NEWS
MI Developments shareholders file suit over track acquisitions
Posted: Thursday, July 08, 2010 4:51 PM
by Frank Angst
A group of MI Developments Inc. shareholders upset with the real estate company’s acquisition of racetracks from its bankrupt subsidiary Magna Entertainment Corp. are pursuing litigation in Canada.
The Toronto Star reports five U.S.-based investment firms claim that through related-party loans and other transactions MI Developments ensured the racetrack assets of Magna Entertainment would remain under the control of Frank Stronach, who controls MI Developments and had controlled the bankrupt subsidiary as founder and chairman.
The claim, filed in Ontario Superior Court of Justice, says MI Developments directors breached fiduciary duties by approving loans that “were not reasonable and fair.” The U.S. firms pursuing the litigation include Farallon Capital Management and represent 26.1% of the equity in MI Developments, the Star reports.
MI Developments’ actions have previously been questioned in legal motions that did not overturn the transactions. MI Developments Chief Executive Officer Dennis Mills believes the company will prevail in the current statement of claim, if the filers take action.
“We believe that this claim is entirely without merit,” Mills said. “It appears that these shareholders filed their claim weeks ago, on May 21, 2010, but decided not to serve it upon MID or any of the other defendants, to guard against the expiry of a limitation period.
“This is the second claim of this nature commenced against MID by dissident shareholders. The first claim was determined by the courts to be entirely without merit and was dismissed both at trial and on appeal. The shareholders were admonished by the courts for their conduct in pursuing those claims, and were required to pay the costs of MID on a substantial indemnity basis. If and when the shareholders who have commenced this new claim decide to pursue it, MID will defend the claim vigorously and will once again seek the highest cost award possible in the circumstances.”
Frank Angst is a Thoroughbred Times senior staff writer
