Mass Torts

It seemed to be only mere hours after the sensational revelations that e-coli bacteria had invaded Walkerton, Ontario’s public water system, causing death and illness, that class action plaintiffs’ lawyers were on the scene, their presence almost as well publicized as the disaster itself. With startling alacrity, Harvey Strosberg, Q.C., of Windsor’s Sutts, Strosberg LLP; Scott Ritchie, Q.C., of London, Ontario’s Siskind, Cromarty, Ivey & Dowler LLP; Stanley M. Tick, Q.C., of Hamilton’s Tick & Associates; David Williams of London’s Harrison Pensa LLP; Robert W. Garcia of Hanover; and Thomas N. White of Wingham’s Crawford, Mill commenced multi-million dollar claims against the Ontario Government, the local municipality, the Walkerton Public Utilities Commission (PUC) and the Grey-Bruce-Owen Sound Health Unit. Quickly hired to oppose them were Paul Morrison of McCarthy Tétrault, for the province; Kenneth Prehogan of Weir & Foulds and Allan Mark of Goodman Phillips & Vineberg for the PUC and its insurer, Roderick McLeod, Q.C., of Miller Thomson LLP and Lawson, McGrenere, Wesley, Rose & Clemhagen for the municipality and its insurer; and Patrick Moore of Rogers, Moore for the health unit.

Not long afterwards, rumours of the Anglican Church of Canada retaining insolvency specialist E. Bruce Leonard, of Toronto’s Cassels Brock & Blackwell LLP, followed quickly on the heels of an announcement by L. Craig Brown of Toronto-based Thomson, Rogers that his firm was launching a class action on behalf of all former students of Church run schools now alleging abuse, other than those residing in British Columbia and Quebec. From the Walkerton tragedy to church run school cases, to hepatitis-c (hep-c), tainted blood and the Toronto subway disaster, class actions have become a legal juggernaut.

Just as the number of lawyers developing expertise in mass tort class actions on the plaintiffs’ side is growing steadily—a formal association of class action plaintiffs’ lawyers is reportedly in the works—so is the defence bar. Even the most cursory review of who’s doing what in mass torts provides convincing evidence that this is a major growth area for litigators. Paul Morrison, who is also heavily involved in significant pharmaceutical class action proceedings, is one of 38 lawyers in McCarthys’ National Class Action Practice Group. The group’s brochure lists 21 different types of class action proceedings in which the firm has been involved. At Cassels Brock & Blackwell, Timothy Pinos and Glenn Zakaib were active in Chevron, which involved leaky heating ventilation pipes, and in the jaw implant and heart pacemaker litigation. The firm, notes Chairman Bruce Thomas, Q.C., also represents Hoechst-Celanese in the polybutylene piping litigation involving defective plumbing systems; Merck in the vitamin price-fixing case; Daicel Chemical Industries Ltd. in the potassium sorbate and sorbic acid price-fixing claim; various defendants in the related citric acid and vitamin C litigation; and one of the defendants in Chadhav v. Bayer, the iron oxide price-fixing case.

Elsewhere on the defence front, Lyndon A. Barnes and Deborah A. Glendinning of Osler, Hoskin & Harcourt LLP are deeply involved in the tobacco litigation, where a class of 2 million Canadians represents the largest proposed class in the brief history of Canada-wide class actions. Colleague Larry Lowenstein represented metals giant Inco in Magnam v. Inco, a sulfur dioxide emission claim that was among Ontario’s first mass industrial accident cases. Partner John Rook, Q.C., is active in the “regulatory negligence” arena. Meanwhile, John A. Campion and Beth Beattie of Fasken Martineau DuMoulin LLP and co-counsel Charles F. Scott and William W. McNamara of Ogilvy Renault represent VIA Rail and the Canadian National Railway Company in Brimmer v. Via Rail. The team scored an important victory recently in convincing the Divisional Court that judges should be allowed to consider extra-judicial proposals for settlement when determining whether certification was the preferable procedure for resolving a multi-party mass tort dispute. At Toronto litigation boutique Hodgson Tough Shields DesBrisay O’Donnell, Bonnie Tough, who participated in the hep-c litigation, represents plaintiffs as well as defendants in class actions.

At Torys, all 15 litigation partners have worked on defence class actions. The firm’s clients in the mass tort field include Panasonic, Mitsubishi, and pharmaceutical companies involved in the vitamin price-fixing cases. Litigator Barry Leon expects the workload to increase as more cases make their way past certification to trial. “Canadian companies are just learning how to deal with class actions, and we’re just starting to see cases that will tell us how deeply and how frequently class action cases will make their way onto the trial list,” Leon says.

In Quebec, Lavery, de Billy has been heavily involved in the defence of class actions since 1985, when the firm successfully defended Cie. Pétrolière Esso against a price-fixing class action. When asked as to the current involvement of senior firm litigators in major class action proceedings, the reply comes back like a drumroll: Guy Lemay and Pierre Baribeau represent five religious institutions known as “Le Recours des Orphelins de Duplessis” against allegations of abuse in a class action; Lemay and Robert W. Mason act for Stone Consolidated in a class action for damages arising from the 1995 flooding of the Rivière Ha Ha; Jean Saint-Onge acts for the excess liability insurers of the Montreal Catholic School Board in a class action for damages resulting from alleged irregularities during a 1995 election; Lemay and Saint-Onge are counsel to Hoechst-Celanese Corporation in the polybutylene plumbing case and to Daicel Chemical Industries Ltd. in the potassium sorbate and sorbic acid price-fixing action, and Pierre Beaudoin, from the firm’s Quebec City office, is defending E-Media against class actions by journalists seeking indemnity for the allegedly unauthorized filing of their articles in an Internet data bank.

Given the sheer number and breadth of the tort-related class litigation taking place, one would think that this is a mature practice area. Nothing could be further from the case. It’s hard to believe, but we’re only in the top half of the first inning. This is just the beginning.

Class action enabling litigation was enacted in Quebec in 1979, in Ontario in 1993 and in British Columbia in 1995. Intended to provide access to justice for groups whose members could not advance their interests in court effectively on an individual basis and at inducing “attitude adjustment” and “behavior modification” in wrongdoers, the legislation was clearly aimed at what have become known as “mass torts.” However, a small yet very talented plaintiffs’ bar in all three provinces has broadened the tort-related class action battlefields from catastrophic accidents (Toronto subway disaster, VIA rail crash, Sagunay River floods) and products liability (tobacco, breast implant, jaw implant, heart pacemakers, hep-c, polybutylene piping, Dalkon shield) to environmental law (Hollick v. Toronto), municipal negligence (Walkerton, Crawford v. London), medical malpractice (Anderson v. Wilson), wrongful search and seizure (Vancouver Skytrain), and intellectual property cases (Robertson v. Thomson Corp., L’Association des journalistes indépendants du Québec v. Le Soleil, La Presse, et als.).

Most recently, with the conviction of numerous international pharmaceutical companies on price-fixing charges, the Competition Act has become a new battlefield. “Class actions based on competition law have become a trend,” says Jean Saint-Onge of Lavery, de Billy. Both sides of the class action bar are anxiously awaiting the Ontario Divisional Court’s reserved ruling in Chadha v. Bayer, the first certification application involving anti-trust law and civil claims under the Competition Act. Chadha is also the first case to consider a claim by an indirect or downstream purchaser of goods. At first instance, Justice Robert J. Sharpe of the Ontario Superior Court of Justice defined a class of 1.1 million end users of iron oxide, a colouring agent in concrete building materials. Members of the class action defence bar argue that a decision upholding the inclusion of indirect purchasers, such as consumers, in the chain of distribution will make class actions unmanageable. According to Kent Thomson at Torys, co-counsel with John Lorn McDougall, Q.C., of Toronto’s Fraser Milner Casgrain for the defendants, the class defined in the action is the largest group ever certified in Canada. “If the court were to allocate 30 minutes to the resolution of the claim of each class member, we would have a trial lasting 265 years,” says Thomson. “Cases of that magnitude would impose a burden that the judicial system cannot reasonably bear.”

But recent judicial developments suggest that the “Pandora’s box” argument has limited force in Canada’s courts. The Divisional Court may well uphold Sharpe and accept the arguments of Joel P. Rochon and Vincent Genova of Toronto’s Rochon Genova, that indirect purchasers should be certified. Already, in a move that augurs well for proponents of broadly-based class actions, the Supreme Court of Canada has refused to hear an appeal from the Ontario Court of Appeal’s certification of hep-c patients in Anderson v. Wilson, generally acknowledged as the high-water mark of certification decisions in Ontario. Anderson is the brainchild of plaintiffs’ Toronto counsel Michael McGowan of McGowan & Associates, Paul E. Harte of Harte Barristers and Michael F. Head of Walker Head.

Cases like Chadha and other price-fixing cases are clearly aimed at corporate defendants. But there are other targets. Patricia Jackson at Torys, for example, points to the recent creation of the Financial Consumer Agency and argues that regulators may find themselves the targets of class actions. “Many class actions are related to the public policy arena,” agrees John Rook, Q.C., of Oslers, noting the federal government’s inclusion as a defendant in the residential schools litigation. Rook argues that “Regulatory negligence allegations and claims of failure have become a class action category of their own.” In British Columbia, the provincial government has been the primary target of its own legislation, and a group of taxpayers have recently been certified in a claim against the Canadian Customs and Revenue Agency.

Regardless of the result in Chadha, “magnitude” will continue to characterize mass tort class actions. As “millions” become commonplace, “billions” rolls off the tongues of plaintiffs’ lawyers with ease. Plaintiffs’ legal fees alone can run well into eight figures. Class actions have become so common in Toronto that the Central Registry set up by the Superior Court to track the proceedings has been unable to keep up with filings on a timely basis. “It’s a booming area and the number of cases are amazing,” says Rook, who goes on to add that, “The move beyond traditional torts liability is testimony to the creativity of plaintiffs’ counsel in expanding the envelope and reframing claims to fit our legislation.” The tide is overwhelming, says Rook’s partner Larry Lowenstein: “Class actions are becoming a way of life in the Canadian courts.”

To date, the incentive to be inventive is certainly there. With mass tort cases producing highly-publicized fee awards like the $35 million to Ontario and British Columbia counsel (now under appeal by the Ontario government) in the $1.2 billion hep-c litigation; $6 million in the $24 million Nantais v. Telectronics heart pacemaker settlement negotiated by Harvey Strosberg; and with “multipliers” of up to four times the hourly value of lawyers’ work now approved by the Ontario Court of Appeal, the rewards for the plaintiffs’ bar can be astronomical. As the settlements and fees mount, plaintiffs’ lawyers are also building up their war chests for the inevitably high costs of fronting further class action litigation. Doubters as to the coming onslaught of class action litigation may wish to reconsider their position given reports that Strosberg, apparently unconcerned about the Ontario government’s appeal of his hep-c fees, has abandoned commercial airlines for a private plane of his own.

As well, plaintiffs’ lawyers are banding together to share substantive expertise and the financial risk of prosecuting class proceedings. Harvey Strosberg and Scott Ritchie, Q.C., together with Ritchie’s associates Mike Eizenga, Mike Peerless and Charles Wright, work closely together. Their appearance on the Walkerton case was virtually simultaneous. And Ritchie’s firm, Siskind, Cromarty, Ivey & Dowler, whose class action experience in the tort area includes the breast implant and Dalkon shield claims, works regularly with other class action co-counsel. McGowan & Associates, a three-lawyer class action specialist firm led by Michael McGowan and Kirk Baert, who share the top ranks of Ontario class action lawyers with Strosberg and Ritchie, has become involved in various high-profile cases by partnering its expertise in class action mechanics with the substantive specialties of other boutiques, such as Toronto franchise specialists Sotos & Associates. Sharing costs and resources, notes Mike Eizenga, of Siskind, Cromarty, can be an “important by-product” of co-counsel arrangements, particularly when the defendants “have extraordinarily deep pockets.”

Similarly in Quebec, Montreal’s Lauzon Bélanger, which is currently managing 35 class actions representing in excess of one million Canadian residents, is closely linked to Ontario and BC plaintiffs’ class action firms, as well as to various American firms. The other two leading Quebec class action firms are Unterberg, Labelle, Lebeau & Morgan and Sylvestre Charbonneau Safard, which co-operate closely on major class proceedings.

In Vancouver, J.J. Camp, Q.C., and David P. Church of Camp Church & Associates have an excellent relationship with Harvey Strosberg and Scott Ritchie, and are well-connected to American class action firms. Other well-known Vancouver plaintiffs’ counsel are Ward Branch of Branch, MacMaster; John Dives of Dives, Grauer & Harper; and Darrell Roberts, Q.C., of Roberts & Griffin. Branch, like Toronto’s Bonnie Tough at Hodgson Tough, represents defendants as well as plaintiffs. Dives, who sued the City of Vancouver and its police force in a successful class action based on arbitrary liquor searches at a Skytrain station, is now contemplating a novel tort-based class action against StatsCan. The most significant problem facing a plaintiff’s lawyer contemplating such an action, Dives says, is the “prohibitive cost of managing such a large class.” The answer, he says, is “creative financing”—which hasn’t proven a serious problem to the plaintiffs’ bar to whom creativity, after all, is their lifeblood.

“You can bet on a horse or you can bet on a lawyer” is the way Strosberg, whose creative financing skills are legend, put it. At the time, Strosberg was Treasurer of the Law Society of Upper Canada, demonstrating how far along the business path the profession has come recently. Strosberg’s comment came by way of explaining how his relatively small law firm managed to finance Nantais v. Telectronics, the heart pacemaker class action suit Strosberg settled for $24 million – and $6 million in legal fees and disbursements. But the case was in the system for three years, during which time his firm carried over $1 million in disbursements alone. Strosberg convinced private investors to advance $350,000 to the representative plaintiff in Nantais, “substantially relieving the pressure on our firm.” In return for a 20 per cent interest rate, recoverable only as a first charge against the proceeds of a successful settlement or trial, the investors agreed to forego recourse against the representative plaintiff, class members or the law firm. Strosberg was careful to point out that Ontario’s Class Proceedings Act requires court approval of financing arrangements and that Ontario Court, General Division (now Superior Court) Justice John Brockenshire readily approved the financing arrangements in Nantais.

However, there’s much more in the pipeline. If Pierre Grégoire, President of Toronto-based Parapet Underwriters, succeeds in marketing Plaintiffs’ Costs Indemnity Insuance (PCI) and Respondents’ Asset Indemnity (RAI), the financing of class action and other big-ticket litigation in this country may never be the same. Grégoire, who practised for ten years with Montreal’s Lavery, de Billy before moving to the insurance industry, says PCI insures plaintiffs against legal costs should they lose their case, or receive an award or settlement that is insufficient to pay those costs. PCI, Grégoire adds, will appeal to plaintiffs who must borrow to finance litigation, or lawyers who require help in carrying the expenses of protracted lawsuits. RAI, on the other hand, targets successful plaintiffs facing prolonged appeals. In either case, financial institutions who would otherwise not consider advancing funds—“No bank would ever loan money to support a class action,” Strosberg says—will now see tangible security in the form of an insurance policy backed by Temple Insurance Company, with assets of $222 million and shareholders’ equity of $124 million. Temple, in turn, is a subsidiary of Munich Holdings Limited, part of the Munich Reinsurance Group, which boasts assets of $185 billion.

While Parapet will extend coverage only in cases having a value exceeding $500,000, litigation of that magnitude is becoming commonplace in Canada, particularly in the mass tort area. Apart from the hep-c and pacemaker settlement, multi-million dollar settlements in such class actions include the $50 million breast implant settlement; $10 million in damages and $2 million in legal fees in Inco v. Magnam; and the non-fatal cases arising from the 1995 Toronto subway crash. The Toronto Transit Commission, sued for $55 million, has already paid at least $6.5 million in out of court settlements.

But small can also be remunerative. Often overlooked, says Paul Unterberg of Montreal’s Unterberg, Labelle, which has represented plaintiffs in class actions of varying sizes, is that lawyers and clients can do very well financially with class actions that do not involve millions or billions of dollars. Unterberg lists three categories of class actions: the mega-case, continental or international in scope, such as the vitamin-price fixing and breast implant cases which are “complicated cases in which there is a lot of money”; national cases typically involving thousands of plaintiffs; and “local cases” confined to a single province or region. Although he has been involved in many of Canada’s class action mega-cases, Unterberg convincingly argues that “You can make reasonable money on local cases if they’re properly prepared and you don’t spend too much time on them.” By way of example, he points to a recent price fixing scheme involving local pharmaceutical chains who conspired to raise the prices of contraceptive pills by $1.50 monthly. Unterberg initiated a class action and settled for $500,000. “The damages went to a women’s shelter, and the legal fees were $100,000,” he recalls. “Not bad for an input of 80 to 100 hours of time, which is typical for these cases.” Environmental cases, such as Quebec’s Maxi Volaille litigation, involving environmental fallout from a chicken processing plant, form a significant portion of Unterberg’s local cases in the tort field.

So far mass torts (broadly defined) have been the principal driver of Canadian class action activity. “Class proceedings are a form of regulation where the government can’t do it all,” says Ritchie. And the trend to torts-based class actions is unlikely to abate, particularly because many Canadian class actions, and especially the competition-based and products liability cases, originate with our class action-happy American cousins. “American counsel feed my firm lawsuits,” says Vancouver’s J.J. Camp. “About 30 to 40 per cent of them make sense up here, like the vitamin price-fixing case.”

Adding to the compound growth prospects for mass torts is a recent study by the US-based Rand Institute for Civil Justice entitled Class Action Dilemmas: Pursuing Public Goals for Private Gain. The study concludes that there has been a “surge” of damage class actions in the past several years. These proceedings, according to the authors, exceed civil rights and other social policy reform litigation in the mid-1990s. As Patricia Jackson at Torys sees it, there is little on the litigation horizon that will be left untouched by the activities of plaintiffs’ lawyers in the long run. “Existing class action litigation,” she says, “is just the tip of the iceberg with many cases just now being investigated and formulated.” As well, recent changes to Ontario’s Rules of Professional Conduct allow solicitation of clients, a change that will greatly simplify life for plaintiffs’ lawyers.

In forecasting the future of mass tort class proceedings, it is important not to forget the benefits they can bring to business. Foremost among those advantages is the opportunity for closure they present. Rather than waiting for individual claims to accumulate over the years, corporations can address their liabilities in one proceeding, without risking inconsistent decisions or facing multiple lawsuits in numerous jurisdictions. Further, creative thinking by defence counsel can influence the nature of the class, limit the claims being asserted and establish an expeditious and inexpensive process for resolving claims.

However, the future scope of mass tort class proceedings has with it a large component of uncertainty, as demonstrated by the anxiety among class action lawyers surrounding the outcome of Chadha v. Bayer. Only Quebec has what can properly be regarded as a significant history of class proceedings. But in Quebec, recourse to such proceedings has become part of the public culture. As François Lebeau of Unterberg, Labelle points out, “Within the last five or seven years our citizens have developed a reflex that makes them think of class actions as a remedy whenever a problem that affects a lot of people arises.” According to Pierre Sylvestre of Montreal’s Sylvestre Charbonneau, class actions are popular “because in our society, no one—the consumer, the citizen, the shareholder—feels they have any real political power to right wrongs.” It is a perspective that says mass tort class actions are the new expression or articulation of the power of the common people. And this was exactly the point made by the Rand Institute for Civil Justice, which studied the recent explosive growth of damage class actions in the United States. And this must certainly be how the residents of Walkerton, Ontario, feel.

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Julius Melnitzer is a Toronto legal affairs writer. This is the first in a three part series of articles focusing on Class Actions. Part Two and Part Three of the series will address recent class action development in labour law, employment law, and securities litigation.