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An Ontario court approved a proposed $30-million settlement of an investor class action against cannabis firm, Aphria Inc., over alleged secondary market misrepresentations — a deal that will see investors share $13.7 million after legal fees and other costs.

Earlier this year, on the eve of the trial, the litigants in the class action lawsuit — which alleged that Aphria issued public disclosure about two planned corporate acquisitions back in 2018 that contained misrepresentations — reached a proposed resolution. 

In the case, which was certified as a class action in 2022, plaintiffs sought $170 million in damages, alleging that the company, along with a couple of directors and officers, made misrepresentations to investors about the acquisitions of Nuuvera Inc. and LATAM Holdings Inc. in a prospectus filing.

However, the plaintiffs reached a settlement amid concerns that even if they won the case they could have a hard time collecting damages, as the size of the award being sought would likely have pushed the company into insolvency. They also risked losing the case, as the company and its directors steadfastly denied the allegations.

Now, the Ontario Superior Court of Justice has formally approved the proposed settlement as being in the best interests of investors, and it approved proposed legal fees for the plaintiffs’ counsel too.

Specifically, the court approved $9 million in proposed legal fees for plaintiffs’ counsel, plus $3.9 million in disbursements and $1.17 million in HST on the legal fees. It also approved the payment of $1.5 million to the Class Proceedings Fund, which is administered by the Law Foundation of Ontario to finance class action litigation.

Class action legal fees that represent 30% of the settlement “is within the range routinely approved in class action litigation in Ontario,” the court said in its decision. “Moreover, it reflects the risk taken by class counsel in pursuing the action and the reward achieved in obtaining a substantial settlement for the class.”

In approving the resolution, the court also noted that the proposed settlement provides investors with certainty, and avoids the costs of prolonged litigation (including a likely appeal).

It also noted that four investors who initially opted out of the class action have since reached a deal to rejoin the class. And, it said that the plan to distribute the settlement funds will result in the fair distribution of those funds.

“Given the time and effort invested by class counsel, the complexity of the action and the risks of a trial and of post-trial insolvency of Aphria Inc., and the need for numerous expert reports, this distribution and the settlement overall is fair, reasonable, and in the best interest of the class,” the court concluded.