On
This decision is significant as it marks the first time a securities class action is dismissed at the merits stage for lack of territorial jurisdiction in
- The authorization judgment's findings on territorial jurisdiction have no res judicata authority at the merits stage of the class action;
- The Court's lack of territorial jurisdiction may be raised at the authorization stage, at the merits stage, or both. The lack of challenge as to territorial jurisdiction at the authorization stage may not be construed as a waiver of right or attornment to jurisdiction at the merits stage;
- The situs of the trade of a security is a relevant juridical fact in determining the situs of economic injury resulting from the decrease in value of such security.
The class action
Mr.
The Shares were publicly issued by
The Notes were issued by
Several proceedings were instituted in other jurisdictions involving the same alleged misrepresentations and omissions, including an international ADR settlement in
Territorial jurisdiction of the
However, the Court found that none of these connecting factors were met in the case at bar, and her holdings on territorial jurisdiction were as follows:
- Territorial jurisdiction is to be assessed globally. Since there is only one cause of action alleged against
Volkswagen AG for all securities, and since there is only one class, there is only one jurisdictional analysis for all three types of securities. And, even if several causes of action were indeed alleged, theCourt of Appeal has held that jurisdiction over one cause of action grants jurisdiction over the whole proceeding. - The authorization judgment has no res judicata authority regarding territorial jurisdiction. Conclusions of the authorization judgment about territorial jurisdiction have no res judicata authority at the merits stage of the class action. In this case, the jurisdictional argument was not presented in the form of a declinatory exception at the authorization stage but rather under the authorization criteria of article 575 CCQ; the court's task was thus to determine whether, taking the facts alleged to be true, it appeared to have territorial jurisdiction. The burden at the authorization stage differs from that of the merits stage, as did the record in this case.
- The Court's lack of territorial jurisdiction may be raised at the authorization stage, at the merits stage, or both. The fact that
Volkswagen AG did not challenge territorial jurisdiction through a declinatory exception at the authorization stage does not constitute attornment to the Court's jurisdiction, does not preclude it from challenging territorial jurisdiction at the merits stage, nor does it not constitute a waiver of right.Volkswagen AG consistently and repeatedly indicated that it contested the Court's territorial jurisdiction throughout the proceedings. As the Supreme Court mentioned inInfineon , the defendant may challenge the court's territorial jurisdiction at the authorization stage, at the merits stage, or both. Volkswagen AG has no establishment inQuébec and the dispute does not relate to its activities inQuébec . The fact that VCCI, a subsidiary ofVolkswagen AG , has an establishment inQuébec is not a sufficient connecting factor toQuébec in regards toVolkswagen AG , nor does the fact that VCCI guarantees the Notes establish an alter ego relationship vis-ŕ-visVolkswagen AG . The Court further rejected the argument thatVolkswagen AG carried on business inQuébec through agents which are dealers distributing securities on its behalf as unsupported by the evidence.- No fault was committed in
Québec . The alleged fault, namely thatVolkswagen AG omitted to disclose adverse material facts and made misstatements relating to its compliance withU.S. emission standards in various impugned documents, would have occurred inGermany , where the impugned documents were prepared, and whereVolkswagen AG conducts its activities, holds its board meetings and makes decisions. The mere fact that impugned documents would have been available inQuébec , or sent to investors inQuébec , is insufficient to establish thatVolkswagen AG committed a fault inQuébec , absent any allegation that these documents emanated from or were prepared inQuébec , or that any decision to publish this information was made or carried out fromQuébec . - The situs of the trade of a security is a relevant juridical fact in determining the situs of economic injury resulting from the decrease in value of such security.
Mr. Chandler alleged an economic injury, namely that the Shares, ADRs and Notes decreased in value followingVolkswagen AG's corrective disclosure inSeptember 2015 . InInfineon , the Supreme Court held that in order to confer territorial jurisdiction, economic injury must be suffered, not merely "recorded" inQuébec , and that the situs of the contract from which the economic injury flows is a relevant juridical fact in fixating the situs of economic injury, even in an extra-contractual liability claim.
On the basis of the uncontested expert evidence on the record, the Judge found that Shares and ADRs are purchased and sold outside
As for the Notes, it was deemed that, in light of all the evidence, any connection to
Consequently, the Court found it did not have territorial jurisdiction pursuant to article 3148 CCQ. The Court further dismissed
Forum non conveniens
Although the Court found that it lacked territorial jurisdiction, it addressed the parties' submissions on forum non conveniens, opining that, should the Court nevertheless have territorial jurisdiction, it should not decline to exercise this jurisdiction in favour of another forum.
Since
Conclusion
This decision is significant for several reasons. First, the Court confirmed that the authorization and the merits stage of a class action, though they are part of the same proceeding ("l'instance"), nevertheless differ in terms of purpose and procedure. Therefore, the authorization judgment's conclusions on territorial jurisdiction, which are then rendered on a prima facie and taking the facts alleged to be true, are not binding at the merits stage, where a different burden of proof applies and the evidence is more extensive.
Second, and most importantly, the
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