Coffin v. Atlantic Power Corp.

Justice Edward Belobaba of the Ontario Superior Court of Justice released Reasons for Decision on July 24, 2015, in Coffin v. Atlantic Power Corp., 2015 ONSC 3686.

The Court denied leave to proceed with claims under Part XXIII.1 of the Securities Act and denied class certification of statutory and related common law claims under the Class Proceedings Act.

The plaintiffs’ action focussed on Atlantic Power’s announcement on February 28, 2013, that it was reducing its annualized dividend from $1.15 per share to $0.40 per share. Atlantic Power is a publicly-traded power generation company that owns and operates power projects in Canada and the United States. Atlantic Power is a dividend-paying company and the main determinant of its dividend level is the cash flow from its power projects. The plaintiffs alleged, among other things, that beginning on November 5, 2012, Atlantic Power and its former CEO and its CFO misrepresented Atlantic Power’s ability to maintain the $1.15 dividend level.

The plaintiffs – both shareholders of Atlantic Power – sought to certify a class consisting of persons who purchased or otherwise acquired shares or debentures on either the New York Stock Exchange or the Toronto Stock Exchange during the period from November 5, 2012 through February 28, 2013, and held some or all of those securities at the close of trading on February 28, 2013.

The plaintiffs filed expert evidence in connection with their assertions.

In response to the plaintiffs’ evidence and allegations, Justice Belobaba noted that the defendants “made a conscientious decision to do battle from the outset.” The defendants “not only filed competing expert reports but also a massive amount of non-public (indeed court-sealed) internal and corporate narrative evidence to fully rebut the plaintiffs’ allegations and show they have no reasonable possibility of succeeding at trial.”

He further noted Atlantic Power’s evidence demonstrated that the company’s disclosure properly stated that dividends were not guaranteed, that dividends were connected to and dependent upon Atlantic Power’s cash flow (which investors and analysts followed and understood), that the company had disclosed risks to its cash flow, that the company had enough cash on hand to continue to pay the $1.15 dividend for a number of years without any further accretive acquisitions, and that dividend payments in general are not formulaic calculations but involve the exercise of business judgment.

Justice Belobaba found that Atlantic Power’s disclosures contained no misrepresentations and that the company had not failed to disclose any material change.

Justice Belobaba also dismissed the plaintiffs’ motion for certification of the action as a class proceeding. He refused to certify the statutory claims in respect of which leave was denied and also refused to certify the plaintiffs’ claims of common law negligent misrepresentation and negligence.

With respect to the debenture-holder component of the claim, Justice Belobaba granted leave for class counsel to file a reconstituted action that would be limited to claims made by debenture-holders provided that the reconstituted action includes a proper representative plaintiff, a redefined class, revised common issues and a new litigation plan and provided that the defendants are reimbursed on a partial indemnity basis for their success on the motion.

On December 2, 2015, with the consent of the parties, Justice Belobaba signed an Order providing for the dismissal of the action, the abandonment of any appeal and the waiver of any claims the defendants might have for costs.

Benjamin Zarnett, David Conklin, Michael Wilson and Charlie Pettypiece of Goodmans LLP represented the defendants, Atlantic Power Corporation, Barry Welch and Terrence Ronan.

Kirk Baert, Jonathan Ptak and Garth Myers of Koskie Minsky LLP, Patricia Speight and Jay Strosberg of Sutts Strosberg LLP, and Joseph Groia, Bonnie Roberts Jones and David Sischy of Groia & Company represented the plaintiffs, Jacqueline Coffin and Scott Fife.