The Ontario Court of Appeal recently reconsidered its decision (the “Original Stay Appeal“) to stay a securities class action claim in Canada, on the basis that Ontario was not the most appropriate forum, where the securities at issue were purchased on foreign stock exchanges. Leave to appeal the Original Stay Appeal was dismissed by the Supreme Court of Canada.
In its most recent decision the Court of Appeal considered an argument that the Original Stay Appeal ought to be set aside on the basis of facts arising after the Order was made. The Court of Appeal agreed that an injustice would be visited on the plaintiff class if they were not allowed to litigate in Ontario lifted the stay (the “Stay Lifting Decision“).
In a prior article previous blog we described how the Court of Appeal found that Ontario was not the most convenient jurisdiction for a lawsuit regarding alleged misrepresentations made to shareholders by BP. In the wake of the April 2010 Deep Water Horizon explosion, Canadian and U.S. shareholders launched class actions lawsuits alleging both pre and post explosion misrepresentations. The Ontario Court of Appeal declined to allow a concurrent lawsuit to proceed in Canada, forcing the Canadian shareholders to seek to join their U.S. counterparts.
However, the Original Stay Appeal was undermined when the U.S. Federal Court refused to hear arguments regarding the pre-explosion claims, blocking the final avenue of recourse for the proposed Canadian class plaintiffs. The lead plaintiffs in the U.S. class action had not brought a pre-explosion misrepresentation claim based on Ontario securities law and the Federal Court refused to entertain a further class action based on a claim that the lead U.S .plaintiff had not pursued. The Ontario Court of Appeal found that the procedural barrier erected by the U.S. Federal Court would leave the Canadian class plaintiffs without recourse, which is an injustice not apparent in its analysis of the Original Stay Appeal.
While it remains to be seen how the Canadian plaintiffs will fare in their attempts to certify in Ontario, the Stay Lifting Decision resuscitates this claim and opens up at least the possibility of a broadening of Canadian securities class actions with respect to securities purchased on U.S. stock exchanges. We will continue to monitor the development of this case.