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Trends in Canadian Securities Class Actions: 2019 Update
Cannabis Litigation Leads to New Highs
By Bradley A. Heys, Robert Patton, and Jielei Mao
19 March 2020
There have now been 100 Statutory Secondary
Market cases filed in Canada in the 14 years since
the new Securities Act provisions first started
coming into effect. The 14 cases filed in 2019 is
the greatest number of filings in any single year
and follows four years of relatively few filings.
Five of the 14 new filings in 2019 (36%) involve
companies in the cannabis industry. Additionally,
of the 12 Canadian-domiciled companies named
as defendants in 14 US shareholder class actions,
eight operate in the cannabis industry.
1 www.nera.com
Trends in Canadian Securities Class Actions: 2019 Update Cannabis Litigation Leads to New Highs
By Bradley A. Heys, Robert Patton, Jielei Mao1
19 March 2020
Introduction
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 2019 update on trends in Canadian securities class actions. We have
prepared a streamlined report highlighting the key trends observed in 2019 in a concise format that
we hope you will enjoy. Interested readers looking for more information or with specific questions
are invited to contact the authors directly.
Trends in Filings
Cases Filed by Year
• Fourteen new securities class actions were filed in 2019, four more than in 2018 and the second
highest number of filings historically (one fewer than the 15 cases filed in 2011). See Figure 1.
• The new filings in 2019 all involve companies with shares listed on public stock exchanges and
allegations of misrepresentations and/or omissions in violation of the continuous disclosure
obligations claims pursuant to the statutory secondary market civil liability provisions of the
provincial securities acts (i.e., Statutory Secondary Market cases).
• Nine of the 14 new cases were filed in Ontario, three of which also have corresponding actions
filed in Quebec. Two cases were filed only in Quebec, and three cases were filed only in British
Columbia, the first new securities class actions filed in that province since 2015.
2 www.nera.com
• In the 14 years since the new Securities Act provisions came into effect, there have been 100
Statutory Secondary Market cases filed in Canada.3 The 14 cases filed in 2019 is the greatest
number of filings in any single year and follows four years of relatively few filings. See Figure 2.
Figure 1. Canadian Securities Class Actions Filed by Year 2006–2019
0
2
4
6
8
10
12
14
16
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year of Filing
Num
ber
of
Filin
gs
Total: 136 Cases Filed
Other Cases
Statutory Secondary Market Cases
4
5 5
12
9
12
15
10
11
13
4
9
7
10
4
3
2
7
4 4
2
11
21
6
9 9 9
4
8
3
6 6
14
14
1
3
9
2
3
3 www.nera.com
Filings by Industry and Economic Sector
• Notably, five of the 14 filings in 2019 (36%) involve companies in the cannabis industry.
• Two of the 14 new filings in 2019 (14%) involve defendants in the health technology and
services sector. Six of the 44 cases filed from 2015 to 2019 (14%) involve companies in this
sector, compared with only one out of 49 cases (2%) filed between 2011 and 2014.
• Only one of the cases filed in 2019 involved a company in the energy and non-energy minerals
sector (a case relating to Just Energy Group Inc.), in contrast to the historical concentration of
cases filed against issuers in that industry. See Figure 3.
Figure 2. Filings Involving Statutory Secondary Market Claims 2006–2019
2006
14
12
10
8
6
4
2
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Total: 100 Cases Filed
Year of Filing
Num
ber
of
Filin
gs
1
3
9 9 9 9
11
4 4
6
14
7
6
8
2008–2014 Average:8.7 Cases
2015–2018 Average:5.3 Cases
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Cross-Border Cases
• Five of the 14 new cases filed in 2019 also involve parallel cases filed in the United States, two
of which involve cannabis companies.
• In total, 12 Canadian-domiciled companies were named as defendants in 14 US shareholder
class actions filed in 2019. Eight of these companies operate in the cannabis industry.
• Of the 14 cases filed in the US, five have corresponding class actions in Canada, not including
one for which a filing in Canada was made in January 2020.
• In the three-year period 2017 to 2019, only 37% of the cases filed in the US against Canadian-
domiciled companies also involved a parallel filing in Canada, down from 53% for cases filed in
the 11-year period from 2006 to 2016. See Figure 4.
Figure 3. Filings by Industry and Economic Sector 2006–2010, 2011–2014, and 2015–2019
2006–201043 Cases
2011–201449 Cases
2015–201944 Cases
Other 37%
(16 Cases)
Health Technology and Services 5%
(2 Cases)
Health Technology and Services 2%
(1 Case)
Health Technology and Service14%
(6 Cases)
Other 37%
(18 Cases)
Finance 28%
(12 Cases)Finance
16%(8 Cases)
Energy and Non-Energy
Minerals 30%
(13 Cases)
Energy and Non-Energy
Minerals 45%
(22 Cases)
Other 27%
(12 Cases) Cannabis Related16%
(7 Cases)
Finance 20%
(9 Cases)
Energy and Non-Energy
Minerals 23%
(10 Cases)
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Status of US Filings against Canadian-Domiciled Companies
• As at the end of 2019, 33 of the 92 securities class actions filed in the US against
Canadian-domiciled companies between 2006 and 2019 remained active (see Figure 5).
Twenty-two of these active cases were filed in the past two years.4
• Of 69 cases filed between 2006 and 2017, 20 cases (29%) were resolved by way of
settlement, 38 cases (55%) were dismissed, and 11 cases (16%) remain unresolved at the end
of 2019.
Figure 4. US Filings Involving Canadian-Domiciled Companies with and without Parallel Canadian Actions 2006–2012, 2013–2016, and 2017–2019
2006–2012
2013–2016
2017–2019
17 US Filings with Parallel Canadian Actions (49%)
16 US Filings with Parallel Canadian Actions (59%)
11 US Filings with Parallel Canadian Actions (37%)
11 US Filings without Parallel Canadian Actions (41%)
19 US Filings without Parallel Canadian Actions (63%)
18 US Filings without Parallel Canadian Actions (51%)
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Trends in Resolutions
Number of Settlements and Median Settlement Amount by Year
• Four Canadian securities class actions were settled in 2019, half as many as were settled in 2018.
• Settlement amounts in these four cases range from $3.3 million to $37.7 million, with an
average of $13.5 million and a median of $6.5 million.
• Median settlement amounts have trended down over time. For the 25 settlements reached
over the past five years, the median settlement is $6.4 million—46% lower than the median
settlement of $11.8 million for the 22 settlements reached between 2010 and 2014, and
64% lower than the median settlement of $17.6 million for 22 of 23 cases settled during the
2006–2009 period. See Figure 6.
Figure 5. Status of US Filings Against Canadian-Domiciled Companies 2006–2019
Num
ber
of
Filin
gs
14
12
10
8
6
4
2
0
Total: 92 Cases Filed
Dismissed Settled Pending
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
14
14
9
8
1
33
66
444
222
11
1
1
1
1
1
2
2
44
3
3
3
2
2
1
9
7
888
5555
3
2
4
Year of Filing
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Other Resolutions
• One case was discontinued during 2019—a case filed against Barrick Gold Corp. in 2018.
A case filed against Barrick Gold in 2014 remains active.
• In 2019, the court denied leave to proceed in a case against BP plc, which was filed in 2012 in
relation to the Deepwater Horizon oil spill.
Figure 6. Settlements 2006–2019
Med
ian S
ettl
emen
t A
mo
unt
(CA
D M
illio
ns)
Num
ber
of
Sett
lem
ents
Note: Based on 69 out of 70 cases settled during the period from 2006 to 2019 for which we have information regarding the settlement amount. Settlement amountshave been adjusted for inflation to 2019 dollars. The settlement amount is not available for one settlement reached in the 2006–2009 period.
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
2006–2009Median Settlement:
$17.6 Million
2010–2014Median Settlement:
$11.8 Million
2015–2019Median Settlement:
$6.4 Million
$0
$5
$10
$15
$20
$25
0
1
2
3
4
5
6
7
8
9
10
Settlement Year
5
3
8
7
5
2
3
6 6
7
2
4 4
8
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Status of Cases at 2019 Year-End Leave and Certification
• In 2019, the Ontario Court granted leave to pursue certain (but not all) statutory secondary
market claims in a case involving Barrick Gold (the case first filed in 2014), and the Alberta
Court granted leave and certification of certain statutory secondary market claims in the case
involving Ithaca Energy Inc. (first filed in 2015). The Ithaca Energy case is the first decision of an
Alberta Court on a motion for leave under the statutory secondary market liability provisions of
the Securities Act.
Of the 100 Statutory Secondary Market cases filed through the end of 2019:
• Leave applications have been contested in 25 cases, with leave granted in 12 cases (48%)
and denied in 13 cases (52%). Leave applications were not contested in 13 other cases, and
in three of them, leave was granted for the purposes of settlement.
• Twenty-six cases were 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 seven cases were discontinued in their entirety prior to
any leave decision.
• Twenty-five unresolved cases had not yet reached the leave stage of the litigation as of the
end of 2019.
• Three other cases that appear to be no longer active never reached the leave stage.
Looking Forward
• Cases involving issuers in the cannabis industry drove filings to new highs in 2019. This is
perhaps unsurprising given the early stage of the industry and the recent volatility in the market
prices of cannabis-related securities. It will be interesting to see whether this high will be
fleeting or whether class counsel will be hungry to file similar cases going forward.
• Other factors that may affect filings and resolutions are the proposed substantive and procedural
amendments to the Ontario Class Proceedings Act, which are expected to pass into law in
2020 and will apply to cases filed after the amendments come into force. These amendments
include a change to the test for certification (by introducing a requirement for common factual
and legal issues to predominate over individual issues, similar to the test applied in the US) and
changes to the rules regarding precertification motions. Some commentators have suggested
that these amendments may make certification more difficult for plaintiffs and may lead to
some cases being pursued in other provinces perceived as more plaintiff-friendly.
9 www.nera.com
Notes
1 Bradley A. Heys is a Director, Robert Patton is an Associate Director, and Jielei Mao is a Senior Analyst with NERA Economic Consulting. We thank Janeen McIntosh for comments on an earlier draft. We also thank 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 report. All errors and omissions are our own.
2 The NERA Canadian Securities Class Action database includes information relating to 169 securities class action cases filed in Canada since 1997.
3 The new provisions of the provincial securities acts that enabled Statutory Secondary Market cases first came into force in Ontario at the end of 2005.
4 One additional case filed in the last two years was dismissed.
About NERA
NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to
applying economic, finance, and quantitative principles to complex business and legal
challenges. For half a century, NERA’s economists have been creating strategies, studies,
reports, expert testimony, and policy recommendations for government authorities and the
world’s leading law firms and corporations. We bring academic rigor, objectivity, and real-
world industry experience to bear on issues arising from competition, regulation, public
policy, strategy, finance, and litigation.
NERA’s clients value our ability to apply and communicate state-of-the-art approaches
clearly and convincingly, our commitment to deliver unbiased findings, and our reputation
for quality and independence. Our clients rely on the integrity and skills of our unparalleled
team of economists and other experts backed by the resources and reliability of one of
the world’s largest economic consultancies. NERA serves clients from more than 25 offices
across North America, Europe, and Asia Pacific.
ContactsFor further information, please contact:
Bradley A. Heys
Director
Toronto: +1 416 868 7312
Robert Patton
Associate Director
Toronto: +1 416 868 7318
The opinions expressed herein do not necessarily represent the views of NERA Economic Consulting
or any other NERA consultant.
To receive publications, news, and
insights from NERA, please visit www.nera.com/subscribe.
Jielei Mao
Senior Analyst
Toronto: +1 416 868 7316
Visit www.nera.com to learn
more about our practice areas
and global offices.
© Copyright 2020
National Economic Research
Associates, Inc.
All rights reserved.
Printed in the USA.
