Desjardins Class Action Lawsuit Gets Green Light From The Supreme Court

The Supreme Court of Canada has given the green light to a class action lawsuit accusing Desjardins Financial Services Firm Inc. of misrepresenting the risk involved with certain investments and will allow the case to proceed.

Class Action Lawsuit: Financial Advisor Misrepresented Investments as Safe

Plaintiff Ronald Asselin initially filed an application in 2011 to pursue a class action lawsuit Canada against Desjardins over the alleged misrepresentations. He says that, between 2005 and 2007, he purchased principal-protected deposits from Caisse Desjardins that were not redeemable before maturity.

According to court documents, Asselin purchased these investments based on representations by a financial planner and mutual fund representative affiliated with Desjardins. He says the financial planner represented the investments as safe and that they would provide a good return.

In March 2009, in the wake of the global financial crisis, Asselin said he was informed that his investments would not yield a return and therefore could not be redeemed before maturity. He sought to file a class action lawsuit against Desjardins, claiming that he had not been adequately informed about the risks associated with the investments.

Asselin claims that Desjardins used risky investment strategies that resulted in a loss of all of the assets.

A judge dismissed the application for the Desjardins class action lawsuit, but the Quebec Court of Appeal overturned the dismissal. Desjardins subsequently appealed the case to the Supreme Court of Canada.

Supreme Court Finds Class Action Lawsuit Meets Threshold to Proceed

On Oct. 30, the Supreme Court ruled in a split decision that the Desjardins class action lawsuit could proceed because it met the threshold for authorizing a class action in Quebec.

The majority of the court found that Asselin had alleged that Desjardins had breached its duty to inform investors about the risky transactions and that, as a result, he suffered a loss of return due to the risky investment strategies. Asselin claims he would not have agreed to invest with Desjardins if he had been adequately informed about the risks associated with the investments.

“The faults are described with sufficient precision, and the information missing for the entire group relates, among other things, to the level of risk involved in the investments, their volatility and the way they worked, including the leverage used,” according to the Supreme Court.

The Supreme Court noted that individuals who provide financial services have a duty to inform, and that failure to do so may leave them open to civil liability. At the authorization stage of a class action lawsuit, the plaintiff does not need to prove that he was not provided the information, the Supreme Court explained.

“At the authorization stage, the applicant bears the burden of demonstrating that the proposed legal syllogism is arguable, not the burden of proving each element of the syllogism on the usual civil balance of probabilities standard,” the Supreme Court wrote.

The Supreme Court also found that the Desjardins class action lawsuit argued that each putative Class Member was affected because of a systematic omission of information.

“A class action based on a brokerage firm’s liability for the conduct of its representatives is therefore possible if the issue is whether the information provided by the firm to its representatives and to the group’s members was insufficient, with the result that a general duty to inform was breached,” the Supreme Court wrote.

“To conclude otherwise would deprive the class action of part of its role of helping people who, for economic and other reasons, face barriers in asserting their rights.”

The Supreme Court determined that Desjardins could be held accountable for how it designed and managed its investments but struck down Asselin’s claim for punitive damages.

Three justices dissented, writing that the Desjardins class action lawsuit could proceed against the fund manager for compensatory damages, but not against the dealer.

“The liability of financial advisors for a breach of the duty to inform and the duty to provide advice is not well suited to a class action because of the highly individual nature of the relationship between a client and an advisor in the context of a contract for investment services,” according to the dissenting justices.

Desjardin Also Facing Data Breach Class Action Lawsuits

Desjardins is no stranger to class action lawsuits. Last year, the financial company was hit with a data breach class action lawsuit after it was reported that nearly 4.2 million Canadians may have had sensitive personal and financial information that was compromised in a data hack.

Do you think the Desjardins investments class action lawsuit should be allowed to proceed? Tell us your thoughts in the comments below!

The Desjardins Class Action Lawsuit is Desjardins Financial Services Firm Inc. v. Asselin, Case No. 37898, in the Supreme Court of Canada.

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