Africa – they have developed systems and processes to identify and deal with potential conflicts.
For example, when a lawyer wants to bring on a new client at a major firm, they are expected to identify all the parties involved in a file that goes into the firm’s database. A conflicts committee then checks for issues before taking on the new assignment.
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