Court File and Parties
COURT FILE NO.: CV-19-00614686-00CP DATE: 20210625 SUPERIOR COURT OF JUSTICE – ONTARIO
RE: VICTOR ROMITA and CHRISTOPHER PEARCE, Plaintiffs – and – INTELLIPHARMACEUTICS INTERNATIONAL INC. and ISA ODIDI, Defendants
BEFORE: Justice E.M. Morgan
COUNSEL: Manjit Singh, Albert Pelletier and Joe Wahba, for the Plaintiffs David Neave and Rebecca von Rüti, for the Defendants
HEARD: June 25, 2021
LEAVE TO PROCEED/certification FOR SETTLEMENT
1The parties have entered into a proposed settlement. They bring this motion on consent for leave to proceed under Ontario Securities Act, RSO 1990, c. S 5 (“OSA”) and certification under section 5(1) of the Class Proceedings Act, SO 1992, c. 6 (“CPA”) for settlement purposes. They also seek approval of a notice to class members and a set date for the settlement approval motion.
I. Nature of the claim
2This is a secondary market liability class action brought under Part XXIII.1 of the OSA.
3The Plaintiffs’ claim alleges that the Defendants, Intellipharmaceutics International Inc. (“Intellipharm”) and its CEO, Isa Odidi, releasing core documents in 2016 which contained untrue statements of material fact. These include statements regarding the bioequivalence of the Intellipharmaceutics’ main product, Rexista, to Oxycontin, and not having to undergo expensive Phase III human studies. The allegations of misrepresentation also include statements in respect of abuse-deterrent studies related to the abuse of Rexista by various pathways that Intellipharm conducted to support its abuse-deterrent label claims. The Plaintiff also alleges that the Defendants misrepresented having submitted sufficient data to support approval of Rexista’s New Drug Application (“NDA”) and having completed the necessary studies and properly submitting the NDA to the U.S. Federal Drug Administration.
4The Plaintiffs allege that Intellipharm’s value and share-price were artificially inflated after February 29, 2016, when the Defendants released the company’s Annual Information Form and Annual MD&A for its fiscal year ended November 30, 2015. The Plaintiff claims that these documents contained the above-mentioned misrepresentations. The Plaintiff further claims that corrective disclosures in respect of the impugned statements were released on July 26, 2017, and that following those disclosures the shares of Intellipharm traded on the TSX fell 45.48% in a single day of abnormally high trading volume.
II. Nature of the settlement
5A parallel class action in the United States has already been settled and approved in the U.S. District Court for the Southern District of New York.
6The parties have now reached a settlement, subject to approval by this Court, which will resolve the entire action for those who traded shares of Intellipharm on the TSX. Under the proposed settlement agreement, the action will be granted leave to proceed and certified for settlement purposes only, following which the Defendants will pay an all-inclusive sum of 10% of the value of the US proceeding. This percentage reflects relative trading volume of its securities between the TSX and Nasdaq.
III. Leave to proceed
7Section 138.8(1)(a) of the OSA requires the Plaintiff to have brought the action in good faith and for the purposes for which the civil remedy under the OSA was designed. Section 138.8(1)(b) of the OSA requires there to be a reasonable possibility that the claim will succeed at trial.
8The Defendants raise no objection here to either of those findings. There is nothing in the record to suggest that the two criteria for leave to proceed have not been met.
IV. Certification
9Section 5(1) of the CPA provides that the Court shall certify a class proceeding where:
(a) the pleadings or the notice of application discloses a cause of action;
(b) there is an identifiable class of two or more persons that would be represented by the representative plaintiff or defendant;
(c) the claims or defences of the class members raise common issues;
(d) a class proceeding would be the preferable procedure for the resolution of the common issues; and
(e) there is a representative plaintiff or defendant who,
(i) would fairly and adequately represent the interests of the class,
(ii) has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and
(iii) does not have, on the common issues for the class, an interest in conflict with the interests of other class members.
10The parties have agreed that for settlement purposes the class is to be defined as:
all persons, other than Excluded Persons, who acquired IPCI’s common shares listed on the TSX on or after February 29, 2016, and who held some or all of those common shares after the close of trading on July 26, 2017.
‘Excluded Persons’ means (i) the Defendants, their legal representatives (including all partners), and directors and officers’ insurers (including all employees), (ii) IPCI’s subsidiaries, affiliates, officers, directors, senior employees, heirs, predecessors, successors and assigns, and (iii) Odidi’s immediate family and any entity in which Odidi or his immediate family had a controlling interest during the Class Period.
‘Class Period’ means the period from February 29, 2016 to and including July 26, 2017, inclusive.
11For settlement purposes and by agreement of the parties, the common issues are:
Did Intellipharm’s Class Period disclosure documents contain a misrepresentation within the meaning of the OSA?; and
Did the statement released on July 26, 2017 correct the previously released impugned documents containing alleged misrepresentations within the meaning of the OSA?
12Given the lack of any objection by the Defendants, the record supports the conclusion that all of the other criteria for certification under section 5(1) of the CPA have been met.
13The record also supports appointing Plaintiffs’ counsel as class counsel for all purposes in respect of this action and settlement, including to manage the escrow account in accordance with the terms of the proposed settlement agreement.
V. Notice
14The parties have booked with me a hearing date for the settlement approval motion. That hearing will take place on October 12, 2021. They have also calculated the appropriate opt-out deadline for class members who do not wish to participate in the proposed settlement.
15The short and long form notices proposed by counsel appear to be acceptable. They set out the information necessary for such notices and will be disseminated in Canada in the appropriate ways.
VI. Disposition
16Leave to proceed under section 138.3 of the OSA and for certification under section 5(1) of the CPA are granted for settlement purposes. The short and long form notices submitted by counsel are approved.
17There will be an Order to go in the form submitted by counsel and completed by me.
Morgan J.
Date: June 25, 2021