Ontario Court Finds No Jurisdiction in Multinational Class-Action against Volkswagen

Andrew Ottaway, B.A. (Hons.), LL.B.Commercial0 Comments

In Leon v. Volkswagen AG, 2018 ONSC 4265 (CanLII), the plaintiff, who resides in Ontario, purchased American Deposit Receipts (ADRs) in respect of Volkswagen shares. The Volkswagen shares plummeted when Volkswagen disclosed that it had perpetrated fraud. Owners of the common shares commenced proceedings in Germany.  The plaintiff initially commenced a class action in respect of his ADRs in New Jersey. The plaintiff conceded in the New Jersey action that the US Federal Court had jurisdiction over the subject matter of the claim and that the venue was proper. However, the plaintiff later withdrew from the US proceedings and commenced the subject class action in Ontario.  The Ontario class action included Ontario purchasers of the ADRs and of common shares (unlike the US proceedings, which were in respect of ADR purchasers only).  

Volkswagen brought a motion to dismiss the action on the basis that Ontario did not have jurisdiction or, alternatively, that the US (for the ADRs) and Germany (for the common shares) were more appropriate forums.

The Judge considered whether the class action had a real and substantial connection to Ontario based on the presumptive connecting factors of:

1) whether Volkswagen carried on business in Ontario: the Judge found that Volkswagen was not carrying on business in Ontario.  While Volkswagen vehicles in Ontario by its subsidiaries, it did not have a physical presence in Ontario. The judge stated that the defendant must be performing some substantial aspect of its own business undertaking beyond simply providing its goods and services within that jurisdiction.  

2) whether the tort was committed in Ontario: the Judge found that the alleged fraudulent misrepresentation was not committed in Ontario.  The plaintiff stated that perhaps he reviewed financial statements, analyst reports or a newspaper article in Ontario before purchasing the ADRs. The judge stated that was not enough to conclude that the tort was committed in Ontario.

The Judge also considered whether the US and Germany were clearly more appropriate forums.  The Judge found that the US and Germany were more appropriate because, among other reasons, the ADRs were purchased in the U.S; the common shares were purchased on German or other European exchanges; the members of the Volkswagen board of directors live in Germany; the applicable law is German law for the common shares and New York law for the ADRs; and a multiplicity of legal proceedings would be avoided if the litigation against Volkswagen was limited to Germany and the U.S.  The Judge dismissed the action on the basis of lack of jurisdiction and, alternatively, on the basis of forum non conveniens

The lawyers at Gilbertson Davis LLP have experience with cross-border litigation, class actions, securities litigation and in bringing and defending against jurisdiction and forum non conveniens motions.   Please contact us for an initial consultation.

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About the Author
Andrew Ottaway, B.A. (Hons.), LL.B.

Andrew Ottaway, B.A. (Hons.), LL.B.

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