Deterring Compensation: Class Action Litigation and Damage Awards Against Corporate Defendants
Author | Natalie Kolos |
Pages | 157-196 |
157
DETERRING COMPENSATION:
CLASS ACTION LITIGATION AND
DAMAGE AWARDS AGAINST
CORPORATE DEFENDANTS
Natalie Kolos
Abstract: The class action has been lauded as an efficient
and effective procedural mechanism to modify a defendant’s
wrongful behaviour and compensate the plaintiff. A dam-
age award against the defendant may modify behaviour. If
fault is established at a class action trial on the merits, the
damage award forces the defendant to internalize the costs
of its “wrongful” conduct, and simultaneously compensates
the plaintiff. The recent Létourneau c JTI-MacDonald Corp de-
cisionin the Superior Court of Quebec appeared to support
the theory that class actions achieve deterrence: Riordan J
awarded the largest damage award in Canadian legal history
against the three tobacco defendants. Although the damage
award reflected the level of fault of the companies and was
aimed at compensating the plaintiffs, the true costs of the
award showed how compensation and deterrence in this case
were inadequate and ineffective. This paper argues that the
unique nature of the cla ss action renders large damage award s
counterproductive in achieving deterrence and compensa-
tion, particularly against corporate defendants. The fiduci-
ary duty that directors owe to their corporations makes the
deterrent effect of class actions questionable. Moreover, the
fiduciary duty brings into question the specific faults alleged
against the corporations and highlights an inherent contra-
diction in the law. Even if deterrence is not the primary aim
in one particular case, the Létourneau decision illuminates a
158 The Canadian Class Action Review
paradox of compensatory damages: not truly compensating.
Therefore, while the plaintiff “won” the action, it also lost.
The class action, at least in this circumstance, is just deter-
ring compensation.
159
DETERRING COMPENSATION: CLASS
ACTION LITIGATION AND DAMAGE
AWARDS AGAINST CORPORATE
DEFENDANTS
Natalie Kolos*
A. INTRODUCTION
On 27 May 2015, the Quebec Superior Court (Class Action Division) or-
dered the largest damage award in Canadian legal history.1 This award
was the result of seventeen years of litigation, beginning in 1998 when
Célia Létourneau and Jean-Yves Blais served two class action certifica-
tion motions on three tobacco companies: Imperial Tobacco Canada Ltd
(ITL); JTI Mac-Donald Corp (JTI); and Rothman s, Benson & Hedges Inc
(RBH). Together, Létourneau and Blais represented a class of over 1 mil-
lion Quebec smokers. The plaintiffs alleged four separate faults against
the companies, including breaching the general duty to not cause injury
to another person, and the duty of a manufacturer to inform its custom-
ers of the risks a ssociated with its products.2 The court found the defend-
ants jointly liable for all four faults.
After 251 days of hearing, Riordan J awarded $15.5 billion in moral
(compensatory) damages, $131 million in aggregate punitive damages,
* Natalie Kolos is a t hird-year law student at the Unive rsity of Western On-
tario and w ill be articling at McCa rthy Tétrault LLP in Toronto, Ontario. The
author would like to th ank Professor Erika C hamberlain for her invaluable
support while re searching and writ ing the original ver sion of this article. The
author would also li ke to thank the Canadian Class Act ion Review’s editors for
their feedback a nd assistance in prepa ring this paper for publicat ion.
1 Graeme Hamilton, “Tobacco Fir ms Ordered to Pay Quebec Smokers $15B in
Dama ges” Natio nal Post (3 June 2015), online: http://news.nationalpost.com/
news/canada/tobacco-firms-ordered-to-pay-quebec-smokers-15b-in-damages
[Hamilton].
2 The court also found the de fendants liable for faults under t he Charter of Hu-
man Rights and Freedoms, CQLR c C-12 as wel l as under the Consumer Protec-
tion Act, CQLR c P40.1.
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