Law Times

Law Times • March 16, 2015 Page 9 www.lawtimesnews.com Secondary-market securities class actions Stats offer glimpse of how leave requirement has played out By JULiUs meLNiTZer For Law Times o no one's surprise, plaintiff and defence lawyers differ on the extent to which the threshold leave requirement in Ontario's Securities Act has proven to be an effective filter against scurrilous secondary- market securities class actions. Before such actions can pro- ceed, the plaintiffs must estab- lish they're bringing the matter in good faith and there's a rea- sonable possibility the court will resolve the case in their favour at trial. Plaintiff-side lawyer Dimitri Lascaris of Siskinds LLP in Lon- don, Ont., says there's an over- whelming fact that points to the efficacy of these requirements. "In every single contested leave application, some part of the leave motion was denied," he says. "So experience has proven that leave is a fairly rigorous screen." Defence-side lawyer Larry Lowenstein of Osler Hoskin & Harcourt LLP's Toronto office agrees that the leave requirement has served a useful purpose. "I agree that it's not just a bump in the road and that the courts have been willing to say no in the right cases," he says. "But overall, the courts have set a disappointingly low test for the degree of scrutiny judges will give to the merits, so for the most part the leave test is work- ing out to be the pretty low bar we have always expected it to be." To date, there have been eight contested leave motions in On- tario. The court granted leave in part in six cases and outright denied it in two. The defendants consented to leave in five instances. Otherwise, there have only been two leave motions in se- curities class actions in Canada. The court denied leave in the B.C. case of Round v. MacDon- ald Dettwiler and Associates Ltd. and granted it in Quebec in 121851 Canada Inc. v. Therat- echnologies Inc., a case for which the leave decision is under ap- peal to the Supreme Court of Canada. The leave statistics come in the wake of a recent report from National Economics Research Associates Inc. indicating that the number of outstanding Ca- nadian securities class actions grew in 2014. The report calculates there were 60 outstanding actions at the end of 2014 compared to 55 at the end of 2013. 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 grow- ing steadily and they're doing that by focusing on the number of unsettled cases and the total exposure," says Lascaris. The report indicates that the 15 filings in 2011 preceded 10 in 2012 and 11 in both 2013 and 2014. The average since 2009 has been 11.4 filings per year, mean- ing that the last 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," says Lascaris. On their face, the 60 unre- solved actions represented more than $35 billion in claims. Set- tlement amounts, however, were on average just 13.8 per cent of claimed compensatory dam- ages, representing total settle- ments of less than $5 billion if the outstanding claims came to a similar result. Extrapolating liability from the six Canadian securities class actions that settled in 2014 for $38.4 million, the potential damage works out to $384 mil- lion for the cases now on the dockets. Taking the report's av- erage settlement of $10.7 million for the 50 settlements from 1997 to 2014 now in the National Economics Research Associates database, the liability for out- standing cases would amount to a little more than $1 billion. Laura Fric, also of Oslers, agrees that the number of filings has been relatively stable. "To me, that indicates that we're in a mature and stable en- vironment," says Fric. "But the danger going for- ward, which I would call eye- brow-raising rather than alarm- ing, 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 as well as the year before were twice as many as in 2012. And while it's impossible to predict just how many of the 60 outstanding cases will settle or go to trial, Fric says 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 says. Another interesting statistic in the report's findings is the fact that settlements in the United States are declining. Excluding settlements above $1 billion, the drop from 2013 is 38 per cent; including such settlements, the decline is 61 per cent. That affects Canada because about half of Canadian securi- ties class actions engage a paral- lel U.S. proceeding. "Canadian settlements roughly double in size when the case is a copycat action," says Fric. "So if U.S. settlements are decreasing, we might expect the same to happen for the corre- sponding cases in Canada." LT FOCUS CANADA & USA 1.800.265.8381 | EMAIL info@mckellar.com | www.mckellar.com The reason why we are Canada's largest and most comprehensive structured settlement firm has everything to do with our passion for service and performance— without exaggeration, we make life easier for you. The world's most popular website is visited over 3.5 billion times per day. Almost as accessible as McKellar. Untitled-4 1 2015-03-10 2:18 PM T 'In every single contested leave applica- tion, some part of the leave motion was denied,' says Dimitri Lascaris.

• Cover