When a foreign defendant is the target of a Québec class action, one of the first questions to consider is whether the Québec court has jurisdiction over such defendant. Pursuant to Québec's private international rules, one of the criteria that grounds jurisdiction in a Québec court is whether a damage was "suffered" in Québec1. Québec courts have held that the mere fact that a financial loss is "recorded" in Québec (on the sole basis, for example, that a Québec resident has his/her patrimony in Québec) does not meet the test for a damage "suffered" in Québec, but a financial loss that is substantively suffered in Québec based on "material facts" arising in that province will be a sufficient basis to ground jurisdiction2.
In the September 4, 2013 decision in Mouaikel vs. Facebook Inc., 2013 QCCS 417 ("Mouaikel"), the Québec Superior Court (the "QSC") applied the above principles and declined jurisdiction over a proposed class action launched, based on alleged misrepresentations and the failure to state material facts, against Facebook, its directors and underwriters involved in the social networking company's IPO.
In Mouaikel, the QSC noted that it was not contested that all of the respondents' alleged activities occurred in the U.S. and that no allegations were made that Facebook was a reporting issuer in Québec or that it had distributed securities in that province within the meaning of the Québec Securities Act. The only "connecting" factor alleged by the petitioner, who bears the burden of proof with respect to the jurisdiction of the Québec courts, was that she and the other proposed group members suffered a damage in Québec as a result of having purchased Facebook's shares at an allegedly inflated price. While the petitioner sought to rely on her statement of account with her Montréal broker, reflecting her purchase and sale of Facebook's shares, the QSC noted that the statement in question did not indicate where the transactions occurred or where the petitioner paid for her shares and that nothing indicated that this occurred in Québec. Based on the fact that Facebook's shares would have been notionally delivered at either the NASDAQ exchange in New York or at Facebook's head office in California, the QSC found that petitioner's payment would have been legally owed at one of such locations. The QSC noted that "nothing happened in Québec other than the recording of the petitioner's loss in her brokerage account." Based on the above, the QSC held that there was no basis to conclude that there was a substantial connection between the alleged facts and the province of Québec and that, accordingly, the QSC had no jurisdiction to entertain the proposed class action.
Interestingly, the QSC went on to note that even if it had concluded that it had jurisdiction to entertain the proposed class action, it would have, based on a number of factors, declined jurisdiction, which it characterized as "tenuous [...] at best", in favour of the New York courts where 41 lawsuits relating to the Facebook IPO and raising the same allegations of wrongdoing have been consolidated. The QSC noted that the claims of the putative Québec class members were already covered by the consolidated class actions in New York, and, as such, Québec shareholders were not left without any remedy.
Footnotes
1 See Article 3148 (3) of the Civil Code of Québec.
2 See, for example, Options Consommateurs v. Infineon Technologies, a.g., 2011 QCCA 2116, which is currently under appeal before the Supreme Court of Canada.
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