NWT court rules on complaint over First Nation’s legal claim

An NWT Supreme Court Justice has ruled the Łútsël K’é Dene First Nation does not have to rewrite its legal claim against a law firm, but has struck portions that “seek to litigate the litigation.”

In a written decision on Monday, Justice Nicholas Devlin ruled largely in favour of the First Nation’s companies in a dispute regarding the wording of a lawsuit against Reynolds Mirth Richards & Farmer LLP, or RMRF.

Tsa Corporation, Ta’egera Company and Denesoline Corporation are suing RMRF and its four partners, alleging the law firm knowingly assisted Ron Barlas – the former head of the First Nation’s business arm – in misappropriating millions of dollars and deceiving and intimidating First Nation’s members.

The suit seeks $30 million in compensation and damages and an additional $2.5 million in punitive damages.

RMRF has denied any knowledge of or complicity in Barlas’ misconduct. The law firm claims any losses were caused by Barlas’ actions, as well as by the negligence and breach of fiduciary duty of the companies’ board members.

RMRF recently sought to have the First Nation’s statement of claim in the lawsuit struck, arguing it is too long, “scandalous,” designed to unnecessarily embarrass the law firm, and an abuse of process that attacks RMRF for defending itself. The firm asked that the claim be redrafted in a more traditionally acceptable and rule-compliant manner.

The First Nation, meanwhile, argued the claim contained the level of detail necessary given the seriousness of the allegations, noting the law firm was easily able to respond to the claim with a statement of defence.

The First Nation alleged RMRF’s motion to strike the claim continues a pattern of litigation that attempts “to obstruct a small and vulnerable First Nation from seeking remedy for legal abuses.”

‘Fairness and functionality’ over form

In his decision, Devlin acknowledged that the First Nation’s claim is “long and detailed” and tells a flowing story in a narrative form over 71 pages.

He said while overlong claims can “invite a lengthy, unfocused, expensive and ultimately untriable litigation,” longform narrative claims can be well done and are becoming more common.

“A blanket rule that short is good and holy serves neither the profession nor the public. What is sacred is fairness and functionality, not form,” he wrote.

In this case, Devlin said, he was not convinced the length of the Łútsël K’é Dene First Nation’s claim made it “scandalous, frivolous, vexatious, otherwise prejudicial, likely to embarrass or delay the fair trial of the action, or otherwise abusive of the court process.”

He wrote that he found the claim “to be fair, functional and more conducive to efficient litigation than not.”

“They might not like it but RMRF is not functionally prejudiced by the claim in any way,” he wrote.

Devlin also did not find there was any “functional disadvantage or unfairness” due to the claim’s use of direct quotes from Barlas’ instructions to RMRF.

He did find, however, that some of the paragraphs in the claim “go well beyond what is necessary or helpful.” Rather than requiring the First Nation to rewrite “excessive quotations” in the claim, he ordered the First Nation to pay RMRF’s costs for its legal challenge of the claim if the law firm is successful in the main lawsuit.

“Forcing the plaintiffs to redraft the claim to tighten the overall language would yield trivial benefits at substantial cost,” he wrote.

‘Abuse of process’

Devlin also ruled in the law firm’s favour when it came to the final section of the First Nation’s claim, which detailed actions RMRF took after it learned the First Nation planned to sue the firm.

In that section of the claim, the First Nation accused RMRF of “a further attempt … to avoid scrutiny of its own conduct by attempting to intimidate and silence” the First Nation through legal threats. The section included a reference to a pre-litigation letter sent by legal counsel for RMRF, urging the First Nation not to file the lawsuit prior to a closer review of the facts and discussion between the parties.

The law firm took issue with what it described as being accused of wrongdoing for defending itself.

Devlin agreed with RMRF.

“It is unseemly for parties to sue one another over suing one another,” he wrote. “The circularity of characterizing a party’s defence as a perpetuation of the wrong it is defending itself against constitutes an abuse of process.”

Devlin added while legal threats to “unsophisticated individuals” on a law firm’s letterhead could be considered intimidation, at the time the letter was sent, the First Nation was represented by legal counsel and the First Nation’s companies were under the control of a receiver.

Devlin struck several paragraphs of the statement of claim – and one paragraph of the First Nation’s reply to RMRF’s statement of defence – that sought to “litigate the litigation.”

Gold, properties and frozen assets

The decision is the latest in a series of legal battles related to the misappropriation of millions of dollars from the Łútsël K’é Dene First Nation’s companies.

In July 2024, NWT Supreme Court Justice Karan Shaner ruled in favour of the First Nation in finding that Barlas had “engaged in egregious conduct and abused his position” as the chief executive officer of Denesoline. Barlas is now appealing that ruling.

In other decisions connected to the case, the court has ordered a lawyer who held gold for Barlas to return a payment he had received, ordered Barlas to transfer ownership of a property to Denesoline, and released some of Barlas’ frozen assets to help pay for his appeal.

Two related lawsuits against RMRF and accounting firm KPMG are ongoing. Both firms have denied allegations of wrongdoing.

Correction: March 19, 2025 – 8:21 MT. An earlier version of this article stated Justice Nicholas Devlin ordered the Łútsël K’é Dene First Nation to pay RMRF’s costs for its legal challenge of the statement of claim. The story has been updated to reflect the fact that Devlin ordered the First Nation to pay those costs only if the law firm is successful in the main lawsuit.