An Ontario court has ruled on which of two legal teams should handle a proposed investor class action against troubled cannabis firm CannTrust Holdings Inc. and its underwriters.

Two legal teams brought proposed class actions against CannTrust on behalf of investors who suffered millions in losses due to alleged misrepresentations in CannTrust’s prospectus.

One group consisted of four law firms: Henein Hutchison LLP, Strosberg Sasso Sutts LLP, Dimitri Lascaris Law Professional Corp. and Kalloghlian Professional Corp. The other group consisted of two firms: Thorton Grout Finnigan (TGF) LLP and Rochon Genova (RG) LLP.

The court ruled that the case should be run by the four-firm team, due to a disqualifying conflict of interest in the two-firm team. TGF has RBC Dominion Securities Inc. (RBC DS) — one of CannTrust’s underwriters — as a client, and RBC DS was not named in the action filed by the TGF/RG legal team.

The court found that excluding RBC DS from the case would limit the amounts that could be recovered for investors if the lawsuit were to succeed.

“RBC is a significant source of possible recovery for the class members and, in my view, should be named as a defendant in the class proceeding,” the court said. It added that the TGF/RG team, by excluding RBC DS as a defendant, had “reduced by 10%, or roughly US$20 million, the maximum recoverable damages against the underwriters. This is not in the proposed class members’ best interests.”

The court also noted that RBC DS should be part of the case because it “could also be the subject of behaviour modification, one of the objectives of class proceedings.”