Kwong v
In parallel class actions commenced in
At the urging of an objecting class member (the Objector),
Her Honour identified several troubling factors, falling principally into two categories: insufficient evidence filed by the plaintiff in support of the settlement, and the "gross" and unexplained discrepancy between the settlement amount negotiated in the US Action and the proposed settlement amount in the Canadian Action.
With respect to the former, Her Honour noted the lack of evidence about any investigations undertaken in the litigation. In particular, there was no evidence that the plaintiff had retained any expert to assist with evaluation of the claim, no discoveries had taken place and documentary productions appeared to have been limited. Her Honour was also troubled by the absence of any evidence about the estimated class size in the Canadian Action and the likely recovery per class member if the settlement was approved. In addition, there was very little evidence in the record about the dynamics of the settlement negotiations between the parties.
With respect to the disparity in the settlement amounts, Her Honour observed that the proposed settlement amount in the Canadian Action (CAD
Finally, Her Honour was troubled by the plaintiff's evidence concerning available insurance that was relied upon to try to justify the "gross disparity" between the settlement amounts in the Canadian and US Actions. According to information provided by the plaintiff, only USD
Key Takeaways
There are several key takeaways.
The failure to coordinate settlement of parallel, cross-border securities class actions arising from substantially the same alleged misrepresentations may undermine the ability of counsel to persuade a court to approve settlement of the Canadian action where there is significant disparity in the proposed settlement amounts to the apparent detriment of the Canadian class.
For that reason, it is advisable for counsel in the Canadian action to attempt to coordinate with their US counterparts (and any responding insurers) settlement of the various actions in a manner that ensures that class members in all actions receive equitable, though not necessarily identical, treatment having regard for factors including litigation risk and expense in each action, comparative class size, relative damages exposure and the availability of funds under responsive insurance policies.
At the settlement approval hearing, class counsel should be prepared to file evidence demonstrating that members of the Canadian class are being treated equitably in comparison to members of the US class.
Finally, in an appropriate case, a class member's reasoned and supportable objections to a proposed settlement may be provided significant weight. In Kwong, the expert evidence filed by the Objector was found by
*The author would like to thank Maxim Tchoudnovski, articling student, for his assistance in preparing this article.
Footnote
1. 2024 ONSC 1311 [Kwong]
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