A pair of groundbreaking rulings issued Monday by an Ontario judge in a securities class action has suddenly made the province a much more attractive jurisdiction for plaintiffs pursuing global securities litigation.
The case, filed against IMAX Corp. and several individual defendants in Toronto in the fall of 2006, is considered a litmus test for a new securities law creating U.S.-style civil liability for misrepresentations that affect stock market values.
Monday’s two-part decision permits the litigation to proceed and separately certifies a global class of investors — no small matter considering that some 80-85 percent of investors reside outside of Canada. The decision also explicitly calls the threshold for such pleadings a low one, which “will no doubt be cheered by investors, and jeered by Bay and Wall Streets,” wrote Jim Middlemiss at The Legal Post. (Click here and here to read the rulings.)
The allegations lodged by Canadian investors closely echo those in an IMAX claim filed in federal district court in Manhattan at about the same time. Both actions allege that the entertainment technology company and its officers and directors publicly misrepresented corporate earnings. (In August 2006, IMAX disclosed that it was being investigated by the Securities and Exchange Commission and that it had not met its earnings targets, and its stock price plunged.) Coughlin Stoia Geller Rudman & Robbins replaced previous lead plaintiffs counsel last June in the U.S. action, which has survived a motion to dismiss. An investor class has not yet been certified in the New York case.
A. Dimitri Lascaris of Siskinds, who is leading the Ontario action with Jay Strosberg of Sutts Strosberg, told us that it is “a very good day for the investing public in Canada.” (For more on Lascaris, read our story on Canadian class action litigation in the August issue of The American Lawyer.)
Lascaris and Strosberg have been waiting a year for a decision; oral arguments on the motion for leave and for class certification took place last December.
“It’s a terrific result,” Strosberg told the Litigation Daily, calling the judge’s opinion “enormously significant.”
McCarthy Tetrault litigators R. Paul Steep and Dana Peebles led IMAX’s defense; both declined to comment on the ruling. But in their opposition arguments to certification, they argued that the judge shouldn’t certify a global class because the U.S. was already handling the class action and was the superior venue for such claims. Lascaris and Strosberg presented briefs filed by the U.S. defense counsel showing that the U.S. defense counsel also argued against the creation of a global class in their opposition to class certification, noting that Canadian investors should be excluded because the action in Canada was “superior.” That led van Rensberg to conclude that the defendants were trying to have it both ways, noted Kevin LaCroix in his post on The D&O Diary blog Tuesday.
LaCroix wrote that the rulings make it more likely “that litigants may seek to pursue claims in Ontario not to support litigation elsewhere, but for its own sake and purposes, without reference to litigation in the U.S. or elsewhere.” But he added that, given that the principles reflected in the decision are “most compelling” to Canadian companies, “it is unlikely that the Ontario courts will be flooded with securities litigation involving companies from outside Canada.”
Lascaris, however, has already been challenging that notion: he filed a $550 million investor class action against AIG in November 2008 under the same new law. “Our court certified, rightly, a global class, and the door is now open for foreign investors to benefit from that protection,” he told the Litigation Daily. (AIG’s defense has filed a motion that the suit should be thrown out on forum non conveniens grounds; an oral argument is set for early February and a decision there is also expected to clarify the reach of Canadian securities laws.)
Strosberg, meanwhile, is seeking global class certification in an investors suit against Canadian mining company NovaGold Resources Inc.; a parallel U.S. claim has likewise survived a motion to dismiss. “Defendants now have to consider cross-border aspects of a class action,” he said. “It no longer matters where a case is initiated, whether in the Southern District of New York or the Ontario Superior Court of Justice.”
This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.