Topic: Class actions

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Class members opting out of secondary-market liability class actions and instituting their own claims – Are there prescription or forfeiture defences available under the Quebec regime?

The Quebec Superior Court, in California States Teachers’ Retirement System v. Bausch Health Companies Inc. (2020 QCCS 275), recently clarified the rules applicable to limitation periods in the context of secondary-market liability actions under the Quebec Securities Act (QSA).

Much like its Ontario counterpart, s. 225.4 QSA provides for an authorization mechanism whereby applicants wishing to institute a secondary-market liability claim against a public issuer must convince the court that their actions are taken in good faith and have a “reasonable possibility of success”. While such actions can take on the form of class … Continue Reading

Managing Securities Litigation Risks in the Age of Uncertainty

The price at which securities of many Canadian issuers are trading has been significantly affected by the global coronavirus pandemic. This will almost certainly impact their risk of litigation arising from the accuracy their public disclosures. For companies that are dual listed in the United States, the risks are likely enhanced.

These risks appear to be exacerbated for issuers whose shares trade on Canadian exchanges as a result of the recent suspension of Ontario limitation periods, giving security holders a longer time within which to commence litigation.

With this in mind, issuers are well advised to continue to work closely … Continue Reading

Directors and officers face increased liability risk due to climate change

Climate change has been a focus in the United States for quite some time now, and the US Securities and Exchange Commission (SEC) published interpretive guidance on climate change disclosures a decade ago. However, the times are changing—and the potential liability for directors and officers has never been higher. Climate change disclosures have been debated at the highest levels of the SEC, and the Plaintiffs’ bar can be expected to broaden their lawsuits beyond the usual fossil fuel producer or utility targets.

Norton Rose Fulbright has prepared a legal update that discusses the evolution of the SEC’s position with respect … Continue Reading

Proposed Changes to the Ontario Class Proceedings Act, 1992 Would Benefit Defendants and Their Insurers in Securities Class Actions

The Ontario government’s recent announcement of proposed changes to Ontario’s class proceedings legislation bodes well for defendants and their insurers. If the amendments become law, they would provide greater latitude to defendants seeking to narrow or dismiss claims prior to certification, make certification a somewhat steeper hill for class counsel to climb, and provide mechanisms to prevent duplicative multi-jurisdictional class actions from proceeding in Ontario. Details of certain of these proposed changes include the following:

Early dismissal motions and dismissal for delay

Prior to the motion for certification, motions by defendants that may dispose of the proceeding in whole or … Continue Reading

Clearing the Way: “Ice Breaker” Settlements in Class Actions

In a recent class action settlement approval hearing, Justice Belobaba of the Ontario Superior Court affirmed the value of early “ice breaker” settlements in complex class actions involving multiple defendants. In such a settlement, one defendant settles ahead of the rest for what may be viewed as a “token” amount, along with a pledge to provide cooperation to the plaintiffs. (Di Filippo and Caron v. Bank of Nova Scotia et al, 2019 ONSC 3282).

The Facts

 In the case in issue, the proposed settlement would resolve two class actions each involving substantially the same group of defendants, all … Continue Reading

US Second Circuit rules Issuer’s statements concerning regulatory compliance too generic to constitute material misstatements

On March 5, 2019, the United States Court of Appeal for the Second Circuit affirmed the dismissal of a class action claim alleging securities fraud based on purportedly misleading statements made by an Issuer regarding its regulatory compliance efforts. The Second Circuit concluded that the Issuer’s statements were too generic to cause a reasonable investor to rely on them, and rejected the claim as a “creative attempt to recast corporate mismanagement as securities fraud.” Singh v. Cigna Corp., No. 17-3484-cv, 2019 U.S. App. LEXIS 6637 (2d Cir. Mar. 5, 2019).

Background:

In early 2012, Cigna Corporation (Cigna or … Continue Reading

Alberta Securities Commission Declines to Stay Enforcement Proceedings In Face of Parallel Class Actions

In February 2019, the Alberta Securities Commission (ASC) declined to stay the hearing of pending ASC enforcement proceedings on the basis of the existence of parallel, pending class action proceedings.

Background

In June 2018, Staff of the ASC issued a notice of hearing against Alberta divisions of the Lutheran Church-Canada and several of their former officers and directors (the Respondents), alleging that the Respondents had made misrepresentations contrary to s. 92(4.1) of the Alberta Securities Act (material misleading statements) in connection with securities offered to members of the Lutheran Church.

The allegations followed the financial collapse of … Continue Reading

Motion Judge Erred in Law by Approving Class Counsel’s Fees

The Court of Appeal for Ontario recently set aside a decision approving the legal fees of class counsel on the condition that counsel would donate 40% of the approved fees to charity.

The appeal provides useful guidance for practitioners on fee approval motions in class actions.

The Settlement Agreement

Welsh v. Ontario, 2019 ONCA 41 involved a class action commenced in August 2015 under the Class Proceedings Act, 1992, S.O. 1992, c. 6 alleging that the province of Ontario had, for decades, negligently operated schools for the deaf and had breached its fiduciary duty and duty of care … Continue Reading

A tough break for third party litigation funding in Ontario? Not so fast.

The Ontario Superior Court (ONSC) issued two back-to-back decisions on acceptable litigation financing agreements, both involving the same third party funder.  While the ONSC continues to approve classic litigation financing arrangements, uncertainty remains as to whether third party financiers may profitably fund counsel fees in the context of class actions.

Classic funding schemes continue to receive unfettered court approval

In David v. Loblaw, 2018 ONSC 6469, Morgan J. approved IMF Bentham’s funding agreement in a class action regarding the alleged price-fixing of bread without modifications, recognizing litigation financing as a potential tool for access to justice.

The … Continue Reading

Take Note: Class Action Defendants May be Ordered to Bear the Costs of Notice to Class Members

Justice Perell’s decision in Fantl v. ivari, teaches class action defendants an important lesson in being careful what they wish for.  In a rare decision, he ordered that a defendant contribute the majority of the costs of providing potential class members with notice of certification.

Background

When a class action is certified by a court, efforts must be made to notify potential class members of the decision so that they are able to exercise their right to opt-out of the class.  Notice is usually provided by newspaper publication, advertisements and dedicated website, among other things.

Typically, the successful plaintiff … Continue Reading

The Importance of Materiality in Secondary Market Misrepresentation Claims: Paniccia v. MDC Partners Inc. Securities Class Action

In the recent decision of Paniccia v MDC Partners Inc., Perell J. refused to grant leave to proceed with a putative secondary market securities class action under Part XXIII.1 of the Ontario Securities Act (OSA) against MDC Partners Inc and certain of its officers on the basis that the alleged misrepresentations were not material.  The decision presents valuable insight into the assessment of materiality, an issuer’s obligation to disclose a regulatory investigation, and a plaintiff’s obligation to plead a corrective disclosure under Part XXIII.1.

Background to the Decision

In August 2015 the Plaintiff brought a putative … Continue Reading

US Supreme Court puts an end to untimely piggyback class actions

Companies confronting serial class actions won much needed relief from the US Supreme Court yesterday, in a decision that held that a class action tolls statutes of limitations only for putative class members’ individual claims, and not for later-filed class actions. A second class action must be filed within the limitations period, or it is barred. The opinion in China Agritech v. Resh (“Resh”), written by Justice Ginsburg, is a welcome development for companies that have been subject to repeated class action lawsuits raising the same claims.

The Resh decision stems from a perceived ambiguity in earlier decisions … Continue Reading

UPDATE: No Room for Double Talk: The Ontario Court of Appeal Addresses Restatements, the Reasonable Investigation Defence and the Test for Leave in Rahimi v. SouthGobi Resources Ltd.

On May 31, 2018, the Supreme Court of Canada denied SouthGobi Resources Ltd.’s application for leave to appeal the decision of the Ontario Court of Appeal, which I provided an update on October 7, 2018.  The Court of Appeal decision provides guidance concerning the availability of the defence of reasonable investigation to a claim under Part XXIII.1 of the Ontario Securities Act  in the context of a restatement, and the test for leave to bring such a statutory claim.   

 … Continue Reading

Reforming Class Actions in Ontario – Your Input Please!

On March 9, 2018, the Law Commission of Ontario (LCO) released its Consultation Paper entitled “Class Actions: Objectives, Experiences and Reforms”. The Consultation Paper is the next phase of the LCO’s Class Actions Project which is set to conduct a general review of the class action landscape in Ontario, with a view to providing a final report with recommendations for law reform where appropriate.

It has now been 25 years since the passage of the Ontario Class Proceedings Act, and this is said to be the first systematic review of the class action regime in Ontario … Continue Reading

CBA Proposal for a Framework to Facilitate Court to Court Communication and Coordination of Overlapping Class Actions Clears the First Hurdle

(The author was a member of the CBA National Class Actions Task Force 2016-2017)

At the CBA Annual Meeting on February 15, 2018, a resolution to approve, as best practices, a revised Canadian Judicial Protocol for the Management of Multi-Jurisdictional Class Actions was approved.  The resolution also urges Canadian courts that administer class actions to adopt the revised Canadian Judicial Protocol.

The Revised Protocol builds on the existing CBA Protocol providing for the creation of a Notification List of all counsel involved  in class actions involving the same or similar subject matter, and the approval and administration of settlements through … Continue Reading

Class actions come to the cryptocurrency markets

In the U.S. there has been an notable uptick in class action lawsuits launched against companies in the cryptocurrency market in late 2017. As public attention turned to the roller-coaster ride of cryptocurrency markets over the past year, it is not surprising that ambitious class counsel have jumped on the ride by issuing their first putative class actions against companies funded through initial coin/token offerings (ICO) and companies that are otherwise active in the cryptocurrency space.  With over $3 billion dollars raised through ICOs in 2017, and few signs of the market dynamics changing any time soon, we … Continue Reading

Ontario Court confirms jurisdiction over claims of all Canadians who purchased shares on NASDAQ and TSX: Paniccia v. MDC Partners Inc. et al, 2017 ONSC 7298

Plaintiffs in class action claims for misrepresentation in the secondary market recently scored a victory when the Ontario Superior Court of Justice determined[1] that not only does it have jurisdiction over these claims brought by Canadians who purchased shares of a company registered in Canada on a foreign stock exchange, but that Canadian securities and tort law should apply to such claims.

Background

In August 2015 Mr. Paniccia commenced a class action against MDC Partners Inc and its officers (together, “MDC”) in Ontario for both a statutory misrepresentation claim under Part XXIII.1 of Ontario’s Securities Act[2] and negligent … Continue Reading

Leave to Appeal Denied in Wong v Pretium Resources

In a previous post, You Get it Right and it’s Still a Misrepresentation: the Paradox in Pretium, we reported on the decision of Justice Belobaba in Wong v Pretium Resources Inc. granting leave to the plaintiff to commence an action for secondary market misrepresentation under Part XXIII.1 of the Ontario Securities Act.

On December 1, 2017 the Divisional Court dismissed the defendants’ motion for leave to appeal.… Continue Reading

Ontario Superior Court Grants Costs Exceeding $1 million to Successful Defendants in “Entrepreneurial” Class Action

The Yip v. HSBC Holdings plc[1] saga continues with the granting of a costs award in the amount to $1,000,455.22 to the successful defendants following a successful motion by the corporate defendant to stay the action on jurisdictional grounds and an unsuccessful cross-motion by the plaintiff for a declaration that the corporate defendant was a responsible issuer (discussed in our post here). That decision is under appeal.

The decision is a cautionary tale for entrepreneurial plaintiffs bringing big dollar claims that may be perceived as overreaching.

The Allegations and Motions

Yip sued HSBC Holdings plc (HSBC) … Continue Reading

No Common Law Duty of Care Owed by Underwriters to Investors in a Bought Deal: LBP Holdings Ltd. v. Hycroft Mining Corporation, 2017 ONSC 6342

No Common Law Duty of Care Owed by Underwriters to Investors in a Bought Deal: LBP Holdings Ltd. v. Hycroft Mining Corporation, 2017 ONSC 6342

On October 24, 2017, Justice Perell of the Ontario Superior Court of Justice dismissed a motion to certify claims for negligent misrepresentation and negligence against two underwriters primarily on the basis that a class action was not the preferred procedure.[1] The Court also held that the plaintiff’s common law negligence simpliciter claim did not disclose a cause of action. The foreseeability and proximity stages of the Anns v Merton[2] test arguably were … Continue Reading

A Cautionary Tale for Defendants Opposing Certification

Perhaps in tongue and cheek, perhaps not, Perell J. begins his decision in Berg v. Canadian Hockey League, 2017 ONSC 5382, by quoting Winston Churchill’s famous World War II speech :

We shall defend our island, whatever the cost may be, we shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender.

The quote sets upon the razor sharp line between zealous advocacy and over pleading – dubbed “Churchillian resistance”[1] –  in certification motions.

In … Continue Reading

Mitigating Securities Litigation Risk From Software Problems

Public companies can face significant securities litigation risk over defective algorithms, data errors and software glitches. As securities class action filings continue to increase across the board, plaintiffs lawyers have attacked numerous companies over stock price declines that occur after software problems are revealed. Recent court decisions denying dismissal in securities class actions against Fitbit and OSI Systems illustrate the risks that technology companies face when there is a gap between their public disclosures and the actual status of their software, including undisclosed defects in software algorithms. Short sellers have also targeted companies with negative investigatory “reports” over alleged software … Continue Reading

No Room for Double Talk: The Ontario Court of Appeal Addresses Restatements, the Reasonable Investigation Defence and the Test for Leave in Rahimi v. SouthGobi Resources Ltd.

The recent decision of the Ontario Court of Appeal in Rahimi v. SouthGobi Resources Ltd., 2017 ONCA 719 provides further guidance concerning the role of the judge on a motion for leave to commence a secondary market class action pursuant to s. 138.8(1) of the Securities Act (the Act) and the application of the defence of reasonable investigation.

In particular, the decision stands for the following:

  1. On a motion for leave under s. 138.8, the motion judge’s obligation is to critically scrutinize the entire body of evidence filed on the motion, including gaps in the evidence filed by the
Continue Reading

The Horror Show Continues: Application of the Limitation Period in s. 138.14 of the Ontario Securities Act in Kaynes v BP, PLC

In Kaynes v. BP, P.L.C. [2017] ONSC 5172, Justice Perell characterizes his decision about the operation of the limitation period set out in s. 138.14 of Part XXIII.1 of the Ontario Securities Act (the Act) as “the latest sequel or prequel in what has turned out to be the case law equivalent of a horror-movie franchise”.

Background

The decision arises from a Rule 21 motion brought by BP for a ruling that the putative class members’ statutory misrepresentation claims were statute-barred under s. 138.14.  The motion was brought prior to argument of the motion for leave under … Continue Reading

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