Amended Statement of Claim

Court File No.: CV-13-20310 CP
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN
SCOTT BARDWELL
Plaintiff
and
MARTINREA INTERNATIONAL INC., ROB WILDEBOER WINDEBOER, NICK ORLANDO, FRED JAEKEL, FRED DI TOSTO, FRED OLSON, ZORAN ARANDJELOVIC and SULEIMAN RASHID Defendants
Proceedings under the Class Proceedings Act, 1992
AMENDED STATEMENT OF CLAIM
(Notice of action issued on December 20,2013)
DEFINED TERMS
The capitalized terms used throughout this statement of claim have the
1.
meanings indicated below:
...,il:: ,',
(a) "Bardwell" means Scott Bardwell;
(b) "Class" and "Class Members" means all persons, other than Excluded
Persons, who acquired securities of Martinrea during the Class Period
and held some or all ofthose securities at the close of trading on
December 18, 2013;
(c) "Class Period" means the period from March 6, 2006 to and including
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(d) "CJA" means the Courts ofJustice Act, R.S.O. 1990, c. C.43, as
amended;
(e) "CPA" means the Class Proceedings Act, 1992, S.O. 1992, c. 6;
(0 "Equivalent Securities Acts" means, collectively, the Securities Act,
RSA 2000, c S-4, as amended; the Securities Act, RSBC 1996, c 418, as
amended; the Securities Act, CCSM c S50, as amended; the Securities
Act, SNB 2004, c S-5.5, as amended; the Securities Act, RSNL 1990, c S
13, as amended; the Securities Act, SNWT 2008, c 10, as amended; the
Securities Act, RSNS 1989, c 418, as amended; the Securities Act, S Nu
2008, c 12, as amended; the Securities Act, RSPEI 1988, c S-3.1, as
amended; the Securities Act, RSQ c V-1.1, as amended; the Securities
Act, 1988, SS 1988-89, c S-42.2, as amended; and the Securities Act, SY
2007, c 16, as amended;
(g) "Excluded Persons" means Martinrea's subsidiaries, affiliates, officers,
directors, senior employees, legal representatives, heirs, predecessors,
successors and assigns, and any member of the Individual Defendants'
families and any entity in which any of them has or had during the Class
Period any legal or de facto controlling interest;
(h) "Financial Statements" means Martinrea's reports to shareholders for
the year ended December 31,2005 through 2012, which contained
Martinrea management's discussion and analysis and audited annual
financial statements;
(i) "GAAP" means generally accepted accounting principles;
(j) "Individual Defendants" means Zoran Arandjelovic, Fred Di Tosto,
Fred Jaekel, Fred Olson, Nick Orlando, Rob Wildeboer and Suleiman
Rashid;
(k) "OSA" means the Securities Act, R.S.O. 1990, c. S.5, as amended;
(1) "SEDAR" means the System for Electronic Document Analysis and
Retrieval which is a filing system developed for the Canadian Securities
Administrators;
(m) "Martin rea" means Martinrea International Inc.;
(n) "TSX" means the Toronto Stock Exchange; and
(0) "Wilde boer" means Rob Wildeboer.
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RELIEF CLAIMED 2.
Bardwell claims on his behalf and on behalf of the other Class Members:
(a)
an order pursuant to the CPA certifying this action as a class proceeding
and appointing him as the representative plaintiff;
(b)
a declaration that the defendants made a misrepresentation during the
Class Period by representing that Martinrea's Financial Statements were
prepared in accordance with GAAP and/or International Financial
Reporting Standards;
(c)
a declaration that Martinrea and the Individual Defendants made the
misrepresentation negligently;
(d)
an order granting leave to amend this statement of claim and the notice of
action to assert the causes of action set out in Part XXIII. 1 of the OSA and
the analogous provisions of the Equivalent Securities Acts nunc pro tunc
to the date this action was commenced;
(e)
a declaration that Martinrea is vicariously liable for the acts and/or
omissions of the Individual Defendants and its other officers, directors
and employees;
(t)
special damages, general damages and the costs of notice and of
administering the plan of distribution of the recovery in this action plus
applicable taxes, in the sum of $100 million or such other sum as this
court finds appropriate at the trial of the common issues or at a reference
or references;
(g)
an order directing a reference or giving such other directions as may be
necessary to detennine issues not detennined in the trial of the common
issues;
(h)
prejudgment interest and postjudgment interest, compounded, or pursuant
to ss. 128 and 129 of the CJA;
(i)
costs of this action on a full indemnity basis, or in an amount that
provides substantial indemnity, plus pursuant to s. 26(9) of the CPA the
costs of notice and of administering the plan of distribution of the
recovery in this action; and
(j)
such further and other relief as to this Honourable Court seems just.
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NATURE OF THE ACTION
3.
This is a securities class action on behalf of all persons who acquired
shares of Martinrea at artificially inflated prices during the Class Period as a result of the
defendants' dissemination of materially inaccurate financial information relating to
Martinrea's Financial Statements for the years ended December 31,2005 through 2012.
4.
On December 18,2013, after the financial markets closed, Martinrea
issued and filed with SEDAR a news release titled "Corporate Update". The news
release announced for the first time that Martinrea's net income may have been
overstated by $10 to $18 million in total, spread over the years 2005-2012, but that the
exact figure will be determined by management, KMPG and PWC.
5.
As a result of the December 18, 2013 announcement concerning the
overstated net income, Martinrea's share price fell from a closing price of $9.42 per
share on the TSX on December 18,2013 to a closing price of $7.48 per share on the
TSX on December 19, 2013, a drop of 21 percent.
THE PARTIES
6.
Bardwell resides in the City of Guelph. He purchased shares of Martinrea
during the Class Period and held some or all of those shares at the close of trading on
December 18, 2013.
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7.
Martinrea was incorporated pursuant to the laws of Ontario and maintains
its head office in the City of Vaughan, Ontario.
8.
Martinrea is engaged in the business of producing metal parts,
assemblies, modules and fluid management systems mainly for the automotive sector.
9.
The common shares of Martinrea are listed for trading on the TSX under
the symbol "MRE", on the over-the-counter markets under the symbol "MRETF', on
European stock exchanges and on alternative trading markets in Canada.
10.
At all material times, Wildeboer was the Executive Chairman of
Martinrea's Board of Directors.
11.
At all material times, Nick Orlando was the President of Martinrea and
has been the Chief Executive Officer of Martinrea since March 11, 2011. He was also
the Chief Financial Officer during the Class Period until March 23, 2011.
12.
Fred Di Tosto is the Chief Financial Officer of Martinrea and has been
since March 23, 2011.
13.
Fred Jaekel was the Chief Executive Officer during the Class Period until
March 11, 2011.
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l4.
At all material times, Fred Olson, Zoran Arandjelovic and Suleiman
Rashid were members of Martinrea's Board of Directors and the Audit Committee.
THE MATERIAL EVENTS
15.
During the Class Period Martinrea made the misrepresentation in many
news releases and filings with the regulatory bodies. Some of these events are described
in the paragraphs following.
From March 6, 2006 until the end of the Class Period, Martinrea issued
16.
Financial Statements and filed them with SEDAR.
Each of the Individual Defendants signed some or all of the Financial
17.
Statements.
In each of the Financial Statements, Martinrea improperly recognized
18.
revenue and improperly understated losses in the years in which they were recorded and
thereby materially overstated its revenues and earnings during the Class Period.
19.
On December 18,2013, after the financial markets closed, Martinrea
issued and filed with SEDAR a news release titled "Corporate Update". The news
release announced for the first time that:
(a) Martinrea's management identified an issue with the historical financial
reporting of one of its Canadian plants that appeared to be rooted in the
tracking of production and tooling inventories; and
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(b) Martinrea's management estimates that Martinrea's net income may have
been overstated by $10 to $18 million in total, spread over the years
2005-2012, but that the exact figure will be determined by management,
KMPG and PWC.
NEGLIGENT MISREPRESENTATION
20.
The defendants owed a duty of care to the Class Members because they
were in a relationship of proximity and it was reasonably foreseeable that the Class
Members would rely upon the misrepresentation and would suffer damages as a result.
21.
Martinrea, and the Individual Defendants, as officers and directors of a
publicly held company, had a duty to disseminate prompt, accurate and truthful
information with respect to Martinrea's fmancial condition, performance, financial
statements, earnings and internal controls and to correct any previously-issued
statements that had become materially misleading or untrue, so that the market price of
its publicly-traded shares would be based upon truthful and accurate information. The
Individual Defendants' breached these specific requirements and obligations.
22.
The defendants, because of their positions of control and authority as
officers and/or directors of Martinrea, were able to and did control the content of some
of the SEDAR filings, news releases and other public statements pertaining to Martinrea
during the Class Period. Each Individual Defendant was provided with copies of some
of the documents alleged herein to be misleading prior to or shortly after their issuance
and/or had the ability and/or opportunity to prevent their issuance or cause them to be
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corrected. Accordingly, each of the Individual Defendants is responsible for the
accuracy of some of the public reports and releases detailed herein.
23.
The Financial Statements contained the misrepresentation.
24.
Martinrea made the misrepresentation by issuing the Financial Statements
and the other documents filed with SEDAR.
Each of the Individual Defendants made the misrepresentation by
25.
authorizing, pennitting and/or acquiescing in the preparation and dissemination of the
news releases referred to herein and the Financial Statements.
The defendants failed to meet the reasonable standard of conduct in the
26.
circumstances because:
(a) they failed to act reasonably, honestly, candidly and in the best interests
of the plaintiff and the other Class Members;
(b) they failed to exercise the degree of care, diligence and skill that a
reasonably prudent person would exercise in comparable circumstances;
(c) they made, or authorized the making of, announcements, new releases,
regulatory filings and other public documents when they knew or ought to
have known that they misrepresented the fmancial condition of Martinrea;
(d) they failed to institute or maintain appropriate quality controls to ensure
that Martinrea's accounting procedures confonned with GAAP and fairly
presented the true financial condition of Martinrea; and
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(e) they failed to make timely disclosure of the material facts about the
financial implications of the overstatement of the net income of the Class
Period.
27.
The defendants knew or oUght to have known that the representation of
Martinrea's financial position was misleading because they had, among other things, they:
(a)
failed to maintain adequate mechanisms for tracking of production and
tooling inventories;
(b)
failed to maintain adequate internal accounting controls; and
(c)
failed to have qualified personnel with the required proficiency to prepare
the Financial Statements to ensure they were free from errors.
28.
The Class Members reasonably relied upon the misrepresentation in
making their decision to purchase Martinrea shares during the Class Period. The
defendants intended that the Class Members rely upon the misrepresentation.
29.
The Class Members also reasonably relied upon the misrepresentation by
the act of purchasing Martinrea shares during the Class Period.
30.
The Class Members suffered damages and loss as a result of relying on
the misrepresentation and purchasing Martinrea shares at artificially inflated prices
during the Class Period. Martinrea, the Individual Defendants, or anyone or more of
them, are liable to pay damages to the Class Members.
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THE RELATIONSHIP BETWEEN THE MISREPRESENTATION AND THE PRICE OF
SHARES OF MARTINREA
31.
Martinrea's shares traded on the TSX and the other markets identified
above. The markets for Martinrea shares are highly efficient and automated markets.
The price at which Martinrea's shares traded incorporated material information about its
financial position relating to the Financial Statements.
32.
The price of Martinrea's publicly-traded shares were directly affected
each time the defendants communicated new material information concerning the
Financial Statements. The defendants were aware at all material times of the effect of
Martinrea's representations on the price of its publicly-traded shares and intended the
Class Members to rely on the disclosures which they did to their detriment.
33.
The documents referred to herein, each were filed with SEDAR, thereby
became immediately available to and were reproduced for inspection by the Class
Members, the public, financial analysts and the financial press and certain prospective
and existing shareholders of Martinrea through the internet and financial publications.
34.
Martinrea routinely transmitted the documents referred to herein to the
fmancial press, financial analysts and certain prospective and existing shareholders of
Martinrea.
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35.
Martinrea regularly communicated with the public investors and financial
analysts via established market communication mechanisms, including through regular
dissemination of news releases on news wire services and through teleconferences with
investors and analysts.
36.
Martinrea was the subject of analysts' reports that incorporated the
information in the documents referred to herein, with the effect that any recommendation
in such reports during the Class Period was based, in whole or in part, on the news
releases and regulatory filings which were inaccurate, untrue and misleading with respect
to Martinrea's financial position relating to the Financial Statements.
PART XXlD.l OF THE OSA
37.
Bardwell intends to deliver a notice of motion seeking leave under
s. 138.8(1) of the OSA to amend the notice of action and this statement of claim to plead
the causes of action set out in Part XXm.l of the GSA and the analogous provisions in
the Equivalent Securities Acts nunc pro tunc to the date this action was commenced.
38.
Subject to leave being granted, Bardwell pleads and relies on Part xxm.l
of the OSA as described in the following paragraphs.
39.
Martinrea was a responsible issuer as defmed in s. 138.1 of the OSA and
in the corresponding provisions of the Equivalent Securities Acts.
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40.
During the Class Period, Martinrea issued, released and filed with
SEDAR the Financial Statements, which are core documents as defined in s. 138.1 of the
OSA and the news releases referred to herein. Each of these documents contained the
misrepresentation as defined in s. 1(1) of the OSA.
41.
Each or some of the Individual Defendants authorized, pennitted or
acquiesced in the release of the documents referred to herein and:
42.
(a) they knew or oUght to have known at the time those documents were
released that they contained the misrepresentation; or
(b) before the time those documents were released they deliberately avoided
acquiring knowledge that the documents contained the misrepresentation;
or
(c) were, through action or failure to act, gUilty of gross negligence in
connection with the release of those documents.
Bardwell and the other Class Members acquired Martinrea shares during
the period between the time when the documents referred to above were released and the
time when the misrepresentation contained in the documents was publicly corrected.
43.
Bardwell and the other Class Members have a statutory right of action for
damages against the defendants as particularized below.
44.
Bardwell and the other Class Members assert the rights of action
contained in Part XXIII. 1 of the OSA against Martinrea and the Individual Defendants.
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45.
Bardwell and the other Class Members are entitled to have damages
assessed against the defendants in accordance with ss. 138.5, 138.6 and 138.7 of the
OSA.
DAMAGES
46.
Bardwell and each other Class Member suffered loss and damage by
purchasing Martinrea shares at artificially inflated prices. Therefore, Martinrea and the
Individual Defendants, or anyone or more of them, are liable to pay damages to the
plaintiffs and the other Class Members.
47.
Bardwell and the other Class Members are also entitled to recover, as
damages, or costs in accordance with the CPA, the costs of administering the plan to
distribute the recovery in this action.
VICARIOUS LIABILITY OF MARTINREA
48.
Martinrea is vicariously liable for the acts and omissions of the Individual
Defendants and its other officers, directors and employees because their acts and
omissions with respect to the misrepresentation were carried out while they were
engaged in the management, direction and control of the business affairs of Martinrea.
, I
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REAL AND SUBSTANTIAL CONNECTION WITH ONTARIO
49.
Bardwell pleads that this action has a real and substantial connection with
Ontario because, among other things:
(a)
Martinrea is incorporated pursuant to the laws of Ontario;
(b)
Martinrea is a reporting issuer in Ontario;
(c)
Martinrea carries on business and maintains offices in the City of
Vaughan, Ontario;
(d)
Class Members resident in Ontario acquired Martinrea shares and
suffered damage and loss;
(e)
the shares of Martinrea trade on the TSX which is located in Ontario; and
(f)
he resides in Ontario.
SERVICE OUTSIDE OF ONTARIO
This originating process may be served without court order outside
50.
Ontario in that the claim is:
(a) in respect of damages sustained in Ontario arising from a tort wherever
committed (rule 17.02(g»; and
(b) authorized by statue to be made against a person outside Ontario by a
proceeding commenced in Ontario (rule 17.02(n».
RELEVANT LEGISLATION
51.
Bardwell pleads and relies on the CJA, CPA, OSA and the Equivalent
Securities Acts.
,
,
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PLACE OF TRIAL
52.
Bardwell proposes that this action be tried in the City of Windsor, in the
Province of Ontario.
January 20,2014
SUITS, STROSBERG LLP
Lawyers
600 - 251 Goyeau Street
Windsor, ON N9A 6V4
JAY STROSBERG
LSUC #: 47288F
Tel:
519.561.6285
Fax: 519.561.6203
S. ALEX CONSTANTIN
LSUC #: 60397W
Tel:
519.561.6231
Fax: 519.561.6203
Lawyers for the plaintiff
1I53223·v7
BARDWELL
Plaintiff
v MARTINREA INTERNATIONAL INC. et al.
Defendants
Court File No. CV-13-20310 CP
ONTARIO
SUPERIOR COURT OF JUSTICE
PROCEEDINGS COMMENCED AT WINDSOR
AMENDED STATEMENT OF CLAIM
SUTTS, STROSBERG LLP
Lawyers
600 - 25 1 Goyeau Street
Windsor, ON N9A 6V4
JAY STROSBERG
LSUC#: 47288F
Tel:
519.561.6285
Fax:
519.561.6203
S. ALEX CONSTANTIN
LSUC #: 60397W
Tel:
519.561.6231
Fax: 519.561.6203
Lawyers for the plaintiff
FILE:
63.418.000

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