Toronto Court Rules Mobilicity Backers Can Proceed with $1.2 Billion Lawsuit Against Ottawa

by Istvan Fekete on March 11, 2015

The lawsuit filed by Mobilicity’s original backers against the federal government can proceed, Ontario Superior Court of Justice judge Frank Newbould ruled on Friday, March 6. The ruling comes six months after businessman John Bitove and New York–based private equity firm Quadrangle Group LLC sued Ottawa for $1.2 billion in damages for making false promises.

As we previously reported, the filing claimed the government had offered certain assurances in return for their investment, such as the ability to sell the company to one of the incumbent players after five years, if necessary.

Ottawa waited six months to reply to the above allegations. Earlier this month, lawyers from the Department of Justice argued that the alleged losses were suffered by Mobilicity, not its shareholders. Since Mobilicity itself isn’t a party to the action, the government asked the judge to dismiss the pleading in its entirety, or in part.

“All of these claims suffer from the same defect: they arise from alleged injury or loss suffered by Mobilicity, and not alleged injury or loss suffered by the individual plaintiffs,” lawyers representing the government said in motion materials filed to the Ontario Superior Court of Justice. “For this reason, the plaintiffs are without legal capacity to commence this action.”

Judge Frank Newbould, who is also presiding over Mobilicity’s creditor protection process, heard Ottawa’s motion and issued a ruling on Friday.

“In my view the claims of the plaintiffs as pleaded are not derivative claims. They are claims for civil wrongs done to them and not to Mobilicity and the damages claimed can be asserted by them in this action,” Justice Newbould wrote in his decision dismissing the motion.

You may recall that after the moratorium expired, Telus submitted an offer for Mobilicity, which was rejected by Ottawa. The incumbent had a further two attempts, but without success. Earlier, in January, in order to secure a better sale price, Mobilicity managed to raise funds for the AWS-3 spectrum auction. Its financial backers ultimately walked away, leaving the wireless startup with no chance of making a bid for airwave licences.

As time goes by, the dream of selling Mobilicity seems less and less likely to become a reality.

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Written by: Istvan Fekete. Follow by: RSS, Twitter, Facebook, or YouTube.

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