Securities class action filings in Canada were down in 2012 compared to 2011’s record number of filings and compared to recent annual averages, according to a February 13, 2013 report from NERA Economic Consulting. The report, which is entitled “Trends in Canadian Securities Class Actions: 2012 Update,” can be found here. NERA’s press release summarizing the report’s findings can be found here.
According to the report, there were nine securities class actions filed in Canada in 2012, down from the “all time high” of 15 new cases filed in 2011, and below the annual average of 12 new cases filed per year since 2008. Eight of the nine 2012 cases were filed under the secondary market civil liability provisions of the provincial securities actions (so-called “Bill 198” cases).
The downturn in the number of new securities class action lawsuit filings in Canadian securities class action may be due in part to the abatement of a couple of filing trends that drove filings prior to 2012. In recent years, filing levels had been increased due to credit crisis related filings and due to the surge in cases against Chinese domiciled companies. There were no new case filings in Canada in 2012 related to either of these trends.
Eight of the nine cases involved companies with shares traded on the Toronto stock exchange. The ninth case involves Facebook, which does not have shares listed on a Canadian exchange. (As discussed here, there is recent Canadian authority allowing cases against companies whose shares traded exclusively on foreign exchanges to go forward in Canadian courts.) Six of the nine new Canadian securities class action cases had parallel U.S. filings
In addition to these new filings in Canadian courts, there were six U.S. class action filings in 2012 involving Canadian-domiciled companies. Two of these six also involved parallel Canadian securities class actions, but four of the six involved companies for which there is no parallel Canadian class action.
Two-thirds of the 2012 securities class action filings in Canada were brought against companies in the mining or oil and gas sectors.
The most significant securities class action settlement in Canada is E&Y’s $117 million settlement in the Sino-Forest case, which, the report notes, if approved would represent “the largest settlement of a Bill 198 case to date.” There have only been two prior audit firm defendant settlements of Bill 198 cases, both of which involved the auditors’ agreement to pay $500,000 to settle the claims.
The report notes with respect to the twelve Bill 198 cases that have settled to date (excluding partial settlements, which would remove the E&Y/Sino Forest settlement from the calculation) that the average settlement amount is $10.5 million and the median settlement is $9.3 million. The average settlement as a percentage of compensatory damages claimed is 12.6% and the median is 8.9%. The average settlement of the four Bill 198 cases that had parallel U.S. claims is $16.9 million and the median is $17.2 million. The average of the settlements in the eight domestic-only cases is $7.4 million and the median is $5.4 million.
With new filings, settlements and dismissals during 2012, there are now a total of 51 active Canadian securities class actions, four more than at the end of 2011 and nearly double the number of active cases four years ago. All but nine of the cases still active as of the end of 2012 were filed after 2007. The combined impact of the growing number of open claims and case law developments suggest that “we may see more settlements during 2013 than we saw in 2012.”
For discussion of a recent law firm memo asking whether class action lawsuits in Canada had “reached maturity,” refer here.