In Sharma v. Timminco Limited Justice Perell
heard two motions from two law firms, each of which represent
different representative plaintiffs in separate class proceedings
dealing with the same subject matter. Each of the two law firms
moved for an order staying the other law firm's class
proceeding in favour of its own.
Both proposed class proceedings alleged securities
misrepresentation at common law and under the Ontario Securities Act. The defendant issuer
in both cases, Timminco, had released quarterly results in which it
reported that previously released information about costs,
production volumes and revenues might no longer be valid. This
allegedly caused Timminco's share price to drop dramatically in
the ensuing period of time. Two separate law firms investigated
potential class actions in relation to Timminco and both ultimately
commenced class proceedings on behalf of separate representative
plaintiffs alleging securities misrepresentation.
The Court ultimately decided to stay one of the class
proceedings in favour of the other. The Court placed particular
emphasis on the fact that the law firm which brought the class
proceeding that was ultimately stayed had framed the cause of
action in a complex manner that would have set a higher and more
challenging legal bar for the representative plaintiff, and for the
class, to meet. For example, the law firm whose proceeding was
ultimately stayed had pled a substantially longer class period and
a broader class definition which created substantive challenges for
the class. This was the most critical factor informing the
Court's decision to issue the stay.
The Court did not place weight on the fact that one of the
lawsuits was issued first. In this regard, the Court noted that
both law firms investigated the claim independently and neither law
firm copied the other.
The Court also rejected attempts by one of the law firms to
disqualify the other on the basis that the latter was obtaining
strategic guidance and advice from a U.S. based law firm.
The Court also emphasized that both of the plaintiff law firms
had excellent track records in the class actions field and good
reputations. Had there been dramatic disparity in terms of the two
firms' respective expertise, this may have changed the
The case was particularly timely in light of the increasing
growth of securities class actions in Ontario and indeed Canada.
Plaintiff-side class actions law firms are increasingly following
the lead of their U.S. counterparts in investigating and
prosecuting securities class actions. In many cases, these class
actions are the object of creative investigation by the law
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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