A recent report from NERA Economic Consulting indicating that the number of Canadian securities class actions grew in 2014 has caused some consternation in the business community. To be sure, there were 60 outstanding actions at the end of 2014 compared to 55 at the end of 2014. But that’s not due to an increase in the number of filings; rather, what happened is that the 11 actions filed in 2014 outstripped the six settlements and one dismissal that occurred.
“NERA makes it sound like securities class actions are growing steadily, and they’re doing that by focusing on the number of unsettled cases and the total exposure,” says Dimitri Lascaris of Siskinds LLP, which represents class action plaintiffs. “But in fact the number of annual filings are down significantly since 2011.”
NERA’s stats indicate that the 15 filings in 2011 were followed by 10 in 2012 and 11 in both 2013 and 2014. The average since 2009 has been 11.4 filings per year, meaning that the past three years have seen below average activity. “That’s hardly the avalanche of litigation that Bay Street and its lawyers were predicting when secondary-market liability was enacted.”
Laura Fric of Osler, Hoskin & Harcourt LLP in Toronto, who acts on the defense side, agrees that the number of filings has been relatively stable. “To me, that indicates that we’re in a mature and stable environment,” she says. “But the danger going forward – which I would call eyebrow-raising rather than alarming – is that we now have a pool of cases that is not insignificant and that has been growing.”
The silver lining is that the six actions settled in 2014 and also in 2013 were twice as many as were settled in 2012. And while it’s impossible to predict just how many of the 60 outstanding cases will be settled, Fric says that the challenge for all stakeholders will be to move these cases along and try them efficiently. “It looks like we’re pretty good at settling, but we haven’t seen a single case go to trial yet,” she said.
The other bit of good news in NERA’s findings is that settlement values in the US are declining. Excluding settlements above $1 billion, the drop from 2013 is 38 per cent; if settlements above $1 billion are taken into account, the drop is 61 per cent.
This affects Canada because about one-half of Canadian securities class actions engage a parallel US proceeding. “Canadian settlements roughly double in size when the case is a ‘copycat’ action,” Fric says. “So if US settlements are decreasing, we might expect the same to happen for the corresponding cases in Canada.”
Mining and oil and gas sectors continue to account for a substantial share of filings, with seven of the Canadian filings in 2014 coming from these industries. Given the slump in commodities prices, 2015 may see a lot more in the way of securities class actions than the past few years.