Where’s the Data? Canadian and American Approaches to Class Action Settlement Outcomes

By Alexandra Lawrence

In October 2019, the United States Federal Trade Commission (FTC) held a public workshop on how to improve class action settlement notices for consumers. The FTC’s primary concern was to ensure that consumers are receiving appropriate redress when competition and consumer protection class actions settle. Much of the discussion at the workshop centered on the FTC’s Staff Report “Consumer and Class Actions: A Retrospective and Analysis of Settlement Campaigns” and used the data from that Report to discuss how settlement notices can be more effective.

This workshop is just one example of the United States’ more comprehensive and data-driven approach to reviewing the effectiveness of settlement notices in class actions, a topic that has received less attention in Canada. The FTC Staff Report and the subsequent workshop were born out of concern that the settlement notice programs of consumer class actions lacked effectiveness and were not achieving their expected outcomes. As a consumer protection agency, the FTC is concerned about settlements not adequately compensating consumers because the settlement process itself creates barriers to class members participating. In light of this concern, the response of the FTC was to initiate a quantitative, data-driven study to identify deficiencies in the settlement notice process, followed by a qualitative approach by way of the workshop to discuss the Report’s findings.

A data-driven approach to class actions has also been pursued elsewhere in the United States. In November 2018, the United States District Court for the Northern District of California reformed its procedural rules for class action settlements, mandating the disclosure of claims rate data and a full accounting of monetary recovery. The Northern District’s Procedural Guidance for Class Action Settlements were discussed at the FTC’s workshop and were praised by several panelists.

Beyond encouraging a data-driven approach to assessing the effectiveness of class action settlements, the FTC also presented data on best practices for settlement distribution. Not surprisingly, a direct payment approach statistically yields the greatest success in compensating class members. A direct payment is only possible when the class member’s identity and contact information is available to the defendant, allowing for a cheque or payment being sent directly to the class member. The FTC reported that 67% of individuals who receive cheques, cash them. In comparison, a claims-made approach, where class members have to take active steps to make a claim for compensation, yields a claims rate of 5-20%.

The FTC noted that in many class actions, a claims-made approach is favoured over a direct payment approach even where the defendant is in possession of the required information. Part of its advocacy work is to educate courts about favouring claims-made processes over direct payments.

Canada’s Approach to Class Action Settlement Outcomes

In Canada, while some discussion about a need for a data-driven approach has taken place, reporting is mandatory in only one jurisdiction so far. Rule 67 of the Superior Court of Québec in Civil Matters requires that information such as the number of class members who made a claim and the amount paid to each class member be reported to the court at the end of each class action. This rule came into force on September 1, 2012, several years before other jurisdictions started considering these types of reforms.

In its Final Report, Class Actions: Objectives, Experiences and Reforms, the Law Commission of Ontario (LCO) acknowledged that a lack of empirical data about settlement outcomes has made the analysis of said outcomes more challenging. The LCO recommended that outcome reporting be mandated in Ontario. The Ontario government adopted this recommendation in Bill 161. If passed, the new provisions in the CPA will require reports at the end of a settlement distribution, including information about the amount of the settlement funds paid out, the number of class members who received notice of the distribution, and the take-up rate – the number of class members who made a claim and were compensated.

In terms of the method for distributing settlement payments, there appear to be far fewer reported cases of direct payments to class members in Canada than in the United States. One of the few cases where a direct payment was made to class members occurred in CBS Pictures v Dillon, a case concerning the surplus rights under a retirement pension plan. There, the identities of all but one of the 139 class members were known, and the settlement allowed for class members to choose between either cash, benefit enhancements, or a combination of both for their approximately $113,000 payouts.

Few Canadian direct payment class actions have involved a scheme similar to that championed by the FTC, where class members are sent cheques directly without any claims process, but it is impossible to say for certain without more data. The question of why direct payments are – or at least appear to be – less common than claims-made approaches could be because class members’ contact information is not known by the defendant, or because damages cannot be determined without a claims process. It could also be the case that there are direct payment distribution methods being utilized in class actions, but we aren’t aware of them because there is no mandatory reporting obligations about settlement distribution outcomes outside of Quebec.

The LCO Report and Quebec’s court rules demonstrate that some attention in Canada is being paid to the lack of empirical data on class action settlement outcomes, but it is clear that in comparison to the United States, Canada is still far behind in this regard. Class actions are procedural tools which are designed to provide access to justice to the masses. How can we know whether access to justice – where justice is defined as compensation for harmed class members – is being achieved if we cannot measure the outcomes of class actions? When it comes to class action settlement outcomes, more data is definitely better.

The Nevsun Decision: A Future Role for Customary International Law Claims in Canadian Class Actions?

Guest blog by Scott Robinson

On February 28, 2020, the Supreme Court of Canada released its long-awaited decision in Nevsun Resources Ltd. v. Araya. The Court’s decision holds important principles for the development and recognition of public international law in Canada, including the potential for corporate liability under it. It also provides an opening for potential future class actions regarding these issues in Canadian courts.

The case initially arose in the context of a proposed class action against Nevsun in B.C. on behalf of more than 1,000 individuals alleged to have been compelled by Eritrea to work in an Eritrean mine owned by Nevsun, a Canadian company, between 2008 and 2012. In addition to various torts under traditional Canadian law, the claim sought damages for breaches of customary international law prohibitions against forced labour, slavery, cruel, inhuman or degrading treatment, and crimes against humanity as separate and distinct actionable claims in their own right under Canadian law.

It was found in the B.C. lower courts that the class action regime could not be availed because the proposed plaintiffs were not B.C. residents, and a common law representative proceeding could not be maintained, such that the case was to proceed as a multi-party traditional lawsuit. Nevsun, however, also moved to strike the customary international law claims as non-justiciable or doomed to fail, yet the B.C. courts all refused to do so. Nevsun appealed on these points. The majority of the Supreme Court of Canada upheld the B.C. courts and dismissed Nevsun’s appeal.

The most pivotal points in the Supreme Court of Canada’s majority decision are as follows:

1.  Customary international law remains a core and evolving part of Canadian common law by virtue of the “doctrine of adoption” that posits customary international law is automatically adopted into domestic law without any need for legislative action. This has long been the end result of Canada’s monist tradition with respect to customary international law, but the Court’s decision firmly settles this issue. Unlike foreign law, judicial notice is to be taken of customary international law. Moreover, Canadian courts have an express “role in implementing and advancing customary international law”.

2.  Claims for violations of customary international law by private actors will generally survive a motion to strike in Canada, even if novel. These claims can be actionable at common law, save for conflicting legislation. It is not necessary that such claims be packaged under existing torts, or that new nominate torts be recognized to advance such claims, or that traditional tort principles be relied upon to achieve damages or other remedy. Indeed, a separate, direct, private law damages remedy for breaches of customary international legal norms may be possible.

3.  If there was ever any doubt, the “act of state doctrine” – which in short precludes domestic courts from assessing the sovereign acts of a foreign government, even if in a peripheral manner – never was, and certainly is not, part of Canadian law.

4.  Endorsing a modern non-state-centric public international law, the decision expressly holds open the idea of corporate private civil liability in Canada for violations of customary international law attributable to the corporation. Fundamentally, claims for such redress against a corporationcan survive a motion to strike: “it is not ‘plain and obvious’ that corporations today enjoy a blanket exclusion under customary international law from direct liability for violations of ‘obligatory, definable, and universal norms of international law’, or indirect liability for their involvement in … ‘complicity offenses’”. The sheer force of this legal development as regards international legal liability for multinational corporations operating in or from Canada cannot be overstated. As a minority of the Court noted, however, it is also a development that generally puts Canada in conflict with other jurisdictions, especially the United States, which have typically found corporations to be beyond the scope of liability for violations of customary international law. It will be very interesting to see how this norm of at least potential prima facie corporate liability at international law will continue to develop in Canadian jurisprudence. The trial of the Nevsun case may provide this opportunity, but no doubt others will follow.

5.  As for the potential impact of the decision on class actions in Canada, it is no secret that class actions have long been a vehicle capable of shifting public policy. That said, this opening of the door to claims for breaches of customary international law in Canadian courts – and significantly, potentially as against corporations – only further aligns with this notion. It would not be surprising to find these types of stand-alone claims for customary violations to be litigated more and more in Canadian class actions going forward, especially as Canadian class actions law continues to address more transnational issues concerning transnational actors.

Ultimately, the scope and substance of any private law remedy for such breaches of customary international law is at present unsettled. The question remains: “can our domestic common law develop appropriate remedies for breaches of adopted customary international law norms?” And further, can we develop “a civil remedy in domestic law for corporate violations of the customary international law norms adopted in Canadian law”? It was not “plain and obvious” to the majority of the Supreme Court of Canada that both questions could not be answered affirmatively. Indeed, “[a] good argument can be made that appropriately remedying these violations requires different and stronger responses than typical tort claims, given the public nature and importance of the violated rights involved, the gravity of their breach, the impact on the domestic and global rights objectives, and the need to deter subsequent breaches.” If so, and if advanced in a class-wide setting, such claims could not only possibly lead to larger classes, but also lead to damages worth millions, especially when considering the “heinous nature of the harm caused by this conduct” typically found to have violated customary international law principles.

Scott Robinson is an associate at Strosberg Sasso Sutts LLP in Windsor. Views are his own.

No Good Unless for the Public’s Good: When Can a Third Party Intervene after Certification is Denied?

By Sonya Molyneux

As is the case elsewhere in Canada, third parties in Quebec must obtain court approval before they can intervene in a class action. Both in Quebec and Ontario, courts are hesitant to grant intervenors precious court time before a class action is authorized/ certified.  On February 12, 2020 Amnesty International (“Amnesty”) was granted intervenor status in the ongoing climate change class action, ENJEU v Canada (see decision). In its judgment, the Court clarified the criteria to be considered when exercising the judicial discretion to include or exclude a third-party seeking leave to intervene. 

Background

In November 2018, ENvironment JEUnesse (“ENJEU”) filed an application with the Superior Court of Quebec to authorize a class action against the Government of Canada (“GOC”). The proposed class action was made on behalf of all Quebec residents aged 35 and under. ENJEU’s ambitious suit includes petitioning the court to compel the GOC to pay $100 to each member (approximately $340 million total) into a fund to mitigate and adapt to the climate crisis. ENJEU alleged the government’s failure to take adequate action to reduce greenhouse gas emissions in the face of global warming violates the class’s fundamental rights protected by the Canadian Charter of Rights and Freedoms and Quebec’s Charter of Human Rights and Freedoms.

Authorization Denied at the Superior Court of Quebec

Like certification in the common law provinces, authorization is the first step in the life of a class action in Quebec. The motion judge’s role is to screen out frivolous and meritless claims. Widely considered a class action-friendly jurisdiction, Quebec does not grant the motion judge any residual discretion once the four criteria for authorization are met.

Although Justice Morrison found all issues raised before the court justiciable, he did not authorize the proposed class action on the basis that the class’ configuration was inadequate (see original version of his decision and unofficial English translation). Justice Morrison rejected the ‘arbitrary’ age parameters of the proposed class, stating, “But why choose 35? Why not 20, 30 or 40? Why not 60?” In addition, the inclusion of children below the age of majority posed an issue of consent for the Court, particularly since ENJEU “is not a statutory entity created by legislature to protect the rights of minors or to act on their behalf.” Justice Morrison concluded it was inapt to proceed in the form of a class action. A claimant could litigate for a declaratory judgment single-handedly.

Decision to Grant Amnesty International Intervenor Status

Justice Bich of the QCCA contemplated Amnesty’s application to intervene on the appeal by asking:

1.     Whether Quebec’s procedural framework allows friendly intervenors at the authorization stage?

2.     If so, should intervenor status be granted in this case?

Justice Bich consulted provisions of the Quebec Code, class action jurisprudence, and academic research. Article 185 of the Quebec Code sets out the three types of voluntary intervenors:

(1)  An aggressive intervenor – the third-party who requests recognition of a right against the parties;

(2)  A conservatory intervenor –the third-party who wishes to replace one of the parties or intends to support/ assist their claims

(3)  A friendly intervenor– the third-party seeking to participate in argument during the investigation.

Justice Bich determined it is less practical and intuitive for judges to grant conservatory and aggressive intervenor status on an appeal for authorization. She expressed concern that these parties will provide little value for the court reviewing the appeal for authorization. She held, however, that a deciding court may approve a friendly intervenor when an appeal for authorization is in progress, where it determines that the intervention will be expedient, and the third party’s contribution will be useful. Generally speaking, courts should have a “certain flexibility” for friendly intervenors where there is public interest or law at stake.

Amnesty requested amicable intervenor status, a move supported by ENJEU and opposed by the GOC. Amnesty proposed to participate in the debate by raising arguments outside the scope of the appellant and respondent’s facta, namely, on matters of international law and the rights of children. In granting intervenor status, Justice Bich relied heavily on two key points. First, Amnesty has expertise in international instruments, including the Declaration of the Rights of the Child and the International Covenant on Civil and Political Rights that both parties lack. Second, the case involved the adjudication of fundamental rights of a public nature. Justice Bich noted it would have been preferable for Amnesty to have sought intervenor status at the motion for authorization itself. Amnesty is limited to making legal observations to assist the appellate court.

Analysis: Is Ontario Less Friendly to Intervenors than Quebec?

In both common and civil law jurisdictions, it is contentious whether an intervenor can be involved in the appeal of an authorization/certification decision. Quebec law is not entirely settled and applicants in Ontario have had mixed results. In Quebec. for example, third parties seeking aggressive intervenor status have not fared well in an appeal of authorization and after authorization was granted (Example 1; Example 2). By and large, however, the Quebec court is more liberal than Ontario in granting friendly intervenor status at the settlement stage.

In Ontario, Rule 13 of the Rules of Civil Procedure enables courts to grant intervenor status “for the purpose of rendering assistance to the court by way of argument”. Under s. 12 of the Class Proceedings Act courts can make orders they deem appropriate to ensure a fair and swift determination of a class action. In theory, this provision grants Ontario courts a broad authority to regularly include intervenors in an appeal for certification. In practice, however, Ontario rarely allows friendly intervenors when certification is contested. For example, in the case Fairview Donut Inc. v the TDL Group Corp, Justice Lax refused the motion for leave to intervene in the certification appeal, on the basis that it would “only serve to delay to determination of issues and may serve to take the proceeding off into a tangent”. Matthew Good attributes the Ontario courts’ restrictive approach to “the narrow confines of certification itself”, namely, that certification is supposed to be a procedural hurdle, rather than a substantive decision on the underlying issues.

When assessing an application to intervene, a court decides whether the proposed intervenor will add a useful, new perspective to the debate. In an adversarial dispute, friendly intervenors provide valuable insight beyond a bipartisan purview. As might be the case in EnJeu, an appeal of an authorization/ certification decision might be the last opportunity an intervenor has to influence the Court’s decision-making. Judges should make greater use of their broad discretionary powers to include friendly intervenors in class action litigation on issues affecting wide segments of society.