class actions: the latest word – april 2012
DESCRIPTION
This presentation offers a comprehensive overview of recent trends in class actions, including statistics related to class certification motions and certification decisions, employment and securities cases of note, trends in Canadian Securities Class Actions, as well as limitation periods and class actions, litigation holds and document retention policies.TRANSCRIPT
Class Actions:The Latest Word – April 2012
Presented by:
Michael D. Schafler Chloe Snider michael.schafler@fmc‐law.com chloe.snider@fmc‐law.com+1 416 863 4457 +1 416 863 4674
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Certification Test (Class Proceedings Act, 1992)
s. 5(1) The court shall certify a class proceeding on a motion… if,(a) the pleadings or the notice of application discloses 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 ofnotifying 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.
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Class Certification Motions
*All data relates to certification motions and appeals (including leaves to appeal) decided between January 1, 2011 – December 31, 2011
17
6
12
3
5
3
0
2
4
6
8
10
12
14
16
18
20
Total ContestedCertification
Motions/Total Appealsand Leave Motions
CertificationGranted/CertificationGranted on Appeal
CertificationDismissed/Certification
Denied on Appeal
x
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Class Certification Motions
• Number of class actions being certified continues to increase– 71% of certification motions resulted in certification of the class action
in 2011 (12/17)
• Appeals of Certification Orders– Half of appeals/motions for leave to appeal resulted in certification– Half of appeals/motions for leave to appeal resulted in denial of
certification
5
1
2
1
4
3
1
2
1
5
1
2
0
1
2
3
4
5
6
Environmental
Franchisor/franchisee
Investment Fraud
Defective Consumer Products
Securities
Contract
Labour and Employm
ent
Tax AdviceGovernm
ent Actions
Price‐Fixing Negligence
Certification Decisions by Subject Matter
*All data relates to certification motions and appeals (including leaves to appeal) decided between January 1, 2011 – December 31, 2011
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Employment Cases of NoteFulawka v. Bank of Nova Scotia, 2011 ONSC 530
• Alleged failure to pay overtime pay
• Certification granted (Div. Ct.); refusal to pay overtime resulted from policy, not individual decisions
• Awaiting decision from Court of Appeal
• CIBC and CN decisions also pending
Kafka v. Allstate Insurance Company of Canada, 2011 ONSC 2305
• Alleged constructive dismissal resulting from new centralized business model
• Certification denied: no common issues
7
different Kafka…
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Securities Cases of NoteFischer v. IG Investment Management Inc., 2011 ONSC 292• OSC found that IG failed to act in the public interest with respect to market timing activities
• Plaintiffs claim the balance of losses not recovered through OSC proceeding• Certification granted (Div. Ct.); OSC proceeding irrelevant to preferable procedure requirement
• Court of Appeal upheld certification (2012 ONCA 47)
Dobbie v. Arctic Glacier Income Fund et al, 2011 ONSC 25• Negligence, negligent misrepresentation, anti‐trust conspiracy and statutory cause of action under s. 130 of the OSA alleged based on the Income Fund’s public disclosures in primary and secondary markets
• Certification granted; leave to appeal granted in respect of decision to certify certain negligence and negligent misrepresentation claims (2012 ONSC 773)
Silver v. IMAX Corporation et al., 2011 ONSC 1035• Allegation that decline in share price caused by IMAX misrepresentations• Granted leave under s. 138 of the OSA (Div. Ct.) • Certification granted (Div. Ct.)
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Trends in Canadian Securities Class Actions: 2011 Update (NERA Economic Consulting)
• 15 new Canadian securities class action: highest number to date
– 45 active Canadian securities class actions on December 31, 2011 (only 28 active cases as of December 31, 2010)
– Represents $24.5 billion in outstanding claims– Continuous disclosure obligations and secondary liability pursuant to
Bill 198 represented 9 of the 15 new class actions
• More than half of all Canadian securities class actions to date have been brought against defendants in the financial sector or the energy/minerals sectors
Courtesy of NERA
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Canadian Securities Class Action Filings
Courtesy of NERA
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11 Settlements in Bill 198 Cases
Courtesy of NERA
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Abdula v. Canadian Solar, 2011 ONSC 5105• Defendants brought motion seeking a dismissal of claims for negligent misrepresentation and statutory cause of action pursuant to s. 138.3 of the Securities Act based on the alleged lack of jurisdiction of the Ontario courts
• Canadian Solar was incorporated under the CBCA; its principal place of business was China; and it traded only on the NASDAQ
• Court held that it had “presence based” jurisdiction, as Canadian Solar was federally incorporated and therefore within the jurisdiction
• Court also had jurisdiction over the Securities Act claims– “[A] company which chooses to be incorporated in Canada, have its principal
office in Ontario and carry on business in Ontario must also expect to be required [to] comply with Canadian and Ontario laws. The disclosure obligation on a company whose shares are publicly traded is not restricted to filings with a stock exchange. The disclosure obligations apply to any material misrepresentation. Therefore it should come a no surprise to Canadian Solar that it is potentially subject to the Ontario Securities Act for misrepresentations that it makes in its public disclosure in Ontario.”
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Seidel v. TELUS Communications Inc (2011 SCC 15)• Plaintiff commenced class action despite arbitration clause in contract
with TELUS, which required arbitration of disputes
• BC Court of Appeal stayed the action in favour of arbitration
• SCC asked to determine whether stay was properly granted and, in doing so, considered the role of arbitration in the Canadian judicial system– Schism between majority and minority regarding the value of arbitration
proceedings
• Majority held that the BC legislation required the action to proceed in the courts:– In the consumer context, declarations and injunctions are the most
efficient remedies in terms of protection of consumers’ interests and the deterrence of wrongful suppliers conduct
– Arbitrations are “private and confidential” and lack precedential value
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S. 28 of Class Proceedings Act, 1992Limitations28. (1) Subject to subsection (2), any limitation period applicable to a cause of action asserted in a class proceeding is suspended in favour of a class member on the commencement of the class proceeding and resumes running against the class member when,
• (a) the member opts out of the class proceeding;• (b) an amendment that has the effect of excluding the member from the class is made to the certification order;
• (c) a decertification order is made under section 10;• (d) the class proceeding is dismissed without an adjudication on the merits;• (e) the class proceeding is abandoned or discontinued with the approval of the court; or
• (f) the class proceeding is settled with the approval of the court, unless the settlement provides otherwise.
15
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Limitation Periods and Class ActionsCoulson v. Citigroup Global Markets Canada Inc., 2012 ONCA 108
• 1998 class action commenced:– s. 130 misrepresentation claim asserted therein was dismissed– appeal did not seek a reversal of the dismissal of the s. 130 claim
• 2003 class action commenced based on same facts• As the 1998 plaintiff did not appeal the s. 130 finding, s. 28 of the CPA did not continue to suspend the limitation period
– The suspension provided by s.28 ended when the appeal period lapsed• Purpose of s. 28 CPA is to protect class members from limitation periods without the need to themselves pursue individual actions in order to avoid being ‘out of time’
• Appeal dismissed; limitation period not extended
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Limitation Periods and Class ActionsSharma v. Timminco Limited, 2012 ONCA 107 • Claim indicated plaintiffs would seek an order granting leave toassert the statutory cause of action for misrepresentation provided by s. 138.3
• Issue on appeal was whether s.28 of the CPA operates to suspend the limitation period applicable to the statutory cause of action for misrepresentation under s.138.3 of the OSAbefore such an action is commenced.
• Indicating an intention to seek leave does not constitute ‘asserting’ a cause of action, and does not activate the limitation period suspension under s. 28 CPA
• Appeal allowed; limitation period not extended
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Litigation Holds
• A litigation hold should be issued as soon as litigation is anticipated
– to identify and preserve information from destruction through (i) the normal accessing and use of electronic and other information, or (ii) through the application of document retention schedules mandating destruction
• A litigation hold explains what electronic and paper‐based documents need to be preserved and provides instructions on how to implement the hold over electronic and other records
• Follow‐up with recipients of the litigation hold to demonstrate that the organization took steps to ensure compliance
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Litigation Holds
• Must be able to establish that the actions taken were reasonable in the circumstances and that all relevant material was retained (and produced)
• Consider retaining an outside expert to take a “snapshot” of electronic data in order to preserve point‐in‐time archives
– Document retention “insurance”
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Spoliation
• The destruction or material alteration of relevant evidence when litigation is existing or pending
• Raises a rebuttable presumption of fact that the lost or destroyed evidence would be unfavourable to the spoliator
– for the presumption to be rebutted, the alleged spoliator must demonstrate that the destruction was in the ordinary course of business before litigation was commenced
• Other remedies for spoliation include the exclusion of expert evidence, adverse assessments of credibility, and costs
• Independent tort of spoliation exists in the United States (but not yet recognized in Canada)
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Document Retention Policies
• Policies should determine what, where and for how long documents are stored
• Not every document has to be kept forever– costs of gathering and reviewing extensive stores of data in the event
of document production can be significant
• Document, publish and communicate policy, and audit compliance
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Avoid this…
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Document Retention
• Statutory requirements to retain certain documents– Articles– Bylaws– Minutes of shareholders and directors meeting– Resolutions of shareholders and directors– Securities certificates – Tax Records– Personal Information– Employment Records
• Statutes also mandate minimum periods for retaining certain documents– e.g. tax records – 6 years; employment records – 3 years
• Limitation periods should also be considered
The preceding presentation contains examples of the kinds of issues companies dealing with class actions could face. If you are faced with one of these issues, please retain professional assistance as each situation is unique.
Michael D. Schafler
michael.schafler@fmc‐law.com
+1 416 863 4457
Chloe Snider
chloe.snider@fmc‐law.com
+1 416 863 4674