Industry News

New securities class action filings outpace settlements in Canada

By James Langton |

The filing of Canadian securities class actions remained steady in 2014, but the year ahead could bring some interesting changes to the climate for class actions, says NERA Economic Consulting.

The global, New York City-based firm reports that there were 11 new shareholder class actions filed in Canada during the past year, which was unchanged from 2013. Of these, 10 involved claims under the secondary market civil liability provisions. Seven of these cases involved securities listed on the Toronto Stock Exchange (TSX), and three included issuers listed on the TSX Venture Exchange (TSXV).

Eight of the 11 new cases were filed in Ontario, NERA reports. And, it notes that four of them also involved parallel actions filed in the United States. Additionally, five claims were filed in the U.S. against Canadian companies.

The resource sector remains the main source of these suits, the firm notes; accounting for seven of the 11 new cases in 2014. At the same time, claims against companies in the financial sector have declined, it says.

Looking ahead, NERA says that, "2015 should be an interesting year" for Canadian class actions. For one, there's the prospect of a new cooperative regulator, which would be accompanied by new federal and provincial securities legislation. "The potential impact on securities class actions depends on if, when, and in which jurisdictions the proposed [legislation] are enacted, and the extent to which the legislation changes the procedural and substantive aspects of the civil liability regime."

It also points to two eagerly anticipated decisions that may be handed down during 2015. "The Supreme Court of Canada may hand down its decision in the Quebec case relating to Theratechnologies (which was argued in 2014), and, in early February, is set to hear appeals relating to the decision of the special five-judge panel of the OCA in the cases involving IMAX, CIBC, and Celestica. We will be watching to see how the decisions in those cases might impact on the future level of securities class actions," said Bradley Heys, vice president at NERA.

The firm also suggests that "the recent volatility in the global commodities and currency markets merits some attention." It notes that, historically, class action filings in the U.S. "have tended to increase in the years following dramatic economic upheavals, such as the bursting of the 'dot-com' bubble in the early 2000s and the credit crisis of five or six years ago. Whether we will see a similar increase in filings in Canada following the next episode of economic volatility remains to be seen."

As for class action resolutions, NERA reports that six Canadian class actions were settled, or tentatively settled, in 2014; and, the defendants in these six cases agreed to pay a total of $38.4 million, which represents an average of $6.4 million.

As of Dec. 31, 2014, there were a record total of 60 unresolved securities class actions representing more than $35 billion in total claims, NERA says. This is more than double the number of outstanding cases that the Canadian market saw five years ago. Of the 60 cases, 38 involve secondary market civil liability claims; and, these suits represent $32 billion worth of claimed damages.