In any event, whether section 130 of the Ontario Securities Act
and Canadian common law would apply to plaintiffs' claims against
the Underwriter Defendants appears to be irrelevant. As
plaintiffs' expert acknowledges, an Ontario court "would in all
likelihood be required to apply U.S. laws" to claims "against
U.S. defendants in respect of American residents who purchased
PSC securities [in the United States] under U.S. securities
laws." (Jack Decl. ¶ 11; see also La Forest Decl. ¶ 16) Thus,
an Ontario court would probably apply sections 11 and 12(a)(2) of
the Securities Act to plaintiffs' claims against the Underwriter
Defendants, leaving plaintiffs in the same position they were in
here. That an Ontario court could be called upon to apply U.S.
law might weigh in favor of maintaining the present action in the
United States — an issue discussed further below — but the
availability of a remedy under sections 11 and 12(a)(2)
undermines plaintiffs' argument that Ontario is an inadequate
forum with respect to their claims against the Underwriter
Defendants. Cf. Howe v. Goldcorp Invs., Ltd., 946 F.2d 944, 952
(1st Cir. 1991) (Breyer, C.J.) (concluding that Canada is an
adequate alternative forum for a shareholder lawsuit in part
because "Canadian courts will either apply American law or they
will apply Canadian laws that offer shareholders somewhat similar
protections by forbidding misrepresentation and fraud and
imposing fiduciary obligations" (citations omitted)).
Plaintiffs' third objection to Ontario is that they "may" be
precluded from asserting claims for damages against Deloitte. In
support of their motions to dismiss, defendants submit a
declaration from Robert Reuter, an expert in Canadian law,
discussing several claims that plaintiffs could assert in
Ontario, including conspiracy, fraud or deceit, negligent
misrepresentation, fraudulent misrepresentation and derivative
claims. (See Reuter Decl. ¶¶ 7-13) In response, plaintiffs'
expert questions the adequacy of only one of these potential
claims, arguing that Canadian law does not permit shareholders to
bring a claim for negligent misrepresentation against auditors
based on damages to share value. (See Jack Decl. ¶ 26) By their
silence, plaintiffs concede that the other claims discussed by
Reuter are available against Deloitte, and thus that they are not
without a "remedy at all." Piper, 454 U.S. at 254, 102 S.Ct.
To be sure, litigating this case in Ontario might prevent
plaintiffs from availing themselves of some benefits of U.S.
securities laws. Forum non conveniens dismissal, however, "is
not trumped simply because the foreign forum will apply different
substantive law than an American court." Capital Currency, 155
F.3d at 609-10. Indeed, "[t]he availability of an adequate
alternate forum does not depend on the existence of the identical
cause of action in the other forum." PT United Can, 138 F.3d at
74. A foreign forum is adequate even if the remedies available in
that forum are only "roughly analogous" to those available in the
United States, Capital Currency, 155 F.3d at 610, or if the
foreign remedies "adequately address the underlying controversy
expressed in [the] plaintiff's complaint." PT United Can, 138
F.3d at 74; cf. Transunion Corp. v. PepsiCo, Inc.,
811 F.2d 127, 129-30 (2d Cir. 1987) (per curiam) (holding that dismissal
was proper notwithstanding that the plaintiff could not bring a
RICO claim in the alternative forum because a fraud claim
provided an adequate substitute); Lana Int'l Ltd. v. Boeing
Co., No. 93 Civ. 7169(LLS), 1995 WL 144152, at *2 (S.D.N Y
Mar.30, 1995) (holding that several common law claims provided an
adequate substitute for the plaintiff's claim under the Lanham
Act, which was "not cognizable in Canadian courts").
Plaintiffs' final objection to Ontario, that the forum lacks an
"effective comparable class action remedy" for defrauded
investors, is more weighty than the other three. The objection
arises from an interaction between substantive and procedural
law. Ontario, it appears, does not recognize the so-called
fraud-on-the-market theory accepted by the Supreme Court in
Basic Inc. v. Levinson, 485 U.S. 224, 108 S.Ct. 978, 99 L.Ed.2d
194 (1988). (See Reuter Decl. ¶ 10(iv); Jack Decl. ¶¶ 23-24;
Brown Decl. Ex. A) Under that theory, purchasers are not required
to prove specific reliance on false information in order to
establish a claim under section 10(b) of the Exchange Act or SEC
Rule 10b-5. Instead, it is assumed that the purchasers relied on
the accuracy of the stock price and that the price reflected all
available information in the market. See Basic, 485 U.S. at
247, 108 S.Ct. 978. Without recognition of this theory,
plaintiffs argue, "individual issues of reliance raise
significant obstacles to certification of a class under [Ontario]
law." (Pl. Mem. at 16; see also Jack Decl. ¶ 25)
In support of their argument, plaintiffs cite Derensis v.
Coopers & Lybrand Chartered Accountants, 930 F. Supp. 1003
(D.N.J. 1996), and Trafton v. Deacon Barclays de Zoete Wedd
Ltd., No. C 93-2758-FMS, 1994 WL 746199 (N.D.Cal. Oct.21, 1994),
both of which held, on precisely the ground urged by plaintiffs,
that Ontario was not an adequate alternative forum for litigation
of a securities class action under section 10(b) of the Exchange
Act and Rule 10b-5. As the Trafton Court reasoned:
While . . . Ontario courts have class action
procedures, in the context of a claim for secondary
market securities fraud, this device is virtually
meaningless without having fraud-on-the-market
substitute for actual reliance. It is hard to see how
the plaintiff class can obtain class certification,
much less ultimate relief, under these circumstances.
Trafton, 1994 WL 746199, at *12; accord Derensis, 930 F. Supp.
at 1008 (citing Trafton, 1994 WL 746199, at *12).
Derensis and Trafton appear to be the only cases directly
on point. Nevertheless, neither case is controlling on this
court, and I find their conclusions unpersuasive. Most
significantly, both courts ignored a crucial distinction between
U.S. and Ontario class action certification requirements. In the
United States, to certify a class action pursuant to Rule
23(b)(3) — the conventional basis for a securities fraud class
action — it is necessary to demonstrate, inter alia, that "the
questions of law or fact common to the members of the class
predominate over any questions affecting only individual
members." Fed.R.Civ.P. 23(b)(3); see, e.g., Amchem Prods., Inc.
v. Windsor, 521 U.S. 591, 117 S.Ct. 2231, 2249-50, 138 L.Ed.2d
689 (1997) (discussing Rule 23(b)(3)). In Ontario, by contrast, a
plaintiff need not show that common issues predominate to obtain
class certification. (See La Forest Decl. ¶¶ 12-13) So long as
the class members' claims or defenses "raise common issues" and a
"class proceeding would be the preferable procedure for
resolution of common issues," certification is appropriate under
Ontario law. Derensis, 930 F. Supp. at 1007-08 (quoting the
Ontario Class Proceedings Act § 5(1), which establishes the
requirements for class certification).
This distinction is significant. The so-called predominance
requirement of Rule 23(b)(3) was a major reason why U.S. courts
adopted the fraud-on-the-market theory in the first place. See
Basic, 485 U.S. at 242, 108 S.Ct. 978 ("Requiring proof of
individualized reliance from each member of the proposed
plaintiff class effectively would have prevented respondents from
proceeding with a class action, since individual issues then
would have overwhelmed the common ones."); see also, e.g.,
Barbara Black, Fraud on the Market: A Criticism of Dispensing
with Reliance Requirements in Certain Open Market Transactions,
62 N.C. L.Rev. 435, 439-40 (1984), cited in Basic, 485 U.S. at
247 n. 26, 108 S.Ct. 978; R. Douglas Martin, Note, Basic Inc. v.
Levinson: The Supreme Court's Analysis of Fraud on the Market and
Its Impact on the Reliance Requirement of SEC Rule 10b-5, 78 Ky.
L.J. 403, 432 (1989/1990). Correspondingly, the absence of a
predominance requirement in Ontario law is a major reason why
Ontario courts have rejected the fraud-on-the-market theory.
See, e.g., Carom v. Bre-X Minerals Ltd., No. 97-GD-39574 et
al., 1998 ACWSJ LEXIS 49572, at *28-29 (Ontario Ct., Gen. Div.
Nov. 4, 1998) ("[C]entral to the development of the
[fraud-on-the-market] theory's presumption of reliance aspect in
the United States is the requirement of a predominance of common
issues for class action certification. . . . In comparison, the
predominance of common issues requirement has not been
incorporated [into Ontario law]."), attached as Exhibit A to
the Declaration of James W. Brown. Thus, the premise underlying
the Trafton and Derensis Courts' analyses — that the class
action device is "virtually meaningless" in the absence of the
fraud-on-the-market theory — is false. Even assuming arguendo,
therefore, that an inability to obtain class certification in
Ontario would be relevant and material, the absence of the
fraud-on-the-market theory does not render that forum inadequate.
If anything, in fact, it looks easier to get class certification
under Ontario law than under U.S. law.*fn4 See also Union
Carbide, 809 F.2d at 199 (affirming forum non conveniens
dismissal of a class action lawsuit based on the Bhopal plant
disaster, notwithstanding the "absence in India of a class action
procedure comparable to that in federal courts here").
Perhaps recognizing this fact, plaintiffs press two additional
reasons why Ontario's class action procedures render Ontario
inadequate. First, citing the recent passage of Ontario's class
action statute in 1993, plaintiffs contend that Ontario is "in
the relatively early stages of developing and applying the
principles governing class actions, particularly in the realm of
securities litigation," and that few securities class actions, if
any, have "actually proceeded on through trial and appeal." (Jack
Decl. ¶ 27; see also 12/31/98 Letter Br. from Neil L. Selinger
& Jeffrey C. Block at 2) Second, plaintiffs contend that, even if
class action certification could be obtained in Ontario, the
requirement of proving individual reliance could be prohibitively
expensive. (See Pl. Mem. at 18; 12/31/98 Letter Br. from Neil
L. Selinger & Jeffrey C. Block at 1-2) These arguments are
First, that Ontario's class action statute is "untested,"
Trafton, 1994 WL 746199, at *12, is irrelevant to whether
Ontario is an adequate forum for forum non conveniens purposes.
Indeed, the Second Circuit considered and rejected just such an
argument in Capital Currency, an antitrust case in which the
plaintiffs had argued that England was an inadequate forum
because no English court had "ever awarded money damages" in an
antitrust suit. Relying on "considered dicta" from a case
decided by the Law Lords of the House of Lords, the Court
concluded that an English court could lawfully award damages, and
held that this showing was sufficient. Capital Currency, 155
F.3d at 610. "[A]lthough English courts have not yet awarded
damages in an antitrust case," the Court reasoned, "it appears
that English courts have the power to do so." Id.
The circumstances of this case are not as stark as those in
Capital Currency. Indeed, contrary to plaintiffs'
representations, it appears that class actions, even in secondary
market securities fraud cases, are becoming more common in
(See La Forest Decl. ¶¶ 7-8) Plaintiffs in Carom v. Bre-X
Minerals Ltd., for example, are proceeding as a class (see
Brown Decl. Ex. A); in fact, plaintiffs' own expert is serving as
part of the "plaintiffs' class action counsel team." (Jack Decl.
¶ 24 n. 18) Moreover, there is a class action pending in
connection with this very case. (See Serio Decl. Ex. D) Thus,
it is plain that Ontario "permits `litigation of the subject
matter of the dispute,'" which is all that is required. Capital
Currency, 155 F.3d at 609 (quoting Piper, 454 U.S. at 254 n.
22, 102 S.Ct. 252).
Plaintiffs' final argument — that the unavailability of the
fraud-on-the-market theory would make litigating in Ontario
prohibitively expensive — is unfounded also. To begin with, it is
hardly evident that the requirement of proving individual
reliance would be especially expensive. For example, an Ontario
court could proceed, as defendants suggest, by way of affidavits
or post-verdict summary hearings (see PSC Parties' Reply Mem.
at 17), neither of which would be prohibitively expensive. More
significantly, that it might be more expensive to proceed in
Ontario is irrelevant to the inquiry into adequacy. See, e.g.,
Scottish Air Int'l, Inc. v. British Caledonian Group, PLC,
81 F.3d 1224, 1234 (2d Cir. 1996) ("[S]ome inconvenience or the
unavailability of beneficial litigation procedures similar to
those available in federal district courts does not render an
alternative forum inadequate." (internal quotation marks and
citation omitted)); Fustok v. Banque Populaire Suisse,
546 F. Supp. 506, 515 & n. 32 (S.D.N.Y. 1982) (Weinfeld, J.)
("Procedures in foreign courts need not be identical to U.S.
procedures as long as the alternative forum is not `wholly devoid
of due process.'") (quoting Alcoa S.S. Co. v. M/V Nordic
Regent, 654 F.2d 147, 159 n. 16 (2d Cir. 1980) (en banc)). It
may be that such a cost is relevant to the private interest
factor analysis discussed further below, cf. Trafton, 1994 WL
746199, at *13 (holding that the expense arising from "the fact
that each class member would have to prove actual reliance" is a
private interest factor weighing against dismissal), but it
should not be a factor in assessing the adequacy of the foreign
forum at the first step of the forum non conveniens analysis.
In short, because Ontario permits litigation of the subject
matter of plaintiffs' complaint, I find that it is an adequate
alternative forum. Plaintiffs' strenuous objections
notwithstanding, this finding should not be surprising. With the
exception of the Trafton and Derensis Courts, every court to
consider whether Ontario is an adequate forum — including at
least two in securities cases — has held that it is. See, e.g.,
Howe, 946 F.2d at 950-52; DeYoung, 707 F. Supp. at 135-37; see
also Lana Int'l, 1995 WL 144152, at *1-3 (finding Ontario
adequate in a suit alleging, inter alia, violations of the
Lanham Act, common law fraud, breach of warranty and breach of
contract); cf. John Labatt Ltd. v. Onex Corp., 890 F. Supp. 235,
241-42 (S.D.N.Y. 1995) (discussing the similarity between U.S.
and Canadian securities laws). To be sure, there are, as these
courts found, "small differences in standards and procedural
differences (such as greater difficulty in meeting class action
requirements . . .)" between Ontario and U.S. law, but such
differences are "beside the point." Howe, 946 F.2d at 952
(citing Piper, 454 U.S. at 254, 252 n. 18, 102 S.Ct. 252); see
DeYoung, 707 F. Supp. at 135-37.
B. Balancing the Gilbert Factors
Having found that Ontario provides an adequate alternative
forum for this dispute, I must now weigh the private and public
interest factors enumerated in Gilbert, and decide — paying
proper deference to plaintiffs' choice of forum — whether the
balance of convenience favors trial here or in Ontario. The
private interest factors enumerated in Gilbert include:
the relative ease of access to sources of proof;
availability of compulsory process for attendance of
unwilling, and the cost of obtaining attendance of
possibility of view of premises, if view would be
appropriate to the action; and all other practical
problems that make trial of a case easy, expeditious
Gilbert, 330 U.S. at 508, 67 S.Ct. 839. The public interest
the administrative difficulties flowing from court
congestion; the "local interest in having localized
controversies decided at home"; the interest in
having the trial of a diversity case in a forum that
is at home with the law that must govern the action;
the avoidance of unnecessary problems in conflict of
laws, or in the application of foreign law; and the
unfairness of burdening citizens in an unrelated
forum with jury duty.
Piper, 454 U.S. at 241 n. 6, 102 S.Ct. 252 (citing Gilbert,
330 U.S. at 509, 67 S.Ct. 839). Within the Second Circuit, it is
well settled that a court "must `adher[e] to the simple uniform
standard of Gilbert in all instances.'" Allstate Life Ins. Co.
v. Linter Group Ltd., 994 F.2d 996, 1001 (2d Cir. 1993) (quoting
Alcoa S.S. Co., 654 F.2d at 153) (alteration in original).