Outstanding Securities Class Actions Reach New Record in Canada

31 January 2011

Toronto -- Currently, there are a record 28 active securities class actions in Canada, representing approximately CDN$15.9 billion in outstanding claims, according to NERA Economic Consulting's Trends in Canadian Securities Class Actions: 2010 Update, released today.

In 2010, eight new securities class actions were filed during the course of the year, with claims of more than $870 million. Filings in 2010 dropped slightly compared to the nine securities class actions filed in 2009 and the record 10 cases filed in 2008.

Trends in Resolutions

Five securities class actions settled in 2010 for payments by defendants of $67.6 million. The average settlement for these cases was $13.5 million and the median settlement was $10 million -- compared to the average and median settlement of $9 million in 2009.

"Bill 198 Cases"

A total of 25 cases have now been brought under the recent secondary market liability provisions of the provincial securities acts (commonly referred to as "Bill 198 cases"). Of these cases, nine have been settled and 16 are still active. The average settlement defendants have paid was $10.7 million. Seven of the new class actions filed in 2010 include claims under these secondary market provisions.

US Securities Class Actions against Canadian Companies

Many Canadian-domiciled firms also face the risk of class action litigation in the US, and several of these cases correspond to similar cases in Canada. Currently, there are 13 active US securities class actions against Canadian-domiciled companies, three of which also have parallel Canadian class actions. Between 1996 and 2010, Canadian-domiciled companies were named as defendants in 71 securities class action filings in the US -- 17 of which of had parallel class actions in Canada. However, these risks may be somewhat reduced going forward in light of the recent decision of the US Supreme Court in Morrison v. Australia National Bank, which places limits on US private securities litigation relating to trading of securities outside the US.

Additional Trends

  • Most securities class actions filed in 2010 involved allegations of operational misrepresentations and accounting misrepresentations.
  • Two of the eight Canadian securities class actions were brought against companies in the minerals sector, three against companies operating in health technology and electronic technology, and two against manufacturing and retail trade companies.
  • Of the cases filed in 2010, four were filed within six months of the end of the proposed class period, one was filed within 12 months, and two were filed within 18 months. Historically, one-third of the cases in NERA's database of Canadian securities class actions were filed within two months of the end of proposed class period, and almost two-thirds of all cases were filed within six months.

Author Comments

"The number of outstanding Canadian securities class actions reached a new high in 2010 and new cases continued to be filed at a steady pace," said Mark Berenblut, NERA Economic Consulting Senior Vice President and Trends co-author. "The future outlook for filings and settlements of Canadian securities class actions are largely dependant on several factors, including: the US Supreme Court decision in Morrison; further decisions by Canadian courts, including anticipated appellate court decisions; increased competition among class counsel; and developments in the Canadian and related economies and particular sectors within those economies."

Securities Class Action Trends Report Series

NERA has been analyzing trends in securities class actions for more than 15 years and, in addition to this Canadian Trends report, produces two studies on the topic annually in the US. This report was authored by NERA Senior Vice President Mark Berenblut, Vice President Bradley Heys, and Senior Analyst Tara Singh.

For more details, and to read the full report, visit www.SecuritiesLitigationTrends.com.

About NERA

NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For over half a century, NERA's economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world's leading law firms and corporations. We bring academic rigor, objectivity, and real world industry experience to bear on issues arising from competition, regulation, public policy, strategy, finance, and litigation.

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