In Kaynes v. BP 1 (referred to herein as "Kaynes") the Court of Appeal for Ontario ("ONCA") recently lifted a stay of a class proceeding in which the Plaintiff is seeking damages for alleged misrepresentations made to shareholders by BP. The alleged misrepresentations centred on the 2010 Deep Horizons Oil spill.
Class actions were commenced in both Canada and the U.S. which led the Court to grant the order to stay proceedings at first instance, finding Ontario to be forum non conveniens. The ONCA was forced to revisit the stay due to developments in the U.S. proceedings.
The proposed representative Plaintiff in the Canadian proceeding, Mr. Kaynes, purchased his BP securities on the New York Stock Exchange ("NYSE"). The Plaintiff alleged that BP misrepresented its operational and safety programs in its public disclosure prior to the Deep Horizons oil spill. Mr. Kaynes contends that the explosion and spill constituted "corrective disclosure" revealing the deficiencies in the earlier disclosure. He further maintains that BP misrepresented its clean-up efforts following the spill.
Canadian Action Stayed
BP brought a motion to stay the action on the grounds of forum non conveniens, which was granted on appeal.2 The Court of Appeal concluded that while Ontario has jurisdiction to hear claims relating to securities purchased on the NYSE (and other foreign exchanges), BP had shown Ontario to be an inconvenient forum. The basis for this conclusion was the existence of the U.S. class action and the fact that the US Securities and Exchange Act of 1934 (the "US Act") asserted exclusive jurisdiction over claims such as those brought by the Plaintiff. The US action and the assertion of exclusive jurisdiction pursuant to the US Act, was enough to convince the Court to stay the action on the grounds of forum non conveniens, despite jurisdiction not otherwise being an issue.
In the US District Court, BP accepted the Plaintiff's position that the action was based on Ontario law, and as such, the US Act did not provide for jurisdiction. The US District Court dismissed the class proceeding on two grounds:
- The pre-explosion claim was based on the Ontario Securities Act3 (the "OSA"), and in the Court's opinion, this claim was statute barred; and
- The Court made an order in December 2010 which appointed lead plaintiffs to represent the class; however, these lead plaintiffs had not brought a pre-explosion claim based upon the OSA. As the Canadian plaintiffs were part of the same class as the lead plaintiffs, they would be required to bring a separate class action for the pre-explosion misrepresentations under the OSA.
The ONCA Decision
Following the decision in the US the Plaintiff moved to have the stay of the class proceeding in Ontario lifted. The ONCA considered whether the dismissal of the pre-explosion claim in the US constituted facts arising after its initial decision which justified lifting the stay.
Ultimately, the Court referenced the dismissal of the US claim coupled with BP's acceptance of Ontario law as being sufficient grounds to lift the stay:
"In our view, these developments taken as a whole, are sufficient to justify lifting the stay. It was certainly not brought to our attention or in our contemplation that the moving party's claim would be dismissed by the US District Court... It is also significant that BP now accepts that the moving party's claim is governed by Ontario law and therefore does not assert that it falls within the exclusive jurisdiction of the US courts."4
The Court noted that if the stay was not lifted, the Plaintiff in Ontario faced a "purely procedural barrier" and would be prevented from having his claim heard on the merits. Accordingly, the Court lifted the stay, and in doing so declined to comment upon whether the Plaintiff's claim may be time-barred, as found by the US District Court.
The Court of Appeal's decision demonstrates the inter-related nature of cross-border class proceedings. In appropriate instances, Courts in both Canada and the U.S. will look to the substantive and procedural law in each jurisdiction in considering the conduct in class proceedings. In Canada, the existence of a foreign class action may be sufficient to stay Canadian claims, unless a Plaintiff will be prevented from pursuing its substantive rights.
1 Kaynes v. BP P.L.C. 2016 ONCA 601
2 Kaynes v. BP P.L.C. 2014 CarswellOnt 10971
3 R.S.O 1990, c. S.5.
4 Supra Note 1, at para's16 and 17
For more information, visit our Canadian Securities Litigation blog at www.canadiansecuritieslitigation.com/
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