On September 4, 2013, Justice David R. Collier of the Quebec Superior Court dismissed a motion for authorization to institute a class action against Facebook Inc., its directors and the underwriters involved in the Facebook Inc. IPO.1 The petitioner claimed to be acting on behalf of all Quebecers who had bought shares of Facebook Inc. and subsequently suffered a loss on reselling them. In her motion, the petitioner alleged, among other things, that the respondents had failed to disclose certain material facts in the documents filed with US securities authorities and that the documents contained misrepresentations.

Facebook Inc. and the other respondents argued that the Superior Court did not have jurisdiction to hear such a lawsuit. In this regard, it is important to note that the following facts were not contested by the petitioner: (i) the respondents were all domiciled in New York or California (ii) the events giving rise to the dispute had all occurred in the United States, not in Quebec, and (iii) Facebook Inc. was not a reporting issuer under the Quebec Securities Act and had not distributed securities in Quebec within the meaning of section 236.1 of the Securities Act.

Thus the Court’s analysis was limited to applying the test under article 3148 of the Civil Code of Québec, more specifically whether the petitioner had suffered damage in Quebec within the meaning of subsection 3 of that article. Following a brief review of the relevant case law, Justice Collier concluded that the petitioner had not suffered damage in Quebec merely because the loss she sustained may have been recorded in Quebec.

The Court then cited article 1734 of the Civil Code of Québec, which states that a buyer is bound to take delivery of the property sold, and to pay the price, at the time and place of delivery. In this case, the Court found that the shares of Facebook Inc. would have been notionally delivered either in New York or at Facebook Inc.’s head office in California. In the absence of evidence to the contrary, it followed that payment for the shares had been made elsewhere than in Quebec.

Since no fault had been committed in Quebec and no damage had been suffered in Quebec, Justice Collier concluded that the Quebec Superior Court did not have jurisdiction to hear the action. Subsidiarily, the Court added that even if it had had jurisdiction, it would have declined that jurisdiction in favour of the New York courts, as the record showed that 41 suits related to Facebook Inc.’s IPO had been centralized and were proceeding before the New York courts. Since those suits included residents of Quebec and were based on the same allegations, the Court considered that the New York courts were better placed to dispose of the matter.

The Court also noted that the prospectus filed by Facebook Inc. was subject to the laws of New York and the evidence substantiating the petitioner’s allegations was likely to be found in New York. Moreover, even if the Superior Court were to hand down judgment against the respondents, that judgment would have to be executed in the United States. In short, the New York courts appeared to be the natural forum for hearing the actions against the respondents and no advantage was to be gained from proceeding in Quebec.

This judgment is of interest in that it examines the question of whether a Quebec resident may bring suit before the Quebec courts against a foreign company following the purchase of shares issued on a foreign stock exchange. It remains to be seen whether the petitioner will appeal the decision.