For the second time, a court has given investors leave to proceed and also certified a plaintiff class in a secondary market misrepresentations claim under the revised Ontario Securities Act. In an order dated March 1, 2011, Ontario Superior Court Justice Wolfram Tausendfreund granted leave to investors to proceed against Arctic Glacier Income Fund, its trustees and related entities and executives. A copy of Justice Tausendfreund’s order can be found here.


As discussed at length here, effective in 2005, Ontario revised its securities laws (in legislative provisions now generally referred to as Bill 198) potentially making it easier for disappointed investors to bring actions for civil liability against directors and officers of public companies for alleged secondary market misrepresentations.


Section 138.8 (1) of the revised Ontario Securities Act specifies, however, that a liability action cannot be commenced "without leave of court granted upon motion with notice to each defendant." The court is to grant leave only "where it is satisfied" that the action "is being brought in good faith" and there is a "reasonable possibility" the plaintiff will prevail at trial.


In a "landmark" December 2009 ruling, discussed here, Ontario Superior Court Justice Katherine van Rensberg granted plaintiffs in the Imax securities class action lawsuit leave to proceed with their claims. Justice van Rensberg also granted the plaintiffs’ motion to certify a global class in that case. In a February 2011 order (discussed here), another Superior Court Justice denied the defendants’ motion for leave to appeal Justice van Rensberg’s rulings.


The March 1 ruling involved an action brought by investors who had purchased shares of the Arctic Glacier Income Fund. The Income Fund is an unincorporated mutual fund trust that is a reporting issuer in ten Canadian provinces. Interests in the Income Fund trade on the Toronto stock exchange. The Income Fund’s sole assets are shares of Arctic Glacier Inc., a corporation organized under Alberta law. The company and its wholly owned subsidiary, Arctic Glacier International, provide packaged ice to consumers in Canada and the United States.


In March 2008, the Income Fund announced that it had become aware of an U.S. Department of Justice antitrust investigation involving the packaged ice industry. In 2009, Arctic International pleaded guilty to a criminal, anticompetitive conspiracy in the U.S. In the plea agreement, Arctic International agreed to pay a US$9 million fine and admitted that it had participated in a conspiracy to suppress competition in the packaged ice business in Michigan between 2001 and 2007. Following the announcement of the investigation, Income Fund’s unit price declined. The plaintiffs initiated an action alleging that they had been misled in connection with the company’s alleged legal and regulatory compliance programs.


As required under the revised Ontario Securities Laws, the plaintiffs moved for leave to proceed. In order to determine whether or not the plaintiffs had met the statutory requirement in order to obtain leave – that is, that "there is a reasonable possibility that the action will be resolved at trial in favor of the plaintiff" – Justice Tausendfreund followed the analysis of Justice van Rensberg in the Imax case with respect to the requirements to meet this standard. After noting that he saw no reason to depart from her analysis, Justice Tausendfreund said that "the applicable standard is more than a mere possibility of success, but is a lower standard than a probability."


Justice Tausendfreund concluded that the plaintiffs had met this "leave test" under Section 138.8 and granted them leave to pursue statutory claims for misrepresentation in the secondary market. He also granted the plaintiffs’ motion to certify a class of all investors who had purchased the Income Fund units during the class period, declining the defendants’ request to narrow the class.


The significance of Justice Tausendfreund’s ruling is that now a second set of plaintiffs has been granted leave to proceed with a claim for secondary market misrepresentations under the revised Ontario Securities Laws. In addition, Justice Tausendfreund, like Justice van Rensberg in the Imax case, found that the showing required to satisfy the "leave test" is relatively low.


It would is possible to overgeneralize from just these two cases, but at least so far that the plaintiffs have been relatively successful in overcoming the initial procedural hurdles in pursing secondary market misrepresentation claims under the revised Ontario Securities Act.


In addition, the plaintiffs have also succeeded in having a broad class certified as well. The certification of a global class in the Imax case may be of greater significance, given that Imax shared traded on both the Toronto and New York stock exchanges, whereas the Arctic Glacial Income Fund shares traded only on the Toronto exchange. But nevertheless, the relatively low initial threshold for leave and the courts’ willingness to certify broad classes are positive developments for the plaintiffs in these cases, and may make the remedies available under the revised Ontario Securities Act more attractive to other claimants.


An interesting and detailed March 8, 2011 analysis of the Arctic Glacier decision by the Osler, Hoskin & Harcourt law firm can be found here. The law firm memo raises a number of interesting questions about the decision, particularly with respect to the class certificaiton ruling. A March 4, 2011 Globe and Mail article about the recent ruling can be found here.


We Are All One: In her fascinating article in the March 7, 2011 issue of The New Yorker entitled "The View from the Stands" (here) about soccer in Turkey, Elif Batuman reported the following comments of one fan of the Beşiktaş team about the team and its followers (who are known as Çarşi):


He characterized Beşiktaş as the team of the unexpected, the team of underdogs, and talked about Çarşi’s slogans, which are unveiled on giant banners during matches. “We are all Black,” proclaimed one banner, after rival fans had made references to the race of the French-Senegalese Beşiktaş star Pascal Nouma. When [competitior] Fenerbahçe disparaged a Beşiktaş manager whose father had been a janitor, there were banners saying “We Are All Janitors.” And when an international committee of astronomers removed Pluto from the list of planets Çarşi took up the cause: “We Are All Pluto.”