IN RE: KIRKLAND LAKE GOLD LTD. SECURITIES LITIGATION

Background

Stephen Brahms sued Kirkland Lake Gold Ltd. and its former CEO, Anthony Makuch, under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. Brahms alleged that three statements Makuch made in January and February 2019 misled investors about Kirkland’s growth strategy and the standards it used to evaluate possible mine acquisitions. He alleged that Kirkland emphasized internal or “organic” growth while pursuing an acquisition of Detour Gold Corporation, and that Makuch described minimum production and cost standards that Detour did not immediately meet. Brahms alleged a $139 loss during the relevant period.

The court had previously allowed claims based on those three statements to continue past the motion-to-dismiss stage. After discovery, the remaining defendants moved for summary judgment under Federal Rule of Civil Procedure 56. Brahms also moved to exclude the testimony and report of the defendants’ proposed expert, George Ireland.

Ruling on the Securities Claims

The court granted the defendants’ motion for summary judgment. For a claim under Section 10(b) and Rule 10b-5, a plaintiff must prove, among other things, a material misstatement or omission and scienter, meaning an intent to deceive or sufficiently reckless conduct. The court held that Brahms could not show a genuine factual dispute on either requirement.

First, the court held that Makuch’s statements about organic and internal growth were not materially misleading. They described internal growth as Kirkland’s primary focus but did not rule out mergers and acquisitions as another possible means of growth. The court also found that the evidence showed Kirkland was not actively or seriously considering acquiring Detour in January or February 2019. Kirkland’s earlier review of Detour’s confidential information ended in December 2018, and the record showed that Kirkland reengaged with Detour in July 2019.

Second, the court held that Makuch’s January 14, 2019 statement about minimum production, cash-cost, and all-in sustaining-cost standards was not materially misleading when read in context. Other statements by Makuch and Kirkland clarified that the standards concerned the future performance or potential of an acquired mine, rather than necessarily the mine’s condition at the time of purchase. The court also considered Kirkland’s publicly known history of acquiring lower-performing mines and improving them. The court noted that Detour later met the stated cost and production standards after Kirkland operated the mine.

The court separately held that Brahms had not presented evidence from which a reasonable factfinder could conclude that Makuch had the required scienter. The court therefore granted summary judgment on the Section 10(b) and Rule 10b-5 claims. Because a Section 20(a) control-person claim requires a primary violation by the controlled company, the court also granted summary judgment on Brahms’s remaining Section 20(a) claim after finding no primary violation by Kirkland.

Expert Motion and Disposition

The court did not consider the substance of George Ireland’s expert testimony because the claims failed as a matter of law without it. It denied Brahms’s motion to exclude Ireland’s testimony and report as moot.

Judge J. Paul Oetken directed the clerk to enter judgment of dismissal, close the motions at Docket Numbers 153 and 173, and close the case.