Inconsistent, Inefficient

Each Canadian province has its own class-action statute, which means US clients may still face five or six overlapping class actions, each one bogged down by interlocutory motions and appeals.
Inconsistent, Inefficient
THE MOST IMPORTANT THING Americans need to know about Canadian class actions is that the legal landscape isn’t always pretty. Especially when it comes to securities suits, it can be fractious, confrontational, inefficient and expensive. Canada’s Federal Court hears class actions but only those limited to federal statutes such as tax and intellectual property. Otherwise, class proceedings fall to provincial courts.

Each province and territory has drafted and administers its own class-action statute and, while they often line up, they don’t always mesh. Canada has no equivalent to the US multidistrict litigation (MDL) system for similar civil actions in different districts, so US corporations hit with Canadian class-action claims may find themselves defending multiple lawsuits — some using differing legal arguments. Settling means trying to negotiate with several different sets of plaintiffs’ lawyers across the country, who don’t always play nicely together; going to trial, meanwhile, presents the risk of conflicting decisions. In other words, it’s a bit of a mess.

The Canadian Bar Association, noting increased frustration “by the jurisdictional overlap caused by provincial class actions claiming to represent national classes,” struck a task force about five years ago to try to establish a protocol similar to the MDL. It involved high-profile members of the judiciary as well as the plaintiff and defense Bar. The result? A watered-down Judicial Protocol for the Management of Multi-Jurisdictional Class Actions that focuses on the approval and administration of settlements. But an actual protocol for dealing with the filing of overlapping suits? A big fat nada. “There was no consensus as to how we were going to solve this,” says Sylvie Rodrigue, the task force chair. “Ontario residents don’t necessarily want to be told, ‘Your case is going to be heard in Saskatchewan’ when they have a Constitutional right to have their case heard in Ontario.”

At the same time, she says, the judiciary is frustrated because “they feel like the Bar doesn’t want to be managed, doesn’t want to be told where the case is going to proceed.” As for the Bar, she says, “some members took issue with giving judges the right to talk to each other outside counsel’s presence” about jurisdiction.

A mess — and one that means US clients could still face five or six overlapping class actions. That’s why the Canadian Judicial Council came back to Rodrigue, a class-action defense litigator who leads the Montréal office of Torys LLP, last year and asked her to reactivate the task force and take another stab at coming up with a protocol. The mandate is to look at why the first attempt failed and try to come up with one that sells.

Tough job — one that seems unlikely on so many levels it’s hard to know where to begin. While the defense Bar would love to be able to defend a single national suit, it’s difficult to imagine there are many judges chomping at the bit to give up their right to decide a case under the law of their own province.

It’s not even always possible. Take a case involving Québec, Ontario and Saskatchewan. The same case heard in Québec will likely not receive the same decision, because the law itself is different in these jurisdictions.

Québec is an outlier, the only province under which civil matters are regulated by French heritage law, so Rodrigue says Québec task force members “don’t see the point of having this panel of judges for Constitutional reasons.” In fact, the province recently made national class actions more difficult, bringing in a new provision restricting a judge’s ability to use his or her discretion to stay a Québec case and attorn to the court of another province in order to create a national class.

As for plaintiffs’ counsel, they present an entirely different challenge. Under a national protocol, scores would be expected to just walk away from potential fees and surrender to competing counsel in another jurisdiction — counsel they see as less capable in a jurisdiction they may feel has less favorable laws.

Would they fight it? Heck, yes. Rodrigue, who is also co-chair of the International Bar Association’s Multi-jurisdictional Class Action/Collective Redress Working Group, is asked if, all things considered, she’s optimistic about the chances of creating a Canadian protocol this second time around. There’s a slight pause. “I don’t know,” she admits. “I don’t think we’re going to reach the point of having only one. … I often say to our US counsel that Canada is where the US was 30 years ago.”

IN CANADA, ANY PLAINTIFF hoping to bring a class action must get certification ­­­­­­— a long and expensive stretch with the potential for interlocutory motions galore. When it comes to secondary-market suits, the lion’s share are argued in Ontario, which as home to the Toronto Stock Exchange is equivalent to the Southern District of New York. In Toronto, lawyers involved in class actions can get a motion date within two weeks. After that, however, there’s also the inevitable appeal to the divisional court, and there it can take six to nine months to get a hearing date, says Joel Rochon, who heads the class-action group at Rochon Genova LLP in Toronto.

After that decision, the losing side often turns to the appeal court, delaying things again by many months. And whoever comes out on the wrong side of the appellate decision may seek leave to be heard by the Supreme Court of Canada. It can be two to three years to resolve a single interlocutory motion, says Rochon. “You’re talking real time.”

Even the judiciary appears concerned. Justice Edward Belobaba, one of two Ontario Superior Court justices who hear class actions in Toronto, said in Crisante v. DePuy Orthopaedics that in the world of certification motions, “excess appears to be the norm” in everything from time spent and the volume of material filed to the number of days scheduled for the oral hearing and the “over-litigation of most issues.”

Rochon believes that could change thanks to a 2014 Supreme Court decision, Hryniak v. Mauldin, which makes it easier for motion judges to order summary judgment. “It’s only now starting to really work its way through the system and in creative ways that I’ve never seen before in complex securities cases.” While a motion for summary judgment cannot be filed before certification hearings, Rochon says he’s seeing counsel increasingly ask class-action judges to hear a summary-judgment motion at the same time as certification arguments. That allows counsel to introduce a lot more evidence supporting their position ­­— affidavit evidence, documentary evidence or even oral evidence — before certification is decided.

Rochon says this kind of hybrid summary-judgment/trial technique really opens the door to moving class actions forward more quickly. “I see a bit of a trend developing with the cases I’m involved in where both plaintiffs and defendants are saying, even in a complex-facts situation, ‘Why don’t we just throw this up to a summary-judgment motion?’”

With clients demanding flat-fee pricing or success-fee arrangements of their defense firms, and the millions of dollars plaintiffs’ firms can spend to carry a single case, it’s not hard to see why speeding things up would be a welcome development. Ontario, like the majority of Canadian provinces, is a loser-pays regime, which means plaintiffs’ firms often have to indemnify their lead plaintiff in order to proceed.

Alan D’Silva, a class-action defense litigator at Stikeman Elliott LLP in Toronto, says some recent “significant cost orders” against plaintiffs, “most of them presumably paid for by the law firms or whoever is funding them,” have the potential of putting a chill on new actions being started. He thinks the cost awards will also impact the enthusiasm of third-party funders because “they probably also have to be wary of developments on the cost front.”

But significant cost awards can also impact the clients of corporate defense firms. In Green v. CIBC, the Ontario Superior Court awarded plaintiffs $2.7 million in costs, creating a new high-water mark for adverse costs to get a case to certification. In his decision, Justice George Strathy, who has since become the Chief Justice of Ontario, suggested that what’s good for the goose is good for the gander, saying failure to award fair costs to the plaintiffs will “reward a defence strategy of wearing down the plaintiffs by wearing down their lawyers.”

IF THERE WERE A CANADIAN “class action of the year” award decided by the plaintiffs’ Bar, a kind of class-action Oscar, it would have been snatched up in 2016 not by shareholders who beat a large listed corporation in a headline-making story, but by a group of 108 post-graduate students, two-thirds of them from outside Canada, who took on a Toronto-based college they said sold them a bill of goods in a consumer-protection case.

In some ways, Ramdath v. George Brown College is the little mouse that roared because it opened the door to the use of aggregate damages in class actions. “George Brown was a small case, but the principles are massive,” says Won Kim of litigation boutique Kim Orr Barristers PC in Toronto, who argued the case.

The students who brought the claim had all taken the college’s post-graduate International Business Management course. The course materials said they could earn three industry designations. But after spending tens of thousands of dollars each, it turned out that, if they wanted the designations, they had to complete additional courses or work experience, and take additional exams at their own expense.

When the students filed their action in 2008, they argued they lost income by delaying entry into the workforce on top of money spent on travel, accommodation, books and living expenses. Their suit was certified in a common-issues trial for breach of contract, misrepresentation and unfair practices under the Consumer Protection Act, which was upheld by Ontario’s appeal court.

A damages trial followed, and it was there that Kim made a canny decision, choosing to drop damage claims for breach of contract, which would require him to show mitigation, as well as damages claims for misrepresentation, which would have required proof of individual reliance. Instead, he sought aggregate damages for the students only under the Consumer Protection Act, which deems reliance. He coupled it with the provision under Ontario’s Class Proceedings Act that states damages can be determined on an aggregate basis “without proof by individual class members.”

The court sided with him, as did the appeal court, saying damages in a class proceeding can be assessed on an aggregate class-wide basis, not merely an individual basis — a first in Canada. The appellate court said aggregate damages are “appropriate,” where reasonable, in order to make the class action “an effective instrument to provide access to justice.” The justices upheld the trial judge’s decision that aggregate costs be awarded for direct out-of-pocket expenses, although not for forgone income or delayed entry into the workforce.

The college’s insurer sought leave to appeal to the Supreme Court of Canada, but the two sides reached a settlement and the application was withdrawn. Justice Belobaba, the trial judge who approved the settlement agreement, noted the college was paying the students much higher direct costs for things such as living expenses than the courts had ordered, and also reimbursing them for up to 40 per cent of the income “lost taking the program” ­­using statistical data submitted by the plaintiffs to estimate the aggregate amount. He noted they are being reimbursed for the “‘forgone income’ on their word alone.”

The plaintiffs’ Bar was beyond thrilled. The fact that the appellate court looked at the use of aggregate damages after the trial, not at the certification stage, is huge, says Kirk Baert, a plaintiffs’ litigator at Koskie Minsky LLP in Toronto. “The court made it clear it’s not some sort of voodoo provision only for when you fulfill 97,000 other criteria: it’s in there to be used.” Normally, he says, damages are supposed to be precise, but “here the court says basically as long as it’s a reasonable approximation of what’s owed, and the defendant isn’t paying too much, it’s none of the defendants’ businesses how the money is allotted among plaintiffs.”

He and other plaintiffs’ counsel say they expect claims for aggregate damages to spread from consumer class actions to securities cases, anti-trust and price-fixing cases, privacy cases, and mass breach-of-contract cases, such as overcharging on credit cards or when airlines overcharge for surcharges or taxes. “Anything where it’s quantifiable and you can easily measure what the defendant [improperly] received, then you can use this to calculate their aggregate liability.”

Not so fast, says Gordon McKee, a defense litigator at Blake, Cassels & Graydon LLP in Toronto. While plaintiffs’ counsel may seek aggregate damage awards in other types of class actions, he says, “I expect it will have limited use beyond consumer-protection claims.” In many other areas, including some of the ones Baert mentioned, “since individual damage causation is part of liability, and damages evidence will be in the control of individual class members, individual damages proof will be unavoidable.”

Robert Staley, a defense litigator and head of class actions at Bennett Jones LLP in Toronto, predicts Ramdath-style aggregate damages will “rarely” be awarded. He points out the case had singular facts: it involved a single misrepresentation, deemed reliance under consumer-protection legislation and had a relatively homogeneous plaintiff group. While aggregate damages remain a potential remedy, he says, “Ramdath is an anomaly and not the start of a trend.”

Baert thinks American lawyers with clients who do business in Canada “won’t like this decision” very much because it takes a big tool out of their arsenal. “The great defense on class actions on both sides of the border is it’s too hard to calculate damages and, at the end of the day, if you can’t figure out the monetary aspect, [a trial’s] a pointless exercise.”

Litigating class actions in Canada assures access to many things: due process, a transparent legal system and respect for the rule of law. But as you can see from the conflicting reads on this one case, in this one province, class actions in Canada are not always neat. Multiply that across 10 provincial and three territorial class-action regimes, add in overlapping filings, and you see how things can get messy.

Don’t expect that to change any time soon.