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Canadian Class Action Defence

Data Breach: Hackers are the “Real Villains” & Minimal Harm to the Class

Posted in Class Action Practice

cybersecurityIn a recent development in data breach class actions in Canada, Justice Perell of the Ontario Superior Court of Justice, while approving the class settlement in Lozanski v The Home Depot, Inc., denied payments sought by the representative Plaintiffs (the “Honoraria”) and substantially reduced counsel fees payable pursuant to the settlement. He did so given his findings that the class had suffered minimal damages, that the action itself was “speculative” and “weak”, and that the real villains were the hackers and not the defendant. Continue Reading

Saskatchewan Court Approves Third Party Funding Without Notice to Defendants

Posted in Class Action Practice

Windy Road Through Canola FieldShould a court hear from a defendant before approving third party funding of a class action against that defendant? As we have previously commented (see here and here), courts in Ontario have usually answered “yes” to that question. However, in Schneider v Royal Crown Gold Reserve Inc a Saskatchewan court took a different approach: Chief Justice Popescul approved a litigation financing and indemnity agreement (“LFA”) without any notice to the defendants. Although he left open the possibility of the defendants challenging the LFA in the future, his reasons suggest that generally courts do not need to hear from defendants before approving third party funding. Continue Reading

Ontario Court Of Appeal Confirms Importance Of Weighing Defence Evidence

Posted in Class Action Practice, Costs, Securities Litigation

Scales of JusticeThe Ontario Court of Appeal recently confirmed the importance of defence evidence when opposing leave to bring statutory misrepresentation claims under Part XXIII.1 of the Securities Act. In Mask v. Silvercorp Metals Inc., Chief Justice Strathy rejected the plaintiff’s argument that leave should be granted as a matter of course if the plaintiff establishes a plausible analysis of the legislation and “some credible evidence.” Rather, the Chief Justice held that the “reasonable possibility of success” test requires weighing all of the evidence – including that of the defendant.

The Court of Appeal affirmed the motions judge’s denial of leave and costs award of $500,000 against the plaintiff. Silvercorp confirms that, given the merits-based analysis under  Part XXIII.1, significant costs awards raise fewer access to justice concerns as compared to typical class actions. Continue Reading

Ontario Court of Appeal Emphasizes Access to Justice over Concerns regarding Individual Issues

Posted in Class Action Practice

Symbol of law and justice in the empty courtroom, law and justice concept.The Ontario Court of Appeal in Fantl v. Transamerica Life Canada dismissed an appeal of a Divisional Court ruling, confirming the certification of an investor class action for negligent misrepresentation.

The ruling required the Court of Appeal to grapple with certifying a class with complex individual issues, and in light of Supreme Court of Canada’s decision in AIC Limited v. Fischer, which refocused the preferability analysis towards addressing barriers to access to justice. Continue Reading

Consumer Class Actions in respect of Pricing Disclosure: The Québec Superior Court Refuses to Certify a “Drip Pricing” Class Action in Quebec

Posted in Class Action Practice

Card and price labels

There have been a number of recent class actions commenced in Canada relating to pricing disclosure – and in particular, the alleged practice of “drip pricing”, whereby a company advertises a base price through various media but additional fees and surcharges are disclosed later in the sales/reservation process. However, in a recent decision, the Superior Court of Québec underscored the risks and challenges for plaintiffs in pursuing such cases, and provided guidance for advertisers and on-line retailers in respect of their pricing practices. In particular, in Prince v. Avis Group Inc. et al., the Court refused to authorize the class action proceedings brought against car rental companies seeking compensation on behalf of Québec consumers based on alleged violations of consumer protection legislation. In so doing, the Superior Court specifically endorsed the advertising best practices of one defendant, and provided some welcome comfort to companies who take steps to advertise a total estimated price as part of their on-line practices.  Continue Reading

Court Reiterates Threshold for Settlement Approval: Class Counsel Must Lead Substantive Evidence on the Reasonableness of the Settlement

Posted in Class Action Settlement

man stamping approved documents or project, shallow depth of fieldIn a recent decision by the Ontario Superior Court of Justice, Justice Belobaba reiterated the need for parties seeking court approval of a settlement in a class proceeding to provide concrete details and substantive evidence that demonstrates that a settlement in a class proceeding falls within a reasonable range and is in the best interests of the class.

Approval of Settlement under Class Proceedings Act in Ontario

In Ontario, a class plaintiff must seek judicial approval for any settlement under the Class Proceedings Act, and the Court must be satisfied that the settlement is fair and reasonable and in the best interests of the class. Similar provisions are found in other class action legislation across Canada. In the past, many plaintiff’s counsel have sought and have obtained settlement approval of class settlements by adducing evidence that is focused on the process of settlement – namely, the settlement was reached by experienced counsel negotiating at arm’s length in an environment of mutual risk, and that the settlement should be considered reasonable in light of the outcome of a fair bargaining process.  Continue Reading

‘No Litigation Should Be Extortionate’: Disqualifying Representative Plaintiffs

Posted in Certification, Class Action Practice

Close-up of business documents with glasses on the tableA business subject to a class action receives a “without prejudice” letter from a potential class member offering to settle a small personal claim for nearly a million dollars, or else the writer will “go public” with the allegations and seek class certification. The business does not accept the “extortionate” offer and the writer proceeds with certification. Can the business put this “without prejudice” letter before the court? And does the appearance of extortion disqualify the writer from acting as representative plaintiff?

The British Columbia Court of Appeal recently answered “yes” to both questions in Sandhu v. HSBC Finance Mortgages Inc.

Background

The original plaintiffs in Sandhu were brothers. They obtained a mortgage from the defendants to purchase residential property. The defendants provided a disclosure statement to the plaintiffs identifying $357 of the mortgage proceeds as going toward a “Title insurance premium.” The plaintiffs subsequently alleged that of this $357, only $115 was the actual insurance “premium”, with the remainder being for “policy insurance costs” and “additional charges.” They commenced an action in 2007 that eventually evolved into a complaint regarding fee disclosure.

In 2011, prior to the certification application, the plaintiffs offered “without prejudice” to settle the action for $876,000, or $438,000 each. Such amounts represented over 3,600 times their individual claims. They threatened that unless these disproportionate sums were paid, they would amend their claim to allege “actual fraud, or at the very least fraudulent misrepresentation.” The plaintiffs pitched this offer as the defendants’ “one chance before it becomes publically known.”

Defence counsel put this letter before the court on the certification application, arguing that the plaintiffs’ efforts at personal enrichment disqualified them from acting as representative plaintiffs.

The applications judge held that the “without prejudice” letter was not admissible on grounds of settlement privilege and faulted defence counsel for putting it on the record. The court certified a class action and designated the two original plaintiffs (and two others) as representative plaintiffs.

British Columbia Court Of Appeal Decision

The B.C. Court of Appeal allowed the appeal. Justice Saunders held, among other things, that the “without prejudice” letter was properly before the court and that the original plaintiffs had disqualified themselves from representing the class.

Justice Saunders held that the “without prejudice” letter fell within an exception to the blanket privilege for settlement communications because it provided a “reasonable basis to question” the plaintiffs’ fitness to represent the class. She explained that this flows from the importance of the representative plaintiff to the integrity of class proceedings: “It is obvious that the confidence of the community of class members and to a large degree the integrity of the proceeding rests on the representative plaintiffs.” Courts should not close their eyes to evidence challenging this integrity.

Taking into account the letter, Justice Saunders held that the application judge erred in principle by designating the original plaintiffs as representatives of the class. In her view, “such a demand for large scale payment on the threat of a certification application is highly problematic.” She held:

 In failing to weigh the lingering effect of this combination of menace and disproportionate recovery, the certification order does not reflect the values inherent in the Class Proceedings Act. Above all, no litigation should be, or reasonably be seen to be, extortionate. This letter, when sent, bore that character and in my view is a disqualifying event for the appointment of its authors as representative plaintiffs.

The original plaintiffs sought to put a fresh affidavit before the Court of Appeal claiming that the “without prejudice” letter was sent fearing a potential adverse cost award and that any surplus would have been given “to non-profit consumer advocacy groups.” Justice Saunders considered this fresh evidence but held that it “does not lessen the appearance of large personal gain, or the appearance of using the threat of a class proceeding to extract a disproportionate payment.”

One would hope that such a situation would not arise frequently. Where it does, however, Sandhu permits defendants to put evidence of the plaintiffs’ “extortionate” behaviour before the court – and challenge the fitness of representative plaintiffs who seek to personally enrich themselves through class actions.

BC Court Refuses to Certify Smart Meter Radio Emissions Class Action

Posted in Certification, Class Action Practice

Close up of a smart energy meter.The BC Supreme Court’s recent refusal to certify a class action in Davis v British Columbia Hydro and Power Authority re-affirms that although the evidentiary threshold for certifying general causation as a common issue is not high, it is also not non-existent.

Background

As previously discussed, in a 2013 decision, the Supreme Court of Canada rejected the argument that courts must take a “rigorous” approach to class certification and confirmed that plaintiffs need only show a “credible” or “plausible” methodology to try issues of loss or harm on a class-wide basis in price-fixing class actions. Lower courts in BC and Alberta have subsequently extended the requirement to show a “plausible methodology” to causation issues in product liability and brokerage class actions. In particular, according to the BC Court of Appeal, there is no requirement for a “gold standard” study proving a causal connection at the certification stage. Continue Reading

Fighting On Many Fronts: Court Allows Individual Action To Proceed Alongside Class Actions

Posted in Class Action Practice, National Class Actions, Preferable Procedure

Chess moves on chess board. Shallow depth of field.In Crider v Nguyen, 2016 ONSC 4400, Justice Perell of the Ontario Superior Court recently dismissed a motion by Zimmer, the manufacturer of a hip implant device, seeking to stay the action of two individual plaintiffs who already appeared to be members of one or both of two overlapping and related class actions: McSherry v Zimmer in Ontario, and Jones v Zimmer in British Columbia.

In coming to his decision, Justice Perell had to navigate issues with respect to (i) whether the plaintiffs had opted in to the British Columbia class action, (ii) whether an Ontario court could make such a determination, (iii) whether the plaintiffs ought now be allowed to opt out of the Ontario class action after the expiry of a court-ordered opt out deadline, and (iv) whether and to what extent Zimmer and the other defendants might be prejudiced by allowing the plaintiffs’ individual action to continue. We discuss the Court’s approach to each of these issues below. Continue Reading

Defendants Sidelined in Third Party Funding Motion

Posted in Class Action Practice

bench in arena ice skate rinkJustice Perell’s July 7, 2016 decision in Berg v. Canadian Hockey League is the most recent development in the evolving law surrounding the role of third party funders in Canadian class proceedings, and in particular the role of defendants in motions for approval of third party funding arrangements. We have previously written about third party funding motions as a developing procedural battle ground in class proceedings. Continue Reading