Litigation Rated Top Legal Trend in 2005

Ask a random sampling of corporate lawyers in Canada to predict the top legal trends for 2005 and you're likely to get an array of answers. But one thing's almost certain: They'll agree on the top three.

To echo that hackneyed real estate maxim about location, the top three legal trends for 2005 are likely to be litigation, litigation, litigation.

The key driver is the continuing campaign to improve corporate governance, as businesses scramble to confront a brave new landscape of legislative and regulatory scrutiny.

Ontario in particular is widely expected early this year to enact long-awaited amendments to its Securities Act that will make it easier for shareholders to launch civil lawsuits against public companies for errors and omissions that have an impact on stock prices.

"My perception is that our securities regulators here have enforcement very high on their agenda," says Peter Jewett, chairman of the corporate department at Torys LLP, adding the federal government recently created several new RCMP units to combat white-collar crime.

At Torys, several senior lawyers are now working "virtually full-time" advising directors and officers of client companies on best practices for corporate governance.

Related to that trend will be a new movement likely to spawn headlines -- business cases reaching the Supreme Court of Canada. Deborah Glendinning, head of the class-action specialty group at Osler Hoskin & Harcourt LLP, says the country's highest court is showing greater willingness to take on complex corporate and commercial cases.

"The ability to get these cases up to the Supreme Court is going to be greater," she says, noting that lawyers have been eagerly anticipating clearer direction on issues concerning the duties of directors and officers.

Arguably just as forceful a driver of litigation will be the trend in Canada toward U.S.-style class-action lawsuits aimed not only at financial mismanagement but also at defective or dangerous products.

"Plaintiffs' lawyers here are kind of learning how to use class action as a weapon," says Mr. Jewett of Torys.

As is happening south of the border, increased regulatory scrutiny and the publicity it generates is likely to add fuel to the class-action fire, as opportunistic litigators comb through newspapers to seize upon cases and then go in search of shareholders willing to stand as the main plaintiffs in class-action suits.

Another burgeoning area likely to see considerable growth is legal advice for directors and officers seeking more comprehensive liability insurance. "In the old days, people just took the policy they got," says Simon Romano, a partner at Stikeman Elliott LLP. "Now, they want to negotiate it."

And with good reason. Prices for policies have been rising "astronomically," he says. He cites one client whose annual premiums recently rose to $250,000 from $75,000 for $20-million worth of coverage.

In many cases, directors' and officers' insurance is purchased as an umbrella policy that covers an entire corporate team. But if one rogue executive or director were to use up the entire liability limit as a result of litigation, there would be no coverage left in the pot for the rest of the group. Individual "D and O" coverage is "a very emerging area."