Should I Stay or Should I Go: Opting Out of a Class Action

By Braden Adsett

Given the exceptional ability of the class action vehicle to aggregate claims and deliver widespread relief, it is subject to unique procedural requirements. One of these procedures is called certification. This is where the court determines if it is appropriate for the class action to proceed based on the five factors articulated by the Supreme Court of Canada in Hollick v Toronto (City) and mirrored in statutes across the country. Once a case has been certified, every person who fits the description of the class is automatically included in the lawsuit. There will be a prescribed opt out period where class members can choose to exclude themselves from the class action if they do not wish to be part of it. This blog post outlines some of the primary considerations when thinking about opting out of a class action.

Why Opt Out?

The main reason a person may choose to opt out of a class action is if they intend to bring an individual action or reach an individual resolution with the defendant. This might make sense for individuals if they experienced harm that is different and/or more severe than other class members. While it is generally advantageous to pool claims together and share the economic burden as a group, in some cases it is possible to pursue a larger damage award individually than as a class member.

For example, lawyer Loretta Merritt argued in the Law Times that class members in historical institutional abuse class actions may be concerned about the disparity in settlement amounts in past cases. Namely, in Rumley v British Columbia, class members were granted a maximum of $125,000 each in compensation for the systemic negligence and abuse suffered at a British Columbia residential school, whereas settlements of other institutional abuse cases such as the Huronia Regional Centre, the Rideau Regional Centre, and the Southwestern Regional Centre, only permitted a maximum of $35,000 per class member. As a result, class members who experienced different and/or more severe harm from other class members may consider pursuing an individual action so that they are not subject to a cap, as is often the case in class action settlements.

There are other, less prevalent reasons class members may choose to opt out. They may have ideological objections to the lawsuit, or fear reprisals from the defendants if they participate. There is no data on the number and reasons for opting out in Canadian class actions.

Consequences of Opting Out

Choosing whether or not to opt out is a consequential decision. If a class member opts out, they will not be allowed to claim any settlement money or court award connected to that class action. They will, however, be able to pursue an individual case. In other words, opting out preserves a class member’s right to pursue individual litigation. This is not a decision to be taken lightly. Opting out and pursuing your own individual action comes with increased legal fees, time commitment, and risk.

Overall, it is advisable for class members to seek independent legal advice if they are considering opting out of a class action. Independent legal advice can help class members navigate the risks and rewards that correspond with each option. Since class counsel has an inherent conflict of interest, class members will want to seek advice from a law firm or legal clinic that is not a part of the action.  

Policy Reform

There are generally two different times when class members can opt out. The first is opting out at certification, after a contested certification motion. In this scenario there is a greater risk attached to opting out given that it is less certain whether the action will be successful and/or what may be the terms of a future settlement or court award. The second scenario is opting out when there is a consent certification order for the purposes of settlement. In this second scenario, there is more information available for class members because they will probably know the general contours of the proposed or approved settlement.

This poses the question, whether class members in the first scenario should have a second opportunity to opt out, when the class action settles? If this were the case, class members would arguably be afforded greater procedural fairness and access to justice, because they would know how their claims will be resolved or compromised in the settlement. Since class members do not have the right to appeal an approved settlement even if they objected to it, they should have the right to exclude themselves from the action if they deem the settlement is not adequate. Recently, the Alberta Court of Appeal left the door open to second opt outs in Macaronies Hair Club and Laser Center Inc v Bank of Montreal. The Court stated that class members cannot appeal a settlement order but that a second right to opt out is available under class action statutes.

In conclusion, there is a lack of empirical data on both the frequency with which class members opt out, and when they do so. However, class members should not be left in the dark when it comes to choosing whether or not to be a part of a class action. In cases where opting out occurs after a contested certification motion, a second opportunity should be provided if the class action settles. For class members considering opting out, it is important to consider the efficacy of an alternative individual action or resolution by getting independent legal advice.

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