Focus: Securities class actions becoming big business

If you don’t think that securities class actions have become big business in Canada, think again.


Between 2008 and June of 2016, Canada has seen 37 settlements of securities class actions amounting to $662.8 million, according to proxy advisory firm Institutional Shareholder Services.

Only halfway into 2016, and public companies have already paid out $32 million in settlements, which exceeds last year’s $26.5-million total. And that’s only settlements. Millions of dollars more are being spent prosecuting and defending claims.

Take the recent Ontario Superior Court of Justice cost ruling in Green v. Canadian Imperial Bank of Commerce, where Justice G.R. Strathy ordered CIBC to pay the plaintiffs costs of $2.7 million for a case that has yet to reach trial.

Andy Cottrell, associate director, head of class action client service at ISS, says Canada has become a world leader in securities class actions, fighting with Australia for second spot.

He says that, five to six years ago, the U.S. was the automatic choice of jurisdiction for filing most securities class actions; however, the 2010 U.S. Supreme Court ruling in Morrison v. National Australia Bank Ltd. changed that globally. That’s when the U.S. Supreme Court shut down access to its courts for investors whose shares trade on foreign exchanges.

“Since that decision has been made, Australia has really gotten significantly more active,” he says. Now, Canada and Australia are leapfrogging each other for second place. He says the number of cases each year varies.

“It ebbs and flows,” he says.

Currently, though, some question if we are entering a lull. Linda Fuerst, a partner at Norton Rose Fulbright LLP, says that, in 2015, there were only four statutory securities class actions launched in Canada, the lowest since the 2008 financial crisis. Yet, the U.S. saw 234 filings in 2015, the highest since 2008. Canada also saw a bumper crop of 18 initial public offerings filed in 2015, which often results in some filings. Yet, none have surfaced.

“It’s puzzling why that happened last year,” says Fuerst, speculating that the fact that many of the IPOs outperformed the market possibly held down the filings.

“There haven’t been a ton of new filings,” agrees Mike Robb, a plaintiff class actions lawyer at Siskinds LLP in London, Ont.

“They tend to happen when the markets are rough.”

Nonetheless, there is still a strong pipeline of cases and it seems that every month a new ruling springs up adding to the case law. For example, carriage motions, where plaintiffs fight for control over a class suit, saw two rulings back to back in the early part of summer, a rarity.

In early June, in Kowalyshyn v Valeant Pharmaceuticals International, Inc., the Ontario Superior Court provisionally granted carriage of the Valeant class action to a consortium of Sutts Strosberg LLP and Koskie Minsky LLP, representing Joyce Kowalyshyn, over a team of Siskinds and Rochon Genova LLP, representing Lorraine O’Brien, in what Justice Paul Perell called a “hard fought” motion.

He noted “determining carriage was very difficult. . . . the proposed class actions are very complex and advance gargantuan claims for many billions of dollars, and the carriage battle was between well matched Class Counsel, whose firms collectively would have undoubtedly already invested a great deal of money for the proposed class actions.”

“The rival law firms were arrogantly proud about the merits of the design of their respective class actions and aggressively dismissive of their rival’s plans.”

Perell examined 16 factors to consider when determining carriage, and sided with the Kowalyshyn team, staying the O’Brien case, subject to further possible stay motions involving a similar Quebec action.

Then, in July, the Ontario Court of Appeal issued its carriage motion ruling in the Mancinelli v. Barrick Gold Corporation appeal, a case involving disclosures around the gold miner’s Pascua-Lama mine.

The appeal court upheld the lower court ruling and awarded carriage to a group headed by Rochon Genova, which included Merchant Law Group LLP and Rosen Naster LLP, over the dream team of Koskie Minsky, Siskinds, Sutts Strosberg and Groia and Company. The court held that the lower court was “entitled to deference” and “the appellants demonstrated no legal error in the application of the [carriage] test.”

The Koskie consortium argued that its claim was more focused and streamlined, and that its team had greater expertise in securities class actions. They also took issue with Merchant’s presence in the consortium, given its history of disciplinary action and judicial criticism, but those arguments didn’t fly with the appeal court.