In an opinion issued last Thursday, a top Canadian court may have opened the door for U.S. plaintiffs firms to participate more openly in Canadian class actions.

The Ontario Superior Court–the provincial court handling Canada’s most important class actions–ruled that direct involvement of U.S. counsel is permissible in a year-old stock-drop suit against Toronto-listed mining company Timminco Limited. The U.S. firm Milberg has been open about its assistance to the eight-lawyer class action boutique Kim Orr in the case. The class action, one of the country’s largest claims under a new U.S.-style securities law, seeks Can. $520 million in damages.

Previously, the Ontario Court had ruled against plaintiffs in at least one case where U.S. involvement became a central issue. In a 2005 decision in Poulin v. Ford, a judge threw out a product liability class action, noting the Canadian firm’s relationship with Motley Rice had gone too far. In that case, Motley was essentially underwriting all litigation costs, and had an agreement with its Canadian counterpart to split the contingency fee.

In this case, Milberg’s role appears to be less direct: It is helping Kim Orr in its investigation and document review, and is providing “strategic advice.” “Prior decisions had really never raised the issue of the extent of American counsel’s involvement this early on,” said Michael Spencer, a Milberg partner involved in the Timminco case. Milberg is actively looking at other potential matters it can help Kim Orr with, he added.

The issue of Milberg came up in a bitter dispute between two plaintiffs firms over which should be granted lead counsel status in the case, known in Canada as a carriage battle. Siskinds and Kim Orr, two elite Canadian plaintiffs class action firms described in detail in this August story in The American Lawyer, filed competing complaints late last year on the heels of Timminco’s stock collapse.

In a 21-page decision explaining his selection of Kim Orr, Justice Paul Perell indicated that, short of taking control of the case, Milberg’s involvement was entirely proper. “It would be grounds for disqualification of an Ontario law firm seeking carriage of an Ontario class action proceeding if the Ontario firm entered into an arrangement where an American law firm, or any foreign law firm for that matter, assumed de jure or de facto the role of the lawyer of record for the representative plaintiff, unless the foreign law firm obtained permission to practice law in Ontario,” Perell wrote. “I do not understand Milberg LLP’s proposed involvement as usurping the role of Kim Orr.”

Payment for Milberg’s services might appropriately be carved out of any future verdict or settlement. “There is nothing inherently wrong with…obtaining services from foreign law firms so long as there is no interference with or usurpation of the lawyer and client relationship,” Perell wrote.

“The central point is that the Canadian courts want strong Canadian counsel calling the shots with the American firms in the supportive role,” says Won Kim, name partner at Kim Orr. The 2005 case was different, he notes, in that “the court viewed that it was Motley Rice who was controlling every facet of the case, with a Canadian front man.”

Justice Perell chastised Siskinds’s A. Dimitri Lascaris for bringing up Milberg’s checkered past. “Unkindly, Siskinds draws attention to a serious stain on the reputation of Milberg LLP,” writes Perell. But “Milberg LLP does not bear the mark of Cain.” The two Milberg lawyers involved in the current filing, Michael Spencer and Arthur Miller, “were not parties to any wrongdoing and…thus no more needs to be said about this…matter.” Spencer is currently trial counsel in an ongoing U.S. securities class action trial, In re Vivendi Universal, S.A., Securities Litigation; Miller, a Milberg special counsel, heads Milberg’s appellate practice and is a professor at New York University School of Law.

The next step in the Timminco case, a motion for leave to proceed, will determine whether the case meets the legal bar to go forward. A date for that motion has not yet been set.