In an October 29, 2009 order (here, Hat Tip: Am Law Litigation Daily), Ontario Court of Justice judge Paul Perell ruled that the direct involvement of the U.S.-based law firm Milberg LLP was permissible in the securities class action lawsuit filed against Timminco Limited and pending before the court.
Timminco had been sued in two separate proposed class actions under Part XXIII.1 of the Ontario Securities Act. The first filed action (about which refer here) was brought by Toronto-based Kim Orr Barristers P.C. The second was brought later (refer here) by the London (Ont.)-based Siskinds law firm. Each of the respective law firms filed cross-motions to stay the other action. (The motions were presented as "carriage motions," the purpose of which is "to stay all other present and future class proceedings relating to the subject matter.")
The Kim Orr law firm argued that because of its association with Milberg, which it described in its motion papers as "a pre-eminent American class action firm," it is "in the best position to prosecute the action." In a response that the Ontario court characterized as "unkindly," the Siskinds law firm drew attention to the "serious stain on the reputation of Milberg LLP," and also raised concerns about the American law firm’s involvement in an Ontario class action.
Calling it a "very difficult decision and a very close call," the Ontario court ruled in favor of the Kim Orr firm and stayed the Siskinds action.
The court did observe that the Siskinds firm is "one of the pre-eminent class action firms in Canada." The Kim Orr firm, founded in January 2008 was formed by attorneys from other firms that the court described as "pre-eminent."
The Ontario court did note the criminal misconduct in which certain Milberg partners had been involved, but also noted that all of the criminally charged attorneys had left the firm. He further noted that the two Milberg attorneys proposed to be involved in the Timminco case were "untainted" by the wrongdoing.
The two Milberg attorneys are Michael C. Spencer (currently involved in the trial of the Vivendi securities class action lawsuit in New York) and Arthur Miller (who among other things is an NYU law professor and previously a law professor at Harvard Law School). In support of its motion to lead the Timminco case, a Kim Orr partner submitted an affidavit stating that Milberg’s "experience and resources will greatly enhance our ability to prosecute the case."
In reaching its decision to allow the Kim Orr firm action to proceed, the court said it found the involvement of the Milberg firm to be a "neutral factor." The court observed that Milberg "does not bear the mark of Cain," and the two Milberg attorneys "have fine reputations and excellent credentials."
The court also noted that while "one can posit examples where the involvement of an American law firm would be grounds for disqualifying an Ontario firm," this is not one of those cases. The court found that Milberg’s proposed role of providing "investigative services, document management services, and strategic advice" not to be disqualifying.
After a detailed review of the two law firms’ respective class action claims, the court decided to favor the application of the Kim Orr firm and granted its motion to stay the Siskinds action.
An October 30, 2009 Am Law Litigation Daily article about the ruling can be found here.
Over the past several years, many of the leading U.S. plaintiffs’ securities class action law firms have launched various initiatives to expand their practice internationally. (Refer, for example, here.) As the Timminco case appears to demonstrate, one consequence seems to be the export to other countries of U.S.-based securities class action experience and expertise.
These developments not only seem to be producing an expanded universe of opportunities for the U.S. law firms, but also, given that what the U.S. firms are contributing is their "experience," seem to threaten the possible overseas extension of many attributes of U.S.-style securities class action litigation.
The decision in the Timminco case discussed above underscores that there are limitations for U.S. attorneys’ involvement. Indeed, the Am Law Litigation Daily article linked above describes a prior case in which the purely financial involvement of the U.S.-based Motley Rice law firm in a prior Ontario class action lawsuit was disallowed. But the fact that Milberg firm will be participating in the Timminco case does suggest that U.S. plaintiffs’ securities class action attorneys may and sometimes will play a role in the prosecution of securities actions outside the U.S., a development that undoubtedly will be unwelcome for the potential litigation targets in other countries.
These developments will also be unwelcome to the potential targets’ D&O insurers as well. Along those lines, it is worth noting that in the October 29 opinion in the Timminco case, Judge Perell expressly noted that "the Timminco directors carry insurance policies that may be available to partially compensate class members if the litigation is resolved in their favor."
Timminco’s D&O insurance limits would potentially exposed whether or not the Milberg firm was involved in the case. But the prospect of U.S.-based securities class action plaintiffs’ attorneys aiding securities class action litigation outside the U.S. does seem to present some unwelcome additional possibilities, both in this case as well as other cases yet to come, in Ontario or elsewhere.
To be sure, the local attorneys appear highly motivated to develop their own securities class action practices, and it could be, as Judge Perell observed in the Timminco case, that the U.S. plaintiffs’ attorneys presence or involvement really is just a "neutral factor." From my perspective, though, the U.S. securities plaintiffs’ attorneys’ involvement could represent an additional force advancing the development of securities class action litigation outside the U.S.