EMPLOYMENT MATTERS – AGF and the Emerging Market Team Defendants.

A couple of weeks ago, AGF launched a lawsuit against the Emerging Market team that left AGF in April 2012, the Dallas-based wealth management company that they went to work for and the recruiting firm that allegedly “lifted the team out”.  (http://www.theglobeandmail.com/globe-investor/funds-and-etfs/funds/agf-alleges-unlawful-conspiracy-in-suit/article4468532/ ).  That initial volley was covered by most of the business commentators across Canada.  This type of case is big news and has not been seen since the CIBC and Genuity Capital Markets case of 2004/5.

AGF put this statement in its press release:  “In our view, this action is about a breach of legal obligations involving ethically wrong behaviour by this U.S. investment company with full participation by individuals including Patricia Perez-Coutts, our ex fund manager,” said AGF Chairman and Chief Executive Officer Blake C. Goldring. “We have a duty to act, and to protect Canadian investors from this type of interference. Integrity is the most important part of our business. “

(http://www.agf.com/static/en/about_agf/release57126.html)

The relief sought against the Defendants is far reaching but open ended as to the amount of damages sought.  Although the discovery process is going to bring to light the real damages. strangely enough, AGF should be in a good position today to quantify the damages that it has suffered.  Its damages are based on lost revenues, lost opportunities and lost customers, all of which should be quantifiable.  The Plaintiffs also want to look at the Defendants’ records to see what else can be claimed.  Apart from the loss of revenue, the plaintiffs also sued for the losses associated with the taking and misuse of AGF’s confidential information. That information included AGF’s plans, strategies and compensation patterns.  The lawsuit will open up a virtual Pandora’ box of information about the industry and one that rivals and the media will enjoy. 

But the claim and its timing leave one puzzled with a whole host of questions emerging after a read of the statement of claim.  Why did the plaintiffs not move more quickly to protect itself and the Canadian investors  if this team was so pivotal to its business?  How did AGF retain some of the team and did those team members give AGF interesting information about the meetings that occurred before the team quit  (see paragraphs 58 to 65 in the statement of claim).  Why wasn’t an injunction sought back in April and why none sought now?

From the defendants’ side, there are as many questions that are yet unanswered?  Why did the defendants make such a splash of quitting one day and popping up at a potential rival the next?  Did they get advice that the restrictive covenants in their employment contracts were unenforceable?  Did they assume that the indemnity from their new employer would hold them truly harmless?  Did they hope that the publicity would range from neutral to beneficial to them? 

As this case unfolds, we will get a seldom-seen glimpse into the entrails of the industry.  Once the pre-trial motions start, we will be a lot wiser.