On Lemons and Leather: Liability for Misrepresentations of Forward-Looking Information in Danier Leather

(2009) 48 Canadian Business Law Journal 3-35

37 Pages Posted: 27 May 2013

See all articles by Edward Iacobucci

Edward Iacobucci

University of Toronto - Faculty of Law

Date Written: 2009

Abstract

The Supreme Court of Canada considered in Kerr v. Danier Leather the liability of a corporate issuer of a prospectus forecasting performance that was alleged to misrepresent the company’s prospects at the time purchasers bought shares. This article analyzes whether there is an obligation on issuers to update previously disclosed forward-looking information (FLI) whenever circumstances change, and whether the business judgment rule applies to such disclosure decisions. The author provides a policy analysis of whether the decision’s interpretation of the Ontario Securities Act best advances the societal interests underlying potential liability for misrepresentations on FLI. As a general rule, there is no obligation on an issuer to disclose FLI. Given that mandatory disclosure rules do not extend to FLI, and given that the issuer itself will predictably bear costs if its FLI disclosures lack credibility, the law should allow the issuer itself to customize the standard for evaluating its liability for misleading FLI. The article concludes that the Danier decision is correct in light of this policy analysis, as it leaves scope for issuers to tailor liability for FLI to their particular circumstances.

Keywords: Danier leather, disclosure, misrepresentation

Suggested Citation

Iacobucci, Edward M., On Lemons and Leather: Liability for Misrepresentations of Forward-Looking Information in Danier Leather (2009). (2009) 48 Canadian Business Law Journal 3-35. Available at SSRN: https://ssrn.com/abstract=2268771

Edward M. Iacobucci (Contact Author)

University of Toronto - Faculty of Law ( email )

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