Strategies to Avoid Or Mitigate Class Action Litigation

• Author: Ian F. Leach
• Pages: 87-117

87

STRATEGIES TO AVOID OR MITIGATE

CLASS ACTION LITIGATION

Ian F. Leach*

A. PERSPECTIVES

When it comes to class actions, efforts to avoid or mitigate the effects of such

litigation clearly depend on one’s perspective.

There are reasons why plaintiffs and their counsel may be indepen-

dently motivated to steer clear of class proceeding litigation and look for

alternative, effective options. For example, a sufficiently funded individual

with a meritorious claim, able to litigate in the absence of a class action

dimension, may very well want to avoid the following four irritants: (1) add-

ing inevitable delay to resolution of his own claim by treading the minefield

of extended certification proceedings and appeals, waiting for notices to be

published and opt out periods to expire, or waiting for relief for the entire

class to be determined and distributed prior to receiving any individual

entitlements; (2) galvanizing the full litigation resources of a defendant or

insurer which otherwise might have been inclined to discuss early settle-

ment of a much smaller individual claim; (3) taking on the added work and

responsibilities of a representative plaintiff; and (4) risking added exposure

to adverse cost awards in the event of failure (at least in Ontario).1

A plaintiff in that situation may stick to litigation of her individual

claim, particularly if it can be done in a way that effectively benefits all

similarly placed claimants anyway (for example, by way of a test case or a

request for injunctive relief that will benefit all those in a similar situation).

For most plaintiffs, however, class proceedings offer economy of scale,

settlement leverage, safety in numbers, and corresponding incentives for

* Ian F. Leach, B.A. (Toron.), LL.B. (Reg.), LL.M. (Cantab.), B.C.L. (Oxon.), is a

partner with Lerners LLP. This paper was prepared with helpful and much appre-

ciated research assistance and input provided by Jason Squire, Jason Schmidt, and

Ken Fraser, all with Lerners LLP.

1 For a more extended discussion of the possible disadvantages to plaintiffs con-

sidering a class proceeding, see Ward Branch, Class Actions in Canada, looseleaf

(Aurora: Canada Law Book, 2009) at 6.100–6.150.

88 THE CANADIAN CLASS ACTION REVIEW

plaintiff counsel involvement, all of which often combine to make litigation

feasible where it otherwise could not have been pursued.2 For such litigants

and their counsel, the obvious goal is to maximize a defendant’s exposure

and the scope of the class proceeding.

In short: only defendants focus on how to avoid or mitigate class action

exposure risk and, viewed solely from their perspective, being targeted by

a class action is something of a nightmare. Such a claim usually presents

a sudden and severe threat to a defendant’s well-being. Rare today is the

class action not seeking millions or several hundred millions, and not every

defendant has access to that kind of insurance or asset portfolio. Regardless

of whether the claim ultimately lacks merit, or whether the numbers set

forth in the statement of claim are inflated beyond reason, it will have to be

noted as a contingent liability and explained to financiers, shareholders, and

other investors. The fallout from bad publicity today will rarely be offset by

vindication months or years down the road.

In the meantime, many safeguards and protections normally available

to defendants seem to fall away in the face of class litigation. In Ontario, at

least, the normal rules of court are supposed to apply to a class proceed-

ing.3 It also has been said many times4 and emphasized in recent years by

the Supreme Court of Canada5 that the class proceeding statutes are sup-

posed to be procedural only, and will not create any new causes of action.

However, a defendant facing a class action may feel, with some justification,

that it really does not enjoy the same rights, tools, and treatment extended to

2 For a more extended discussion of the comparative advantages of class proceed-

ings, see Branch, ibid. at 6.10–6.90.

3 Class Proceedings Act, 1992, S.O. 1992. c. 6, s. 35 [CPA].

4 Bendall v. McGhan Medical Corp. (1993), 14 O.R. (3d) 734 (Gen. Div.), motion

for leave to appeal dismissed, [1993] O.J. No. 4210 (Gen. Div.) [Bendall]; Peppiat

v. Nicol (1993), 16 O.R. (3d) 133 (Gen. Div.); Campbell v. Flexwatt Corp. (1997),

44 B.C.L.R. (3d) 343 (C.A.), leave to appeal to S.C.C. refused (1998), 228 N.R.

197n; Ragoonanan v. Imperial Tobacco Canada Ltd. (2000), 51 O.R. (3d) 603

(S.C.J.) [Ragoonanan].

5 See Bisaillon v. Concordia University, [2006] 1 S.C.R. 666 at paras. 17–18 (“The

class action is . . . a procedural vehicle whose use neither modifies nor creates

substantive rights . . . . It cannot serve as a basis for legal proceedings if the vari-

ous claims it covers, taken individually, would not do so . . . . Thus, unless other-

wise provided, the substantive law continues to apply as it would to a traditional

individual proceeding.”) [Bisaillon]. See also Dell Computer Corp. v. Union des

consommateurs, [2007] 2 S.C.R. 801 at paras. 105–7 [Dell] (“The class action is a

procedure, and its purpose is not to create a new right . . . . [The] class action is

clearly of public interest. However . . . as important as it may be, the class action

is only a legal procedure . . . . The notion that the class action procedure does not

create new rights has been reiterated on numerous occasions . . .”).