Class Actions 101

Posted November 1, 2008

By: Marcia Pritzker Schmitt

Class actions are a relatively recent phenomenon in Canadian law. Ontario did not have class action legislation until the Class Proceedings Act came out in 1992. Most Canadian jurisdictions, including Ontario, have seen an explosion in the number of class action cases brought within the past 5 years.

It would be hard not to notice the fact that class actions seem to be everywhere. In news reports across the country people are being advised of actions being launched for all sorts of claims from misleading shareholder reports, to poisonous foods, and exploding fuel depots. For most Canadians, the phrase ‘class action’ brings to mind visions of Hollywood’s David and Goliath-type legal dramas where giant corporations are called to account for causing death and destruction for the sake of profit.

But where do class actions come from and what do they mean for Ontario’s legal landscape?

WHY START A CLASS ACTION

Class actions are an ideal way to address situations where a number of individuals have similar claims and it would not be worthwhile for them to hire lawyers individually and pursue those claims.

In a class action, the entire class is represented by one or a few individuals, who are named in the Statement of Claim as the Representative Plaintiff(s). The other class members do not need to be named nor participate in the class proceedings in court, as long as their issues are common to all class members, and therefore form part of the main claim.

According to the Class Proceedings Act, 1992, there are three objectives to pursuing something as a class action, as opposed to an individual action: First, to improve access to justice; second, to increase judicial efficiency; and third, to modify the behaviour of wrongdoers.

WHAT QUALIFIES AS A CLASS ACTION?

Class actions are commonly pursued in cases of product liability, breach of shareholder rights, airplane or train accidents, or in claims like illegal surcharges on money services.

Class actions are subject to a unique set of rules and procedures, which vary in minor ways from province to province.

All class actions must be certified before they can proceed. This means that the plaintiffs bring a motion for the court to certify that a class action is the appropriate mechanism to advance the common issues of the class members.

In order to be certified, a class action must meet the following 5 criteria:

  1. the pleadings must disclose a cause of action;
  2. there must be an identifiable class;
  3. the proposed Representative Plaintiff must be appropriate;
  4. there must be common issues; and
  5. the class action must be the preferable procedure.

The pleadings must disclose a cause of action

The court wants to know that the claim is not being brought frivolously. The Plaintiffs have to show that it is plain and obvious that an identifiable wrong has been done, and that as a result of the wrong, the class has suffered harm. This is a lower threshold than what is required in standard (non-class action) cases.

There must be an identifiable class

A class can be any group of two or more persons.

The Plaintiffs have to show that the class can reasonably be identified. This does not necessarily mean that the exact names of the people in the class must be known at the time of the certification hearing, but the court must be satisfied that a reasonable person would be able to identify who is involved in the class. This is important because in Ontario a class action binds all of the class members, unless they opt out. If the class definition is ambiguous, people may not know if they are part of the class, and may lose the opportunity to exercise their rights within the process.

There must be an appropriate Representative Plaintiff

The Representative Plaintiff must:

  1. Fairly and adequately represent the interests of the class;
  2. Produce a plan for advancing the proceeding and notifying the class members; and
  3. Not have a conflict with the interests of the other class members.

The Representative Plaintiff does not have to have the most serious or valuable claim, nor do they need to fully understand all of the legal facts and issues. But he or she should be able to understand the basic nature of the claim and the purpose of the proceeding, and they must be able to give instructions to legal counsel. It is important for the Representative Plaintiff to be aware that they may be responsible for legal costs of the other side, should the action fail.

There must be common issues

The recent decision of Cullity, J. in Tiboni v. Merck Frosst Canada Ltd., 2008 CanLII 37911 (ON S.C.), confirmed that the test is not whether or not there are more common issues than individual issues, but rather whether or not common issues exist among the class members, and whether the resolution of these issues will advance the three objectives of the Class Proceedings Act: access to justice; judicial economy; and behavioural modification.

The Future of Class Actions

It is likely that the advantages that are provided by class actions will mean that the explosion in the number of class action proceedings in Canada will continue. In the past, it has been a daunting, if not impossible task for a single consumer, shareholder or victim to bring an expensive legal claim against defendants with virtually unlimited resources. Now, class actions have the potential to level the playing field. It is hoped that with this evolution in Canadian law, the goal of true access to justice has become a little less elusive.

Class Action is the preferred procedure

In Markson v. MBNA Canada Bank (2007), 85 O.R. (3d) 321 (C.A.), the Court of Appeal examined what is required to confirm that a class action is the preferred procedure. That decision found that a class proceeding is preferred if:

  1. it promotes the three objectives of the Class Proceedings Act : access to justice; judicial economy; and behavioural modification;
  2. a class proceeding is a fair, efficient and manageable way of advancing the claim AND it is preferable to other options, such as joinder of proceedings, test cases and any other method of advancing the claim; and
  3. consideration is given to the importance of the common issues of the claim, in relation to the claim as a whole.
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