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Law Times • February 2, 2009 NEWS PAGE 5 Appeal court strikes $67-million claim against firm A BY ROBERT TODD Law Times legal spat involving former Livent Inc. executive My- ron Gottlieb and Stikeman Elliott LLP seems to have ended following a recent Ontario Court of Appeal decision, which upheld a lower court's decision to strike the former theatre company ex- ecutive's $67-million claim. Gottlieb had pursued a court action based largely on allega- tions against Stikemans and some of its employees and partners. He claimed that the defendants con- spired to see that he was falsely accused of manipulating financial records at Livent, which led to the company's eventual collapse. The claim also contained alle- gations against former Walt Dis- ney Co. president Michael Ovitz and accounting firms Deloitte & Touche and KPMG. Gottlieb and his former part- ner Garth Drabinsky are currently facing fraud and document forg- ery charges at the Superior Court, to which they have pleaded not guilty. They are facing allegations of defrauding shareholders and creditors of over $500 million. While that trial has concluded, it was unclear at press time when a verdict would be released. Ontario Court of Appeal Jus- tices Robert Sharpe, Robert Blair, and Paul Rouleau, in a Jan. 19 de- cision, unanimously upheld Supe- rior Court Justice James Spence's Nov. 19, 2007 ruling on Gottlieb's claim. Spence struck it because a favourable determination of crim- inal proceedings on the matter was not pleaded, noted the appeal court decision. "Even if the claim is to be re- garded as one of conspiracy to in- jure, central to that conspiracy as it is pleaded is the allegation that the appellant was falsely impli- cated in a fraudulent scheme with which he had been charged prior to bringing this action," wrote the appeal court. "We agree with the motion judge that such a claim cannot proceed in the face of the ongoing criminal proceedings or in the absence of a determination favourable to the appellant in the criminal proceedings." The appeal court said Gottlieb had argued the statement of claim included a specific allegation "of a conspiracy to fabricate certain spe- cific evidence" and that it should go ahead even if he were convicted in the criminal case. But the court said, "It is diffi- cult to see how such a claim could be dealt with prior to the determi- nation of the criminal proceed- ings as it would be impossible to know what, if any, damages the appellant had suffered until he has been acquitted or convicted on the criminal charges." It later stated, "We need not decide, however, whether such a claim exists in law as even on a broad and generous reading of this detailed statement of claim it sim- ply does not assert this narrower cause of action as a distinct and identifiable claim. "The statement of claim is plainly based on the assertion that the respondents falsely accused the appellant of fraud. Even if the nar- rower and distinct cause of action now advanced in argument exists in law, the 'further further amend- ed' statement of claim would have to be entirely recast to plead that cause of action so as to permit scrutiny under Rule 21. Given the history of this matter, there is no basis to give the appellant leave to amend the claim." The court concluded, "Ac- cordingly, we agree with the mo- tion judge that the claim should be struck out in its entirety as disclosing no cause of action." The following costs were awarded to respondents: $19,000 to Stikeman Elliott LLP et al., $13,000 to Deloitte Touche, $13,000 to KPMG et al., $7,500 to Michael Ovitz et al., and $5,000 to Maria Messina et al. Counsel for Gottlieb did not respond by press time to Law Times' requests for comment on the Court of Appeal's decision. Stikeman Elliott management de- clined interview requests. Goodmans LLP lawyer Ben- jamin Zarnett, who represented Stikemans and other named in- dividuals on the case, says his cli- ents were pleased to get the ap- peal court's approval of the lower court decision. "I think it's a relatively unique and unusual claim," says Zarnett. "Unusual for someone to try to sue for something like this, and you see the way the courts have dealt with it." He says there's plenty of legal precedent to back the ruling. "If you're suing, you can't, while a criminal proceeding is going on, take actions that assume what the result of that proceeding is going to be. So in that regard, the courts were following well-established precedent," says Zarnett. Richard Stephenson of Paliare Roland Rosenberg Rothstein LLP, who represented Ovitz and two other accused, says his clients never felt there was any substance to the claim, which he says had a face value of $57 million plus $10 million for punitive damages. "It's obviously both annoy- ing and troubling to have to deal with it and respond to it," says Stephenson. "The finality — we're assuming it's final — is an enormous relief." He says, "The prospect of the victims, and I don't think anybody denies that they're the victims, are being sued by the person who's being charged with the offence, needless to say it was highly ironic and some- what distressing." LT ANNOUNCEMENT The Board of Trustees of The Law Foundation of Ontario has elected Mark J. Sandler as Chair Legal Supplies - Will Stationery Wills and Powers of Attorney are important personal documents. To reflect this Dye & Durham has designed a complete line of quality stationery products. your LAW OFFICE PRODUCTIVITY source WILL STATIONERY LSW300 – Last Will and Testament forms with vertical grey ruling at left and right sides. LSW320 – Follow Sheets with same grey ruling to go with first page. LSW165 – Will Envelopes, made of the same paper as the Will Backs. Engraved with "Will". 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