Private equity firm Partners Group just got hit with a trade-secrets lawsuit from a railroad company that says it took investment ideas
- Private-equity firm Partners Group has been hit with a trade secrets lawsuit by a railroad operator with which it once discussed possible investing opportunities, according to a lawsuit filed in New York state court.
- MidRail, a freight rail operator, claimed it entered into a non-disclosure agreement with Partners Group in 2017 to discuss rail investments together.
- But after MidRail provided Partners Group with "confidential business information," including about its merger and acquisition pipeline and business model, the PE shop used this information for its own investing purposes, the lawsuit alleges.
- The lawsuit claims Partners Group used the MidRail information to compete directly with MidRail in a 2019 bid for US rail operator Patriot Rail.
- MidRail ultimately won the bid, but paid $100 million more for Patriot than it had originally planned, the lawsuit said.
- A Partners Group spokeswoman said: "The lawsuit filed today is wholly without merit, and Partners Group will vigorously defend against the asserted claims."
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Private equity firm Partners Group has been hit with a trade secrets lawsuit by a railroad operator with which it once discussed possible investing opportunities, according to a lawsuit filed in New York state court.
MidRail, a freight rail operator, claimed in the lawsuit that it entered into a non-disclosure agreement with Partners Group in 2017 to discuss rail investments together.
But after MidRail provided Partners Group with "confidential business information," including about its merger and acquisition pipeline and business model, the PE shop used this information for its own investing purposes, the lawsuit alleges.
The lawsuit said Partners Group solicited MidRail's "most sensitive information" and then used it to compete directly with MidRail, including in a 2019 bid for U.S. rail operator Patriot Rail.
MidRail, partnering with a new private equity firm, won the bid, but says that it paid $100 million more for Patriot than it had originally intended, according to the lawsuit.
Reached for comment on Friday, a Partners Group spokeswoman called the lawsuit "wholly without merit."
"Partners Group will vigorously defend against the asserted claims," she said.
Patriot bid allegations
The events leading up to the Patriot bid, as alleged by MidRail, help explain the lawsuit.
MidRail said it introduced the potential purchase of Patriot to Partner Group in 2018. That was before Patriot was even on the market for sale, MidRail said.
Then, following that introduction, Partners Group "responded with interest" and MidRail continued to share information about the possible deal throughout 2018.
MidRail stated that information provided to Partners Group was done with the express understanding that the PE shop would use the information "only for evaluating and/or entering" into business transactions with MidRail and for no other purpose.
It also referenced a non-disclosure agreement, which MidRail claims it later found Partners Group to have violated.
Deal talks
In May and June 2019, they continued to talk about about Patriot, which by then was engaged in a formal sale process, the suit alleges.
At this time, the lawsuit said, Partners Group told MidRail it was planning a first round bid for Patriot and assured MidRail that if it made it past the first round, it would partner with MidRail.
MidRail provided Partners Group with confidential information about its strategy for Patriot, the lawsuit said, including information on how the materials for a previously discussed deal could be adapted for a Patriot acquisition.
Then, Partners Group made "repeated requests" for detailed information from MidRail about the application of MidRail's strategy and M&A pipeline as it related to Patriot, which MidRail provided.
But after getting into the second round of bidding, Partners Group refused to work with MidRail, the lawsuit said.
In July 2019, the lawsuit said Partners Group met with Patriot, including a management meeting and a dinner, during which Partners Group "improperly shared MidRail's confidential plans for Patriot... while falsely representing these MidRail creations as [Partners Group's] own."
As a result, MidRail "was forced to drastically increase its bid, and therefore cut into its projected investment profits, to compete against (for all practical purposes) itself," the lawsuit said.
MidRail teamed up with a new equity partner and ultimately bid $100 million more for Patriot than it had originally planned, the lawsuit said.
Fundraising claims
It also said in the suit that, based on information and belief, Partners Group has continued to use its information including as part of fundraising efforts.
The lawsuit referred to a new $5 billion Euro infrastructure investment fund Partners Group was raising.
It said that Partners Group featured MidRail's confidential information in order to solicit investments for the fund.
The lawsuit seeks economic damages and says it was harmed at least in the hundreds of millions of dollars.