Writing Off An Investment Loss May Be Avoidable: Morganti & Co.’s Shareholder Litigation Practice

(December 13, 2018). Aggrieved investors are able to seek recovery for their investment losses from bad investments under certain circumstances.  Morganti & Co. offers its legal services to represent aggrieved investors in seeking damages from directors and officers of companies that mislead investors.  The legal services are provided on a contingency fee basis and the Firm will finance the cost of the lawsuit.  Importantly, investors with as little financial losses can still seek recovery in the form a class proceeding (a “class action”).

Pursuant to Canadian provincial Securities Acts a “responsible issuer” is required to provide continuous disclosure statements about its interim financial statements and material changes in the company’s business, operations or capital that would reasonably be expected to have a significant effect on the market price or value of any of the securities.  Responsible issuers are also forbidden to release documents and statements containing any misrepresentation.  A misrepresentation includes the situation when a company omits a material fact from a document  or statement to investors, e.g., prohibition against cherry-picking only the positive facts opposed to all the material facts on the topic addressed in the press release or statement.  A fact may be considered material if there is a substantial likelihood that a reasonable investor would consider it important in deciding whether to invest and at what price.

If the company or a third-party subsequent releases a statement that “publicly corrects” or partially publicly corrects a prior statement or document (e.g., an interim financial statement, management discussion and analysis, press release, etc.) an investor has a right of action for damages against the company and any insider that authorized the release of the previously released document(s) and statement(s) without regard to whether the investor relied on the misrepresentation in making the decision to purchase the company’s securities.

In order to advance the claim for damages an investor must obtain the authorization from the provincial judge and, in doing so, must proffer sufficient evidence that the claim is brought in good-faith and that there is a reasonable possibility of success that the claim will succeed at the trial.  This procedure should not be treated as a mini-trial.

With actual experience arguing these applications, opposed to some lawyers that simply hand-off your claim to the experienced lawyers, Morganti & Co.’s lawyers are able to prepare bespoke or tailored applications to the court that will (a) identify the representation by the defendant(s); (b) determine whether the statement is a “core” or “non-core” type and any type of corresponding intent to release the statement; and (c) establish that there is a reasonable possibility that the document or statement contains a misrepresentation.

Before you write-off an investment loss as a normal result of a risk-reward situation, you are welcome to consult with a lawyer at Morganti & Co. to determine whether there is an opportunity to recover some or all of your losses.

During 2018, Morganti & Co. has been in court seeking approval (the above process) for investors to advance their statutory claim to trial relating to MDC Partners Inc., Ithaca Energy Inc., and Colt Resources Inc. During 2019, Morganti & Co. will return to court to complete the submissions against Ithaca Energy Inc. and Colt Resources Inc. and make new submissions relating to Guestlogix Inc., Nobilis Health Inc., North American Palladium Ltd., and Namaste Technologies Inc.