How in-house counsel can best defend global class actions

Global class-action lawsuits can have a ripple effect across multiple jurisdictions. In-house counsel should strategizing from day one
How in-house counsel can best defend global class actions
Illustration By Gary Neill

Global class-action lawsuits can have a ripple effect across multiple jurisdictions. In-house counsel should strategizing from day one

Where bad behaviour is alleged, class-action lawsuits can’t be far behind. And when that bad behaviour crosses borders, increasingly often, the litigation does as well.

As technology makes the legal and business worlds smaller, many counsel who manage the legal affairs of companies that do business outside Canada are concerned the spectre of global lawsuits is getting bigger.

“In this day and age, you can’t just bury your head in the sand,” says Robert Piasentin, General Counsel, Corporate Secretary and Privacy Officer at Sierra Systems in Vancouver. “You have to stay on top of other jurisdictions to understand what could happen. I’m based in BC, but I can’t afford to think what’s going on in the BC courts is all I need to know.”

It’s not just decisions in lawsuits brought on behalf of a global class that has people like Piasentin on alert. The impact of rulings made in other countries has been working its way into decisions handed down in Canadian courtrooms.

While the US is unquestionably the granddaddy of class actions and remains the most influential jurisdiction, especially in securities, other countries have been warming to collective litigation.

Britain recently introduced class actions for competition law claims — the first time opt-out class actions have been permitted in the UK. France legalized consumer class actions in October last year. Italy has a class-action regime, Austria, Argentina and the Netherlands too, under a different structure. Germany is flirting with privacy class actions.

That’s promising to change the paradigm.

“You need to know what the developments are in any jurisdiction that could be relied on,” says Piasentin, “just as a point of reference – not as persuasive or a binding decision – just what could be used as an argument so you can take the appropriate steps to defend. What the courts are ruling, what direction they’re moving in, gives you a guideline of where things may end up going here in Canada as well.”

The shape shifting in global litigation is not confined to class-action lawsuits.

Canadian and American courts have not been universally welcoming to global classes, whittling them down sharply in decisions such as Morrison v. National Australia Bank in the US and Kaynes v. BP in Ontario. Plaintiffs’ counsel, in many cases, will coordinate parallel filings across multiple jurisdictions and there may also be copycat suits.

Defending them can be just as complex. But it can also provide in-house counsel with some tactical advantages.

When competing actions are filed, whether in the same or in multiple jurisdictions, it can take the courts months to sort out who will get carriage of which classes and where.

Jeffrey Ellis, Executive Vice President, US General Counsel, Legal, Corporate & Compliance Group, at BMO Financial Group in Chicago, says that time can be used to study the different plaintiffs’ counsel to try to figure out who it makes the most sense to work with.

Ellis says much of the front-end work in a class action is non-legal, “trying to figure out the psychology of the different players.

“We’ve been dealing with one matter recently where we got lawsuits in different states and where local counsel have been key. So we have a global law firm, which is our lead counsel on the matter, and we’ve got local counsel specialized in the area in a few other jurisdictions where we know for a fact that they know plaintiffs’ counsel.

“In some cases they practised together at the same firm, they’re familiar with the judge and the court where the matter is being heard and, if so, that’s invaluable.”

The bank will use the period when plaintiffs’ lawyers are fighting among themselves to familiarize themselves with all aspects of the landscape, he says.

“We spend, as anyone would, a great amount of time thinking who’s the judge hearing the matter, what does counsel look like on the other side, where else have they brought matters, what can we find out from the local Bar, what’s the personality, how do they tend to approach issues. A lot turns on the thinking of the judge – their rulings, their personalities – and the same thing for counsel on the other side.

“So we use the time to determine, for example, who’s going to send this letter, who’s going to call so-and-so to tee up this issue, and who’s going to present on this topic, because we think they might be well received by the other side because they worked together once years ago on something else and we believe their personalities are compatible,” he says.

Carriage fights or actions competing for the same class members in different jurisdictions may also provide in-house counsel with the opportunity to try and eliminate plaintiffs’ counsel who seem completely unreasonable, says Michael Rosenberg, a litigation associate at McCarthy Tétrault LLP in Toronto.

“If there’s a situation where class counsel in Ontario is being difficult, and there’s an opportunity to work with another partner to effect a just resolution of the claim in another jurisdiction, it’s something that in-house counsel should be considering and actively exploring,” he says.

“That can be done through Ontario counsel, or through counsel retained in the other jurisdiction, or through in-house counsel themselves just being open to that possibility and willing to reach out in the interests of finding a reasonable solution.

“And if counsel in the other jurisdiction is not cooperating with class counsel in Ontario, it can really be a way to break a log jam if you come to a point in settlement negotiations where there’s no easy way forward.”

Sometimes, when a company’s officers and directors are named as defendants in class actions, there can be a log-jam inside the corporation itself.


Personalities inside the company can be just as important – and challenging – to manage when it comes to mounting a coordinated defence.

But it’s important to try and manage them because, as any in-house counsel whose client has been dragged into a multi-jurisdictional class action can attest to, the legal bills add up incredibly quickly making internal differences a costly proposition.

When Wendy Kelley, now of W Kelley Law in Toronto, joined Biovail Corp. (now Valeant Pharmaceuticals) as Senior Vice President and General Counsel in 2006, the company and four officers were already fighting class actions in the US and Canada. The defendants each had separate lawyers in both countries. The US lawyers believed they couldn’t coordinate on one document search of the e-discovery. It was also determined that the way the e-discovery was conducted had not been properly documented, so it had to be done over again.

Legal fees in the US and jurisdictions like the UK can be double those in Canada. Cash can fly out the door alarmingly fast, says Kelley.

That makes it critical to try to explain the importance of coordinating a defence and even working together, where possible, to any of the officers and directors named, she says.

“It depends on the personalities and on the organization, but I imagine there would be certain circumstances where they would agree, where you could get them to agree, and you could sit down and talk about the expense, particularly if there’s not a lot of insurance. This is using up your insurance to settle your case, if I’ve got $100 million in D&O insurance and I’ve used up, say, $30 million to defend these guys, then I only have $70 million left to play with.

“So in certain circumstances you have to sit down with the people being sued, have knowledge of how significant this can be, and try to get cooperation in advance. If you don’t get ahead of it and rationalize with whoever’s being sued about the costs and how to do it, and get your e-discovery done right in the first instance, then the risk is you’re going to lose control of it.”


Eric Adelson, Senior Vice President, Head of Legal Canada for Invesco Ltd. in Toronto, says dealing with the internal forces and getting advance buy-in is just as important for in-house counsel at a company involved in a class action as a plaintiff.

When Invesco – which operates in 20 countries and trades on the New York Stock Exchange – was contemplating joining five other institutional investors in a class action related to Sino-Forest Corp., Adelson developed a clearly defined goal in joining the suit. (In this case, it was to preserve shareholder opt-out rights, which ultimately proved unsuccessful.)

He then consulted with three separate internal constituencies. “We knew there would be publicity around it so the first discussion was with the portfolio managers who actually invested in Sino-Forest to get their views on it,” Adelson says. He also went over the merits of the case with the Canadian management team, “a sort of a cost-benefit discussion,” as well as with the US parent company.

“Lining up the internal people and getting them onside is definitely key because it’s taking you, as internal counsel, outside your normal comfort zone. We’re a small department, we’re only five lawyers who deal with this business [in Canada], so if I get involved in something like Sino that takes a lot of my time away from things I normally do.

“In a year, maybe I spend 20 hours on litigation matters in total, whereas in the Sino-Forest case it was probably 20 hours in the first week. You need to get the buy-in because that’s time I can’t be serving the business doing other things that some people might think is more worthwhile — and ultimately we’re service providers.”

The group of six institutions had daily calls to discuss developments and what the response or strategy might be going forward. “It was pretty collaborative.”

Unlike defending against class actions, says Adelson, a former general counsel at Mackenzie Financial Corp., there were “other interested parties on our side that we had to coordinate with.

“Sometimes you have to subsume your own interests to those of the greater good and understand why it is you’re getting involved in this. You certainly owe a duty to the other co-plaintiffs so you have to think about that.

“When you’re a defendant in a class action, primarily you’re going to defend yourself and if it ends up other defendants are liable but you get off, I’m not so sure you’d care.”

Adelson, like many others, sees the number of global class actions growing in the years ahead. “In securities law, and in any financial services, the general expectation is that we haven’t seen the end of class actions. We’re probably going to see an awful lot more in the coming years. It’s just a question of how long it will take, and that depends on the class-action plaintiffs’ Bar.”


With global litigation increasingly becoming a real possibility, Daniel Yelin, Senior Director, Business and Legal Affairs at Valeant Pharmaceuticals in Montréal, says the issue of forum shopping has to be among the top concerns. “You certainly don’t want to be having to defend a global class action in a place like Texas, which would be an absolute nightmare.”

He points to decisions like Excalibur Special Opportunities LP v. Schwartz Levitsky Feldman – where an Ontario Superior Court judge determined in a conflict of laws analysis there was insufficient connection with the jurisdiction – as encouraging for potential corporate defendants.

“It does seem like there is some pushback in Ontario at certifying a global class action and really looking at whether the class action is the proper vehicle and the connection is sufficient to the jurisdiction. It’s heartening to see the courts are taking that seriously.”

Kathrine Smirle of RBC Law Group at Royal Bank of Canada in Toronto is not as convinced as some others that global class actions will be a force to be reckoned with.

Class-action laws can differ between countries, making coordinating them challenging, and recent decisions have persuaded her “the jurisdictional question is an obstacle. Another obstacle, even more basic than that, is the notice requirement.

“Even if [plaintiffs] get to the right jurisdiction, it’s really hard to get the scope of the notice requirements to make sure the class members are all properly notified. That’s a practical impediment as well to the global class action going forward.”

Given the conflict-of-law and notice challenges, Smirle believes plaintiffs’ counsel will go increasingly for parallel local suits filed in multiple jurisdictions over global class actions.

Yet some people point to the fact that Canadian courts have figured out how to make national classes work despite differences in provincial class-action regimes, saying plaintiffs’ counsel will figure it out.

Deborah Glendinning, Chair of the National Litigation Department at Osler, Hoskin & Harcourt LLP in Toronto, says despite decisions like Morrison, Kaynes and Excalibur, she is among those who expect the number of global class actions to increase because barriers are coming down.

“International firms are expanding, business and the economy is global, and the technology is making everything more accessible,” she says. “So I absolutely see an increase for sure.

“I also see plaintiffs are starting to be more strategic about where they bring cases and when, in terms of jurisdiction — bringing cases where they think they have the most leverage in the early days, which we didn’t used to see so much. I think the globalization of the litigation world has facilitated this to some extent.”

Glendinning, who was national coordinating counsel to Imperial Tobacco Canada on tobacco litigation, says one of the most significant trends in this area is coming not from the courts but from the corporate clients themselves, “who are changing their approach to these things.

“In the early days the battle was fought at certification. If you lost at certification you sat down and you brought your cheque book,” she says. “Now that we’re 20 years in, companies realize that doesn’t work anymore, there are just too many cases filed and they’re not going to settle everything — it doesn’t make business or commercial sense.

“So companies are fighting and we’re having trials on the merits, and we’re having common issues trials, and we’re having successes. That’s important. There’s too much certification still and plaintiffs have to realize certification doesn’t mean a cheque is going to be written. That’s an important message to send.”

The size of that cheque, if and when it is written, is something that may turn out to be very much in flux.


The most interesting issue in global class actions right now has to do with Canadian damage caps and whether they can be imposed across borders. The discussion is just in its inception, says Rosenberg.

When Ontario passed its statute creating secondary market liability for misrepresentation (considered to be the basis for the regimes used in most other provinces, with minor variations), it included a provision limiting the liability of a corporate defendant to 5 per cent of its market capitalization or $1 million, whichever was greater.

When a company settles or assesses damages in more than one Canadian jurisdiction, s. 138.7 of the Ontario Securities Act says the liability limit will be less the aggregate of all settlements and damage awards assessed “under comparable legislation in other provinces or territories in Canada,” for the behaviour complained of.

Rosenberg says there is “some debate on the wording of the statute, what you get credit for in settlements in other jurisdictions. The clear intent of that legislation would’ve been to carve out any settlements you make. The issuer is one indivisible company, it’s just a defendant. Whether it settles in the States or in Canada or anywhere else shouldn’t make a difference.”

As a member of the Law Commission of Ontario’s advisory committee reviewing the Class Proceedings Act, he says he hopes to “see the issue discussed” as part of a secondary-market liability statute review.

“I would argue the damages caps do have to be reduced to reflect foreign settlements, but there is this argument by plaintiffs’ counsel that they don’t.”

In the meantime, he says, not taking foreign settlements or damage awards into consideration is a pitfall in-house counsel should be wary of.

“Counsel should be very careful in crafting the settlement, where you have cross-border claims resulting in one jurisdiction with the intention of enforcing it, to whittle down a global class … so that you’ve got some meaningful reduction of the prospective damages here in Ontario based on what you just paid out in the other jurisdictions.”

How to do that? “Careful crafting of the settlement language, and I think it might impose conditions on the US settlement — perhaps you could seek approval at an early stage in Ontario. There’s room for some creative thinking here, but it’s certainly something that appears to be emerging as the new issue in a world where classes are being reduced based on foreign settlements. It’s a fascinating issue.”


Eric J. Adelson Daniel Yelin Deborah A. Glendinning Robert Piasentin