Court File and Parties

Court File No.: CV-16-561057 Date: 2019-02-21 Ontario Superior Court of Justice

Between: Larry O’Reilly, Plaintiff – and – Imax Corporation, Defendant

Counsel: M. Catherine Osborne & Justin Tetreault, for the Plaintiff Trevor Lawson, for the Defendant

Heard: February 20, 2019

Before: M. D. Faieta J.

Supplementary Reasons for Decision

[1] Further to paragraph 65 of my Reasons for Decision dated January 25, 2019, the parties provided further submissions regarding the quantification of the value of the loss of the RSUs and stock options. The parties have agreed to all other outstanding issues related to the quantification of damages.

[2] The Plaintiff received notice of termination on January 4, 2016 and his employment was terminated on July 8, 2016. The Plaintiff was awarded a reasonable notice period of 24 months.

[3] As previously noted, the quantification of such loss is to be made on the basis of what would have probably happened had the Plaintiff been employed until the end of the notice period: Buchanan v Geotel Communications Corp., (2002), , 18 C.C.E.L. (3d) 17 (Ont.C.A.), para. 171.

[4] Although I have accepted the Plaintiff’s submission that he would have exercised and sold the equity instruments (the RSUs and stock option grants) at the “earliest possible opportunity” following the vesting of these instruments, the length of that period remains to be determined.

[5] The Defendant submits that the Plaintiff’s sales activity before the termination of his employment is a better indicator. The Defendant relies on the Plaintiff’s sales activity between December, 2008 and March, 2016. The Defendant states that prior to the termination of his employment, the Plaintiff sold vested RSU and share options, on average, approximately 13.7 months after such RSUs and share options vested. Accordingly, the Defendant submits that the damages to which the Plaintiff is entitled in relation to RSUs and share options that would have otherwise vested during the reasonable notice period should be calculated using the average share price for the 13.7 month period following the vesting date for all such RSUs and share options.

[6] In my view, the Defendant’s approach likely overstates how long the Plaintiff would have waited before selling these instruments following the termination of his employment as he was no longer subject to the policies (the IMAX Share Ownership Guidelines and the IMAX Insider Trading Policy) that restricted the timing of such sales prior to termination. In any event, I find that the better indicator of how long the Plaintiff would waited before selling these instruments is to consider his actual sales activities during the reasonable notice period in respect of other RSU and stock options.

[7] The Plaintiff submits that he would have immediately sold his stock options and RSUs upon vesting during the reasonable notice period. He also submits that this approach is consistent with the approach taken by other courts that assessed damages as the difference between the option price and market value on the date which it could have been purchased: McDonald v. LAC Minerals Ltd., [1987] O.J. No. 1216, para. 40.

[8] However, an examination of the Plaintiff’s account statements do not support the view that he would have sold the resulting shares immediately upon vesting during the notice period. Two examples illustrate the varying approaches taken by the Plaintiff:

(1) 35,000 stock option units were granted to the Plaintiff on July 1, 2010 and vested in various allotments over the next five years. He received 3,500 units on July 1, 2011, 5,250 units on July 1, 2012, 7,000 units on July 1, 2013, 8,750 units on July 1, 2014 and 10,500 units on July 1, 2015. The Plaintiff sold 15,750 units on August 15, 2013, the remaining 19,250 units on April 22, 2016. (2) 37,500 stock option units were granted to the Plaintiff on March 25, 2011 and vested in various allotments over next five years. He received 3,750 units on March 25, 2012, 5,625 units on March 25, 2013, 7,500 units on March 25, 2014, 9,375 units on March 25, 2015 and 11,250 units on March 25, 2016. The Plaintiff sold 9,050 units on August 3, 2016 and the remaining 28,450 units on August 4, 2016.

[9] Having reviewed the Plaintiff’s sales activities, as helpfully summarized in Schedule “A” of the Defendant’s submissions, and focusing particularly on his sales activities during the reasonable notice period, I find that the damages to which the Plaintiff is entitled in relation to RSUs and share options that would have otherwise vested during the reasonable notice period should be calculated on the basis that the Plaintiff would have sold the resulting shares five months after the vesting date for all such RSUs and share options.

[10] I direct that: (1) the Plaintiff provide his costs submissions by March 1, 2019; (2) the Defendant provide its responding costs submissions by March 8, 2019; (3) the Plaintiff provide his reply costs submission by March 15, 2019. All submissions to be no longer than six pages, exclusive of any offers to settle and a bill of costs.

Released: February 21, 2019 Mr. Justice M.D. Faieta