Defendant Class Proceedings

By Flavia Zaka

Class proceedings usually invoke images of a large asymmetry of numbers between parties: multitudes of individuals on the plaintiff side, and relatively few, but powerful, governments or corporations on the defence side. Though this is the most common model, it is not the only one that class action statutes permit.

Ontario’s legislation also contemplates defendants to act as representatives of an entire class.  Section 4 of the Class Proceedings Act (CPA), allows either party to ask the court, at any stage of the proceedings, to appoint a representative defendant; they need not be willing – this role can be imposed on them, so long as the court believes that they would vigorously defend their position, insofar as it aligns with that of the class. This may lead to a bilateral class action – that is, a class of plaintiffs against a class of defendants. Though exceedingly rare, one such action was filed in ON last summer, by a proposed class of Long-Term Care (LTC) residents, against a proposed class of LTC homes, as well as the municipal and provincial governments.   

In what situations do these actions arise and how do they differ from plaintiff class actions?

While the idea of a defendant class proceeding was present at the origins of class action legislation in Ontario, their potential remains largely unexplored in both theory and practice. The Ontario Law Reform Commission’s 1982 Report, on which the CPA was based, devotes only three of its 880 pages to defendant class actions, deeming them “sufficiently discrete to merit separate treatment”. In these few pages, it contemplates these actions may arise in situations of unincorporated associations, or where individuals unrelated to each other have committed a wrong in common. Such cases were anticipated to involve antitrust, securities or environmental lawsuits. In practice, they have involved aboriginal land title, conspiracy and fraud, copyright, and also the mere seeking of declarations.

The first case to be treated by Canadian courts was Chippewas of Sarnia Band v Canada (Attorney General). Here, a sole plaintiff, a First Nation Band claiming title to lands in and around Sarnia that it had never surrendered, asked the Court to certify a class of defendants – the 2,200 individuals who had a competing title to or interest in the land. (The interest, which could be traced back to the same letters patent issued in 1853, gave the plaintiff a claim against each individual.) The court granted certification of the defendant class, over the objections of the named defendant who argued defendants could not be included in a class against their will. The Court stated that “section 4 of the Act does not require that all potential defendants be named prior to certification of the proceeding, nor is the provision expressly confined to willing or consensual representative defendants.”

The second case, Berry v Pulley, was a bilateral class action, alleging fraud, conspiracy and interference with economic relations, involving pilots from Air Ontario and Air Canada. When the former company was acquired by the latter, leading to issues in pilot seniority, pilots from Air Ontario asked the court to assign Air Canada pilots as representative of a class of 1,682 defendants. Again, the Court agreed on the basis that the plaintiffs had a cause of action against every member of the defendant class, and defendants can choose to opt out and be sued individually. The courts in both Chippewas v Canada and Berry v Pulley found certification of defendant classes to be both procedurally efficient and to align with access to justice, insofar as the costs of litigation would be widely spread among the defendants.

Two more cases were certified a decade later, though of a very different nature. In Chrysler Canada Inc v Gatens, 2010 ONSC 5467 and General Motors of Canada LTD v Abrams, 2011 ONSC 5338,  each car manufacturer commenced a proposed class action against its retired employees. In both cases, the manufacturer sought a declaration that it could unilaterally alter or terminate the retirees’ health care benefits. Both actions were certified for the purposes of settlement. In contrast, the Federal Court in Voltage Pictures v Salna denied certification of a motion by a group of film production companies who alleged that their copyrights in several films had been infringed online. They brought an action against three individuals who they claimed illegally downloaded the plaintiffs’ films using peer-to-peer networks. The Federal Court found that the pleadings did not disclose a cause of action against any of the three proposed representative defendants.

In their usual orientation, defendant classes are designed to facilitate industry-wide lawsuits. The 2014 SCC decision in Bank of Montreal v Marcotte, however, may provide plaintiffs a different avenue for such litigation. In Marcotte, the Court interpreted Quebec’s class proceeding rule to allow a representative plaintiff to sue multiple defendants, even if the plaintiff does not have a personal cause of action against each defendant, so long as they represent class members who do. This would be the predicament of the proposed LTC bilateral class action; not every class member has been wronged by each and every LTC home, though each member of the plaintiff class has a cause of action against at least one member of the defendant class. Although Marcotte has not been explicitly adopted in an Ontario case, it is perhaps a matter of time; other jurisdictions in Canada do not require that a representative has personal standing in order to sue multiple defendants in an industry.

The same underlying reasons for encouraging plaintiff class actions operate with defendant ones: avoid inconsistent judgements, improve judicial efficiency, increase access to justice, and provide deterrence.  But these reasons collide in strange ways in defendant class actions. First, distributing the costs of litigation among defendants can diminish the effect of deterrence.  On the other hand, unlike plaintiff class actions, where the representative plaintiff and class members are indemnified against losses, no such practice exists with defendant-side proceedings; the consequences of an adverse judgement could be financially devastating. In this light, an opt-out regime that does not require affirmative consent from each class member may cause serious financial consequences and gives rise to due process concerns. After all, a defendant class member has little control over their own defence, may be represented by a defendant who is not willing (so long as they are likely to vigorously defend their position), and is liable for both damages and adverse costs.

Though treated similarly to plaintiff class actions, defendant class proceedings are peculiar, and create awkward tensions in principles that undergird class action legislation. At the same time, they have been used effectively in rather diverse contexts. What is as clear today is it was four decades ago, is that they merit a separate study.   

LTC Class Actions and Bill 218 – Navigating a Shifting Legal Landscape

By Flavia Zaka

There are 626 Long Term-Care (“LTC”) Homes in Ontario, housing more than 79,000 people. By the end of the first wave of COVID-19, 55% of the LTCs had reported an outbreak.  To date, 1959 residents have died from exposure to the virus.

At least 15 proposed class actions against LTCs have been filed since March 17 in Ontario (most listed here, and an additional one here). Two of them name the Provincial Government as a (co-)defendant. They vary significantly in class size, damages, and number of defendants – the largest naming Sienna Senior Living as a proposed representative of 96 LTCs, along with the City of Toronto and Provincial Government as defendants. (The action proposes a class of defendants as well as plaintiffs – a rare situation that will be the topic of an upcoming blog.)   

The class definitions vary.  Some include all residents, while others limit the class to those who contracted the virus.  One action even includes non-residents who contracted the virus from an infected LTC resident, or a cross-infected person. Most don’t have a fixed date range, remaining open until the end of the pandemic. There are significant  overlaps in classes, which may lead to carriage motions.

The most striking similarities among the class actions are the allegations against the LTCs. The expansive lists include: lack of proper sanitation protocols; failure to implement screening measures  and basic social distancing practices, including the separation of infected and non-infected residents; failure to comply with public health guidance, directives and orders; as well as severe understaffing. These increased the risk of exposure to the virus, resulting in pain and suffering, and in specific cases, illness and death. These allegations surface under four recurring causes of action against the LTCs: breach of contract, negligence,  breach of fiduciary duty, and breach of the Occupier’s Liability Act.  Causes of action against the government include breach of fiduciary duty, negligence and breach of section 7 of the Charter.

The damages claimed range from $1.5 million to $600 million. With LTC insurance coverage for infectious disease  reportedly between $5million and $10 million for such claims, it is unlikely settlements will exceed these amounts. (These insurance policies are subject to renewal at the end of 2020 – the new ones offered do not cover infectious disease.)

In order to curtail the risk of operating in a pandemic, the Conservative Government in Ontario introduced Bill 218, Supporting Ontario’s Recovery and Municipal Elections Act, 2020. Section 2(1) offers immunity from COVID-19 liability to any person or organization (including the Crown) that exposed others to the virus, provided that (a) they made a “good faith effort” to comply with legislative, regulatory and policy requirements, and (b) that their actions/omissions did not constitute gross negligence. “Good faith effort” has been explicitly decoupled from reasonableness, defined in the Bill as “an honest effort, whether or not that effort is reasonable.”  Gross negligence is not defined. What is clear, is that this is a significantly higher legal standard than negligence. The proposed legislation would be retroactive to March 17, 2020, affecting each of the proposed LTC class actions.

Determining gross negligence requires granular engagement with the facts, but one guiding principle is that there must be “a very marked departure” from the applicable standard of care.[1] This includes an assessment of the magnitude of foreseeable risk flowing from the failure to take due care.[2] As a species of negligence, there need not be conscious wrongdoing.[3]

Can a “good-faith” failure to comply with regulatory requirements be deemed grossly negligent? If one considers that LTC homes have a far greater standard of care, than say, a gym, by virtue of being entrusted with the care of such vulnerable populations, then a failure to rigorously engage in proper sanitation protocols, knowing the magnitude of harm that it would cause, may be a very marked departure from the expected standard of care.

If Bill 218 passes as currently worded, the filed class actions would be dismissed unless amended to include gross negligence or a lack of good faith attempt to follow government directives.[4] New actions filed would be assessed under the amended Class Proceedings Act (“CPA”), that came into force on October 1st.  This presents its own set of new challenges to class actions, among them, the stricter certification criteria, discussed in an earlier blog. Of particular concern would be the amended section  5(1)(d), which requires that common issues predominate over individual ones. While the question of a marked departure from standard of care of the LTCs would be a strong common thread among all class members, the defendants are likely to focus on the individual harms suffered. Whether a breach of standard of care led to the individual harm – death, trauma, lung damage, etc. – must be proven over and again. Given the size of the class, these individual issues may overwhelm the common ones. It remains to be seen how the courts will assess the predominance requirement, and if LTC class actions will even be a terrain to test the amended CPA.

[1] McCulloch v. Murray, [1942] SCR, 141 (SCC) at 145.

[2] Lapshinoff v. Wray, 2020 BCCA 31.

[3] Dagenais v Timmins (City) (1995), 31 MPLR (2d) 196 (Ont CA); Wynter v Canada 2017 FCA 195.

[4] Section 2(6) of the Bill states: “Any proceeding referred to in subsection (4) that is commenced before the day this Act comes into force is deemed to have been dismissed, without costs, on the day this Act comes into force.”