Of the 21 Statutory Secondary Market cases in which a leave application has been contested, leave was granted in nine cases (43%) and denied in 12 cases (57%). In the most recent fouryear period (2015 to 2018), a somewhat lower proportion of contested applications for leave have been granted as compared to applications decided in the preceding nine years (2006 to 2014): four of the last 11 contested leave applications (36%) have been granted compared to five of the first 10 contested leave applications (50%).
Trends in Canadian Securities Class Actions: 2018 Update
By Bradley A. Heys and Robert Patton1 13 February 2019
NERA Economic Consulting maintains a proprietary database of information regarding Canadian securities class actions (the NERA Canadian Securities Class Action database).2 We are pleased to present our 2018 update on trends in Canadian securities class actions. This year, we have prepared a streamlined report highlighting the key trends we observed in 2018 in a more concise format we hope you will enjoy. Interested readers looking for more information or who have specific questions are invited to contact the authors directly.
Trends in Filings
Cases Filed by Year Eight new securities class actions were filed in Canada during 2018, one more than in 2017,
and one fewer than in 2016.3 Six of the eight new filings are shareholder class actions involving companies with shares
listed on a public stock exchange, five of which include claims pursuant to the statutory secondary market civil liability provisions of the provincial securities acts (i.e., "Statutory Secondary Market" cases). A sixth Statutory Secondary Market case involves claims brought against the manager of an exchange-traded fund (ETF). One case involving a company with shares listed on a public exchange involves claims of negligence and breach of trust relating to the impugned conduct of the issuer's former CEO. One of the eight new cases filed this year involves allegations of fraud and misappropriation brought by a class of investors in a real estate venture.
Number of Filings
Figure 1. Canadian Securities Class Actions Filed by Year 20062018
16 Other Cases Statutory Secondary Market Cases
14 Total: 120 Cases Filed
12 12 12 6
11 10 3 4 10 1
5 2 3 2007
Year of Filing
For five of the eight new Canadian cases filed in 2018, we are aware of parallel class actions filed in the US (in three instances, these parallel cases were first filed in the US prior to 2018). This is broadly consistent with recent history in that about half of new filings in Canada in the period from 2011 to 2017 also had parallel cases filed in the US.
Nine cases involving Canadian-domiciled issuers were filed in the US during 2018, including three filings corresponding to two of the new Canadian cases filed in 2018 (two of the US filings relate to the same issuer). Six of these US filings have had no parallel filing in Canada yet.
Interestingly, over the last two years (20172018) only five of 17 cases (29%) filed in the US against Canadian issuers also involved a parallel filing in Canada. This comes in contrast to the 16 of 27 cases (59%) filed in the period from 2013 to 2016, and 17 of 35 cases (49%) filed in the period from 2006 to 2012 (see Figure 2). This trend may simply reflect the fact that cases are filed more quickly in the US than they are in Canada and, thus, might be tempered if additional parallel cases are filed in Canada in the future.4
Figure 2. US Filings Against Canadian-Domiciled Companies by Year of US Filing
17 US Filings with Parallel Canadian Actions (49%)
18 US Filings without Parallel Canadian Actions (51%)
16 US Filings with Parallel Canadian Actions (59%)
11 US Filings without Parallel Canadian Actions (41%)
5 US Filings with Parallel Canadian Actions (29%)
12 US Filings without Parallel Canadian Actions (71%)
Filings by Industry Sector Of the eight new cases filed in 2018, four involve companies in the Finance sector and two
involve companies in the Energy and Non-Energy Minerals sector.5
Over the last five years, cases involving companies in the Health Technology and Services sector account for 12% of new filings (five new cases), compared to less than 4% (three cases) filed during the preceding eight years.
Companies in the Energy and Non-Energy Minerals sector have consistently attracted more filings than any other single sector. Cases involving issuers in the Finance sector slowed in the period from 2011 to 2013, but more recently have returned nearly to the level seen around the time of the global financial crisis (see Figure 3).
Figure 3. Filings by Industry Sector of Issuer 20062010, 20112013, and 20142018
20062010 43 Cases
20112013 36 Cases
Other 37% (16 Cases)
Energy and Non-Energy
Energy and Non-Energy
Other 42% (15 Cases)
20142018 41 Cases
Other 24% (10 Cases)
Energy and Non-Energy
Health Technology and Services 5%
Health Technology and Services 3%
Health Technology and Service 12%
Trends in Resolutions
Number of Settlements and Median Settlement Amount by Year Eight Canadian securities class actions were settled (or tentatively settled, pending court
approval) during 2018, the greatest number of settlements in any year since 2008.
Settlement amounts in these eight cases range from $0.5 million to $110 million, with an average of $21.7 million (heavily influenced by three relatively large settlements).6 The median settlement is $3.3 million.
Taking a longer view, among all Statutory Secondary Market cases to date, defendants have agreed to pay a total of more than $600 million to settle 41 cases, with settlements ranging from approximately $0.1 million to $110 million. The average settlement amount for these 41 cases is $15.5 million and the median is $9.0 million (excluding partial settlements). Including partial settlements of Statutory Secondary Market cases, defendants have agreed to pay a total of more than $800 million.
After adjusting for inflation, the median settlement across all Canadian securities class actions (not just Statutory Secondary Market cases) over the six-year period from 2013 to 2018 was $9.8 million, down from a median of $15.8 million for settlements in the preceding seven-year period from 2006 to 2012--a decline of approximately 38% (see Figure 4).
Number of Settlements Median Settlement Amount (CAD Millions)
Figure 4. Number of Settlements by Year and Median Settlement Amount 20062012 and 20132018
20062012 Median Settlement:
$25 8 7 $20
20132018 Median Settlement:
$9.8 Million 4
$15 $10 $5
Note: Median settlement amounts are based on 65 out of 66 cases settled during the period from 2006 to 2018 for which we have information regarding the settlement amount. Settlement amounts have been adjusted for inflation to 2018 dollars.
Status of Cases at 2018 Year-End
Our database includes 51 Canadian securities class actions that appear to be unresolved as of the end of 2018. All but five of these 51 cases were filed in 2006 or later (including four cases in which there have been partial settlements). Thirty-one of these cases are Statutory Secondary Market cases (see Figure 5).
Number of Filings
Figure 5. Status of Cases at 31 December 2018 by Filing Year 20062018
2 2 2008
9 3 2
2 2 2 2010
7 11 10 4
2 1 5 33
Year of Filing
2 4 2014
Active Denied Certification and/or Leave Discontinued Settled Judgment Total: 120 Cases Filed
Of the 87 Statutory Secondary Market cases filed since the amendments to the Ontario Securities Act came into force at the end of 2005, 41 cases have been settled (as noted above) and 15 have been either discontinued or are no longer active after leave of the court (required under the provincial statutory provisions for these cases to proceed) was denied. Class certification was also denied in three of these 15 cases. At the end of 2018, there were 31 Statutory Secondary Market cases that had not yet reached the leave stage and remained unresolved (see Figure 6).
Figure 6. Status of Statutory Secondary Market Cases at 31 December 2018
Settled 47% (41 Cases)
Denied Leave 9%
Leave and Certification Of the 87 Statutory Secondary Market cases:
- Leave of the court has been granted in 20 cases and denied in 12 cases; - Twenty-six cases settled prior to any decision regarding leave of the court; - Statutory Secondary Market claims were discontinued in one case (although other aspects of
that case remain unresolved), and five cases were discontinued in their entirety, prior to any leave decision; and - Twenty-three unresolved cases had not yet reached the leave stage by the end of 2018.
In 11 cases, leave of the court was granted without opposition.
Of the 21 Statutory Secondary Market cases in which a leave application has been contested, leave was granted in nine cases (43%) and denied in 12 cases (57%).
In the most recent four-year period (2015 to 2018), a somewhat lower proportion of contested applications for leave have been granted as compared to applications decided in the preceding nine years (2006 to 2014): four of the last 11 contested leave applications (36%) have been granted compared to five of the first 10 contested leave applications (50%) (see Figure 7).
Figure 7. Outcome of Contested Motions for Leave by Date of Decision 20062014 and 20152018
20062014 10 Cases
20152018 11 Cases
Leave Denied 50%
Leave Granted 50%
Leave Denied 64%
Leave Granted 36%
To date, we are aware of 46 Canadian Statutory Secondary Market cases that have been certified as class actions. In 37 (80%) of these cases, certification has not been contested with it being granted either for the purposes of settlement (26 cases) or on consent of the parties (11 cases).
Contested certification motions have been heard in 12 cases, with certification being granted in nine (75%) and denied in three (25%) of these cases.
We are aware of three unresolved cases in which motions for both leave and certification have been filed, and four other cases in which motions for certification have been filed. However, these motions had not yet been decided by the end of 2018.
Status of US Filings Against Canadian-Domiciled Companies In the 13-year period from 2006 to 2018, there were 79 filings of securities class actions in the
US involving Canadian-domiciled companies, including nine new cases filed in 2018.
Of these 79 US cases, 18 (22.8%) have settled, 36 (45.6%) have been dismissed, and 25 (31.6%) remained unresolved at end of 2018 (see Figure 8).
Number of Filings
Figure 8. Status of US Filings Against Canadian-Domiciled Companies 20062018
9 Total: 79 Cases Filed
4 4 32 2 12 0
2 1 1 2007
1 4 5 1
Number of Filings
1 1 2014
2 1 5
Looking Back and Looking Ahead
2018 marked the fourth year that new filings of Canadian securities class actions fell below the average rate of new filings witnessed during the period from 2008 to 2014. In that period, securities class actions filed in Canada ranged from nine to 15 cases per year and averaged 12 cases per year. More recently, during the period from 2015 to 2018, annual new filings ranged from four to nine and averaged only seven cases per year.
Precisely how filings will evolve in the future is impossible to predict, but a potentially relevant observation is that the lull observed over the past several years has coincided with a generally rising and quiescent stock market. Whether financial markets will grow more turbulent, and what effect that would have on filing rates, remains to be seen. We will continue to monitor and report on these developments as they unfold.
1 Bradley A. Heys is a Director and Robert Patton is an Associate Director with NERA Economic Consulting. We thank Dr. Patrick Conroy for comments on an earlier draft. We also thank Jielei Mao, David Ogilvie, and Mattia Dolci for valuable research assistance with this paper. We appreciate the contributions of Svetlana Starykh to this and previous editions of this study. These individuals receive credit for improving this paper. All errors and omissions are our own.
2 The NERA Canadian Securities Class Action database includes information relating to 153 securities class action cases filed in Canada since 1997.
3 We report a single filing where multiple claims have been made in respect of substantially similar facts. 4 For example, over the five-year period ending in 2018, the annual median time to file from the end of a proposed class
period in the US was between 10 and 18 days (for Rule 10b-5 cases); in Canada, the annual median time to file for Statutory Secondary Market cases was between 2.5 and 8.7 months. See Stefan Boettrich and Svetlana Starykh, "Recent Trends in Securities Class Action Litigation: 2018 Full-Year Review," NERA Economic Consulting, 29 January 2019, available at http://www.nera.com/publications/archive/2019/recent-trends-in-securities-class-action-litigation--2018-full-y.html. 5 One of the cases involving the Finance sector relates to real estate investments, which fall into the Finance industry sector as defined by FactSet Research Systems, Inc. 6 All dollar amounts are in CAD unless otherwise stated.
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