Rogers battle in court: Lawyer for Edward Rogers argues board shakeup ‘occurred validly’

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The two factions fighting for control of Rogers Communications Inc. were in British Columbia’s Supreme Court on Monday, where a lawyer for Edward Rogers argued that Edward’s written order to reconstitute the company board and install five hand-picked directors “occurred validly” and should be viewed no differently than if there had been an in-person meeting of all shareholders.

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Ken McEwan said the telecommunication company’s articles and corporate law in B.C., where Rogers is incorporated, allow for the board shakeup under a written resolution that requires only two-thirds of votes to be cast in favour. The Rogers family controls nearly 98 per cent of the family’s Class A voting shares through a family trust, which Edward chairs.

McEwan told the judge Edward came before the courts as a shareholder exercising “clear shareholder rights” under the B.C. Business Corporations Act.

However, a lawyer for Rogers Communications countered that Edward had ignored not only language within the company’s articles that specifically mentions a meeting, but also the intent of his late father, company founder Ted Rogers, on how the trust’s power was to be used to remove directors at the $30-billion telco.

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“Words have to be given some meaning,” said Stephen Schachter, the lawyer for Rogers Communications.

The company’s disclosure and what the founder wanted are “not determinative, but it does line up,” he told the judge.

In addition to most of the A shares, the Rogers family also owns about 10 per cent of the company’s Class B shares. Those shares don’t carry votes, but shareholders outside the family who own them can still attend meetings.

“No minority shareholder has complained,” McEwan told Justice Shelley Fitzpatrick in his submission, asserting that lawyers for the company were attempting to “distract (from the) simplicity of the issue” she has to determine.

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Schachter countered that determining how a “significant public company” such as Rogers discharges something as crucial to corporate governance as the removal of directors needs to be scrutinized. He added that no power should be used “to overwhelm the language of the articles” of a corporation.

Before breaking for lunch, the judge asked the lawyers for input on whether they believe her choice is “all or nothing” on the issue of turfing and replacing the directors, and whether a meeting was required.

Later, she pressed Schachter on whether she was being asked to fill in gaps — interpreting what wasn’t definitively spelled out — to reach the conclusions he was looking for.

He responded that he found it “very troubling” to contemplate accepting the position that one person — Edward Rogers — could do what he wanted without consulting anyone else.

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“He cannot thumb his nose at due process,” the lawyer said.

The judge indicated that she hadn’t yet drawn any conclusions.

“I won’t go too far because I’m not taking that position,” she said.

David Conklin, another lawyer for Rogers Communications, urged the judge to consider broader issue of corporate governance in her decision for the benefit of all Rogers’ stakeholders.

Otherwise, “Mr. Rogers could change his mind in six months and replace any director,” he said. “He could replace the board — again. He could replace management — again.”

The legal battle has split the boardroom and the Rogers family. It has also created an unusual situation where two boards of directors each claim to be in control of the company.

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Edward Rogers maintains he tossed independent directors David Peterson, John Clappison, Bonnie Brooks, Ellis Jacob and John MacDonald on Oct. 22 with his written resolution. In their place, he appointed Jack Cockwell, Jan Innes, Ivan Fecan, Michael Cooper and John Kerr.

But the company insists the original board is still intact.

For that reason alone, observers expect the judge will expedite her decision.

“I recognize the urgency of the situation,” she said at the conclusion of Monday’s hearing. The matter was put over until 2 p.m. on Friday, by which time she suggested she may have reached a decision.

“I will give you a decision with reasons to follow if I’m able to,” the judge said, adding that there were many written submissions to read. “I’m just not sure where I’m going to be at.”

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The corporate and family drama at Rogers began with a move spearheaded by Edward Rogers to replace company CEO Joe Natale, citing concerns about performance and his ability to lead the company through a $16 billion takeover of Shaw Communications Inc., a deal that will transform the company if it is approved by regulators next year.

His plan was to install Chief Financial Officer Tony Staffieri in the top job. Instead, Edward Rogers’s mother and two sisters joined five independent directors to block the change and fire Staffieri on Sept. 29.

About three weeks later, the board stripped Edward Rogers of his role as chairman and gave it to lead independent director John MacDonald, a former AT&T executive.

In an affidavit filed ahead of Monday’s hearing, Ted Rogers’ widow Loretta said she had a “memorandum of wishes” left by her late husband when he died in 2008 instructing the chair of the family trust to undertake wide consultation within the Rogers family, which she said Edward did not do before attempting to cast aside longstanding directors.

Furthermore, she said, it was laid out in the memo that if there was a conflict with directors that could not be resolved through respectful negotiation, the chair must go through the “public gauntlet” of calling a shareholders meeting to seek their replacement.

McEwan, the lawyer for Edward Rogers, urged the judge to resist looking to the memo, which had been kept confidential since 2008, including from Class B shareholders.

“I submit it has no legal relevance,” he said.

— With additional reporting by Bloomberg