Recent court decisions in Ontario and Quebec on class-action lawsuits concerning financial transactions indicate the climate for such suits is diverging in Canada\u2019s two most populous provinces.
Two major class-action cases against banks have been certified in Ontario over the past year, while judges in Quebec have dismissed three others. And with Ontario courts warming to class actions in the wake of new legal amendments, lawyers say some cases may migrate to Ontario from British Columbia, the province in which class-action plaintiffs have traditionally fared best.
\u201cThere is definitely something afoot in Ontario,\u201d says Shaun Finn, a partner with McCarthy T\u00e9trault LLP<\/b> in Montreal and co-author of a new book entitled Defending Class Actions in Canada. <\/i> \u201cQuebec seems to be heading in the opposite direction.\u201d
Finn points to the Ontario Court of Appeal\u2019s certification of two cases \u2014 both regarding allegedly improper credit card fees \u2014 against TD Bank Financial Group<\/b> and Ottawa-based MBNA Canada Bank<\/b>. In both, the Supreme Court of Canada has declined to hear appeals of the certification orders.
In Quebec, judges are taking \u201ca harder look\u201d at the merits of class-action cases before authorizing them to proceed, Finn says. As of 2005, Quebec courts have snuffed attempts to mount class actions against A\u00e9roports de Montr\u00e9al, Novopharm Ltd., Agropur Coop\u00e9rative and Pharmascience Inc. as part of what Finn describes as a pattern of imposing \u201crigorous and conservative\u201d tests on plaintiffs\u2019 claims.
For further evidence that class actions in Quebec and Ontario are moving in different directions, Finn points to litigation in both provinces concerning arbitration clauses in consumer contracts with Dell Canada Inc., which resulted in an Ontario decision repudiating the clauses and a Quebec decision upholding them. This has left lawyers elsewhere in the country scratching their heads.
\u201cThe picture is evolving very quickly,\u201d says Ray Wagner, a lawyer with Halifax law firm Wagners<\/b>, who is arguing the Nova Scotia component of a national class-action case concerning interest rates against National Money Mart Co. He notes that every province now has proclaimed class-action legislation.
Adrian Lang, a lawyer in Toronto with Stikeman Elliott LLP<\/b> who defends banks, pharmaceutical companies and insurance companies facing class actions, agrees that the certification of the cases against TD and MBNA \u2014 and the SCC\u2019s decision not to allow appeals on those decisions \u2014 suggests the climate is changing in Ontario.
Lang says both cases indicate that plaintiffs in Ontario may be able to employ methods to aggregate damages permitted in amendments to the Ontario Securities Act introduced in 2006, a key development that could propel more such cases in Ontario.
\u201cOne area in which courts have, in the past, found that class actions are not preferable is when damages cannot be aggregated,\u201d Lang says. But, in both the TD and MBNA cases, the plaintiffs were permitted to submit estimates of aggregate damages, even though the true extent of the damages stemming from allegedly improper fees levied on massive numbers of credit card transactions over a period of many years would have been extremely difficult and expensive to quantify precisely.
The MBNA case, in particular, \u201csets out a statistical method to determine damages,\u201d Lang says. She believes plaintiffs will be eager to modify this method in other cases in the future.
Although Lang believes the MBNA case went \u201cone step too far\u201d in facilitating plaintiffs\u2019 need for creative tools to develop estimates of aggregate damages, she believes the court\u2019s decision to permit plaintiffs to use new methods to aggregate damages indicates that class actions are becoming easier to certify in Ontario.
This means more settlements are inevitable, Lang says: \u201cDefendants are faced with overwhelmingly large numbers for damages. In most cases, certification is the last step before settlement.\u201d
The TD case offers a vivid example of the kinds of damage figures bandied about in such cases. \u201cWe are suing on the basis of an assessment of damages of more than $400 million,\u201d says plaintiffs\u2019 counsel Harvey Strosberg of Sutts Strosberg LLP<\/b> in Windsor, Ont. A similar case against Toronto-based CIBC<\/b> ultimately resulted in a $16.5-million settlement.
At TD, senior manager of external communications Kelly Hechler says that the Ontario court decision is a \u201ccertification only\u201d and \u201cnot a determination on the issue.
\u201cTD is confident that our method of handling foreign currency transactions has been transparent,\u201d Hechler says, \u201cand both lawful and fair to our clients in every respect. We plan to defend our position vigorously.\u201d
@page_break@As for Strosberg\u2019s estimate of damages, Hechler says: \u201cAs with any situation, that is under judicial review. It would be inappropriate to provide comments at this time.\u201d
Although lawyers such as Lang and Finn, who specialize in defending corporations facing class actions, view developments favouring certification of class actions in Ontario with anxiety, plaintiffs\u2019 lawyers such as Strosberg are pleased.
\u201cIt\u2019s nice to see that the courts are beginning to recognize aggregate damages,\u201d says plaintiffs\u2019 lawyer Joel Rochon of Rochon Genova LLP<\/b> in Toronto.
Rochon hopes Ontario\u2019s changing class-action climate will help propel a case he and a consortium of lawyers launched in 2006 against mutual fund giants AGF Funds Inc., AIC Ltd., IG Investment Management Ltd., CI Mutual Funds Inc. <\/b> and Franklin Templeton Investments Corp. <\/b>concerning alleged market-timing practices.
Although the defendants have already paid almost $200 million in settlements following investigations by the Ontario Securities Commission, Rochon argues that those settlements represent \u201conly about 50\u00a2 on the dollar\u201d for damages to mutual fund investors.
\u201cThere haven\u2019t been class actions against the mutual fund companies before. This case will clarify their fiduciary obligations,\u201d Rochon says. \u201cWe\u2019re set to move forward toward certification by the end of 2008.\u201d
In the meantime, Rochon says, a recently certified class-action lawsuit against Atlas Cold Storage Holdings Inc. will provide further evidence in terms of the direction that Ontario class-action jurisprudence is heading. The defendants in this case are charged with defrauding investors of $350 million through allegedly false financial reporting.
Rochon and Strosberg both point to settlements of cross-border class actions against Toronto-based Nortel Networks Corp. and Menu Foods Income Fund of Streetsville, Ont., to elaborate further on the class-action climate in Ontario. The two lawyers believe both cases demonstrate that corporations now see Canada as part of a unified North American legal arena in which settlements forged in the U.S. will prevail north of the border as well.
\u201cNortel is important, from a multinational perspective, because Canadian and American shareholders were treated equally,\u201d says Rochon, who notes that at the time the class action against Nortel began, Ontario had yet to introduce \u201cfraud on the markets\u201d legislation similar to U.S. laws, which are now emulated in the Ontario Securities Act.
\u201cThis was the largest multinational settlement in Canadian history,\u201d he adds.
Strosberg says the proposed settlement of a class action against pet-food manufacturer Menu Foods also suggests that corporations now view Canada as part of a unitary North American legal arena.
On April 1, Menu Foods advised the U.S. District Court for the District of New Jersey that it had reached a cross-border settlement in principle through mediation.
\u201cWhat we\u2019re seeing is that North America is not just a free trade zone,\u201d Strosberg says. \u201cAll of the corporations deal with it as a unitary market now. Smart companies want to deal with all their problems at the same time.\u201d
In B.C., which adopted class-actions legislation in 1996, lawyers say the certification of the TD and MBNA class actions changes everything. \u201cOntario has snapped into alignment with B.C.,\u201d says Ward Branch of Branch MacMaster in Vancouver. He says that tools to quantify aggregate damages introduced into B.C. law gave that province \u201ca seven-year head start.\u201d
Those tools first were employed in Scott v. TD Waterhouse Investor Services (Canada) Inc., a case with 28,000 plaintiffs that was certified in 2002 and settled nationally in 2005. It has engendered a series of lawsuits against brokerages regarding allegedly improper fees. A similar case against Merrill Lynch Canada Inc. is now underway.
\u201cThe B.C. legislation directs the courts to make claims simplification possible; and it tells judges they have discretion to facilitate this,\u201d Branch says. \u201cThat gives you all you need.\u201d
The B.C. law also stipulates that costs are not payable by plaintiffs in class actions, which Branch describes as \u201ca fair rule that allows plaintiffs access to justice.\u201d In Ontario, plaintiffs can be held liable for costs; the Supreme Court recently upheld an award of costs against a plaintiff in the Danier Leather Inc. case.
Proposed amendments to B.C. law aimed at facilitating class actions in the financial services sector were withdrawn, says J.J. Camp, a lawyer with Camp Fiorante Matthews in Vancouver: \u201cWe told the government the proposed constraints on liabilities were too severe.\u201d
In his view, the amendments would have put B.C. ahead of the rest of the country for plaintiff\u2019s rights. \u201cThe only real way we can get engaged in B.C. now,\u201d he says. \u201cis through working with Ontario lawyers.\u201d\tIE<\/b>
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