An Ontario court has just released a welcome decision for
issuers who may find themselves defending parallel securities class
actions in multiple jurisdictions. In the decision, the judge held
that members of a class certified in Ontario can be bound by a
settlement reached in a related class proceeding in the U.S., and
then excluded from participating further in the Ontario class
proceeding. In rendering her decision, the judge noted, "[i]t
is not the function of this court to jealously guard its own
jurisdiction over a class proceeding that has been certified
In Silver v. IMAX, 2013 ONSC 1667,
released on March 19, 2013, van Rensburg J. granted the
defendants' motion to amend the Ontario class to exclude those
who were part of the class in a parallel, conditionally-settled
U.S. action. The result is that, by settling their action in
the U.S., the defendants were able to resolve the overwhelming
majority of claims on both sides of the border.
The parallel Canadian and U.S. proceedings in IMAX were
both commenced in 2006. The shares of the defendant IMAX had traded
on both the Toronto Stock Exchange and the NASDAQ. In an earlier
decision, van Rensburg J. had certified a class in Ontario that
included purchasers on both exchanges. The lead plaintiff in the
U.S. proceeding had also originally sought to represent such a
"global" class. However, as a result of the U.S. Supreme
Court's decision in Morrison v. National Australian
Bank in 2010, which effectively excludes purchasers on foreign
exchanges from bringing statutory claims for secondary market
misrepresentations in the U.S., the class certified in the U.S. did
not include those who purchased their securities of IMAX on the
The defendants subsequently reached a settlement with the
plaintiffs in the U.S. proceeding. The settlement was approved by
the court in the U.S. subject to the Ontario court granting an
order excluding those persons who overlapped with the U.S. class
(i.e. those who purchased their IMAX securities on the NASDAQ) from
the class in the Ontario proceeding.
In granting the defendants' motion to amend the class in the
Ontario proceeding, van Rensburg J. held that it was the preferable
procedure to remove the overlapping claims from the Ontario
proceeding, on the basis that the settlement in the U.S. furthered
the objectives of class proceedings, in particular the objective of
access to justice. In so doing, van Rensburg J. found that "it
would be consistent with the reasonable expectations of the
overlapping class members, who acquired their shares on the NASDAQ,
and in circumstances where IMAX was subject to both U.S. and
Ontario securities laws, that their rights could be determined by
the U.S. Court in the context of applicable U.S. law."
The judge also stated that "[i]t is not the function of
this court to jealously guard its own jurisdiction over a class
proceeding that has been certified here. Such an approach is
inconsistent with the principles of comity. It is also not the
function of the court to favour or protect the interests of class
counsel within this jurisdiction, knowing that they have invested
time and resources into the litigation, and that their compensation
will depend on the size of the judgment or settlement they are able
Justice van Rensburg (following the test prescribed by the
Court of Appeal for Ontario in Currie v. McDonald's Restaurants of
Canada) also formally recognized the U.S. court's
approval of the settlement on the basis that (i) there was a
"real and substantial connection" between the U.S. and
the overlapping class members' claims, (ii) those overlapping
class members were accorded procedural fairness in the U.S.
proceeding, and (ii) the overlapping class members' rights were
adequately represented in the U.S.
The decision in IMAX provides some needed assurance to
defendant issuers that, in appropriate circumstances, Ontario
courts will recognize settlements in foreign proceedings as
being binding on Ontario class members who are included in the
foreign settlement. This decision helps alleviate some of the
uncertainty about whether a defendant is required to settle all
global proceedings at once, and therefore risk being held up in
settlement efforts by intransigent plaintiffs in one or more
jurisdictions. It is possible that van Rensburg J.'s decision
will be appealed, but for now it should provide issuers with some
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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