TORONTO – An eight-year-old agreement personally put together by Ted Rogers and Jim Shaw explicitly prevents Shaw Communications from buying any cable company east of the Manitoba/Ontario border, says a lawsuit launched by Rogers Communications.
Shaw agreed to buy Mountain Cablevision of Hamilton, Ont., in July for what’s been reported as $300 million. Rogers wants the courts to stop the deal.
Back in 2000, the two companies worked out a swap of cable systems where in exchange for Rogers’ British Columbia systems (about 625,000 subs in and around Vancouver), Shaw gave up the CATV it owned in New Brunswick (almost all of the province) and Southern Ontario (Richmond Hill, Markham, etc.) and about 609,000 subs.
Part of that agreement, however, says that neither company, for a period of 10 years after the swap was done, will “start a new, or acquire a, broadband wireline cable business,” in either of its territories. That swap closed March 8, 2001 and Rogers’ court filing says Shaw can’t buy Mountain until that day in 2011.
While Rogers can’t buy a cable TV business west of the Manitoba/Ontario border and Shaw can’t buy east of that line, Shaw did keep the systems it already owned in Thunder Bay and Sault Ste. Marie, Ont. and Rogers looked the other way, essentially, when Shaw purchased tiny cable outfit Norcom in 2006. Rogers told Shaw then that despite the fact the western MSO didn’t ask first when buying Norcom, Rogers waived its rights under the swap agreement for the Norcom acquisition.
Even then though, according to the Rogers factum filed with the Ontario Superior Court of Justice, Shaw told Rogers it considered the swap agreement over back then. “Shaw took the position that, ‘whatever the restrictions were contemplated at the time Shaw and Rogers entered into the Swap Letter, they have run their course given the expiry of the fifth anniversary of the closing of the cable assets.’ Rogers rejected this position and put Shaw expressly on notice that Rogers would hold Shaw accountable for any future breaches of the Swap Agreement,” reads the RCI filing.
The swap agreement speaks of two five year terms rather than a single decade-long stretch because the parties wondered whether or not one long term would be upheld in court, says Rogers.
Whatever was explicitly contemplated or not at the time by the two men who did the deal, isn’t a part of the factum, which sharply criticizes Jim Shaw for sending company president Peter Bissonnette and former Shaw general counsel Margot Micaleff to be cross-examined for this case last month, even though Bissonnette was not directly involved in the swap agreement.
“Mr. Shaw has not sworn an affidavit in the current proceeding. Instead, he has left it to Mr. Bissonnette and Ms Micaleff, neither of whom was present at the initial meeting with Mr. Rogers, to give evidence about the transaction. Neither of these surrogates is in a position to speak authoritatively about Mr. Shaw’s intentions when entering into the Swap Agreement,” reads the Rogers filing.
“Mr. Shaw is well aware of the current litigation and has been in Canada for much of the time since it was commenced. In fact, he was in Toronto with Mr. Bissonnette for four days during the week of August 24, 2009. Mr. Shaw could have given direct evidence in this proceeding but has elected not to do so. in fact, he has not even reviewed the affidavits or supporting documents filed by Rogers.
“Rogers submits that this Honourable Court ought to draw the appropriate adverse inference from the failure of Mr. Shaw to give evidence in this proceeding despite his awareness of the litigation and his availability to do so,” continues the Rogers factum.
“Moreover, Mr. Shaw’s absence from this proceeding leaves open some surprising, and sometimes awkward, questions about the matters at issue.” For example, Bissonnette and Micaleff say the restrictions on where Shaw could go in the country “were contrary to Shaw’s business interests in spite of the fact that they were negotiated by Mr. Shaw himself and embodied in an agreement signed by him personally. It is difficult to believe that, had Mr. Shaw given evidence in this proceeding, he would have expressed the same view about the deal he negotiated with Mr. Rogers,” reads the RCI filing.
The other direct party to this deal, Ted Rogers, is deceased but the company has provided even hand-written notes from Ted as evidence, where he supplied specific instructions to maintain the swap agreement as-is.
Shaw on the other hand, also insists that the 2005 acquisition of Sprint Canada, which offers telecom services in Shaw territories is a breach of that agreement anyway by Rogers and that it now considers the swap agreement provisions “spent”, says the Rogers factum.
Rogers says that Sprint isn’t a CATV company, which the swap agreement states, so it is not violating the deal by owning and operating Sprint (now re-branded Rogers) in Shaw regions.
Watch for more on this continuing story.
