Introduction to Class Action Claims
A class action allows a representative to advance a legal claim on behalf of two or more persons where common issues exist.
Prior to the enactment of class action legislation in various jurisdictions, representative claims existed for many years in the common law Provinces.
Former Rule 75 of the Ontario Rules of Civil Procedure provided for representative claims where numerous persons had the same interest and could sue, subject to authorization of the Court, for the benefit of all.
While that Rule has been repealed in Ontario, several common law Provinces have similar provisions remaining in effect.
As referred to below, class action legislation is now in place in several jurisdictions, including Ontario.
The Ontario legislation developed as a result of a product liability case, Naken v. General Motors Canada Ltd.1 in which the Supreme Court of Canada refused to allow a representative action on behalf of owners of General Motors’ Firenza automobiles to move forward as a class action.
The Ontario Court of Appeal2 had allowed the claim to proceed pursuant to Rule 75 of the Rules of Civil procedure — the former representative action provision referred to above.
The Supreme Court of Canada held that Rule 75 was “totally inadequate” as the procedural basis for a class action while at the same time acknowledging that, as a practical matter, this conclusion may mean that hundreds of potentially meritorious claims would not obtain access to justice.
The Class Proceedings Act
The 1982 Ontario Law Reform Commission Report on class actions identified three major goals of a class action regime:
b) Increased access to courts; and
c) Behaviour modification.
The Attorney General’s Advisory Committee on Class Action Reform in its 1990 Report expanded on these goals concluding that the new legislation should have as its objective:
b) Improved access to justice for those whose claims might not otherwise be pursued; and
c) Behaviour modification, i.e. the generation of a sharper sense of obligation to the public by those whose actions affect large numbers of people.
The Class Proceedings Act3 (“the Act”) came into force in Ontario on January 1, 1993.
The Act creates no new cause of action. It is entirely procedural.
The Act provides for the certification of class, actions and the procedural framework for prosecution of those claims including rules with respect to notice, settlement, counsel fees, opting-out, etc.
The Act gives the Court broad powers of case management and the ability to use the mandated procedure to obtain just and expeditious results.
The Act creates a very effective tool for advancing product liability claims affecting a large number of plaintiffs.
Certification of Class Action Claim
A proposed class action claim is instituted through the normal route of issuance of a Statement of Claim. Such action must, however, be certified by the Court as a class proceeding before it can take advantage of the procedures available for class action claims.
In the event that the certification test is met, certification is mandatory.
Section 5 of the Act sets out the test for certification of a claim:
b) There is an identifiable class of two or more persons that would be represented by the representative plaintiff or defendant,
c) The claims or defences of the class members raise common issues;
d) A class proceeding would be the preferable procedure for the resolution of the common issues; and
e) There is a representative plaintiff or defendant who, (i) would fairly and adequately represent the interests of the class. (ii) has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and (iii) does not have, on the common issues for the class, an interest in conflict with the interests of other class members.
The Act goes on to indicate that the Court shall not refuse to certify a class proceeding solely on any of the following grounds:
b) The relief claimed relates to separate contracts involving different class members.
c) Different remedies are sought for different class members
d) The number of class members or identity of each class member is not known.
e) The class includes a sub class whose members have claims or defences that raise common issues not shared by all class members.
Cause of Action on the Pleadings
The test for finding a cause of action involves an assumption that the facts as set out in the Statement of Claim can be proved, or whether it is “plain and obvious” that the Statement of Claim discloses no reasonable cause of action. The threshold is therefore very low, consistent with the applicable test under Rule 21 of the Rules of Civil Procedure where a Statement of Claim is being attacked as not disclosing a cause of action.
Neither the length and complexity of the issues, the novelty of the cause of action, nor the potential for the defendant to present a strong defence should prevent the plaintiff from proceeding with his or her case.
The test for finding a cause of action will be met unless the defendants can show that it is “plain and obvious, beyond doubt, that the plaintiffs could not succeed”.
Identifiable Class of Two or More Persons
It is not necessary that the actual identity of all members of the class be known in order to satisfy the requirement that the class be identifiable. The purpose of the class definition is three-fold:
(g) it defines the parameters of the lawsuit so as to identify those persons who are bound by its result;
(h) It describes who is entitled to notice pursuant to the Act.
In the context of product liability claims, a class might be defined as a group of purchasers or consumers of a specific product.
One of the earliest class actions certified in Ontario, Bendall v. McGhan Medical Corp.4 leave to appeal to CA refused (November 26, 1993), was a products liability claim where the class was defined as:
All persons who have had silicone gel breast implants placed in their bodies, whose implants were manufactured, developed, designed, fabricated, sold, distributed or otherwise placed into the stream of commerce by the named defendants.
Counsel can be creative in defining the proposed class in product liability claims. The Ontario Courts have demonstrated flexibility in considering class definitions provided the purposes of the class definition are met.
Common Issues
A class action cannot exist without a core element of commonality. That commonality is inextricably linked with the causes of action pleaded.
“Common Issues” are defined as:
(b) Common but not necessarily identical issues of law that arise from common but not necessarily identical facts.
It is not necessary that common issues raise questions which if answered, would determine the issue of liability. What is required is that resolution of the common issues will advance the proceedings. The common issues are generally defined in terms of questions to be answered in the action.
Preferable Procedure
In considering whether a class proceeding would be the preferable procedure for the resolution of common issues, the Courts seem to be significantly driven by the legislative objectives set out above. Judicial economy, access to justice and behaviour modification figure prominently in the consideration of the preferable procedure test.
The Courts are given broad discretion in determining whether a class proceeding is the preferable procedure for resolving common issues.
In addition to considering the legislative objectives, the Courts also consider questions of complexity, fairness and the existence of an alternative out-of-court procedure.
Representative Plaintiff
The representative plaintiff must be able to represent the interests of the class fairly and adequately with an effective and workable plan for advancing the litigation without any conflict-of-interest with class members on the common issues.
It is not necessary that the representative plaintiff have a cause of action against each of the named defendants. It is sufficient that there is a cause of action.
No special rules apply but counsel should satisfy themselves that the proposed representative plaintiff will meet the requirements and be approved by the Court.
Retainer/Fee Arrangements and Funding
Section 32 of the Act sets out the requirements for all agreements governing fees and disbursements between lawyers and representative parties.
These requirements apply to all agreements in respect of class action claims whether they be contingent fee agreements, traditional fee-for-service agreements, or otherwise.
Section 32 requires that agreements respecting fees and disbursements be in writing and contain the following:
(b) An estimate of the expected fee, whether contingent on success in the class proceeding or not; and
(c) The method by which payment is to be made, whether by lump sum, salary or otherwise.
Section 32 furthermore provides that an agreement respecting fees and disbursements between a solicitor and a representative party is not enforceable unless approved by the Court, on the motion of the solicitor.
Amounts owing under an enforceable agreement are a first charge on any settlement funds or monetary award.
Where an agreement respecting fees and disbursements is not approved by the Court, the Court may:
(b) Direct a reference under the Rules of Court to determine the amount owing; or
(c) Direct that the amount owing be determined in any other manner.
Section 33 of the Act indicates that despite the Solicitors Act and an Act Respecting Champerty, a solicitor and a representative party may enter into a written agreement providing for payment of fees and disbursements only in the event of success in a class proceeding.
Contingent fee retainers are most common in class actions. Counsel is allowed a substantial reward for the risk of not being paid and for taking on a difficult but meritorious claim. The Class Proceedings Committee and the Class Proceedings Fund were established by the Law Society Amendment Act (Class Proceedings Funding), 1992, SO 1992,c.7 to assist in promoting access to justice by providing funds to pay some portion of the disbursements of a Plaintiff in a class action and to pay costs in favour of the defendant if a supported case is unsuccessful.
The Class Proceedings Committee decides whether a particular case should be supported financially and, if so, the amounts and purposes for which funding is granted. The Fund is administered by the Board of the Law Foundation.
The Committee considers various factors in making funding decisions. The factors include the following:
(b) Fundraising efforts by the representative plaintiff;
(c) Proposed use of the funds;
(d) Financial controls;
(e) Public interest;
(f) Likelihood of certification;
(g) Amount of funding required for other cases.
The Committee has issued specific instructions for making an application for funding and those instructions should be carefully followed in connection with any such funding application.
The Court retains discretion in awarding fees in favour of class counsel. A detailed discussion of class counsel fee awards is beyond of the scope of this article. However, various approaches have been adopted by the courts in connection with class counsel fees. Those approaches include application of a multiplier (where class counsel’s fee is the value of docketed time multiplied by a multiplier — the Court approves or sets both the base fee and the multiplier), percentage awards based on the value of an overall settlement or judgment, per capita fees (based on a fee for each class member), etc.
Product Liability Class Action Claims
The product liability area offers significant potential for class action claims.
To date, Ontario Courts have certified a number of class actions based on product liability theories. These include cases concerning heart pacemaker leads, faulty clothes dryers, and breast implants.
The substantive law in the class action area does not differ from that involved in individual cases of product liability.
Product liability claims are typically framed in either contract or tort. Contractual liability can arise from express or implied warranties made by the manufacturer or seller of a product. The Sale of Goods Act contains implied warranty provisions which refer to the merchantability of the product and its general fitness for purpose.
Contractual liability can also arise when all parties involved in a claim were privy to a contract.
This issue can raise specific problems with respect to class actions because there are multiple buyers and sellers of the product in question.
Tort theories generally present greater possibility for class action litigation of product liability claims than do contractual theories.
Product liability claims can be established in tort through allegations of a manufacturing defect, negligent design, failure to warn and the “learned intermediary” rule. (The “learned intermediary” rules deals with situations were products are sold by manufacturers to intermediaries who stand between the manufacturer and the consumer. Manufacturers are required to provide fair and appropriate warnings to the intermediary. A plaintiff need only satisfy a subjective test in demonstrating a causal link between injuries sustained and a failure to warn).
Identification of proper parties is critical in any claim but particularly so in product liability class action claims. These claims are usually brought against various parties who have played a role in placing the defective product into the “stream of commerce”.
Potential defendants can include manufacturers, wholesalers, distributors and other intermediaries. Regulatory authorities, repairers, installers, and independent contractors, are also potential defendants.
Jurisdictional Issues
Jurisdictional issues frequently arise in product liability class action claims. Corporations market their products across national and international boundaries. This situation gives rise to the possibility of claims brought on behalf of a national class.
There are a number of decisions certifying national class actions.5 The decision in Wilson v. Servier deals with alleged liability with respect to certain weight loss pills. Cumming I. certified a national class which included non-Ontario residents. The defendants objected to the inclusion of non-Ontario residents and argued that the ruling of Cumming J. extended the law on jurisdiction.
In refusing leave to appeal, the court stated that it is not unusual that a manufacturer or marketer of a product in one jurisdiction is sued over the allegedly defective product in the jurisdiction in which it is consumed:
“To achieve the objectives of access to justice. judicial economy and behaviour modification, Canadian consumers should have the option of litigation in one action in one jurisdiction, if the consumer so chooses. The choice (which is available through the opt-out provision) should be that of the consumer, particularly when the defendants are not prejudiced by that choice.”
Product liability actions will no doubt result in future certification of many more national class action claims.
Conclusion
The Act provides an effective procedure to obtain a remedy for product liability claims that affect more than one claimant, particularly where the individual claims are small as compared to the significant cost of litigating the issue.
The Act governs procedure; it does not confer substantive rights. Counsel should consider to the possibility of the class action claim when evaluating any product liability issue.
David Thompson is a Member of OTLA and practices with the firm
Scarfone Hawkins LLP in Hamilton, ON.
Notes
1. Naken v. Genetal Motors Canada Ltd.(1983), 144 DLR(3d) 385(8CC)
2. Naken v. General Motors Canada Ltd.(1983),92 DLR(3d) l00(OntC.A.).
3. The Class Proceedings Act, SO 1992, c.6
4. Bendall v. McGhan Medical Corp., (1993), I4OR (3d) 134,1(16 DLR (4th) 339 (Gen. Div.)
5. Nantais V. Telectronics Proprietary (Canada) Ltd. (l995),250.R.(3d)33l, 127 D.L.R. (4th) 552 (Gen. Div.), leave to appeal refused (1995), 25 OR. (3d) 331 at p.347,129 D.L.R. (4th) 110 (Gen. Div.), leave to appeal denied(1996), 28 OR. (3d)523n,7 C.P.C. (4th) 206 (C.A.);
McKrow v. Manufacturers Life, [19981 O.J. No. 4692 (Gen. Div.);
Macrae v. Mutual of Omaha Insurance Co. (unreported decision of Cumming J.dated July 14, 2000) [Doc. No. 24257/96, Ont. S.C.J.];
Carom v. Bre-X Minerals Ltd. (1999), 43 O.R. (3d) 44!, 30 C.P.C. (4th) 133 (Gen. Div.); affirmed in part, reversed in part, Ontario Court of Appeal, unreported decision, October31, 2000 [now reported 51 OR. (3d)236);
Chadha v. Bayer Inc. (1998), 82 C.P.R. (3d) 202 atp.. 205 (Ont. Gen. Div.);
Webb v. K-Mart Canada Ltd. (1999), 45 OR. (3d)638,49 C.C.E.L. (2d) 59(Div. Ct.);
Harrington v. Dow Corning Corp. (2000), unreported decision of B.C. Court of Appeal, dated November 8, 2000 [2000 BCCA 605]; Robertson v. Thomsom Corp. (1999), 43 OR. (3d) 161, 171 D.L.R. (4th) 171 (Gen. Div.)
Wilson v. Servier Canada Inc. (2000) 50 OR (3d) 219, leave to appeal to the Divisional Court refused at 52 OR (3d) 20
