Canadian Lawyer InHouse

15 CANADIANLAWYERMAG.COM/INHOUSE MAY 2016 2006 2007 2008 2009 2010 2011 rights group last year as an intervener at the Supreme Court in the CIBC/IMAX/Celes- tica appeals. The leave hearings "are going to be more intense and more complicated," says Jasminka Kalajdzic, a law professor at the University of Windsor and a co-author of the text book The Law of Class Actions in Canada. "Judges are going to want plaintiffs' counsel to have done their due diligence" at the leave stage, she suggests. The hearings are also likely to result in judges performing "very fact-specifi c in- quiries" before deciding whether to grant leave, says Linda Fuerst, a senior partner at Norton Rose Fulbright LLP in Toronto. These types of hearings and the extent of the so-called "gatekeeper role" for judg- es presiding over the motions stems from provincial securities legislation enacted across the country over the past decade. The statutes, which all have very similar language, were designed to provide an op- portunity for investors to sue issuers, direc- tors, and offi cers of public companies who made misrepresentations or failed disclo- sure obligations. The potential class actions were another form of market regulation. At the same time, the statutes include a screen- ing mechanism to try to prevent American- style "strike suits" where the goal is to have defendants settle quickly to avoid the cost of litigation. The mechanism kicks in at a leave or authorization hearing, before a Superior Court level judge in Canada. In Ontario, for example, the Securities Act states that the court must be satisfi ed that "there is a reasonable possibility that the action will be resolved at trial in favour of the plaintiff," as one of the conditions for granting leave. In the proposed CIBC action, Justice George Strathy (who has since been ap- pointed chief justice of Ontario) ruled in 2012 after an eight-day leave hearing that given the complexity of this litigation it would be unfair to engage in a "fairly cali- brated weighing process" at this stage. Hav- ing considered all the evidence, Strathy said a judge should simply ask if the plaintiffs' case is so weak or so successfully rebutted it has no reasonable possibility of success. (Strathy did not grant CIBC leave as a result of the limitations period provision — a decision that was ultimately overturned by the Supreme Court of Canada. Since that time, the Ontario government changed the Securities Act to state that a notice of motion is all that must be fi led within three years under the statute, rather than being granted leave within that period, for an action to be permitted to continue.) The Ontario Court of Appeal agreed with Strathy's interpretation of the test, but in April 2015, the Supreme Court ruled on the issue in Theratechnologies Inc. v. 121851 Canada Inc. The proposed class action involved a publicly traded pharmaceutical company that had its share price drop signifi cantly after a public release by the U.S. Food and Drug Administration. The Supreme Court overturned the de- cision of the Quebec Court of Appeal and found that the plaintiff did not meet the test to be granted authorization to proceed with the class action. Justice Rosalie Abella, in writing for the court, stated that a reasonable possibility of success is a higher standard than for a normal class action to be certifi ed. The threshold is "more than a speed bump," stated Abella, in reference to a prior Ontario Superior Court decision on the issue. "The courts must undertake a reasoned consideration of the evidence to ensure that the action has some merit," she said, to ensure that the "robust deterrent screening mechanism" prevents litigation without merit from being certifi ed. The leave hearings should not be "a mini- trial," explained Abella. When the decision in the CIBC and the companion cases was issued several months later, the rulings of Justice Suzanne Côté and Justice Andromache Karakatsanis both agreed that Theratechnologies explained the threshold for what plaintiffs must show — a Green v. CIBC / Silver v. IMAX / Trustees of the Millwright Regional Council v. Celestica December: Fresh statement of claim pleaded in IMAX, adding new defendants. December: U.S. appeals court overturns decision quashing Celestica class action. September: Statement of Claim fi led under the Class Proceedings Act against IMAX for alleged misrepresentations. November: Notice of Motion seeking leave under the Ontario Securities Act is fi led against IMAX. It is the fi rst time a statutory claim for alleged misrepresentation in the secondary market has been fi led. March: Millwright Trustees fi le a class action against Celestica in the United States for alleged misrepresentations. August: Action fi led against Celestica under the CPA in Ontario. July: Statement of Claim under the CPA fi led against CIBC for alleged misrepresentations. December: Leave and certifi cation motions heard in IMAX. March: Limitations period under the Securities Act expires in IMAX. December: Leave is granted and action is certifi ed in IMAX and ultimately backdated to December 2008 by the motion judge. January: Limitations period expires in the action against Celestica. October: U.S. District Court dismisses Celestica class action in the U.S. December: Limitations period for alleged misrepresentations expires against CIBC.

• Cover