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.   

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