Fox Paine co-founder sues his colleagues(2)

Saul Fox has filed a lawsuit against his firm’s co-founder, Dexter Paine, claiming that Paine is trying to force him out of the firm.

Saul Fox, co-founder of Foster City, California-based buyout firm Fox Paine & Co. is suing his partner W. Dexter Paine III, claiming that Paine made a series of moves to force him out of the firm.

The story was first reported on Bloomberg on 2 September.

Paine set up a new management company and fund, Fox Paine Management III and Fox Paine Capital Fund III, respectively, in 2005, and at the time obtained Fox’s permission to use the Fox Paine name and assets to support the fund. But in his lawsuit, Fox claims that Paine recruited nearly all of the firm’s employees for the fund, and tried to “enrich himself and his new venture at the expense of Fox and FPC [Fox Paine & Co.], and even to drive Fox from the firm”.

Fox also claims that Paine tried to sell several portfolio companies of other funds while Fox was in Australia, attempting to hold a board meeting in May to discuss potential deals.

A spokesperson for Fox Paine Management III said the suit has “no merit”.

“In setting up and managing Fox Paine Management III, LLC, we obtained a license from Fox Paine & Company and have always adhered to a set of mutually agreed-upon terms for sharing resources and costs,” according to a Fox Paine Management III statement. “Mr. Fox has no managerial, investing or strategic role in Fox Paine Management III, and this lawsuit will have no effect on our approach to our business, operations or investments.”

The statement added: “After so many years of working together, Dexter Paine and the employees of Fox Paine Management III are of course disappointed that Saul Fox has filed this suit.  It has no merit, and we offered to mediate the issue, but were rebuffed. . . Mr. Fox has no managerial, investing or strategic role in Fox Paine Management III, and this lawsuit will have no effect on our approach to our business, operations or investments.  Mr. Paine also remains committed to fulfilling his ongoing responsibilities as president of Fox Paine & Company, a company he co-founded.”

Fox previously worked at Kohlberg Kravis Roberts, before he founded Fox Paine with Paine in 1997. Paine was a senior partner at Kohlberg & Co., a firm formed after Jerome Kohlberg parted ways with KKR, of which he was a co-founder.