Ontario Court confirms jurisdiction over claims of all Canadians who purchased shares on NASDAQ and TSX: Paniccia v. MDC Partners Inc. et al, 2017 ONSC 7298

Plaintiffs in class action claims for misrepresentation in the secondary market recently scored a victory when the Ontario Superior Court of Justice determined[1] that not only does it have jurisdiction over these claims brought by Canadians who purchased shares of a company registered in Canada on a foreign stock exchange, but that Canadian securities and tort law should apply to such claims.

Background

In August 2015 Mr. Paniccia commenced a class action against MDC Partners Inc and its officers (together, "MDC") in Ontario for both a statutory misrepresentation claim under Part XXIII.1 of Ontario's Securities Act[2] and negligent misrepresentation. While initially the claim was brought on behalf of all global purchasers on the TSX and NASDAQ, he later amended the proposed class to include only Canadian purchasers on the TSX and NASDAQ.

MDC is a Canadian company with its registered office in Toronto, Ontario, but with its head office and investor relations group in New York. It is engaged worldwide in marking, communications and providing public relations services. At the material time, it was listed on both the TSX and NASDAQ. The vast majority of trading of the shares occurred on NASDAQ. An unknown number of shareholders (likely over 100) holding between 0.8% to 2.6% of MDC's shares reside in Canada. Mr. Paniccia himself purchased 245 shares of MDC on NASDAQ in April 2015.

In July 2015, a substantial MDC shareholder commenced a proposed class against MDC in the United States District Court for Southern District of New York on behalf of MDC share purchasers on NASDAQ. This action was dismissed with prejudice, before certification, in September 2016.

At the same time, the US Securities and Exchange Commission brought enforcement action against MDC, and in 2017 MDC paid $7 million in civil penalties.

Jurisdiction Challenge

MDC challenged the class definition, seeking to restrict the Ontario class to only the Canadians who purchased on the TSX, and excluding those who, like Mr. Paniccia, purchased shares on NASDAQ. While MDC conceded that the Ontario court had jurisdiction simpliciter over the claims of all Canadian purchasers, it argued that the Ontario court is forum non conveniens for Canadians who purchased on NASDAQ.

Following a detailed discussion of the forum non conveniens analysis and highlighting principles of comity, the Court found that Ontario was the appropriate forum for Canadians who purchased shares on NASDAQ, finding that...