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Canadian Class Actions Monitor

Ontario Court of Appeal Affirms Aggregate Damages Appropriate

Posted in Appeals, Case Comments, Class Actions
Sara AlbertSimran Choongh

The Ontario Court of Appeal has recently released two related decisions: Trillium Motor World Ltd. v Cassels Brock & Blackwell LLP, 2017 ONCA 544 (“Cassels Decision”) and Trillium Motor World Ltd. v General Motors of Canada Limited, 2017 ONCA 545 (“GM Decision”).

Both are trial decisions relating to class actions arising from General Motors of Canada Limited’s (“GMCL”) 2009 restructuring plan. Though many legal issues are addressed in the two sets of reasons, the focus of this post is the Court’s consideration of the appropriateness of aggregate damages in class action suits in the Cassels Decision.

Background

In 2009, as a result of the global financial crisis, GMCL required a financial bailout from the Canadian government. This required an acceptable restructuring plan.

The issue arose when three of the key players retained Cassels Brock & Blackwell LLP (“Cassels”) for legal advice – Industry Canada, 51 Saturn dealers, and a group representing GMCL dealers across Canada.  Cassels failed to disclose its retainer with Industry Canada to the GMCL dealers, despite the potential adverse legal interests.

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Who are the principals of class counsel?

Posted in Case Comments, Class Actions
Paul Blanchard

In a class action, diverging opinions between a class representative and his lawyer can lead to delicate situations, especially when the outcome of the proceeding is at stake. In the recent case of Lépine c. Société canadienne des postes,[1] the Quebec Superior Court had to rule on an application to approve a settlement transaction filed by class counsel, supported by the defendant, but forcefully contested by the class representative.

1.               Background

Michel Lépine (“Lépine”) had bought some service from the Canada Post Corporation (“Canada Post”), consisting of free lifetime Internet access with the purchase of a CD-ROM. A month later, the free internet service was terminated. The same service was then offered to consumers, but at a price of $7.95 or $9.95 per month, depending on the options chosen by the subscribers.

Lépine filed an application for authorization to institute a class action against Canada Post and Cybersurf, the Internet service provider. The authorization was granted by the Quebec Superior Court. Similar proceedings were filed in Ontario and British Columbia, and subsequently settled.

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Douez v. Facebook, Inc.: Supreme Court of Canada decision creates new uncertainty about enforceability of forum selection clauses in consumer contracts

Posted in Class Actions
Alexandra CocksEdmond Chen

In a recent decision that could affect consumer class actions in Canada, the Supreme Court of Canada ruled in Douez v. Facebook, Inc. (“Facebook”) that a forum selection clause contained in Facebook’s Terms of Service was unenforceable when applied to a claim for breach of British Columbia’s privacy legislation. The precedent set by this case creates more uncertainty around how forum selection clauses will be applied by Canadian courts and could give plaintiffs new ammunition to avoid forum selection clauses in pursuing their claims. In allowing the appeal, the Supreme Court of Canada significantly modified the test for validity of forum selection clauses from Z.I. Pompey Industrie v. ECU-Line N.V. (the “Pompey test”).

We have also reported on the implications of this decision on privacy and cyberspace law.

Background

Ms. Douez brought a proposed class action in British Columbia on behalf of more than 1.8 million Facebook users. She alleges that an advertising product called “Sponsored Stories” that was briefly used in 2011 violated section 3(2) of the British Columbia Privacy Act. The advertising used a user’s profile picture and Facebook posts in advertisements on their friends’ “newsfeeds” on the site. Ms. Douez alleges that was done without the user’s consent.

The BC Supreme Court rejected Facebook’s application seeking to enforce the forum selection clause mandating that Facebook users pursue lawsuits exclusively in Northern Californian courts and certified the class action. The BC Court of Appeal reversed that decision and ruled that the forum selection clause was enforceable, effectively ending the class action.

Supreme Court of Canada Decision- introducing public policy considerations into the “strong cause” test

In a narrow 4-3 decision, the Supreme Court of Canada overturned the BC Court of Appeal’s decision and modified the application of the Pompey test for enforceability of forum selection clauses. The Pompey test consists of a two-step analysis:

  1. Can the applicant prove that the clause is “valid, clear and enforceable” under contract law? At this point, the respondent may also raise defences of unconscionability, undue influence or fraud.
  2. If the clause passes step 1, can the respondent show “strong cause” for the court not to enforce the clause?

Although the Court unanimously agreed that the Pompey test remains the correct framework for determining the enforceability of forum selection clauses, the majority modified the traditionally jurisdictional factors to be considered under the second step of the test.

The majority ruled that beyond jurisdictional questions, the court should take into account public policy considerations related to “gross inequality of bargaining power between the parties and the nature of the rights at stake.” The Court sought to balance uncertainty for companies with the ability of consumers to access justice following an infringement of their rights.

  • The majority held there was gross inequality in bargaining power because the Terms of Service were a “consumer contract of adhesion,” where a user must accept all the terms as written, without a right to negotiate, in order to use Facebook. The implication is that all consumer contracts of adhesion will have this weigh against them when determining enforceability of these clauses, regardless of whether the contract was actually unfair or not.
  • Although forum selection clauses in consumer contracts have already been legislated as having limited enforceability in Québec, this increases the risk that they will be found unenforceable across all Canadian jurisdictions.
  • The majority held that due to the “quasi-constitutional” nature of the rights granted by the Privacy Act, Canadian courts are better suited to situate the case within the relevant “social and cultural context” than foreign courts.

Taking these factors into account with jurisdictional issues, the majority ruled that there was strong cause to not enforce the forum selection clause when applied to an action under the Privacy Act. As a result, the BC Supreme Court decision certifying the class action was restored.

Implications

The Facebook decision clearly signals that consumer protection and the protection of privacy rights are at the forefront of judicial concerns in Canada. While forum selection clauses remain a good way to ensure certainty in constraining potential legal action, their enforceability is now uncertain and likely be challenged by plaintiffs in consumer claims, especially in cases involving consumer contracts of adhesion or privacy related claims.

With an increasing trend of privacy related class action lawsuits in Canada as consumer data continues to be commodified in untested ways and targeted by hackers, due diligence in assessing privacy risks is even more important for companies offering services in Canada.

A job to be a hockey player: Ontario Superior Court of Justice certifies a class action to decide whether OHL players are employees entitled to get a minimal wage pay

Posted in Class Actions
Paul DavisOksana Migitko

The Ontario Superior Court of Justice recently certified a case that, as reported by some media, could change Canadian hockey forever.[1] Two representative plaintiffs, Sam Berg, a former Niagara IceDogs forward, and Danial Pachis, a former member of the Oshawa Generals, will be allowed to pursue a lawsuit against the OHL and its clubs[2] alleging that junior hockey players do not get what they are entitled to under the law, namely, minimum wages for their services on the basis that they are employees. The case demonstrates the difficulties of pursuing a cross-border class action where some members of the class reside in Canada and others reside in the United States.

Students or employees?

Berg and Pachis’ case revolves around the “single profound question” of whether junior players are employees of their clubs and, if so, at what moment amateur athletes become professionals.[3] The plaintiffs allege that major junior players are employees because their relationships with their respective teams are identical to those between an employer operating a commercial organization and its staff. The OHL and its teams claim, in contrast, that a player is not an employee but a participant in a multi-faceted development program that focuses on athletes’ sports training, education, and character growth. The clubs’ aim is to provide young players with educational opportunities to choose a right career path both inside and outside of hockey. Continue Reading

3rd Edition of E-Discovery in Canada now available

Posted in Class Actions

E-Discovery_in_Canada_Cover_JAN2017

 

Susan Wortzman, partner and Director of E-Discovery, and a team of experienced authors the third edition of E-Discovery in Canada. The book covers everything lawyers, in-house counsel and law clerks need to know about conducting e-Discovery, from preservation to proportionality to costs.

Learn from the professionals in Canada and find out how to leverage their know-how for better outcomes for your clients’ in this revised and updated edition. The third edition can be purchased here.

The End of an Era: The Ontario Court of Appeal Confirms (Again) that the Securities Class Action Against Timminco is Out of Time

Posted in Class Actions
Paul Davis

A secondary market class proceeding against Timminco Ltd. has been in legal purgatory since 2012, a victim of the changing jurisprudence governing the limitation period applicable to those claims. In a May 2017 decision (Timminco 2017),[1] the Ontario Court of Appeal decided that the case could not proceed because the plaintiff investor had not commenced his motion for leave to proceed under Ontario’s Securities Act in time.

Timminco 2017 represents the last gasp of the group of proposed class actions in which the courts of Ontario – and ultimately, the Supreme Court of Canada – worked out the governing interpretation of the interplay between Ontario’s Class Proceedings Act, 1992 and Securities Act.

The Solar Panels Announcement

The path to the Ontario Court of Appeal’s decision in Timminco 2017 sheds some light on the development of secondary market class proceedings in Ontario. The substance of the case (which has never been litigated) relates to the issuer’s announcement in March 2007 that it developed a process to produce silicon for solar panels. The company’s share price increased dramatically in response to the disclosure of its financial results for Q4 2007 on March 17, 2008 and continued until November 2008, when it made corrective disclosures concerning its financials. Upon those disclosures, the share price fell precipitously. Continue Reading

A Failed Gamble

Posted in Class Actions
Alexandre Mireault

The recent decision in Ifergan v. Loto-Quebec, 2017 QCCS 1332, presents a rare occasion where the Superior Court of Québec refused permission to institute a class action lawsuit.  The Court determined that even the low standard of “alleging facts that justify the conclusion sought” was not met in this case, and that an overzealous litigant was ill-suited to represent the proposed class, given his past behaviour before the courts.

The Allegations

The Applicant presented an Application for Authorization to Institute a Class Action, in which he claimed that the Respondent Loto-Quebec had misrepresented the likelihood of winning its Super 7 or the Lotto Max lotteries, due to a particular methodology for generating numbers for consumers opting for automated selection, known as “quick-pick”. He alleged that this constituted a fraudulent commercial practice within the meaning of the Consumer Protection Act. The Applicant sought to represent a class defined as, “All persons having purchased from the Respondent or retailers a quick-pick ticket for either the Super 7 or Lotto Max lotteries.”

The Applicant was no stranger to litigation against Loto-Quebec. In 2008, he had personally instituted a claim against Loto-Quebec with regard to the Super 7; in 2009, the Super 7 was replaced by Lotto Max. The Applicant relied on the facts he had gathered during his initial claim in order to present his claim against both lotteries.

The Applicant relied on Loto-Quebec’s expert testimony from the 2008 claim to allege that, for the purposes of a lottery draw, a central computer would create randomized selections of seven numbers, which would then be sold sequentially at various sales points. The selections would be randomized again only after three or four draws. Applicant alleged that the failure to randomize selections after each draw and ensure that all possible seven-digit combinations were available distorted the likelihood of winning, constituting a fraudulent commercial practice within the meaning of the Consumer Protection Act.

Loto-Quebec also relied on its expert from the 2008 claim, who provided testimony to qualify the statements previously made. He stated that his past testimony treated a different set of circumstances, and he affirmed that all possible seven-digit combinations were available to all customers, and that all had an equal chance of winning the jackpot.

Facts Justifying Conclusions Sought

The Court rejected the proposed action with regard to Lotto Max, as the facts presented in the Application related only to the Super 7, and no allegation was made to the effect that both lotteries employed an identical selection method.

The Court sided with the Respondent’s version of the facts regarding the customer’s chances of winning, concluding that the evidence presented did not allow for an inference that the customer was deprived of a fair chance of winning, or that the Respondent had contravened the rules of play advertised in relation to its lotteries. As a result, the Court rejected the proposed action on the basis that the facts alleged in the Application did not justify the conclusions sought.

Action Out of Time

The Respondent alleged that the Application was barred by the limitation period because the Applicant learned about the alleged faults in 2012. With regard to Lotto Max, the Court concluded that action was not out of time given the absence of allegation of fault by the Respondent in his earlier claim. With regard to the Super 7, the Court concluded that the action was out of time since the Applicant knew about the alleged fault. Although the Applicant argued that he was unaware that the facts of which he had knowledge constituted a fault, the Court sided with the Respondent, reaffirming that ignorance of a right of action does not suspend the running of time for the purpose of a limitation period.

Unqualified Representative

The Court also determined that the Applicant was not qualified to represent the proposed class. The Court found that the Applicant’s emotional investment in the matter affected his ability to ensure representation of the defined class.

In 2008, following the rejection of his previous claim against the Respondent, the Applicant had sought leave to appeal; when this was denied, he sought permission to appeal to the Supreme Court of Canada. When it was denied, the Applicant submitted an application for reconsideration of the order refusing leave to appeal. His language in that application was poetic, to put things mildly. When his final application was denied by the Supreme Court, the Applicant drafted an open letter to the Superior Court, in which he further demonstrated an attitude hostile to the courts.

In this context, the Court concluded that given the Applicant’s demeanour and past representations before various courts there was serious doubt as to his ability to respect his duties to the members of the proposed class. Furthermore, the Court called into question the Applicant’s ability to act with the objectivity and perspective necessary to represent the class in its relations and negotiation with Respondent. The Court finally concluded that the fact the limitation period had expired on the Applicant’s cause of action made him unqualified to represent the interests of a class.

Not Quite a No-Hitter: Ontario Superior Court Declines to Strike (Most) Claims Related to Pre-Installed Software

Posted in Class Actions
Breanna Needham

In the recent decision of Bennett v. Lenovo[1] (Bennett), in the Defendant Lenovo’s motion to strike the proposed class action in its entirety, the Ontario Superior Court of Justice declined to strike three of the four causes of action relating to manufacturer installed software loaded onto laptop computers. The Court’s decision demonstrates the difficulty that can arise in pleading motions as the law concerning privacy matters associated with consumer technology products continues to grow and change.

Background

The Plaintiff, a Newfoundland-based lawyer, purchased a Lenovo laptop from an online vendor. After receiving the laptop, he subsequently noticed the Virtual Discovery adware program that was pre-loaded onto the laptop. Continue Reading

Quebec Superior Court Grants a Defendant Pre-Trial Discovery of Six Class Members

Posted in Class Actions
Vincent Boutet-Lehouillier

In Martel v. Kia Canada inc., 2017 QCCS 976, the Quebec Superior Court (Justice Chantal Tremblay) ruled on a motion by the defendant to examine class members. The motion was filed by Kia shortly after class counsel stated that they would call six previously unannounced witnesses at trial, all class members. The Court agreed that Kia should be able to examine all six class members on discovery before the case could be set down for trial and clarified the applicable test for pre-trial examinations of class members.

Background

A class action was authorized (certified) against Kia on June 12, 2015 by the Quebec Court of Appeal (reversing the Superior Court). Among the common questions identified by the Quebec Court of Appeal were whether the information regarding maintenance frequency found in the owners’ manuals was false and, if so, whether this was a “false or misleading representation to a consumer” within the meaning of Quebec’s Consumer Protection Act. The petitioner sought to have the sums allegedly paid in excess for additional maintenance be reimbursed. Continue Reading

Plaintiffs Lack Standing to Bring Representative Action to Claim Aboriginal Rights

Posted in Class Actions
Timothy Froese

The British Columbia Supreme Court recently refused to allow the Chief and Council of the Hwlitsum First Nation (“HFN”) to advance a representative action to claim Aboriginal title and rights on behalf of a historic rights-bearing community. In Hwlitsum First Nation v Canada (Attorney General), 2017 BCSC 475, Justice Abrioux held that the representative action could not proceed because the class or collective for whom the representative plaintiffs purported to act was not capable of clear and objective definition.

As we previously noted in the Canadian Class Actions Monitor’s commentary on Araya v Nevsun Resources Ltd, 2016 BCSC 1856, British Columbia does not have a common law class action. Rather, the Class Proceedings Act, RSBC 1996, c 50 (“CPA”), sets up a comprehensive code for class actions in British Columbia. Representative proceedings under Rule 20-3 of the British Columbia Supreme Court Civil Rules are limited to actions in which the plaintiffs allege a common right or seek a common remedy.  One example, noted in Nevsun, is where plaintiffs allege collective rights, such as Aboriginal rights or title.

Background

HFN, as represented by its Chief and Council, commenced an action on behalf of itself and its members seeking declarations of Aboriginal title and rights and compensation. HFN claimed to be the continuation of or successor to the Lamalcha Tribe, and specifically to be comprised of descendants of a prominent historical member of the Lamalcha, Si’nuscutun.  The defendants included the Attorney General of Canada (“Canada”), the City of Vancouver and several First Nations.

HFN had previously applied to the Minister of Indian Affairs and Northern Development to be formed as a new band under s.17(1)(b) of the Indian Act, RSC 1985, c I-15.  At the time of the hearing, that application was being held in abeyance by Aboriginal Affairs and Northern Development Canada.

The Standing Application

HFN claimed Aboriginal title and rights, which are collective rights that must be brought on behalf of an identifiable group that is capable of advancing a claim under s.35 of the Constitution Act, 1982.

Canada, supported by the other defendants, brought an application that challenged HFN’s standing to advance the claim as a representative proceeding under Rule 20-3.

The plaintiffs argued that their standing to bring the representative action was a question of mixed fact and law that should be decided at trial. However, Justice Abrioux applied the reasoning in Campbell v British Columbia (Forest and Range), 2011 BCSC 448, affirmed 2012 BCCA 274, and found that it was appropriate to hear the issue of standing as a preliminary matter.

As in his earlier decision in Nevsun, Justice Abrioux held that British Columbia does not have common law class actions, but has both class proceedings under the CPA and representative proceedings under Rule 20-3.  Furthermore, while representative actions under Rule 20-3 typically use the 3-part test for representative proceedings set out in Hayes v British Columbia Television Broadcasting Systems Ltd (1990), 46 BCLR (2d) 339 (CA), in the case of aboriginal claims, the 4-part test from Western Canadian Shopping Centres v Dutton, 2001 SCC 46, is used:

  1. whether the collective rights-bearers on behalf of whom they purport to act is capable of clear definition;
  2. whether there are issues of law or fact common to all members of the collective so defined;
  3. whether success on the petition means success for the whole collective so defined; and
  4. whether the proposed representatives adequately represents the interests of the collective.

HFN’s principal claims were based on collective rights that could not be advanced by individuals, and a successful challenge to the representative plaintiffs’ standing would “drive the plaintiffs from the judgment seat.” Because of this, Canada was required to establish that it was plain and obvious that the representative plaintiffs did not have standing to advance the collective claims.

The Standing Application Decision

Justice Abrioux applied the Western Canadian Shopping Centres test, and found that the plaintiffs failed to meet the critical first step because the proposed class or collective could not be determined by objective criteria. HFN members could not be identified objectively, including for the following reasons:

  • There was an inherent conflict in the proposed class definition, as the plaintiffs asserted in the Notice of Civil Claim that HFN was synonymous with the Lamalcha, but proposed a class definition that excluded Lamalcha who were not descended from Si’nuscutun.
  • Ancestry alone is not sufficient to establish that a modern collective has a claim to the rights of a historic group.
  • Some members of the proposed class were members of other bands, and may not support HFN’s objectives.
  • There was no evidence of any agreement authorizing the plaintiffs to represent the Lamalcha Tribe.

Significantly, membership in the HFN could not be objectively determined because it could depend entirely upon the exercise of discretion of the Chief and Council:

“With respect, the HFN’s alleged objective criteria for membership are more akin to those of a private members’ club where selection is dependent on the board of directors’ ultimate discretion, rather than on proving membership in a recognized collective with the standing to advance a claim for s.35 rights and remedies.”

As a result, it was plain and obvious that the claim for Aboriginal title and rights could not proceed as a representative action, and was bound to fail. The individual claims of some of the plaintiffs, which were based on discrimination and violations of individual s.2 and s.15 Charter rights, were permitted to proceed following amendments to the Notice of Civil Claim.

Implications

Although the representative action can be suited for actions on behalf of a group claiming collective rights such as Aboriginal title, the first hurdle is establishing that such a group exists and can be defined through objective criteria. This case is an example in which the failure to properly define the collective resulted in the loss of the ability to advance an action to claim those collective rights.