U.S. lawyer Michael SpencerKevin Van Paassen
Ontario's move to allow American-style shareholder class-action lawsuits has attracted a feared and revered Wall Street plaintiffs' lawyer to the province just as the pendulum is swinging away from similar suits in the United States.
Michael Spencer, a senior partner who sits on the executive committee at Milberg LLP - one of the original class-action firms - is preparing to practise law in Canada.
He was most recently a lead counsel in the Vivendi SA shareholder lawsuit that left the French media company facing an eye-popping $9.3-billion (U.S.) damage award for misleading investors.
The size of that award was reduced by the courts. But Mr. Spencer, who recently led a U.S. class action against a French company on behalf of American, French, British and Dutch investors, is at the epicentre of the globalization of securities class actions.
That epicentre will soon be stationed part-time in the offices of Kim Orr Barristers PC, a Toronto class-action boutique, working on Canadian and cross-border cases.
Mr. Spencer makes no bones about why, at the pinnacle of his career, he is prepared to swap the perks of a privileged life in Manhattan for Toronto. It's because of Ontario's Bill 198, enacted in 2005, which allows shareholders who buy stock on the open market to sue if they feel a company misrepresents its financial situation.
Ordinarily, an amendment to provincial securities law would not attract the attention of someone in Mr. Spencer's ambit, but these are not ordinary times for U.S. class-action lawyers.
Eight years of Republican rule made both the courts and the U.S. Congress more conservative. Under pressure from big business to wipe out so-called strike suits - lawsuits filed in the hope the target will find it cheaper to settle than to fight - they've been cracking down by tightening pleading standards for shareholder class actions and punting such suits out of state court and into federal jurisdiction.
Then there is the decision in Morrison v. National Australia Bank, a knockout blow upheld by the U.S. Supreme Court last summer. It says investors who buy shares on a non-U.S. exchange cannot pursue a claim under U.S. securities laws. That pretty much precludes any future global class action like Vivendi ever again being run out of a New York court.
Set that against an Ontario decision last year to take jurisdiction over a global class of shareholders in Silver v. Imax Corp., and Toronto's appeal becomes obvious.
"Simply put, Canada presents a great opportunity," Mr. Spencer says from his Milberg office in New York.
The opportunity was so compelling that the Yale and Harvard-educated lawyer, an alumnus of the blue-chip New York firm of Cravath Swaine & Moore LLP, "sweated through" a three-day essay-style exam in Toronto in October just to get his Canadian law-school equivalency.
"I had to study Canadian constitutional law and criminal law, subjects thought to be distinctly Canadian. For someone who is 35 years out of law school, that was a pretty daunting task."
It didn't end there. Mr. Spencer next had to plow through "masses of material" for two days of barrister and solicitor exams administered by the Law Society of Upper Canada. He then applied for an exemption from articling for 10 months, the internship normally required of law school grads.
The Law Society informed him last month that his exemption had been granted, so all that remains is a three-day course this week on professional conduct and practice management in Ontario.
Once that is done and he gowns up for the first time to be called to the bar in Ontario, the relatively young world of Canadian shareholder class actions could be in for a shakeup.
The number of lawyers who have tried shareholder class actions in Canada can be counted on one hand. That's because only one, involving Danier Leather Inc., has ever gone to trial. The plaintiffs lost.
The overwhelming majority are either knocked out or settled by shareholders' lawyers early for a portion of the claim, removing the potential cost of losing.
Won Kim, the Canadian class-action lawyer whose offices Mr. Spencer will call home when he's in Toronto, says that's about to change.
"In order to get the big awards that properly compensate damaged shareholders, we're going to have to try these cases," Mr. Kim says. "What Mike brings to the table is that he's tried literally the biggest securities case in the United States. He brings a wealth of experience. His results speak for themselves."
Those results are the product of a fierce intelligence and relentless work ethic, says Matthew Gluck, a Milberg partner who worked alongside Mr. Spencer on the long Vivendi trial.
"It starts with brains," Mr. Gluck says. "He's very smart and a real thinker. He's also a very hard worker. If he's making a legal argument, he will have read every case in the brief, digested it and anticipated all the possible problems. He is a very careful lawyer."
He's also extremely experienced. Mr. Spencer has tried several dozen class actions, many against big names such as Bayer Group, AT&T, Intuit Inc., Pacific Life Insurance, Equitable Life Assurance Society, Ernst & Young and virtually all the tobacco companies.
In 2006, four senior partners at Milberg's predecessor firm, Milberg Weiss LLP, were indicted on charges they had run a 30-year kickback scheme, secretly paying people to serve as lead plaintiffs. The partnership agreed to pay $75-million (U.S.) in a non-prosecution agreement, and the U.S. government recognized the misconduct did not extend to anyone else currently at the firm.
In fact, an Ontario court said in unrelated case in 2009 that the current Milberg "does not bear the mark of Cain," and referred to the "fine reputations and excellent credentials" of Mr. Spencer and his colleague on that case.
In Canada, the on-the-ground presence of a lawyer like Mr. Spencer may prove to be a game-changer, says Robert Staley, a corporate defence litigator lawyer at Bennett Jones LLP.
"I know him by reputation; he's one of the top plaintiff securities class-action lawyers in the United States," Mr. Staley says. "To be blunt, there's a perception that some Canadian plaintiff firms don't have the heft to take cases to trial, and that influences how they settle. With somebody like Michael Spencer in the mix, it certainly adds more credibility to the threat to try cases."
So should officers and directors of listed Canadian corporations be uneasy at the prospect of Mr. Spencer turning his gaze to Canada?
"I'm not someone who wants to blow my own horn but I hope we can bring a level of sophistication and experience in prosecuting these cases as well as resources, both financial and in terms of experience, that will support the plaintiffs' side," he says.
"And yes, I hope it does give pause to anyone who would be contemplating violating the law."
With files from The Wall Street Journal
Special to The Globe and Mail