In a decision in Silver v. IMAX dated March 19, 2013, the Ontario Court has defined the test for the enforcement of a US class action settlement order in a parallel Canadian class action, giving defendants the opportunity to settle each case independently, rather than being obliged to settle both cases, or neither one. (A leave to appeal motion by the Plaintiffs was argued on July 29, 2013, in Brampton, Ontario.)
In 2009 in IMAX, Madame Justice Katherine van Rensburg of the Ontario Superior Court granted leave to investors to proceed for the first time in Canada with a statutory secondary market misrepresentation claim and then certified the case as a class action on behalf of a global class of shareholders (who had purchased securities on both the TSX and the NASDAQ).
That decision was made even though certain IMAX shareholders purported to advance a parallel class action on behalf of NASDAQ shareholders in US Federal Court. (The 2009 decision was denied leave to appeal.)
In 2012, a US Judge approved a settlement of the US class action, but made that order conditional upon the decision of Justice van Rensburg to enforce it; if so, the shareholders bound by the US order ( i.e. , those shareholders who did not opt out of the US class and were therefore eligible to receive compensation), could not also continue to participate in the Ontario action.
IMAX brought a motion to amend the Class definition in the Ontario action to exclude the NASDAQ purchasers. Justice van Rensburg found for IMAX.
The Court applied a two-step test. The Court first applied the test for the recognition of a foreign judgment defined by the Ontario Court of Appeal in Currie v. Mc-Donald's Restaurants of Canada; that is, Justice van Rensburg concluded that there was a “real and substantial connection” between US Court and the NASDAQ purchasers of IMAX shares, that the investors in the US Action had been accorded procedural fairness and were adequately represented, and that they had been given adequate notice that their decision not to opt out of the US action settlement would preclude their continued participation in the Ontario action.
(That notice to the cross-class members as to their litigation options had been reviewed in advance and amended by counsel to the Ontario plaintiffs.)
Justice van Rensburg then considered the Ontario Class Proceedings Act, 1992, and concluded that it would not be “preferable” for the NASDAQ purchasers who were members of both classes to lose the benefit of the US action settlement, and instead be required to continue as members of the class in the Ontario action.
Justice van Rensburg also rejected the argument that it would be unfair to the remaining TSX purchasers to continue to litigate the Ontario action as members of a smaller class.
As parallel class actions against cross-border public issuers become more common, so too does the prospect of a global class in a Canadian action overlapping with a class in a US parallel class action.
This decision gives public issuer defendants the ability to settle a US class action, and thereby narrow the class in a parallel Canadian action, rather than be forced to agree to terms required by counsel on both sides of the border simultaneously.
Further to the above, and more broadly, the decision provides a template for the recognition and enforcement, by a Canadian judge, of an order in a US class action which encompasses persons who are also members of a Canadian class.
Counsel for IMAX in the Ontario Action is McCarthy Tétrault LLP with a team comprising Paul Steep and Dana Peebles.
Class Counsel is Siskinds LLP with a team comprising Dimitri Lascaris, Michael Robb, Daniel Bach and Serge Kalloghlian; and Sutts Strosberg LLP with a team comprising William Sasso and Jay Strosberg.