On November 2, 2011, IMAX Corporation reached an agreement with plaintiffs on the principle terms and conditions of a settlement of a class action litigation pending before the United States District Court for the Southern District of New York. The class action complaint alleged that IMAX improperly recognized revenue on theater system installations, and that IMAX, as well as its auditor PricewaterhouseCoopers, issued materially false statements between February 27, 2003 and August 9, 2006.
The U.S. action is one of two similar class actions against IMAX. IMAX is currently defending against an action in Canada filed in the Ontario Superior Court based on facts substantially identical to those alleged in this action. The Canadian action, which is the first global class action certified under the recently enacted Ontario Securities Act, asserts claims on behalf of individuals who purchased on the NASDAQ or the Toronto Stock Exchange from February 17, 2006 through August 9, 2006. If the court approves the settlement of the U.S. action, IMAX would be released from liability for the claims of the members of the Canadian class who purchased their securities on the NASDAQ -- the vast majority of the global class.
Under the terms of the settlement, which is still subject to approval by the court, the putative class members will recover $12 million in damages, in exchange for a release from liability for all claims that have been or could have been brought in any jurisdiction relating to the purchase of IMAX securities during the class period, or the subject matter of this litigation. Both IMAX and PwC have settled this action without admitting any liability.
The settlement of this lawsuit, which has been pending since August 2006, represents the latest in a series of victories that Cleary Gottlieb has obtained on behalf of IMAX. In June 2011, Cleary Gottlieb obtained a favorable resolution for IMAX of an investigation conducted by the U.S. Securities and Exchange Commission’s Division of Enforcement (and a parallel investigation by the Ontario Securities Commission) regarding allegations similar to those alleged in this class action.
