New IMAX Decision Means Class Members Must Choose Between Jurisdictions
A judgment released yesterday in Silver v. Imax (2013 ONSC 6751) provides more assurance that Ontario courts are prepared to intervene where class members in parallel proceedings seek to: (i) participate in a foreign settlement, and (ii) continue participating in an ongoing class proceeding in Ontario.
Background: In 2006, investors commenced class proceedings against Imax in both Ontario and the U.S., notwithstanding that the vast majority of trading in Imax shares occurred over the NASDAQ. Justice van Rensburg certified a global class that included investors who purchased shares over either the TSX or the NASDAQ. In contrast, the U.S. proceeding excluded investors who acquired shares over the TSX. In 2012, the U.S. District Court granted conditional approval to a settlement in the U.S. Proceeding.
The Problem: As a result of the overlapping classes, approximately 85% of the class members in the ongoing Ontario proceeding were also captured by the settlement in the U.S. proceeding. Imax moved to amend the class definition in the Ontario proceeding to exclude the investors who were included in the settlement in the U.S. proceeding.
Decisions: Justice van Rensburg (who was subsequently elevated to the Ontario Court of Appeal) amended the class to exclude investors who did not opt out of the settlement in the U.S. proceeding. Essentially, investors who were members of both classes were forced to choose: they could opt out of the settlement and participate in the Ontario proceeding or be bound by the settlement in the U.S. proceeding. They could not obtain double recovery by doing both. In a decision released yesterday, Justice Tzimas denied a motion seeking leave to appeal the Order of Justice van Rensburg to an appellate court (the Ontario Divisional Court).
Importance: These decisions are particularly important because they may give defendants increased comfort in their ability to settle one class proceeding without settling a parallel proceeding. They diminish the leverage that a plaintiff may have to extract a higher settlement by refusing to participate in a global settlement. Accordingly, these are important victories in promoting fairness for defendants.