The rise of high-stakes global class actions

Canadian lawyers face greater uncertainty as complex global class actions increase. At a February Ontario Bar Association Institute program, lawyers highlighted cases that have helped to evolve the landscape.

Cross-border class-action litigation has proliferated over the past five to 10 years, said panelist Nadia Campion of Polley Faith in Toronto. Plaintiffs are increasingly seeking to increase the size of their classes by including foreign class members, she said, adding that from about 2010, “the courts were not entirely comfortable with exercising jurisdiction over global classes. But that’s all changed now.”

Campion outlined two significant Court of Appeal decisions, both with many class claimants with no connections to Canada. Excalibur involved a Canadian auditor involved in a private placement of shares and warrants by American owners of a Chinese corporation. The Court of Appeal overruled the lower courts’ denial of certification, ruling that there was a real and substantial connection to Ontario, essentially saying that if class members “have been harmed or potentially harmed by operations of a Canadian entity operating in Canada, then that is sufficient to give rise to a real and substantial connection test under which jurisdiction can be exercised,” said Campion. The key consideration was that courts can exercise jurisdiction over claims against Ontario-based defendants.

Air Cargo “really clarifies the factors and principles that will be considered when determining whether to exercise jurisdiction,” said Campion. A group of global airlines allegedly conspired to fix prices of air freight shipping services. The defendants brought a motion for a declaration that the Ontario courts could not exercise jurisdiction over absent foreign claimants and sought a stay order. The motion judge agreed with that but it was overturned on appeal.

Courts appear to have a more international outlook, said Campion, who added that the lower courts “seemed to be resisting certification of class actions involving foreign class members, whereas the Court of Appeal is overturning those decisions and sending a different message.”

Carlo Di Carlo of Stockwoods in Toronto spoke about the “groundbreaking” foreign exchange price-fixing action Mancinelli decision and what plaintiff lawyers are seeking to do in terms of precertification in discovery.

Mancinelli highlights an emerging trend, particularly in multinational class proceedings, to attempt to use evidence that is compelled in one jurisdiction—in this case the U.S.—and bring that evidence back into Canadian proceedings using s. 1782 title 28 of the US Code. This broad provision “essentially allows a U.S. court to compel a U.S. citizen to give testimony that can be used in a foreign proceeding,” said Di Carlo.

The “heartbreaking” Rana Plaza case calls into question the risks Canadian companies face when they buy goods from overseas manufacturers that violate laws, said Robert Gain of Toronto’s Koskie Minsky.

In this case, Loblaw hired a company to produce garments, which outsourced some of the work to another company that manufactured the garments in Rana Plaza in Bangladesh. After Rana Plaza collapsed in 2013, the plaintiffs brought a class action on behalf of the garment workers and the defendants brought a motion to dismiss. The Ontario court concluded that the law of Bangladesh, with its one-year limitation, applied so it was out of time since the action was started within two years but more than one year. But the court proceeded to move forward with the analysis, assuming that Ontario two-year limitation applied.

The court found that Loblaw had no direct control over the other company because it was not a subsidiary. The court also found that the imposition of liability would be unfair to Loblaw because it had no responsibility over the vulnerable plaintiffs, it did not create the dangerous work environment, it had no control over the circumstances that led to the danger and it had no control over the employees. “Holding a new category for negligence in these circumstances would create a new flurry of litigation for Canadian companies that operate indirectly,” said Gain.

In discussing the importance of forum selection clauses, Sandeep Joshi of BMO Financial Group in Toronto highlighted the jurisdictional aspects of the Supreme Court’s deeply divided Douez v. Facebook. Douez lived in BC and used Facebook, a global corporation incorporated in Delaware but headquartered in California. In a 4‒3 majority, the Supreme Court refused to enforce the foreign selection clause.

These clauses “ensure that global corporations are able to try to mitigate the risk they are not dragged into litigation in foreign countries,” said Joshi. The courts “have routinely noticed that the principles of private international law support enforcement and recognize that not enforcing them is the exception and not the rule.”

Global class actions have also been infiltrating investor-state dispute settlement arbitration practices, possibly opening the door to allow class-like relief to investors under investor-state dispute settlement mechanisms.

Carolyn Lamm of White & Case in Washington, D.C., detailed the complex organization of the information of 60,000 claimants in the Abaclat case. Claims arose out of Argentina’s enactment of legislation concerning the restructuring of its public debt, which led to the government’s default in sovereign bonds. She described such claims in the international context as collective consolidated or mass proceedings as opposed to class actions. 

International multiparty claims are inevitable, Lamm added, because with globalized business, the group of possible claimants with similar cross-border claims has only increased. “And multijurisdictional collective efforts are some of the only ways that claimants and plaintiffs from different countries, different legal regimes can seek collective redress.”