Davies, Ward & Beck LLP Disqualified from Representing Trilogy

Trilogy Retail Enterprises LP (Trilogy) was initially represented by Davies, Ward & Beck LLP with respect to Trilogy’s bid for Chapters Inc. (Chapters). The Davies team was composed of J-P. Bisnaire, Shawn McReynolds and Andrea Daly, on corporate matters, Berl Nadler on banking issues, David Smith on tax matters, Sandra Forbes on litigation matters, and Cal Goldman, John Bodrug, Brian Facey and Christopher Margison on competition.

On December 26, 2000, Mr. Justice Farley of the Ontario Superior Court of Justice ordered that Davies, Ward & Beck LLP (DWB) (now, Davies Ward Phillips & Vineberg LLP), was in conflict of interest and thereby disqualified from acting on behalf or advising Trilogy in connection with its bid for book retailer Chapters Inc. (Chapters). The conflict of interest arose from the firm’s previous representation of Coles Book Stores Limited and SmithBooks in 1994-1995 on competition law issues arising from the corporate amalgamation of those two companies to form Chapters.

Farley J. found that the two retainers were sufficiently related to give rise to the inference that the predecessors to Chapters had provided Davies with confidential information relevant to Trilogy’s bid for Chapters. The firm’s expedited appeal from the decision of Farley J. was dismissed with costs by the Court of Appeal on January 26, 2001. The panel, consisting of Goudge, MacPherson and Simmons JJ.A., held in a unanimous decision written by Goudge J.A. that Farley J. was correct in concluding that in the circumstances of this case the law firm should be disqualified from representing Trilogy. Specifically, the Court agreed with Farley J. that the two retainers were “sufficiently related”, and that Davies was not able in the circumstances of this case to rebut the presumption that the confidential information received in the earlier Coles/ Smithbooks retainer is relevant to the Trilogy retainer.

Following the Superior Court ruling, Trilogy retained Torys.

Chapters was represented in the litigation by Mark A. Gelowitz, Allan D. Coleman and Laura Fric of Osler, Hoskin & Harcourt LLP. DWB was represented before Farley J. by James A. Hodgson and Bonnie Tough of Hodgson Tough Shields DesBrisay O’Donnell and at the Court of Appeal by Bryan Finlay, Q.C. of Weir & Foulds.

Following the successful completion of Trilogy’s offer on February 1, 2001, Chapters Inc. waived the conflict of interest. Davies, Ward & Beck LLP and Phillips & Vineberg merged effective February 1, 2001 to form Davies Ward Phillips & Vineberg LLP, which has been retained by Chapters, Trilogy and Indigo to jointly represent them in connection with competition law matters related to the proposed merger of Chapters and Indigo.