Class actions: Their day in court

By Luis Millán March 2013

Few class actions ever make it to trial in Canada. That could soon change.

Class actions: Their day in court

Dimitri Lascaris, Siskinds
London, ON
Photo credit: Stephen Grimes

Businesses in Canada are understandably nervous about the proliferation of class actions. No less than 123 class actions were filed across the country last year, up from 106 in 2011 and nearly four times as many as 2006, according to the Canadian Bar Association’s National Class Action Database. Over the past few years, class action suits have spread into new areas of law: securities, environmental, competition and labour, to name but a few. What’s more, uncertainty and ambiguity are always a key challenge for business, and when it comes to class actions, it’s been hard to tell where the complex and shifting legal landscape is heading next.

We ought to have a better idea soon enough, however, since the Supreme Court of Canada has no fewer than five important appeals to consider this year that will offer an opportunity to review class action certification law in a common law jurisdiction for the first time in over a decade (since its ruling in Hollick v. Toronto). Here is an overview of these and other developments that bear watching as they will likely shape the class action legal landscape over the year.

1. Indirect purchasers: Can they sue or not?

Three of the appeals before the Supreme Court are antitrust cases that relate to price-fixing (two from the British Columbia Court of Appeal, the other from the Quebec Court of Appeal), which ought to have “far-reaching and lasting impacts,” says Eric Hoaken, co-head of the class actions practice at Bennett Jones LLP in Toronto. The three appeals — Pro-Sys Consultants Ltd. v. Microsoft Corporation, Sun-Rype Products Ltd. v. Archer Daniels Midland Company, and Option Consommateurs v. Infineon Technologies AG — will consider whether “indirect purchasers” can recover damages due to alleged anti-competitive behaviour. The Competition Act allows a cause of action to “any person” who has suffered loss as a result of criminal misconduct. The question is whether that applies to indirect purchasers who buy off the shelf, as well as to those who buy directly from manufacturers.

"Rulings that favour the defendants would deal a serious blow to indirect purchaser class actions in Canada. "

Rulings that favour the defendants would deal a serious blow to indirect purchaser class actions in Canada. Hoaken expects that such an outcome would open the floodgates to a series of decertification motions, motions to strike and summary judgment motions. But if plaintiffs carry the day, he expects to see the opposite:  new certifications and new class actions being launched. Either way, Hoaken says these will be “crucially important decisions that will define the scope of class actions going forward.”

2. Paying the penalty and the damages 

Then there’s securities class action appeal in AIC Limited et al. v. Dennis Fischer et al., also before the Supreme Court. In the so-called “market timing” case, the Ontario Court of Appeal held that a settlement reached in a regulatory proceeding does not preclude or bar a related class proceeding. Hoaken says that if the appellate court decision is upheld, defendants may face a double whammy in the future — hefty financial penalties imposed by securities regulators — provided these haven’t been distributed to the victims — as well as exposing themselves to a class action. But Dimitri Lascaris, a veteran class action securities plaintiffs’ lawyer with Siskinds, believes the Supreme Court ruling will have a more significant impact on other types of class actions, “unless securities regulators in this country substantially alter their practice of usually keeping the money. But in cases where there might be a greater tendency of regulators to share penalties with victims of the offence, the decision in that case could have a very significant impact on those types of class actions.”

3. More trials, tougher certification?

Few class action trials have actually made it to trial in this country, at least outside of Quebec. In Ontario there have only been 16 merits decisions since the Class Proceedings Act was enacted in 1992. Quebec, the first province in Canada to introduce class action legislation in 1978, has had 62. All told, there have been only 92 class action trials in Canada, with 86 of those reaching a trial decision, according to figures compiled by Jonathon Foreman, a litigator with Harrison Pensa LLP.

Sylvie Rodrigue

Sylvie Rodrigue, Torys LLP

That’s about to change, says Sylvie Rodrigue, chair of the CBA National Task Force on Class Actions. The conventional practice of reaching for a settlement when plaintiffs obtained a certification order in a class action is about to give way to trials on the merits, she predicts. And in many cases full-scale legal battles on the certification front are going to fade away. A more mature class action environment coupled with the perception that the threshold for certification, particularly in Ontario, has become softer is prompting the defence bar — and clients — to rethink their tactics and deploy their resources to a setting where they feel they have a good chance of defeating claims. According to Ward Branch of Branch MacMaster LLP in Vancouver, “certification in some areas, like product liability, is almost inevitable so let’s put our resources into fighting the merits.” Rodrigue, who heads the new Torys LLP office in Montreal, concurs. “When the case is very strong at trial, sometimes it would be more efficient and a lot less costly for the defendant to negotiate the common issues they want to see tried — and just go to trial.”

That said, more class action trials may nonetheless lead to tougher certification battles, says Rodrigue. If the Quebec experience is anything to go by, the more judges preside over class action trials, the more they tend to interpret certification criteria stringently.

4. Third-party litigation funding — more fuel for plaintiffs’ bar

More class action trials means plaintiffs are going to have to invest “significantly more than they have been accustomed to in the past” in the prosecution of class action suits, says Lascaris. The emergence of third-party litigation funding in Canada — now common in Australia — could not have come at a more auspicious time for the plaintiffs’ bar.

Third-party litigation funders are private companies or equity pools that invest in class action litigation. Proponents say it promotes access to justice, provides class counsel access to financial resources, and spreads significant risk exposure.

"The emergence of third-party litigation funding in Canada —now common in Australia — could not have come at a more auspicious time for the plaintiffs’ bar."

Public bodies such as the Class Proceedings Fund in Ontario and Le Fonds d’aide aux recours collectifs in Quebec can provide plaintiffs with funds to cover the cost of disbursements, indemnity for costs in the event that the representative plaintiff’s action is unsuccessful and, in Quebec, help pay for legal fees. But the 10 per cent premium that the Class Proceedings Fund charges is expensive, says Lascaris. “I understand that it needs to be adequately capitalized but that is a significant price for the class to pay, and if private litigation funders are prepared to assume the burden of adverse cost protection at a much lower price then it is inevitable that you are going to see a proliferation of third-party funding agreements.”

An increase in third-party financing arrangements appears to be in the cards in loser-pay regimes like Ontario but Branch says that might result in a growing number of cases filed in British Columbia, which is a no-cost regime.

5. Global class actions
Ward Branch

Ward Branch, Branch MacMaster LLP

The United States may have closed the door on American-based global class actions — at least in securities law — following the U.S. Supreme Court’s decision in Morrison v. National Australia Bank, but here in Canada the Ontario courts seems to have left it ajar. The controversial ruling in Silver v. IMAX, which held that a real and substantial connection existed between the dispute and Ontario, certified a class in which a significant number of the plaintiffs are non-residents of Canada. “IMAX definitely provides a useful precedent for those who are seeking certification of a global class,” said Lascaris. But there will no doubt be judicial restraint, he adds.

Rodrigue is already preparing for an uptick in global class actions, a minefield littered with unresolved issues surrounding enforceability, jurisdiction and settlements. As the co-chair of the International Bar Association Multijurisdictional Class Action.

Collective Redress Working Group, she is trying to forge a judicial protocol similar to the one she helped develop with the CBA to facilitate the management of multijurisdictional class actions. “We’re trying with the IBA to come up with a protocol that at least in the context of settlements would ensure there is final closure, and that all the courts are on board. That could be very useful.”

Luis Millán is a legal journalist based in Wakefield, Quebec.

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