Class Actions and Multi-Jurisdictional Conflicts: The need for Class Action Reform In the Age of Globalization : Canada Post Corp. v Lépine


The globalization of our world economy coupled with the rise of multi-national corporations, mass production and technological advancement has no doubt conferred benefits to consumers in the form of choice, as well as great advantages to businesses in the form of opportunity and profit. However, with these great benefits may come great risk when things go wrong. Class action litigation is a useful vehicle for minimizing these potential risks.

Class actions serve three main purposes. Firstly, they provide for greater access to justice. This is demonstrated through the availability of contingency fees to class claimants. Class actions also permit individuals to bring claims as a group for actions that would not otherwise be brought independently due to the great financial burdens involved. Secondly, they promote judicial economy. For example, it is more efficient to have a group bringing an action as a whole class than each member of the class bringing a separate action in the courts. Lastly, class actions serve to modify the behaviour of potential defendants, and in essence make potential wrongdoers aware of the serious consequences that could follow in the event promises or duties to consumers are breached.

Given the global nature of commerce in the 21st century, the initiation of multi-jurisdictional class actions in the courts may pose future challenges. Maintaining judicial consistency in national class actions where members of the class are spread throughout Canada is a challenge that must be addressed. For example, class action settlements that are reached in more than one jurisdiction relating to the same matter may result in conflicting decisions.

In Canada Post Corp. v Lépine, class action proceedings were instituted against Canada Post for allegedly marketing a lifetime Internet service in 2000 to consumers, and subsequently canceling this service the following year. As a result, a class action was filed in Quebec in 2002. Later that year, subsequent class actions were filed in both the Ontario and British Columbia courts. Following settlement discussions in all three provinces, the Ontario and British Columbia plaintiffs eventually accepted an offer from Canada Post. However, the Quebec plaintiffs did not accept any offer.

The Ontario settlement offer was worded to cover all residents of every province except British Columbia but included Quebec. The Ontario settlement offer was approved by the Ontario Court in 2003. However, the following day, the Quebec court certified the class action against Canada Post on behalf of all Quebec residents in effect disregarding the earlier settlement offer approved in Ontario, which was intended to extend to all Quebec residents. The Ontario settlement was intended to settle the claims of all Quebec residents, yet the Quebec courts went ahead and certified an action for all Quebec residents effectively ignoring the previous Ontario order.

Canada Post appealed the Quebec decision through the Quebec court system in an attempt to have the Ontario Settlement offer recognized in Quebec. However, all of Canada Post’s appeals were dismissed. The matter then went before the Supreme Court of Canada, which upheld the decisions of the Quebec courts.

The Supreme Court had the opportunity to clarify the concerns associated with conflicting national class action decisions. However, the Supreme Court did not offer a broad ruling. Rather, it offered a limited decision to justify the decision of the Quebec Courts by focusing on the elements of notice and the timing of filing the action.

With respect to notice, the Supreme Court held that the notice provided to Quebec residents about the Ontario settlement was “insufficient and confusing”. The Supreme Court emphasized the importance of adequate notice in class actions. It stated that the notice to Quebec residents about the Ontario settlement was misleading because “it made it look like the Ontario proceeding was the only one.” The Supreme Court stated that notice is a fundamental principle of procedure in class actions because it enables class members to understand how the action may affect their rights, and provides information to class members about the possibility of opting out. Given that this notice requirement was not met, the Supreme Court upheld the decision of the Quebec Court of appeal and denied extending the reach of the Ontario settlement to Quebec residents.

In regards to the issue of the timing of the action, the Supreme Court in reviewing article 3155 of Quebec’s civil code held that because the Quebec action was filed before the Ontario action, Quebec did not have to enforce the later Ontario judgment.

This decision seems to suggest that a foreign decision may still be enforceable in another province provided that adequate notice is provided and that the class action in the foreign jurisdiction is filed first. The Supreme Court failed to provide broader guidance on handling the issue of multi-jurisdictional conflicts but it stated that this would be a more appropriate role for the provincial legislatures rather than the courts to work out. It stated:

The provincial legislatures should pay more attention to the framework for national class actions and the problems they present. More effective methods for managing jurisdictional disputes should be established in the spirit of mutual comity that is required between the courts of different provinces in the Canadian legal space. It is not this Court’s role to define the necessary solutions. However, it is important to note the problems that sometimes seem to arise in conducting such actions.

As class action litigation continues to progress, it is likely with time for further jurisdictional disagreements to take place. However, with legislatures working together to promote harmony through legislative framework, a better-coordinated system may soon be put in place to manage future conflicts as they arise.

Tobacco Litigation In Canada Not Butting Out without a Fight

A recent decision by the British Columbia Court of Appeal has granted Imperial Tobacco Canada Limited (“Imperial”) the right to add the Federal Government of Canada to the class action as a third party for contribution and indemnity in the event Imperial is found liable to the Government of British Columbia for tobacco related health care costs incurred over the years . This judgment reversed a lower court decision, which refused to permit the Federal Government to become a third party defendant to the action.

The Federal Government of Canada is alleged to have played an active role from the early 1900’s onwards in cooperating with the Tobacco industry in researching, developing and engineering ways of producing improved tobacco varieties, which were ultimately sold to consumers despite the fact that scientific evidence linking cancer to smoking were available. It is also alleged that the Feds sponsored research programs relating to tobacco.

According to Donald McCarthy, Imperial’s VP of Law, “The B.C. decision will demonstrate that the Government of Canada has known about the risks associated with smoking for decades and that it instigated and promoted the development and sale of lower-tar tobacco product”. He went on, “the Government of Canada has been a senior partner of the tobacco industry for decades. They have legalized tobacco in Canada, heavily regulated it, and taxed it to the tune of billions of dollars every year”.

Imperial also issued third party claims in the provinces of Newfoundland, Quebec and New Brunswick against the Federal Government of Canada  making certain that the battle over smoking related healthcare litigation is not about to butt out any time soon.

Ontario Court Certifies Imax Corporation Class Proceeding

Securities Class Actions in Ontario are on the up. In a recent Ontario Superior Court decision in the case of Marvin Neil Silver et al. v. Imax Corporation et al., the court granted leave and class certification giving the green light for the action to proceed to trial as a class proceeding.

This case marks the first time Section 138.3 of the Securities Act has been grappled with by a court in Ontario.  In effect, this section creates sweeping  liability against security issuing companies and/or their officers and directors where these companies themselves or other entities purporting to act on behalf of these companies release public information which creates a market misrepresentation.  As a result, a security holder who tries to sell shares in the company during the misrepresentation period, or a buyer who acquires such shares during this period will be able to maintain an action against the company, its officers, and directors without the need to prove reliance on the representation itself. The misrepresentation period is based on the time period the misrepresentation was made until the time it is publically corrected.

In the case at issue, the plaintiffs alleged that Imax released materially false and misleading information in its February 17, 2006 press release which stated the company had successfully completed 14 theatre system installations in the previous quarter, being a record for a single quarter. On August 9, 2006 nearly 6 months after its first press release, it issued a second press release, which stated that of the 14 theatres it claimed to have previously “completed”, 10 had not opened, and the screens for 7 of these had not even been installed.

Given the serious liability imposed by section 138.3 without the need for misrepresented shareholders to prove they relied on the misrepresentation, the Securities Act lays out some procedural safeguards, which require that for an action to be commenced under section 138.3, it must have leave of the court. This leave requirement means that the court must be persuaded that the action is brought in good faith and that a reasonable possibility of success is possible if it were to proceed. In the court’s decision, it held that, “There is no reason to read in a ‘high’ or ‘substantial’ onus requirement for good faith in this type of proceeding” as this would undermine the deterrent factor of section 138.3. This decision clearly seems to take an interpretive approach that will favour plaintiffs into the future.

The purpose of having section 138.3 was to make it easier for shareholders to sue those who misrepresent or omit to include material information in public documents.  After all, information is truly the lifeblood of trading on the securities market. However, it was not clear how high of a burden on plaintiffs the courts would create in allowing such actions to proceed. Clearly, the direction the courts have taken will please plaintiff counsel.

Leave and certification are two thresholds plaintiffs must overcome in class proceedings of this nature and it seems as if the new changes to the Ontario Securities Regime will serve as launching pad of opportunity for more securities class actions to come.

Canadian Record Labels Face $6 Billion Class Action For Copyright Exploitation

Canadian Record labels including Warner Music Canada,  Sony BMG Music Canada, EMI Music Canada, and Universal Music Canada have been named as defendants in a class action lawsuit launched by  recording artists for facilitating the reproduction of unlicensed musical works without payment, permission or compensation. The representative class plaintiff is the estate of late Jazz musician Chet Baker, who alone owed copyrights to over 50 exploited works.

The claim arises out of the defendants’ conduct in knowingly and deliberately making or authorizing the making of, reproduction, distribution and sale of the works of canadian artists without obtaining a license or paying out a royalty to the artists. The record labels have already admitted to exploiting  $50 million dollars worth of music over several decades, which was documented on a “pending list”, which reflects the exploited music for which no license was obtained nor any royalties paid. It is believed that this “Pending List” is comprised of over 300,000 sound recordings for which class members have yet to be compensated for.

After 20 years of exploitation, the class action seeks the option of obtaining statutory damages in the amount of $20,000 per infringement, which could put the labels on the hook for over $6 billion dollars if found liable.

This demonstrates the record labels’ arrogant conduct and disregard  in copyright interests of artists, yet stringent enforcement against consumers who pirate online music.

Outsourcing Legal Services In Class Proceedings Not “Inherently Wrong” Rules Ontario Court

As class proceedings in Canada continue to bloom from their relative infancy, the courts will play a key role in guiding the future directions of such proceedings. Now is the time for courts in Canada to lay the foundations for what is sure to become a class action packed future.  As part of this class action expansion into the Twenty First Century, I will focus on the development of the jurisdictional boundaries at play  on the issue of collaborating with foreign counsel when prosecuting a class action proceeding in Ontario.

In the recent Ontario carriage motion of Sharma v. Timminco Ltd., both Kim Orr and Siskinds, two prominent class action plaintiff firms were squaring off over which firm should have carriage of a class action involving similar subject matter,that being the misrepresentation by Timminco Ltd. about  its ability to produce solar grade silicon, causing its share value to plummet as a result. One of the issues under consideration was whether Kim Orr’s desire to collaborate with a foreign law firm if it were granted carriage would be appropriate.

In the words of Justice Perell, “there is nothing inherently wrong with Ontario class counsel who are acting for plaintiffs in obtaining services from foreign law firms so long as there is no interference with or usurpation of the lawyer and client relationship between the Ontario lawyer of record and his or her clients”. It was also held that so long as  foreign firms do not assume the “de facto” role of lawyer of record, obtaining such services are appropriate. However, Justice Perell also stated that the foreign firm cannot have a proprietary interest in the class proceeding.

On the facts of this case, the foreign firm obtained by Kim Orr  was merely hired as an advisor drawing from its own experience. It was not controlling the litigation, and only served an advisory role as well as providing investigative and documentary management services.  This decision is significant, as it may encourage Canadian plaintiff firms to retain the expertise of foreign firms when prosecuting class actions.

Many foreign firms may have useful insight to maters at play in Canadian class proceedings as they may have already litigated a parallel class action of a similar nature in their own jurisdiction. In addition, class actions in the United States for example have been around longer than in Canada so obtaining American law firms may add depth to Canadian plaintiff counsel’s approach.

It is not uncommon for defendant’s counsel in Canadian class actions from obtaining legal advice from foreign firms. However, the controversial distinction that arises when plaintiff’s counsel attempts to follow suit is that unlike in the case with corporate defendants who  can have a pre-existing solicitor client relationship with foreign law firms, plaintiffs’ situations tend to be different. This is because a lawyer representing a  large class of plaintiffs in Ontario who then assigns the lawsuit to foreign counsel with no connection to the case creates dilemmas with unfair fee splitting, and  is viewed with more caution on public policy grounds. However, this decision seems to clarify the balance of what degree of involvement foreign counsel may have going forward.