Class action decision clarifies rules on overlapping plaintiffs
A recent decision in the Silver v. IMAX case should have a positive impact on the willingness of defendant issuers to settle class actions – good news for both defendants and plaintiffs in terms of resolving litigation without an expensive, time consuming and risky trial, says Toronto litigator Brian Radnoff.
Ruling on a motion in the case relating to the overlapping class proceedings in Ontario and the United States, Ontario Superior Court Justice Katherine van Rensburg held that a group of NASDAQ investors who were part of the Ontario class can be bound by a settlement in the U.S. and prevented from participating further in the Ontario action. Read Decision
“This is a reasonable and sound decision. Given the proliferation of cross-border class action securities litigation, it is necessary to create some rules about class membership in these class actions,” says Radnoff, a partner with Dickinson Wright.
“When class actions are proceeding in the U.S. and Canada, there is likely to be overlap in the class members in these types of actions. Where the action brought in one jurisdiction settles, defendants need to know to which class members the settlement applies. Settlement of class actions will be fostered when the defendants know that a settlement definitely applies to certain class members, and that those class members cannot continue what is essentially the same claim for the same losses in another jurisdiction,” he explains.
In this context, says Radnoff, the judge specifically considered the fairness of the U.S. settlement to the overlapping plaintiffs. “This is not simply a rubber stamp and permits the court to ensure that the overlapping class members who are bound by the U.S. settlement have not been treated unfairly,” he says.
The decision is also important and useful in terms of comity and recognition of foreign proceedings, Radnoff notes.
“Given the increasing amount of cross-border litigation, and the transnational nature of securities markets, courts in both countries must take a liberal approach to recognizing the decisions and judgments in the other jurisdiction. A similar type of recognition is occurring in insolvency law, for the same reason,” he explains.
Although overlapping class members have not been a significant issue, says Radnoff, it will become increasingly more prevalent as more securities class actions are brought in Canada, and particularly Ontario.
“Many nationals from one country purchase securities on exchanges located in the other country. It is important to have clear rules about how these overlapping plaintiffs have their claims resolved,” he says.