After an unsuccessful attempt to bring a securities class action in Ontario on behalf of Canadian security holders of BP, a plaintiff recently – and again unsuccessfully - sought to start his class action in Texas. The U.S. court decision is now the leading case interpreting a section of the Ontario Securities Act (the “OSA”).
On September 25, 2015, the U.S. District Court for the Southern District of Texas (the “U.S. Court”) dismissed the plaintiff’s claim, which alleged the statutory cause of action for secondary market misrepresentation under the OSA. The U.S. Court held that it had already appointed lead plaintiffs in an existing class action in Texas, and that those lead plaintiffs had determined not to pursue claims under the OSA. The court also held that the plaintiff’s claim was time-barred under the OSA’s limitation period, and could not be saved on the basis that the alleged misrepresentation was “continuing”.
The plaintiff’s earlier proposed class action in Ontario was stayed by the Court of Appeal in 2014.
The U.S. Class Action
In 2010, numerous investors commenced putative securities class actions against BP in the U.S., arising from the April 2010 Deep Water Horizon oil spill in the Gulf of Mexico. That same year, the U.S. Court appointed New York and Ohio retirement funds as lead plaintiffs for a putative class of purchasers of BP American Depositary Shares and ordinary shares (the “Proposed U.S. Class”). Those lead plaintiffs are pursuing their claims against BP under U.S. federal securities laws (the “U.S. Class Action”).
Canadians who purchased BP securities over the NYSE are included in the Proposed U.S. Class.
The Proposed Canadian Class Action
In 2012, a similar claim was brought in Ontario under the statutory cause of action in s. 138.3 of the OSA. The proposed class was made up of Canadian residents who acquired securities of BP anywhere in the world. The vast majority of the proposed class members acquired their BP securities over the New York Stock Exchange or London Stock Exchange, with a limited number purchasing over the Toronto Stock Exchange.
In 2014, the Court of Appeal for Ontario stayed the claims of Canadians who purchased over the foreign exchanges (including the proposed representative plaintiff, who had purchased his shares over the NYSE). The Court held that, although an Ontario court had jurisdiction over the claims of those foreign exchange purchasers, it should decline that jurisdiction on the basis that the U.S. and the U.K. were clearly more appropriate forums for the determination of those claims.
In March 2015, the Supreme Court of Canada denied leave to appeal from the decision of the Court of Appeal. Immediately thereafter, the plaintiff commenced a proposed class action in the U.S., alleging the statutory cause of action under the OSA. That claim was brought on behalf of Canadians who purchased BP securities over the NYSE.
The U.S. Court’s Decision
On September 25, 2015, the U.S. Court granted BP’s motion dismissing the plaintiff’s proposed class action. The U.S. Court held that the plaintiff was “not entitled to now assert a separate class action based on a claim that the lead plaintiffs determined not to pursue.”
The U.S. Court went on to find that the plaintiff’s claim was, in any event, barred by the limitation period under the OSA. The plaintiff’s claim was based on alleged misrepresentations made in 2007 and 2008, and s. 138.14 of the OSA required that those claims be brought within three years of the date that the documents containing the alleged misrepresentations were first released. As the plaintiff had not even brought his claim in Ontario until 2012, his claim was statute-barred.
The plaintiff argued that s. 138.3(6) of the OSA provides an exception to the statutory limitation period. Section 138.3(6) grants the court discretion to treat multiple misrepresentations having common subject matter or content as a single misrepresentation. The plaintiff argued that this gave the court discretion not to apply the limitation period if BP continued to make the same representations after 2008, even if the plaintiff’s claim was not based on such representations. The U.S. Court expressed serious doubt as to whether s. 138.3(6) granted it discretion to save the plaintiff’s claim (finding “it most likely does not”), but held that even if it did, it would not exercise its discretion given that the plaintiff was “unable to provide the Court with a compelling justification for his delay”.
Notably, the U.S. Court’s decision may be the most direct authority on the relatively unique argument that s. 138.3(6) of the OSA can save a claim that would otherwise be limitation barred by s. 138.14.