A number of countries have procedural mechanisms allowing groups of aggrieved parties to pursue their legal claims in the form of a collective action. While no other country has a class action mechanism quite like that of the United States, another country that also has well-developed class action mechanisms is Canada. However, unlike the United States, in Canada there is no federal class action process; instead, class action claims must be brought in one of the provincial or territorial courts and invoke the relevant jurisdiction’s litigation processes.
One of the Canadian jurisdictions where class action litigation is active is Ontario. Since the province adopted Class Proceeding Act over twenty years ago, numerous class actions have been filed in the province. The Law Commission of Ontario is now undertaking a comprehensive review of the Class Proceedings Act, as discussed on the Commission’s website (here). As part of the Law Commission of Ontario’s review of experiences with the Class Proceedings Act, the Commission has asked for interested parties to submit comments .
In response to the Commission’s request for comments, the U.S. Chamber of Commerce Institute for Legal Reform and the Canadian Chamber of Commerce have prepared a paper that will be presented at an event in Toronto on March 23, 2015. The paper, entitled “Painting an Unsettling Landscape: Canadian Class Actions 2011-2014,” can be found here. The Institute for Legal Reform’s March 23, 2015 press release about the paper can be found here.
The paper takes a comprehensive look at class action litigation in Canada – not just in Ontario, but in all of the provincial and territorial courts as well. The paper describes a number of recent developments in the provincial courts, which the paper’s authors suggest “certainly will invite the filling of more class actions in Canada.”
The paper opens by noting that while there had been some reason to believe several years ago that Canada might be “stepping away from its long-standing liberal approach to class actions,” more recent developments suggest that this trend has “evaporated.” Canadian courts have, according to the paper, “their tradition of consistently lax class certification standards,” adding that “it is once again a relatively sure bet that a class proposed to a Canadian court will be certified.” This “increasingly favorable atmosphere” has been “readily apparent” in a number of substantive areas, including, for example, the antitrust and securities arenas.
In terms of how the cases fare once they go forward, the paper notes that class action trials are “occurring with increasing frequency.” Indeed, class trials are “much more likely to occur in Canada than in the U.S.” The paper notes that defendants have gained some notable trial successes. With respect to the cases that settle, the paper notes that “Canadian tribunals are more rigorously assessing whether class members are appropriate benefiting from settlements.” Some courts are “growing increasingly skeptical of class counsel fee applications.”
The paper evinces a particular concern with third-party litigation funding, which, the paper says, is “gaining greater currency in Canada, particularly in the class action context.” The paper expresses the concern that the increased use of third-party litigation funding “threatens to undermine the effectiveness of ‘loser pays’ policies adopted by some jurisdictions to discourage non-meritorious litigation.” The paper does express support for recent developments in Ontario where the courts have insisted that third-party funding arrangements be publicly disclosed and judicially approved. The paper argues that increased transparency and judicial scrutiny will help reduce “the prospects that funders will seek to satisfy their own financial goals in derogation of class member interests.”
Of interest to readers of this blog, the paper has a number of interesting comments about securities class action litigation in Canada. Among other thing, the paper comments, with reference to the recent Ontario court decision in the Canadian Solar case (about which refer here) , among others, that “recent decisions of Ontario courts have made it clear that the Ontario Securities Act may be applied extraterritorially.” However, the paper also notes that in Ontario Court of Appeal’s decision in the BP case, the court ruled that a putative class action involving securities that were purchased over a foreign exchange should have been stayed on forum non conveniens grounds.
The paper also notes that “recent decisions have confirmed that leave to pursue class claims under the Ontario Security Act is evaluated with minimal scrutiny.”
The Institute for Legal Reform’s press release about the Canadian class action paper contains a statement from the Institute’s President, Lisa Rickard. Among other things, Rickard says that “recent confirmation by Canadian courts of low class action certification standards, and the convergence of other factors … are setting the stage for increased abuse of this type of litigation across Canada.” Rickard adds that “the growth of third party litigation funding is also fueling class action lawsuit abuse in Canada because it is a sophisticated scheme for gambling on litigation that rewards those who invest in the lawsuits, or the gamblers, at the expense of the class members themselves.”
The paper concludes with a call for “meaningful legal reform” throughout the Canadian provinces. The paper calls on the litigation defense community to advocate for “more meaningful class certification requirements” and for measures to create “disincentives to the filing of non-meritorious actions.” The paper also calls for lawmakers to formalize third party funding safeguards, and at a minimum establish requirements for the disclosure of and requiring judicial approval for funding arrangements. The paper concludes with a call for the defense community to remain active in the Law Commission of Ontario review process to “ensure that the effort is not dominated by plaintiffs’ counsel perspectives.”