Won Kim; Kim Orr Barristers P.C.
Studies show that shareholder lawsuits in Canada are on the rise at a time when US courts are raising pleading standards and slashing punitive damages. And you know who's been paying attention to the burgeoning market to the north? Milberg LLP, the new incarnation of Milberg Weiss Bershad & Schulman LLP — the former Wall Street powerhouse that pioneered shareholder class actions, and, at one time, terrorized corporate America.
In a strategy sure to generate buzz on both sides of the border, the new Milberg is about to become active in Canada.
“I've developed an appreciation that Canadian law has been getting as good as or better than US law at protecting investors' rights,” says Michael Spencer, a class-action litigator and member of Milberg's executive committee. “So we've been quietly monitoring the situation and we think there are some interesting prospects that have come up.”
Spencer was in Toronto recently with Arthur Miller, head of the firm's appellate practice. They met with lawyers from Kim Orr Barristers P.C., a Toronto class-action boutique, and have quietly begun working together. Both confirm that they are working on joint filings (and the first one should be coming soon), but say it's premature to go public with further details.
When pushed, all Spencer would say is “anyone looking at the markets and the things regulators are interested in wouldn't be surprised at the things we are looking at. We are proceeding very cautiously because it's clear to us these are situations involving Canadian law and Canadian investors and Canadian courts.”
Won Kim of Kim Orr says the presence of the dominant US class-action firm is a boon for Canadian shareholders who, in the past, have too often come up empty-handed.
“Canadian investors haven't been particularly well served over the years when it comes to market misconduct,” he says. “Bill 198 is a tool that can be used to change that and Milberg can help enormously in terms of experience and advice, not to mention resources and infrastructure. They've done these kinds of suits for decades.
“They're the pre-eminent securities firm in the United States. What they bring to the table is invaluable.”
Miller is expected to play a role in shaping the firm's Canadian strategy — and he has credentials that would be impressive in any jurisdiction. He wrote Federal Practice and Procedure
, the principal authority on US federal practice, as well as Civil Procedure
, the casebook still used by most US law schools.
“I think Arthur's sterling reputation will convince Canadian judges and the Canadian Bar that we mean business,” says Spencer, “but in a very respectable way.”
Spencer stressed the firm sees Canada as a viable new market, and not a stalking horse that would allow it to gain access to information in pre-certification discovery that could be used to further US suits.
“The things we're looking at are primarily Canadian cases, and I would expect the litigations would be in Canada,” he says. “I don't think there will even be US cases over these things we're looking at.”
Larry Lowenstein, head of the litigation department at Osler, Hoskin & Harcourt LLP, calls the arrival of Milberg in Canada “an important development.
“It doesn't entirely surprise me because the Canadian securities-class litigation scene is much more active now, but I'm a little surprised at what they're saying about this not being just a matter of using the discovery processes to aid US actions.
“If what they're saying is they can marry their expertise with a Canadian firm's personnel, that could be quite a credible business plan.”
Miller says Canada has made significant progress in the area of securities class actions and he praises Ontario's new regime for tamping down strike suits.
“I think Canadians have understood it's important to prevent the entrepreneurial instincts from creating too much of an incentive to bring cases at the margins,” he says from New York. “That's being done through better control over attorney-fee awards, limitations on fee awards and limitations on damages. My sense is Ontario is avoiding some of the mistakes made in the United States.”
Miller says another important element key in Milberg's decision to become active in Canada is the Ontario Court of Appeal's decision in Markson v. MBNA Canada Bank
. The appeal court judges held that statistical sampling can be used to calculate a damage award — meaning proof of individual losses is not necessarily needed before a class action can go ahead.
“In some respects, Ontario's class-action law and some pieces of Ontario's securities law strike me as better vehicles for protecting investors and having a more legitimate, reasonable, rational procedure than the existing situation in the United States,” he says. “In some respects, Ontario has leapfrogged the United States.”
Joel Rochon of Rochon Genova LLP, a Toronto-based class-action boutique, says given the corporate shenanigans on both sides of the border Canadians should embrace the expertise of US firms with strong experience in prosecuting securities cases. He says a key question is whether the Canadian defence Bar and courts will adequately recognize the involvement of US firms when it comes to settlement agreements.
“In the past, their time has only been treated as a disbursement,” says Rochon. “I query whether this somewhat protectionist approach needs to be re-examined by the courts to encourage positive collaboration.”
Sandra Rubin is a freelance legal affairs writer.