Adapting to Climate Change: A Look at Three Controversial Developments That Are Heating Up the Canadian Class Action Debate

• Author: Shaun Finn and Jonathan Ostrega
• Pages: 258-327

258

ADAPTING TO CLIMATE CHANGE:

A LOOK AT THREE CONTROVERSIAL

DEVELOPMENTS THAT ARE HEATING

UP THE CANADIAN CLASS ACTION

DEBATE

By Shaun Finn1 and Jonathan Ostrega2

Adaptation to climate change is now inevitable. The only question is whether

it will be by plan or by chaos.

– Roger Jones, co-author of the Intergovernmental

Panel on Climate Change Report of 20073

A. INTRODUCTION

The proliferation of class actions in Canada, vaguely predicted less than a

decade ago, is a reality that governments, courts, companies, and counsel

have had to come to terms with. Unlike other areas of the law that have

experienced a more gradual evolution, group litigation has gone through

a series of mutations and continues to expand at an unprecedented rate.

This is explained, in part, by the fact that it is nourished by a much older,

more vigorous tradition south of the border and also, in part, because it

can be employed in a wide variety of different factual and economic cir-

cumstances. Products liability, consumer protection, and mass torts are

just some of the many environments in which class action proceedings

can flourish. One of the difficulties facing parties and practitioners alike

1 Associate, McCarthy Tétrault LLP, Montréal, member of the firm’s National

Class Actions Group. The authors wish to thank the Honourable James Farley

and Me Donald Bisson of McCarthy Tétrault LLP, Professor Denis Ferland of

Laval University, Mr. Cameron Fiske, and Me Carl Dholandas for their gener-

ous assistance. Any mistake is that of the authors only.

2 Student, McCarthy Tétrault LLP, Montréal.

3 Time Magazine, online: www.time.com/time/magazine/arti-

cle/0,917,1,1604879,00.html.

VOL UME 4, No 2, march 2008 259

is getting a handle on the quickly changing caselaw and gauging how it

is likely to develop.

Although it would be impossible to survey all of the issues that have

arisen in the Canadian class action context, this paper examines three

controversial subjects that have come to dominate much of the discourse:

class-wide arbitration, securities class actions, and multi-jurisdictional

class proceedings. These three topics have emerged as hot spots precisely

because they all lie at the intellectual frontier of class action practice and

raise important substantive, procedural, and policy concerns. While the

authors cannot purport to resolve the dilemmas faced by modern jurists

and lawmakers, they do provide context, information, and analysis that

will hopefully render the debate more accessible. Adaptation to the cli-

mate changes that are reshaping our legal world is critical. Without such

adaptation, events are likely to outpace decisions and the people who

make them.

B. SECTION ONE: CLASS-WIDE ARBITRATION

1. Introduction to Class-Wide Arbitration

One of the emerging fields in the area of class actions is that of class-wide

arbitration. This unique method of dispute resolution seeks to combine

two judicial institutions—the class action and arbitration procedure—to

allow arbitrators to mediate disputes on behalf of multiple claimants.

Class-wide arbitration is perceived by some as having the potential to

dramatically increase the powers of arbitrators, who are granted consid-

erable latitude for contract interpretation. In legal systems that permit

class-wide arbitration, such as the United States, arbitrators have the

authority to determine whether an arbitration clause applies in a given

case, and whether class-wide arbitration will be permitted in specific

circumstances. In this respect, class-wide arbitration can be seen as a

way to bypass ordinary court procedures. It is imperative, therefore, that

this novel approach to conflict resolution be explored, so that jurists can

assess whether this development is a step in the right direction.

260 THE CANADIAN CLASS ACTION REVIEW

2. History of Class-Wide Arbitration in the United

States

a) The Dawn of U.S. Class-Wide Arbitration—T he

Keating Decision

Although the United States has had traditional class action4 and arbitra-

tion5 regimes since the 1930s, the prospect of class-wide arbitration was

never truly addressed until the 1982 case of Keating v. Superior Court of

Alameda County.6 This case involved a franchise agreement between the

Southland Corporation and approximately 800 of its California-based

franchisees. The various claims alleged a variety of contractual and statu-

tory breaches. At issue was whether the inclusion of an arbitration clause

in the franchise agreements could prevent a class action proceeding from

taking place. The court considered imposing a solution whereby arbitra-

tion agreements contained in contracts of adhesion would not be permit-

ted to operate to stay (what would otherwise be) properly maintainable

class actions. In its ruling, however, the Supreme Court of California

opted to allow the arbitration to proceed on a class-wide basis.

The court held that the decision as to whether claimants can proceed

by way of class-wide arbitration should be made at the trial level. The

logic of the majority’s opinion in this regard was based on considerations

of efficiency, flexibility, and fairness.7 Where multiple parties are involved

in the dispute, each having a relatively small claim and lacking the req-

uisite means to participate actively, the argument is that consolidation

is both necessary and desirable. According to a majority of the court, if

the right to a class-wide proceeding could be automatically eliminated

through the inclusion of an arbitration clause, “the potential for under-

cutting class action principles, and for chilling the effective protection of

interests common to a group, would be substantial.”8

The court, in Keating, suggested that the interests of justice would

be best-served by allowing class-wide arbitration to proceed in certain

4 Fed. Rules Civ. Proc., rule 23, 28 U.S.C. [F.R.C.P.].

5 Title 9, U.S.C. §§ 1–14, was first enacted 12 February 1925 (43 Stat. 883),

codified 30 July 1947 (61 Stat. 674), and amended 3 September 1954 (68 Stat.

1233). Chapter 2 was added 31 July 1970 (84 Stat. 692), two new sections

were passed by Congress in October of 1988 and renumbered on 1 December

1990 (PL 669 and 702); Chapter 3 was added on 15 August 1990 (PL 101-

369); and section 10 was amended on 15 November 2006 [F.A.A.].

6 31 Cal. 3d 584 (S.C.C. 1982) [Keating].

7 Ibid. at 613.

8 Ibid. at 609.