The number of outstanding securities class action
lawsuits in Canada reached an all-time high during 2010 according to a January
31, 2011 report by NERA Economic
Consulting entitled "Trends in Canadian Securities Class Actions: 2010
Update." The report can be found here.
The report includes an appendix in which securities lawsuit trends in several
other countries are summarized, including Australia, Japan, and Italy, as well
as the United States.
According to the report, there were eight new securities
class action lawsuits filed in Canada during 2010. The number of 2010 filings
is one fewer than the nine new cases filed in 2009, and two fewer than the
record ten filings in 2008. Allowing for the settlements in six cases during
the year in which defendants agreed to pay a total of CAN$80 mm, there are now
28 active Canadian securities class action lawsuits.
A total of 25 lawsuits have now been filed under Bill 198, the relatively new
secondary liability provisions of the Ontario securities laws. Of the nine Bill
198 cases that have settled, the average settlement is CAN$10.7 mm, with four
cases settling for more than $10 million and three settling for less than CAN$3
Interestingly, one of the 2010 filings involved a company
- Canadian Solar - whose shares do not trade on a Canadian exchange (its shared
trade on NASDAQ. This is the second Canadian securities suit involving a
company whose share do not trade on a Canadian exchange (the first being the
2008 lawsuit involving AIG).
The report notes that it has become relatively common in
recent years for Canadian companies to be subject to securities lawsuit in the
United States. Between 1996 and 2010, Canadian-domiciled companies have been
named as defendants in securities class action lawsuits in the U.S. Of these,
17 cases also had parallel class action lawsuits in Canada.
The report notes that the number of future filings in the
US against Canadian companies may decline in future years owing to the U.S.
Supreme Court's holding in Morrison v. National Australia Bank. Indeed,
Morrison could have an impact on at least some of the cases pending in the U.S.
against Canadian companies. The report notes that the Morrison case comes at a
time when Canada and even other countries may be expanding the reach of their
collective action mechanisms. It is entirely possible that there may be an
increase of lawsuits in Canada involving companies whose shares do not trade in
Canada, particularly in light of the fact that at
least one Canadian court has been willing to certify a global class of
The average settlement amount of the 37 U.S. cases
involving Canadian companies that have settled is US$71.5 mm, but this average
is skewed by two large settlements involving Nortel. The median of these
settlements is US$6 mm. For the 14 US cases against Canadian companies that
have settled since 2007 (i.e., after the Nortel settlements), the average
settlement is U.S $20.5 mm and the median settlement is uS$6.2 mm.
This Week at the PLUS D&O Symposium: Weather
permitting, this week I will be attending the 2011 PLUS D&O Symposium in
New York City. I know that many readers of this blog will also be there. I hope
that if you see me at the Symposium that you will take a minute to say hello,
particularly if we have not previously met. I look forward to seeing everyone
there, or at least everyone who can make it through the storm. Safe travels to
all, good luck to all of us with the weather.
other items of interest from the world of directors & officers liability,
with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.