Law360 Canada ( January 14, 2022, 6:21 AM EST) -- Appeal by the defendants Varma, Madra and Palihapitiya from the trial judgment finding them jointly and severally liable for $3.36 million in damages and $12.33 million in disgorgement of profit. Cross-appeal by the respondent from the quantum of the disgorgement order. The respondents sued the appellants, asserting various causes of action, including breach of fiduciary duty, breach of contract, inducing breach of fiduciary duty and inducing breach of contract. The respondent Extreme Venture Partners Fund I LP (“Fund I”) was a venture capital fund that provided seed capital to start-up technology companies. Fund I was a limited partnership. Its general partner was EVP GP. Varma and Madra were managing directors of Fund I and shareholders of EVP GP. Madra and Varma established a second fund named Extreme Venture Partners Annex Fund I LP (“Annex Fund”) and surreptitiously obtained $5 million in financing from Northleaf. After the Annex Fund was established, Madra and Varma provided Northleaf with confidential information about Fund I’s portfolio and investment strategy. As a result, Annex Fund invested in six of Fund I's most successful portfolio companies for two years. One of Fund I’s investments was Xtreme Labs. The respondents sold their shares in Xtreme Labs to Palihapitiya for $18 million. Prior to the sale, the appellants carved certain assets out of Xtreme Labs and transferred them to a holding company. One of those assets was an equity interest in Hatch Labs which later sold for $30 million. The trial judge found Varma and Madra breached their duties of honesty, loyalty and confidentiality owed by being directors of EVP GP in starting the Annex Fund independently. She found the appellants worked together and coordinated their efforts to present Palihapitiya's offer to buy Xtreme Labs and hid this coordination and pressured Fund I’s board to accept the offer. They acted out of self-interest as Palihapitiya’s offer to buy the company was their opportunity to increase their compensation and equity in the business. The trial judge also found that Varma and Madra worked with Palihapitiya to facilitate his acquisition of Xtreme Labs at a discounted purchase price. The trial judge based the amount of the disgorgement award on the proportion of shares of Xtreme Labs that Fund I held at the time of the transaction. The respondents argued a prophylactic disgorgement order necessarily required the disgorgement of all profits received from the transaction. The Varma/Madra appellants disputed the calculation of damages on the sale of Xtreme Labs. The Palihapitiya appellants also argued that the trial judge erred in imposing joint and several liability for her disgorgement order and that the trial judge erred in finding that Palihapitiya knowingly assisted in the breaches of fiduciary duty....