Case involved alleged overstatement in a prospectus, leading to financial losses for investors
The Ontario Superior Court of Justice has approved a $3 million settlement agreement in a securities class action.
The plaintiff alleged that Gatos Silver, Inc. overstated the mineral reserve of its sole producing mine in a July 2021 prospectus, leading to financial losses for investors. Tetra Tech prepared the technical report with the alleged error and certified its accuracy. The plaintiff claimed that Gatos's disclosures based on this report were misrepresentations and that Tetra Tech and its employees who were involved in preparing the report are liable for damages under the Ontario Securities Act and common law.
The defendant agreed to pay $3 million in full settlement of all claims, securing full and final releases for all class members and resulting in the dismissal of the action. Class counsel, assisted by the claims administrator, disseminated notice of the proposed settlement and received no objections from class members. They estimate the potential damages for primary market purchasers to be between $3.7 million and $7 million and for secondary market damages between $7.5 million and $11.85 million.
The Superior Court noted that a settlement must be fair, reasonable, and in the best interests of the class, with the burden of proof on the plaintiff. The court found that the settlement, similar to a prior settlement with another group of defendants, was reached through arm's length negotiations, establishing a presumption of fairness.
Class counsel advised that the settlement recovers approximately 16 percent to 26 percent of estimated damages, with combined settlements recovering 20 percent to 33 percent of losses. This recovery is notably higher compared to a parallel US class action.
The court deemed the disbursements incurred, including expert fees, fair and reasonable. The fees and disbursements total 31 percent, which is within the range approved in other class actions.
The court concluded that the settlement, the allocation plan, and the ancillary relief sought were fair, reasonable, and in the best interests of the class. The court also approved the class counsel's fees and disbursements, issuing an order as submitted by the class counsel.
