2019 Year in Review: Top 5 Class Action Cases Affecting Class Members

By Azra Alagic

Class action case law continues to grow. This month’s blog explores some of the most important Canadian decisions of 2019 due to their impact on present and future class members.

#1 Umbrella Purchasers – Expanding the Class Definition and Cause of Action

In September 2019, the Supreme Court of Canada released its decision in Pioneer Corp v Godfrey  and confirmed that umbrella purchasers have a cause of action under section 36 of the Competition Act. Umbrella purchasers are those people who bought a product (for example, a DVD player) that was the subject of the price-fixing scheme, but from a manufacturer or supplier who was not a part of the conspiracy. The United States has generally rejected the idea that umbrella purchasers can be included as class members within class actions. However, the Supreme Court of Canada agreed with the theory that it might be possible to show umbrella purchasers also overpaid because a price-fixing scheme can raise the price of all DVD players. Whether plaintiffs can prove harm will have to be decided at trial, but the Court’s decision makes it easier to certify large classes of purchasers in price-fixing cases. The focus now will be on discovery and the merits of the case, and less on the certification stage in a price-fixing scheme action.  

#2 Privacy Breaches – What’s the Harm?

Breaches of privacy continue to be of increasing concern not only for individuals who have social media accounts, but also for companies and the information they store digitally. Casino Rama’s data system was hacked in 2016. Customers’ personal information was compromised after the casino refused to pay the hacker’s ransom, who then posted the information online. The casino alerted authorities and the affected customers. They also took steps to take down the information from the internet. The affected customers initiated a class action, but in May 2019, the court denied certification. In Kaplan v Casino Rama, Justice Belobaba emphasized that the hackers, not the company who held the information, were responsible for the breach of confidence and publicity given to private life He noted that their lack of reasonable security measures did not translate to legal liability.  He also found that there was no evidence that any vulnerable party had experienced “fraud or identity theft as a result of the cyber-attack” or “any compensable financial or psychological loss.” As mentioned by commentators, the certification stage has been a challenge for proposed privacy breach class actions, as seen where Justice Belobaba struggled with the commonality for cause of action in Kaplan, where he denied certification on the ground of common issues. Moreover, if no identity theft occurs, what is the actual harm of accessing personal information? As stated by Justice Belobaba, “the fact that there are no provable losses and that the primary culprit, the hacker, is not sued as a defendant makes for a very convoluted class action.”

#3 Overcharging Consumers – Arbitrate or Litigate?

The Supreme Court of Canada’s decision in Telus Communications Inc. v Wellmanconfirmed that business customers are bound by the arbitration clause in their contracts and cannot be included in a class action. Telus’ practice of overcharging in the context of rounding up to the nearest minute on a phone call was not disclosed in their contracts. Telus argued successfully that the business (non-consumer) contracts included an enforceable arbitration clause that precluded certification of a class action on their behalf. Non-consumers cannot fall back on the consumers’ argument that arbitration clauses are not binding. Ultimately, it is up to the legislature to exempt non-consumers from the enforcement of the arbitration agreements. Small businesses and other class members caught by a mandatory arbitration clause may try to pursue group arbitration or class arbitration instead, as some commentators have suggested.  

#4 Forced Mediation – Taking the Action from Canada to the Netherlands

Can Uber require its drivers to arbitrate their disputes in the Netherlands? The Ontario Court of Appeal decided Uber cannot do so in Heller v Uber Technologies IncThe Court held that if Uber drivers are employees under the Employment Standards Act, the arbitration clause violates the Act. Uber drivers were forced to pay a fee up front to be able to make any claim regarding their contract.The clause was held unconscionable due to the imbalance of bargaining power inherent in the standard form contract. The Court in Heller recognized Uber’s contract requirement for an Ontario worker to arbitrate in the Netherlands was unenforceable. As stated by Justice Nordheimer, “In other words, as an Ontario resident he is statutorily entitled to the minimum benefits and protections of Ontario’s laws. He should not be left in a situation where those benefits and protections are set by the laws of another country.”  Uber has appealed the decision to the Supreme Court of Canada, which commentators believe will provide a better understanding to parties who contract on the basis of arbitration clauses.

#5 The Right to Appeal Decisions by Claims Administrators – When Can the Court Intervene?

JW suffered sexual abuse by a nun at a residential school while he would wait in line to take a shower. He brought a claim for compensation in accordance with the Indian Residential Schools Settlement Agreement (IRSSA). However, his claim was rejected by the adjudicator through the Independent Assessment Process (IAP) as there was no evidence that the nun had done the act for a sexual purpose. Although sexual intent was not an explicit part of the test, the internal reviewer affirmed the initial adjudicator. The class member eventually appealed to the Supreme Court of Canada in JW v Canadaasking the Court to find that decisions of IAP adjudicators are subject to judicial review and that the court’s supervisory role includes the power to overturn incorrect interpretations of the settlement agreement. The majority of the Court found that the Court can intervene only in exceptional circumstances, but disagreed as to whether JW’s case raised such exceptional circumstances. Justice Abella, Chief Justice Wagner and Justice Karakatsanis found that they did because the adjudicator failed to apply and implement the terms of the Agreement, as there was no language that indicated the sexual intent of the perpetrator is relevant or required for “any touching”. Justice Côté and Justice Moldaver found that the exceptional circumstance in the case was due to a gap in the agreement, where the Chief Adjudicator of the IRSSA is unable to reopen claims that were wrongly decided, which is in place to ensure consistency of decisions. JW illustrates the importance of protecting class members’ interest at the settlement approval stage to ensure fair outcomes and an ability to review unfair claims decisions.

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Not Quite Child’s Play: Unpacking the Lack of Clarity in Class Actions Involving Minors

By Alexandra Lawrence

There are several distinctions between the various provincial class proceedings statutes, but one commonality is that not one statute in Canada sets out the procedure for when a class member, including the representative plaintiff, is a child. In fact, according to the Canadian Foundation for Children, Youth and the Law, there is little consistency between provinces in terms of how minors are able to participate in judicial proceedings at all.

It is not uncommon for a proposed class to be made up of both adults and individuals under the age of the majority, and yet, courts do not always address the distinction between adult and child class members. For example in Templin v HMQ Ontario, the Court certified on consent an action where the proposed class consisted of the 6200 children who resided at or were inpatients of the Children’s Psychiatric Research Institute (“CPRI”) from 1963 to 2011. Given that the action was certified in 2016, at least a portion of the class was likely under the age of majority on the date of certification. Nevertheless, there was no discussion in the certification decision about whether the child class members should be treated differently from the other class members.

In comparison, in Abdulrahim v Air France, the same court in a settlement approval hearing noted that a number of the class members were minors and that the settlement was approved on their behalf. The court ordered that their settlement money be paid into court, and that this money could be withdrawn once they reached the age of majority.

Neither of these cases required minor class members to be represented by litigation guardians or representatives (adults who have the authority to instruct counsel on behalf of a child litigant), which is typical where children are a party to a proceeding. A judge in a recent Quebec decision, Environnement Jeunesse c. Procureur général du Canada, however, took a very different approach.

In Environnement Jeunesse, Justice Morrison denied the plaintiff’s application for authorization. One of the reasons he cited in his decision for denying authorization was that individuals under the age of 18 could not be members of the class, since the age of majority in Quebec is 18 and a person cannot fully exercise their civil rights before this. The Court had concerns that all minors in Quebec would become class members in this action, and that it would be inappropriate for the plaintiff to impose on all parents the obligation to act to exclude their children from this action, as would be necessary to opt out of the litigation.

Justice Morrison stated that while in previous class actions no distinction was made between class members who were minors and those who were not, in the present action the age of the class members was an important element at the heart of Environnement Jeunesse’s request.

The lack of consistency between courts regarding the treatment of child class members is troubling. Either legislatures, the courts, or both, ought to clarify the roles of class counsel and representative plaintiffs, and when litigation guardians are required. This is necessary particularly in light of the Federal Court’s recent affirmation in Rooke v Canada (Health) that representative plaintiffs in a class proceeding must be represented by a lawyer or satisfy certain special circumstances. If a lawyer is required in all class proceedings, then what is the role of the representative plaintiff, or where the representative plaintiff is a child, their litigation guardian? And more importantly, when is a litigation guardian needed for a class member, if ever?

The role of the litigation guardian of a minor representative plaintiff was clarified in the case of LC v Alberta, an action related to the alleged failure of the Director of Child Welfare in Alberta to comply with the Child Welfare Act concerning apprehended children who had become the subject of a temporary guardianship order. One of the proposed representative plaintiffs was a minor. The Court required that the minor, EMP, be appointed a next friend (also known as a litigation guardian or representative in other parts of Canada) and identified the guardian’s roles in the context of a class proceeding as determining whether EMP should remain in the class proceeding, or if she should be the representative plaintiff. 

In LC, Justice Graesser stated in the certification decision that it is not ideal for a representative plaintiff to be under age and require a litigation guardian. This is likely because the representative plaintiff’s role in a class proceeding is far more involved than the average class member. Most provinces have legislated that a representative plaintiff must meet three criteria: 1) they must fairly and adequately represent the interests of the class; 2) they must produce a plan for the proceeding; and 3) they cannot have a conflict of interest, on the common issues, with the class. The Supreme Court in Western Shopping Centres Inc. v Dutton expanded on these criteria, stating that a court should be satisfied that the representative plaintiff will vigorously and capably prosecute the interests of the class.

If the representative plaintiff’s role is to represent and defend the interests of the class, and a litigation guardian’s role is to make decisions that are in the best interest of the child, then it is redundant to require every minor class member to have a litigation guardian. If children are a part of the class, this should already be in the mind of the representative plaintiff as they make decisions on behalf of the class. While the decision to opt out is an individual one, it is not self-evident that a litigation guardian is needed to make the decision or to effect the opt-out. After all, opting out is usually as straightforward as sending an email or form. Opting out entails none of the traditional litigation rights that are exercised by ordinary litigants such as instructing counsel or directing the litigation; indeed, class members are not parties to the litigation, and have none of the rights of ordinary litigants, as the B.C. and Ontario Courts of Appeal recently affirmed in the Visa Merchant class actions.

Justice Morrison’s decision to deny certification because the action involves children is also inconsistent with Canada’s international legal commitments. Children’s right to participate in judicial proceedings affecting them is provided for in Article 12 of the Convention on the Rights of the Child (the “CRC”). The CRC was ratified in Canada in 1991 and since then has been recognized in Canadian courts. If children have a right to participate in judicial proceedings, it follows that those participatory rights should include class proceedings. Requiring child class members to appoint litigation guardians as a condition of certification creates a significant, perhaps insurmountable, barrier to class actions. More clarity must be provided by legislatures or by courts as to how far children’s participatory rights go in class actions, and the proper role of both class counsel and litigation guardians.

Regulating the Self-Regulated Profession: The Roma Refugee Class Actions

By Karly Lyons

On August 20, 2019 motions to certify three class proceedings for the purpose of settlement came before Justice Perell of the Ontario Superior Court. All three lawsuits were against immigration and refugee lawyers and alleged professional negligence. The claims involved Roma refugee claimants fleeing a far-right organization in Hungary called the Hungarian Guard.  All of the class members had hired either Viktor Serhey Hohots, Joseph Stephen Farkas or Erzsebet Jazi to file their refugee claim and all were denied refugee status. The class members all advanced the following common questions: (1) did the Defendants owe a duty of care to the class; (2) did they breach this duty of care; and (3) did they owe a fiduciary duty? Justice Perell certified the three actions as class proceedings.

Mr. Istvan Horvath is one of the representative plaintiffs. According to the Statement of Claim filed by class counsel Flaherty McCarthy LLP, Mr. Horvath was a Roma refugee claimant who arrived from Canada in 2009. He alleged after one initial meeting with counsel a different individual attended the hearing and was unprepared to adequately proceed. Mr. Horvath alleged that as a result of inadequate legal representation, his refugee claim was rejected one month after his initial Refugee Hearing. Fortunately, he was allowed to remain in Canada on Humanitarian and Compassionate Grounds.

Mr. Horvath’s counsel were officially disciplined by the Law Society of Upper Canada (as it then was) in 2015 for abdicating their professional responsibilities. The other representative plaintiffs in the action also had counsel who were disciplined by the Law Society. The disciplinary decisions led to discussion of the vulnerability of refugee claimants and the need for dedicated counsel. These disciplinary proceedings formed the basis of the causes of action in the class actions.

Class actions against lawyers for professional negligence are unusual but not unprecedented. In Ontario, the first such claim was certified twenty years ago. Just this past month a Calgary judge certified a class action against a lawyer by residential school survivors he previously represented, for negligence and charging excessive fees.

A class proceeding is complex and can involve a confluence of laws and procedures. What began as Immigration and Refugee Board decisions then led to official discipline by a self-regulated profession which in turn led to certified and settled class proceedings. The traumatic individual situation of Mr. Horvath led to a more complex resolution than he likely anticipated. This settlement will also surely raise issues surrounding notice as the certified class consists of Roma refugees, many of whom were deported once their refugee claims were rejected and continue to be displaced elsewhere.

Class proceedings based on a cause of action of professional negligence raise important questions about competency of counsel and self-regulation. When counsel is professionally negligent, disciplinary measures of law societies are triggered. However, when negligence is on a large scale with a population who may be deported as a result of the negligence – does self-regulation still work? Had Mr. Horvath (and others in his community) not been allowed to remain in the country on compassionate and humanitarian grounds, would counsel have been disciplined? Will the class ever be properly compensated given their potential geographical dispersal? Is it a failure of self-regulation that the harm done reached a scale where a class proceeding was the appropriate procedure?

The Roma refugee class proceedings remind us of the importance of competent counsel when dealing with vulnerable individuals. They are also unique applications of the class action device to claims of professional negligence in a self-regulating profession.

Expanding the Reach of Class Actions: Administrative Segregation

By Alexandra Lawrence and Karly Lyons

According to the Canadian Bar Association, there are currently 295 active class actions in the province of Ontario. These proceedings are wide reaching and affect many Canadians in some way – even if they do not know they are class members.

What kinds of class actions are being pursued? The Law Commission of Ontario’s Report “Class Actions: Objectives, Experiences and Reforms” released in July 2019 includes a breakdown by causes of action since 1993. Almost half of the class actions filed in Ontario since 1993 concern the Securities Act, the Competition Act, and product liability. Another sizeable chunk of litigation (around 30%) includes consumer protection, employment/pensions, franchise, insurance, and privacy.

Comparatively few class actions are brought on behalf of historically marginalized groups, but that may be changing. Recently, there has been an increase in less traditional causes of action in class action litigation, with many of these cases having a human rights focus. This litigation will often seek damages under the Canadian Charter of Rights and Freedoms using the violation of a specific Charter right as the cause of action. A specific example of this litigation is in the context of administrative segregation, or what is more commonly known as solitary confinement.

The Canadian Federal Government stipulates that administrative segregation is to be used only for the shortest period of time necessary when there are no other reasonable and safe alternatives. However, since the purpose of administrative segregation is to provide security to inmates, the length of this type of segregation can be indefinite. Disciplinary segregation, on the other hand, is a form of punishment for offences committed at a penitentiary which is time-limited – the segregation may not last more than 30 days for a single offence or more than 45 days for multiple offences. 

The Federal Government has faced repeated criticism and lawsuits over the practice of administrative segregation claiming that the practice is akin to torture. The Supreme Court of Canada recently granted the Federal Government’s request to allow their current administrative segregation policy to remain in place for now, giving the Government more time to enact new legislation. The request came in response to a December 2017 decision from the Ontario Superior Court which declared parts of the legislation governing administrative segregation unconstitutional and gave the Federal Government a year to correct the legislation. The government successfully persuaded the Ontario Court of Appeal on two occasions to grant them an extension.

Administrative segregation class proceedings allege that the government is violating inmates’ section 7, 9, 11, and 12 rights under the Charter when inmates are placed in solitary confinement for prolonged periods of time. A recent example is Reddock v Canada (AG) where the representative plaintiff claimed the Federal Government breached the inmates’ Charter rights in addition to committing systemic negligence when placing inmates in administrative segregation. The representative plaintiff argued that the practice of administrative segregation is physically and psychologically harmful, and because of this placing inmates in administrative segregation for a prolonged period of time is in contravention of the Charter. Ontario Superior Court Justice Paul Perell agreed and granted the plaintiff’s motion for summary judgment on the illegality of administrative segregation practice, finding that “placement in administrative segregation for more than fifteen days causes serious physical and mental harm.” He awarded the class $20 million in damages to be paid directly to class members.

In November, the Ontario Court of Appeal will hear an appeal of Brazeau v Canada (AG) which was also decided by Justice Perell. Similar to Reddock, the representative plaintiffs in Brazeau alleged that by placing mentally ill inmates in administrative segregation, the Federal Government breached class members’ section 7, 9, and 12 rights under the Charter. In response to a summary judgment motion brought by the plaintiff, Justice Perell found that two groups of inmates’ section 7 rights were violated by the Federal Government: first, inmates who were voluntarily placed in administrative segregation for more than 60 days, and; second, inmates who were involuntarily placed in administrative segregation for more than 30 days. Justice Perell also found that the section 12 rights of the above-mentioned sub-classes were also violated.

Justice Perell awarded the class $20 million in damages but instead of directing the compensation to individual class members, he earmarked the money to help boost mental health supports for inmates and correctional facilities. The Federal Government is appealing his decision in part on the basis that he lacks the jurisdiction to order such a remedy.

In addition to Reddock and Brazeau, there are currently two other administrative segregation class actions that are winding their way through the courts – one from British Columbia, one from Quebec. Both Reddock and Brazeau, in addition to these other actions, have held that the enabling legislation of the Corrections and Conditional Release Act and the manner of its operation are contrary to the Charter.

When an individual’s Charter rights are violated, they may be entitled to a damage award under section 24. A class proceeding represents the interests of all members of the class. If the Charter rights of a large group of people have been breached by a defendant’s common practice, it may be possible to obtain a large aggregate damages award for class members. Such damages can be assessed on a class wide basis because it is not always necessary to assess each class member’s circumstances. Rather, a court can award general damages in order to serve a deterrence or vindication function, if not a compensatory one. In Reddock, Justice Perell held that “there is a base level of compensatory harm for the contraventions of the Charter or for systemic negligence,” and accordingly awarded the class compensatory damages. The availability of class-wide damages in these cases makes Charter class actions more attractive to lawyers who must fund the litigation out of their own pockets and are only paid for their work if the case results in a large monetary payment by the defendant.

Administrative segregation is just one of the many human rights and/or Charter oriented class proceedings being brought in courts across Canada. Other examples of these actions include those brought by residential school survivors, such as McLean v Canada, actions against the Federal Government for failing to address climate change, and systemic sexual abuse actions.

Charter-based class actions have been litigated in the past. However, the Charter is being argued in greater numbers in class proceedings and is stretching the traditional categories of litigation as outlined above. Of interest will be the outcome of the Brazeau appeal and if the Ontario Court of Appeal comments on the jurisdiction of judges to dispense aggregate Charter damage awards in ways other than directly to individual class members. As non-traditional categories of Charter class actions arise, courts may in turn begin to develop creative uses of damage awards as a means of using section 24 of the Charter to address systemic issues. Regardless, the Brazeau appeal should prove a significant decision for the future of Charter litigation and other human rights class actions.