Trends in Canadian Securities Class Actions: 2010 Update

Mon Jan 31 15:24:00 EST 2011
By Bradley A. Heys, Tara K. Singh, and Mark L. Berenblut

Climbing to New Heights -- the Number of Active Cases is at its Highest

Outstanding securities class actions reached a new record in Canada in 2010, according to this newly released edition of NERA's study, Trends in Canadian Securities Class Actions: 2010 Update. The study's co-authors, Vice President Bradley A. Heys, Senior Analyst Tara K. Singh, and Affiliated Consultant Mark L. Berenblut, report that as of the end of 2010 there were a record 28 active securities class actions in Canada, representing approximately CDN$15.9 billion in outstanding claims. 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.

The study also notes that 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. 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.

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. As of 31 December 2010, 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.