Cross-border playbook

In August, 2013, a proposed class action settlement of one of Canada’s largest automotive recalls featured close collaboration by plaintiff lawyers here and in the United States.

Three Canadian plaintiff firms worked with their American counterparts in a Canadian settlement covering 1.3-million vehicles. A similar lawsuit was settled earlier in the United States. (The class action involved allegations against Toyota Canada of sudden gas pedal acceleration.)

“It was truly cross-border in that the plaintiff group worked with the U.S. group and [Canadian] defence worked with the U.S.,” says Won Kim, principal of Kim, Orr, one of three Canadian firms that prosecuted the national class action. “There was a fluid exchange of information from all the parties.”

Increased co-operation between cross-border plaintiffs is one of several trends transforming — and complicating — the class action litigation landscape with consequences for corporate in-house counsel, say defence and plaintiff lawyers.

For example, some cross-border class actions seek to represent plaintiffs in Canada and the U.S., sparking occasional fights over which law firm has carriage of the case. In some cases, class actions may be certified in Canada but not in the U.S.

Furthermore, recent changes in Canadian securities law make it easier for shareholders to seek damages for alleged company financial misrepresentation. And, despite legal similarities with Canada, the U.S. has recently tightened its rules on certification and jurisdiction.

 “The [cross-border] playbook is becoming infinitely more complex because of the co-ordination and sophistication of plaintiffs on both sides of the border and also because of the heightened regulatory environment that all businesses operate in right now,” says Christopher Naudie, a partner with Osler, Hoskin & Harcourt LLP in Toronto and co-chair of the firm’s national class action specialty group. For in-house counsel, he adds, “the demands on co-ordination have certainly increased.”

An integrated approach

Ward Branch, a founding partner of Vancouver-based Branch MacMaster LLP and author of Class Actions in Canada, estimates at least 30-40 per cent of class actions, notably securities, competition and product liability, have a cross-border component.

“The trend we are seeing is Canadian firms starting their litigation sooner so they can work together with U.S. counsel co-operatively to advance the case and work together strategically to decide what buttons to push at what time and on what side of the border,” he says.

In 2011, in the British Columbia Supreme Court, Branch MacMaster and Camp Fiorante Matthews filed a proposed national class action against Visa and Mastercard and 10 major banks in Canada and the U.S. alleging a multi-billion dollar price-fixing conspiracy related to fees paid by merchants on credit card transactions. At present, a consortium of lawyers have commenced proposed class actions in five provinces, with a decision on a certification application heard in the B.C. Supreme Court last spring under reserve.

Significantly, Branch says his firm is working with lawyers from Robins, Kaplan, Miller and Ciresi, one of two American firms appointed to represent U.S. plaintiffs in a proposed $7.5-billion (US) class action settlement reached last year (but under challenge in the courts by retailers opposed to the deal).

“They have a lot of information and intelligence they can offer us so we have effectively retained them as consultants in relation to the Canadian litigation,” says Branch. “In the past, the U.S. case ran out ahead and settled for ‘X’ and Canada was the tail on the dog. Often the defendant would tell the Canadian [plaintiff] to get stuffed or offer 50 cents on the dollar of what was offered in the U.S.”

For its part, the American firm receives a fee for its advice. “You end up negotiating an arrangement where they get paid for their assistance,” notes Branch. “They have built up this intellectual capital already and so for a marginal bit of work in Canada they get to sell the same product twice.”

In-house counsel, says Branch, should weigh the merits of an early settlement before a class action gets off the ground. But if the decision is to fight a claim, he says corporate counsel need to integrate the approach to cases that arise on both sides of the border.

Cross-border class actions can take several forms, from parallel files with separate classes or overlapping classes in Canada and the U.S. to cases certified in Canada but not in the U.S. (which typically groups product liability cases under a multi-district litigation panel).

Whatever the type of case, co-ordination of documents and strategies on both sides of the border is a top priority for in-house counsel, says veteran class action defence lawyer Silvie Rodrigue, managing partner of Torys LLP Montreal office. “The procedure will be different in each system but still requires co-ordination,” she says. “For example, we don’t want documents where there is discovery or document production to be filed too quickly so the plaintiff counsel in Canada can put his hands on it and feed the case in Canada.”

Co-ordination is as important at settlement to ensure so-called global peace for the defendant, says Catherine Beagan-Flood, a partner at Blake, Cassels & Graydon LLP in Toronto whose class action portfolio includes anti-trust, product liability, consumer protection and privacy.

A successful strategy in product liability and anti-trust cases, she says, is to ensure recognition of a proposed settlement in one jurisdiction by provincial courts elsewhere.

“Be pro-active,” she says. “Make sure that you go to all the other provinces where there is litigation to get the cases that exist there dismissed and get an order recognizing and enforcing the [proposed] settlement approval.”

Cross-border co-ordination also extends to findings of guilt and payment of fines, adds Beagan-Flood.

In an investigation of anti-trust and white collar crime, for example, she says U.S. counsel need to consider the impact of a plea on deliberations in Canada. “There will often be an assumption that what you do in that circumstance will only have an effect in the U.S., without realizing that it can [be relevant] in other countries as well,” she says.

Keeping a global perspective is essential, says David Kent, a partner with McMillan and national co-chair of its dispute resolution and class action practice. He represents Mastercard in the current Canadian credit card case.

“Just as the North American economy has fewer borders, so too does litigation and there are entrepreneurial lawyers in the U.S. who are actively shipping their litigation abroad just as there are eager Canadian lawyers who are happy to be the franchisee,” he says.

Since class actions often begin in the U.S., Canadian plaintiff firms have access to publicly available court information that could prove valuable for their subsequent case. Kent says Canadian lawyers have had “mixed success” in efforts to drill deeper for U.S. documents, such as requests for intervenor status to gain access to otherwise-redacted testimony.

Sometimes a proposed settlement in the U.S. reshapes an ongoing case in Canada.

In 2009, in Silver v. Imax Corp., the Ontario Superior Court of Justice certified an international class that included Canadian and U.S. shareholders of the Mississauga, Ont., movie theatre company that traded on the TSX and NASDAQ and whose stock suffered a steep price drop after news of an informal Securities and Exchange Commission inquiry. Class certification was granted first in Ontario and then in the U.S., leading to parallel cases.

Earlier this year, the Ontario court agreed to remove the American plaintiffs from the proceedings as they had reached a conditional settlement in the United States.

One exception to the pattern of speedier judicial action in the U.S. is Quebec, says Cassels Brock lawyer Tim Pinos who, with fellow partner Glenn Zakaib, served as counsel to Toyota in Ontario and co-ordinating counsel for the recall-related cases filed in other provinces. “Once a judge gets assigned with a class action, generally they push them forward,” says Pinos, noting the potential for “a substantial amount of heartburn” for plaintiff and defendant.

From a plaintiff perspective, a case that begins in Canada will require an investment of time and money to produce evidence that could otherwise be generated in the U.S. For defendants, a lower bar for class action authorization in Quebec and other provinces compared to the U.S. raises the possibility that a case proceeds here first but not in the U.S.

 “You have to be very cognizant about co-ordinating your outside counsel in the various jurisdictions and having a very real sense of where you want cases to proceed first from a precedential standpoint,” says Pinos.

U.S. pulls back

The recent divergence between Canada and U.S. on treatment of proposed class actions further complicates the picture for in-house counsel. 

“The U.S. is getting more restrictive on class action at every level,” observes Rodrigue, who also chairs the Canadian Bar Association National Task Force on Class Actions. “The Supreme Court of the United States is really trying to pull back on class actions — on the burden of proof, on the type of cases that will be allowed  and also on their jurisdiction,” she says.

Canada, by contrast, “is going in the opposite direction at every level,” she adds. The U.S., which introduced legislation on class action almost 50 years ago, has a mature history compared to Canada, where Quebec introduced its rules in 1978 followed by Ontario in 1992 and provinces thereafter.

“Where the U.S. is restricting class actions, Canada is opening the door,” she says. “Where the U.S. is restricting jurisdiction, Canada is opening the door. Where the U.S. is being more restrictive on the burden of proof, Canada is going in the other direction. It is the complete opposite at every possible level.”

Meanwhile, the Supreme Court of Canada has released a landmark trilogy of competition cases heard by lower courts in British Columbia (Sun-Rype Ltd. V Archer Daniels Midland Co. and Pro-Sys Consultants Ltd. V Microsoft) and in Quebec (Samsung Electronics Co. Ltd. V Option Consommateurs) which, along with others pending at lower courts, underscore the coming of age of class action litigation in Canada, observes Osgoode Hall Law School professor Janet Walker, who has served on Canadian and international panels on class action.

“In Canada we have a similar legal system to the U.S. and so we have a chance to benefit from the experience in the U.S. and to create class action procedures and practice that best suit our needs in Canada,” she says. “It is an exciting time in which lawyers, judges, academics... and not the least significant representatives of business and industry, such as in-house counsel can play a real role in shaping our class actions to meet our needs.”

The evolving picture on class action in Canada has the caught the attention of some veteran U.S. lawyers. 

In 2005, after Ontario enacted Bill 198 to allow for U.S.-style suits by shareholders who allege company misrepresentation of financial information, renowned New York securities class-action lawyer Michael Spencer attended a conference in Toronto where he met Canadian class action plaintiff lawyer Won Kim.

Spencer, a senior partner at Milberg LLP, was lead counsel in a $9.3-billion (US) damage award, since lowered, against French media company Vivendi SA. “Mike is considered one of the top securities lawyers in the world,” says Kim. “It was a no-brainer for us.”

Since their meeting, the two firms have collaborated on several securities cases, including Sharma v Timminco Ltd. In that case, to the dismay of plaintiff counsel, the Ontario Court of Appeal ruled in 2012 that a complaint had to commence within three years of an alleged financial misrepresentation. Earlier this year, a special five-judge panel of the appeal court heard appeals on several cases affected by the time-limit issue.  A decision, still pending, could have significant implications for the filing of securities class actions, says Spencer and others.

In 2011, Spencer took the additional step to take the necessary exams to gain admission to the Ontario bar. He now divides his time between his New York practice and Toronto, where is he is counsel at Kim, Orr.

“The U.S. is a mature system that is somewhat contracting as far as securities are concerned and Canada is poised on a knife’s edge with respect to some fundamental  doctrinal decisions that the courts have yet to make,” says Mr. Spencer. “That’s why Canada is more exciting.”

CBA Protocol provides guidance

As a class action defence lawyer who regularly appears before judges in Quebec and Ontario, Torys partner Silvie Rodrigue has first-hand experience with one provincial court ignoring the rulings of another.

In 2009, the Supreme Court of Canada dismissed an appeal of Canada Post v Lepine, declining to give guidance on the management of multi-jurisdictional, overlapping cases. “More effective methods for managing jurisdictional disputes should be established in the spirit of mutual comity that is required between the courts of different provinces in the Canadian legal space,” the court concluded. “It is not this Court’s role to define the necessary solutions.”

As chair of the Canadian Bar Association National Task Force on Class Actions, Rodrigue spearheaded efforts that led to the establishment in 2011 of the CBA Judicial Protocol for the Management of Multi-Jurisdictional Class Actions. Case management provisions were excluded from the protocol pending further study by the task force.

“For me, the driver of this and the most important thing is communication and comity,” says Rodrigue.

In cases across multiple jurisdictions, the current protocol covers the handling of notification (with affected parties in multiple jurisdictions ensured access to the same information about a proposed class action) and settlement (with all courts participating in a simultaneous video-conferencing). The protocol applies when one party makes a request of the courts and becomes binding on the proceedings, if ordered by the judges.

Acknowledging some criticism of the protocol since implementation, Rodrigue describes it as “baby steps, but it is better than nothing.”

In 2012, the protocol was first used in Osmun v. Cadbury Adams, with courts in Ontario, Quebec and British Columbia agreeing to convene a simultaneous hearing that facilitated a settlement without the need for three separate hearings.

“It has not been without bumps and it has been cumbersome at time,” says Christopher Naudie, a partner with Osler, Hoskin & Harcourt and a specialist in class action defence and cross-border litigation. “But based on the experience to date, it is working,” he adds. “Clients have appreciated the benefits and reduced costs associated with approving  a national class settlement.”

Even when the protocol is not officially used, it serves as an informal guide. Class action defence lawyer Catherine Beagan-Flood, a partner with Blake, Cassels & Graydon LLP, says some cases have not suited the protocol, as currently written. “But we came up with a tailored protocol that was inspired by the CBA protocol and got approval from the courts to use that instead,” she says.

In addition to Rodrigue’s ongoing work as chair of the CBA national task force, she is co-chair of the International Bar Association Multi-Jurisdictional Class Action/Collective Redress Working Group. In that capacity, she hopes to export the Canadian protocol to the international level.