Diamond Fields seeks dismissal of suit

Facing a lawsuit by shareholders of Exdiam, Diamond Fields Resources (DFR-T) has asked a Texas court for early discovery hearings to consider a motion to dismiss the action.

The lawsuit, brought by two Texan companies, International Resource Ventures and Hanvey Production, and by individual shareholders Charles Burford and Farid Al-Awadi, named Diamond Fields, its U.S. unit DMC, Inco (N-T), and Diamond Fields chairmen Jean Boulle and Robert Friedland. The plaintiffs have since withdrawn their claim against DMC.

The plaintiffs allege in their petition to the District Court of Dallas County that Boulle formed and financed Diamond Fields in violation of fiduciary duties he owed to Exdiam and its shareholders. Their petition contends “the entire corporate existence of Diamond Fields is a corporate opportunity belonging to Exdiam,” and that both Boulle and Friedland used confidential information belonging to Exdiam to pursue business opportunities for Diamond Fields.

The plaintiffs brought two previous actions against Diamond Fields, one in Texas last year, and the other in Arkansas in February 1996. Both were withdrawn, and the withdrawal is a central aspect of Diamond Fields’ defence.

“Lawyers don’t file and dismiss, file and dismiss, if they have good claims,” says James Maloney, Diamond Fields’ counsel in the Texas action. The company contends that the voluntary dismissals of the two earlier actions should mean that the third action cannot be heard, since the rules of civil procedure in Arkansas allow a suit to be resurrected only once.

The Diamond Fields lawyers also argue that the claim is a frivolous one, intended only to harass the parties to Inco’s takeover deal. In reply to questions about a possible settlement out of court, Maloney did not rule out a payment but said, “we have not had [offers] that merited a response, and we’re not prepared to have this deal held hostage.” On the legal merits of the claims, he said, “we have a saying in Texas that accurately describes this: `all hat and no cattle.'”

Diamond Fields’ motion was being heard at presstime, and the company expected that if the motion was successful, its motions to dismiss the action might be granted in the next three weeks.