Research Capital sues Skyservice Airlines

Saturday 07/10/2017 - Source: airline-news

Research Capital Corp. has launched a $35-million lawsuit against officials at Skyservice Airlines Inc., including company founder Russell Payson, over allegations they conspired to block the investment firm from cashing warrants worth millions of dollars. The suit also alleges that Skyservice “wrongfully and without justification” booted Research Capital’s designated director from the airline’s board. None of the allegations has been proven.

The claim, filed recently in Ontario’s Superior Court of Justice, names private equity firm Gibralt Capital Corp., which purchased Skyservice in an $82-million deal earlier this year; Timothy Casgrain, the airline’s chairman who was appointed director of the Canadian Broadcasting Corp. in April; and Skyservice board members Marshall Myles, Rob Giguere, Ron Patmore and Thomas Cryer.

“Payson and Casgrain wrongfully, capriciously and arbitrarily determined not to recognize [Research Capital’s] rights ... and persuaded each of the other defendants to participate in an ongoing way in this wrongful denial of entitlement,” reads the 17-page claim, adding that the pair’s “high-handed” actions should generate punitive damages.

The case stems from a $30-million equity financing that Research Capital led for the airline in 2000 — the privately owned carrier now has a fleet about two dozen aircraft that it flies on behalf of tour operators. As part of the financing deal, Research Capital was paid $1.4-million and promised about 1.5 million Skyservice warrants that could be exercised at $2.50 per share, or about $3.9-million, the claim says.

But when Research Capital tried to exercise those warrants in 2015, the airline refused, partly because the investment firm named the airline in a legal action, the claim says.

Shortly after, Research Capital says its representative on Skyservice’s board — a condition of the equity financing — was turfed. This year, Patrick Walsh, Research Capital’s chief executive, met with Messrs. Patmore and Myles to hash out a settlement.

Mr. Walsh said it would take a $10-million payment to settle the lawsuit, which the Skyservice directors dismissed, the claim says.

Gibralt “wrongfully conspired” with the other defendants to ignore the agreement between Skyservice and Research Capital, the claim says.

In May, Research Capital’s top executive was told Gibralt’s purchase of Skyservice “was dead,” but a month later Gibralt made an offer to buy the airline, according to the suit.