Ex-Leaf Lanny McDonald in lawsuit over $1.6B quarry

CALGARY— A group of investors led by former hockey great Lanny McDonald was facing off Wednesday against corporate heavyweight Brookfield Asset Management Inc. in the Alberta Court of Appeal.

The two sides are at odds over how a company called Birch Mountain Resources Ltd. went bankrupt in 2008, and how its $1.6-billion limestone quarry in the heart of Alberta’s oilsands ended up in Brookfield’s hands for less than $50 million.

McDonald and his co-plaintiffs allege in court documents that Brookfield subsidiaries used “misleading,” “usurious” and “oppressive” actions to gain control of the company and its Hammerstone quarry.

Brookfield said the accusations are “meritless, frivolous and an abuse of process” in court filings.

Last year a Calgary judge agreed, dismissing the case and ruling that there was no merit to the claim. Now McDonald, who became an independent director and shareholder of Birch Mountain following his storied NHL career with the Toronto Maple Leafs, Colorado Rockies and Calgary Flames, is back in court armed with new evidence as his legal team tries to launch an appeal.

McDonald could not be reached for comment, but former lead plaintiff Wanda Bond said in an email Wednesday that “we are confident that we will win this appeal.”

The stakes are high though, with an appeal to the Supreme Court of Canada the only remaining option if the plaintiffs fail, Bond said.

For John Mazag, a Birch Mountain shareholder who had invested most of his savings and then lost everything when the company went bankrupt, the appeal is important both financially and for the principle at stake.

He said he was hopeful when Brookfield subsidiary Tricap Partners Ltd. agreed to invest in Birch Mountain because it had the deep pockets to help fund the hundreds of millions of dollars needed to put the quarry into full production.

Brookfield, which declined to comment, said in court filings that in 2008, Birch Mountain defaulted on loan provisions several times, was losing money, and was failing to meet production targets.

By November 2008, Tricap called in its loan that was secured by all of Birch Mountain’s property, and eventually took control of the quarry.

The plaintiffs say Tricap didn’t act in good faith, while Brookfield said Tricap met all obligations under the loan agreement.