'Are national class actions constitutional?' A reply to Walker, Hogg and McKee.

Author:Krusell, Joshua
Position:Janet Walker, Osgoode Hall Law Journal, vol. 48, p. 95, 2010 and Peter W. Hogg and Gordon McKee, National Journal of Constitutional Law, vol. 26. p. 279, March 2010 - Canada
 
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Abstract

This article argues that national opt-out class actions are incapable of meeting the demands of constitutionality in Canada, despite a "real and substantial connection" to the forum jurisdiction or otherwise. Neither the legislative jurisdiction of provincial legislatures nor the adjudicative jurisdiction of provincial courts is capable of overcoming the territorial strictures engrained in the constitutional principles of our federation. While there are many persuasive policy arguments that bode in favour of allowing national classes, it is an unfortunate but inescapable reality that the national opt-out class is unconstitutional in Canada. This reality requires us to look to possible alternatives to create a viable future for pan-Canadian mass litigation. The use of coordinated parallel provincial opt-out classes will provide effective methods for managing jurisdictional disputes while ensuring that the substantive effects of provincial class proceedings legislation and the exercise of provincial superior court authority remain within provincial jurisdiction. Such parallel actions have already proved successful in practice and practitioners are working toward enhancing the efficacy of parallel actions through the creation of formal frameworks of coordination that fit within the existing provincial legislative landscape.

OVERVIEW I. PROVINCIAL STATUTES CANNOT GIVE RISE TO A NATIONAL CLASS Restrictions on the Extraterritorial Effect of Provincial Law The Substantive Effects of Opt-Out Class Actions Bar Provincial Statutes From Providing for Their Extraprovincial Operation II. THE PROBLEM OF CERTIFYING A NATIONAL CLASS IN A PROVINCIAL COURT Provincial Superior Courts are Incapable of Exercising Direct Jurisdiction Over National Opt-Out Class Actions III. THE PROBLEM OF RECOGNIZING CLASS JUDGMENTS IN SUBSEQUENT JURISDICTIONS IV. LIVING WITHOUT THE NATIONAL CLASS Most Alternatives to the National Opt-Out Class are Similarly Unable to Meet the Demands of Constitutionality Coordinated Parallel Provincial Opt-Out Classes are the Best Available Constitutionally Viable Alternative to the National Opt-Out Class V. CONCLUSION OVERVIEW

In her recently published article, "Are National Class Actions Constitutional?--A Reply to Hogg and McKee," Janet Walker vigorously defends her proposition that "there is simply no credible challenge to be made to the basic jurisdiction of Canadian courts to certify multi-jurisdictional class actions." (1) Peter W. Hogg and co-author Gordon McKee previously challenged Walker's position by arguing that the jurisdiction of the provincial superior courts in Canada to decide the claims of non-resident class members is restricted to claims that have a "real and substantial" connection to the forum province. (2) Walker's response is that there is no such restriction on the certification of national class actions as "neither the text of the Constitution nor the constitutionally mandated rules of the conflict of laws restrict court jurisdiction in this way." (3) Walker bolsters her argument with appeals to the policy benefits served by the unfettered ability of provincial superior courts to certify national class actions--namely, access to justice, judicial economy and behaviour modification. (4)

This article presents an alternative to the views represented by Walker, Hogg and McKee. It argues that provincially-constituted national class actions that bind non-residents of a forum jurisdiction on an opt-out basis are unconstitutional in Canada, even where a 'real and substantial connection' might be found to exist. National opt-out class actions are incapable of being constitutional on two bases. First, provincial legislation purporting to allow for the certification of national opt-out classes is extraterritorial and therefore ultra vires a province's legislative jurisdiction. Second, there is no extra-legislative basis upon which courts may certify national opt-out class actions, so courts certifying such actions or subsequently recognizing those certifications are acting beyond the constitutional limits of their adjudicative jurisdiction.

This article will contribute to the ongoing debate surrounding national opt-out class actions in three ways. First, it will comprehensively summarize and clarify the academic discourse at the leading edge of this issue and position these academic commentaries in the messy legal landscape of the case law. Second, it will shift the prevailing dialogue from the beneficial policy reasons for adopting a national class regime to the pre-existing legal basis needed for such classes. Finally, it will provide new arguments in support of the position that national opt-out class actions are unconstitutional.

Part 1 of this article sets out an argument that provincial legislation giving rise to national opt-out class actions affects the substantive rights of non-residents of the forum jurisdiction and is therefore restricted by territorial limits. In Part 2, I submit that a forum court presented with the issue of certification of a national class is bound by constitutional limits that make it inappropriate to exercise adjudicative jurisdiction over unnamed extraprovincial plaintiffs. Part 3 adds that, because a forum court is incapable of appropriately exercising jurisdiction in relation to unnamed non-resident plaintiffs, it is unconstitutional for courts in other provinces to subsequently recognize its certification of a national opt-out class. Part 4 suggests options for multi-jurisdictional mass litigation in light of the fact that national class actions based on an opt-out regime should be unavailable due to their unconstitutionality. The article concludes by recommending that coordinated parallel provincial opt-out class actions are the best available alternative to the national class given that they are capable of both respecting the constitutional principles of our federation and providing policy benefits to class plaintiffs and defendants alike.

  1. PROVINCIAL STATUTES CANNOT GIVE RISE TO A NATIONAL CLASS

    Questions regarding the constitutionality of national class actions arose following the first pan-Canadian opt-out class action certification in the 1995 case of Nantais v Telectronics Proprietary (Canada) Limited. (5) The issue of constitutionality is particularly acute with regard to prospective class members that do not reside in the forum jurisdiction where an action is brought, and who have taken no positive action to include themselves in the proposed class. In litigation concerning Ontario's Class Proceedings Act, 1992, RSO 1992, c 6, which is silent on the matter of national classes, the defence raised the following question:

    Can a court, under this Ontario statute, include in a proposed class, members outside of Ontario, who have not specifically requested inclusion, so that they would be prevented from taking actions in their own jurisdictions? (6) The answer to this question is complex and raises serious issues regarding the authority of provincial legislatures to affect the rights of individuals beyond their borders, the conflicting jurisdiction of our provincial superior courts, and the extent to which the substantive legal rights of Canadian citizens can be altered by a procedural device. This investigation is further complicated by the fact that it concerns principles of both constitutional law and the conflict of laws at private international law.

    To test the constitutionality of national opt-out class actions requires an investigation of :he constitutional limits surrounding two distinct types of jurisdiction. Legislative jurisdiction is the power of a state or legislature to apply its law to create or affect the legal interests of persons or entities. (7) Adjudicative jurisdiction concerns the authority of courts to hear and resolve legal and factual disputes arising out of issues of substantive law by subjecting persons or entities to a judicial process; it is the legal power and authority of a court to make a valid decision binding on the party or parties concerned in any matter properly brought before it. (8)

    Restrictions on the Extraterritorial Effect of Provincial Law

    Legislative recognition of class actions is a relatively recent development in Canada. Only British Columbia, Ontario and Qudbec passed statutes governing class proceedings by the end of the 1990s. (9) All three legislative schemes mandate that potential class members resident in the province in which the legislation originates are presumptively included in the action unless they otherwise make efforts to opt-out of the class. (10) If a class member fails to opt-out of the action, then he or she will be precluded from bringing an individual claim against the defendant regarding the same subject matter upon judgment being rendered in that action. The provincial legislatures are squarely within their authority to legislate in relation to the civil rights of their residents in this manner, as provided for by ss. 92(13) and (14) of the Constitution Act, 1867:

    92. In each Province the Legislature may exclusively make Laws in relation to Matters coming within the Classes of Subjects next hereinafter enumerated; that is to say, ...

    13. Property and Civil Rights in the Province.

    14. The Administration of Justice in the Province, including the Constitution, Maintenance, and Organization of Provincial Courts, both of Civil and of Criminal Jurisdiction, and including Procedure in Civil Matters in those Courts. (11)

    These provisions are connected to class actions insofar as judgments of civil matters affect parties' "Property and Civil Rights" and are managed according to "the Constitution, Maintenance, and Organization of Provincial Courts ... of Civil ... Jurisdiction". (12) "Property and civil rights" is the most important provincial head of power, as it encompasses the entire body of private law that governs the relationships between persons, as opposed to the...

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