Transcript 2010 D&O Symposium International D&O: Focus Canada New York City ~ February 3 & 4, 2010 International D&O: Focus Canada MODERATOR: David B.

2010 D&O
Symposium
International D&O:
Focus Canada
New York City ~ February 3 & 4, 2010
International D&O:
Focus Canada
MODERATOR:
David B. Williams, Senior Vice President,
Chubb Insurance Company of Canada
PANELISTS:
Justice Colin Campbell, Superior Court of Justice, Ontario Superior Court
Jay (A.R.) Cassidy, Esq., Senior Vice President,
FINPRO - Claims Advocacy Practice, Marsh Canada Limited
Alan D’Silva, Partner, Stikeman Elliott
Dimitri Lascaris, Esq., Partner, Siskinds LLP
Rissa Revin, LL.B., Senior Vice President, Chief Claims Officer,
Liberty International Underwriters Canada
Today’s Agenda
I.
Comparative Overview of Canadian & U.S.A.
Securities Law
II.
Class Action Landscape In Canada
III. IMAX Decision: A Discussion on Class
Certification
IV. Key Cases Impacting The Canadian Class
Action Litigation Environment
V.
Closing Remarks
What’s your perspective?
Provincial Vs Federal
Class Certification in
Canada
•
In Canada, class actions may be pursued in either the Federal Court
of Canada or in the courts of general jurisdiction of the Provinces
•
The Federal Court of Canada’s jurisdiction is much narrower than
that of the United States federal courts
•
The vast majority of class actions are therefore pursued in the
Provincial courts of general jurisdiction
•
This sometimes results in two or more Provincial Courts certifying
overlapping extraterritorial classes
•
Due to the size of its population and economy, Ontario appears to
attract more class actions than any other Province
•
Ontario has an opt-out regime, but some Provinces, such as Alberta,
have an opt-in regime
The Ontario Class
Proceedings Act, 1992
5. (1) The court shall certify a class proceeding…if,
(a)
the pleadings… disclose a cause of action;
(b) there is an identifiable class of two or more persons that would be
represented by the representative plaintiff or defendant;
(c)
the claims or defences of the class members raise common issues;
(d) a class proceeding would be the preferable procedure for the
resolution of the common issues; and
(e)
there is a representative plaintiff or defendant who,
(i)
would fairly and adequately represent the interests of the class,
(ii)
has produced a plan for the proceeding that sets out a workable
method of advancing the proceeding on behalf of the class and
of notifying class members of the proceeding, and
(iii) does not have, on the common issues for the class, an interest
in conflict with the interests of other class members.
Main Distinctions between
CPA Section 5 and FCRP 23
1. PREDOMINATION
• The Ontario CPA does not require that the common
issues predominate over the individual issues, but
only that a class action be the “preferable
procedure” for resolving the common issues
• Ontario’s Courts have held that, if the resolution of
the common issues would “significantly advance
the litigation”, a class action can be the preferable
procedure even where the individual issues
predominate
• By contrast, Rule 23(b)(3) requires that “questions
of law or fact common to class members
predominate over any questions affecting only
individual members”
The Significance of the
Absence of a Predomination
Requirement
• Personal injury class actions are routinely certified
(Vioxx, Zyprexa, Medtronic (cardiac defibrillators))
• Reliance-based claims are frequently certified (BreX, CP Ships)
Main Distinctions between
CPA Section 5 and FCRP 23
2. COSTS
• Under the Ontario CPA, costs are generally
awarded to the prevailing party on an interlocutory
motion
• On certification motions, Ontario’s Courts may
decline to award costs in (i) a test case, (ii) cases
raising a novel point of law, or (iii) cases involving a
matter of public interest
• Ontario Courts now rarely exercise their discretion
to award no costs to the defendants on an
unsuccessful certification motion
• Not all Canadian Provinces award costs in
certification motions (e.g. Quebec)
Main Distinctions between
CPA Section 5 and FCRP 23
2. COSTS (Cont’d)
• Costs awards are generally made on a “partial
indemnity” basis, which generally means 30-40% of
the prevailing party’s actual costs
• In certification motions, most costs awards range
from $150,000-$300,000
Main Distinctions between
CPA Section 5 and Rule 23
3. Numerosity
•
Under Rule 23, the class must be so numerous
that joinder is impracticable
•
In Ontario, there need only be 2 or more class
members.
Part XXIII.1 of the Ontario
Securities Act
• Called into force on December 31, 2005
• Similar amendments have since been adopted in
numerous other Provinces (Alberta, British
Columbia, Quebec)
• Part XXIII.1 did not eliminate pre-existing causes of
action: s. 138.13 states that “the right of action for
damages…to an action under [Part XXIII.1] are in
addition to, and without derogation from, any other
rights…the plaintiff…may have in an action brought
otherwise than under this Part”
Part XXIII.1 of the Ontario
Securities Act
Part XXIII.1
“Core” documents:
negligence/reverse
onus
“Non-core”
documents:
knowledge, willful
blindness or “gross
misconduct”
Rule 10b-5
Scienter
Part XXIII.1 of the Ontario
Securities Act
Part XXIII.1
Rule 10b-5
Liability is Capped:
Liability is Uncapped
Issuer: 5% of market cap
D’s & O’s: greater of
$25,000 and 50% of total
comp over prior 12
months
Experts: greater of $1
million and 50% of
revenues from issuer over
prior 12 months
Part XXIII.1 of the Ontario
Securities Act
Part XXIII.1
Rule 10b-5
Defendants bear the
burden of proving that a
stock drop that is
contemporaneous with a
corrective disclosure was
due to other factors
Plaintiff bears the burden
of proving loss causation
Part XXIII.1 of the Ontario
Securities Act
Part XXIII.1
Preliminary merits test:
1. Plaintiff is acting in
good faith
Rule 10b-5
Preliminary merits test:
Plaintiff must state with
particularity facts giving
rise to a strong inference
2. Plaintiff has a
that the defendant acted
reasonable possibility
with the required state of
of success at trial
mind
The test is pleadingsThe test is evidence
based
based
Part XXIII.1 of the Ontario
Securities Act
Part XXIII.1
Rule 10b-5
Plaintiff has a cause of
action without regard to
whether or not the plaintiff
relied on the
misrepresentation
Reliance is a necessary
element of the cause of
action, but there is a
rebuttable presumption of
reliance in cases of
market efficiency
(fraud-on-the-market
theory)
Part XXIII.1 of the Ontario
Securities Act
Part XXIII.1
Rule 10b-5
Plaintiff is entitled to all non- Stay of discovery
privileged evidence having a pending resolution of a
semblance of relevance to
motion to dismiss
the issues raised on the
leave motion (Imax)
BUT
A Defendant may elect to
remain silent in the face of
the leave motion (CV
Technologies)
Part XXIII.1 of the Ontario
Securities Act
Barbarians at the Gate?
Part XXIII.1 of the Ontario
Securities Act
• In the 4 years since Part XXIII.1 was called into force,
approximately 16 class actions, or 4 class actions per
year, have been filed under the new law.
• According to Cornerstone, over the same period
there has been an average of 172 securities class
actions filed in the U.S.
• Adjusted for the size of Canada’s capital market, this
is equivalent to an average of 17 filings a year in
Canada.
• Will the decision in Imax result in a level of filings that
is comparable to that of the United States?
Questions?
To order a hard copy of The Litigation
Unleashed –A Guide to Ontario’s
Secondary Market Liability Regime,
email [email protected] or you can
download it from the PLUS website at
http://tinyurl.com/yznnzc2