THE EVOLVING BUSINESS OF CLASS ACTIONS IN CANADA
Managing risk in a shifting regulatory landscape
By Lucy Saddleton, Managing Editor, ADB Insights
In a landscape of varied and evolving legislations across multiple jurisdictions, Canadian law firms handling class action lawsuits must stay nimble as they navigate many obstacles as well as opportunities.
At a recent webinar, The Business of Class Actions hosted by The Legal Innovation Forum, a panel of experts discussed the latest trends driving the evolving business of class actions in Canada - and international influences. Regulatory changes, such as stricter consumer protection laws and amendments to class action statutes in certain provinces have influenced case certification and settlement dynamics. The rise of insurance and third-party litigation funding are also shaping the landscape of class actions, enabling more plaintiffs to pursue claims.
JURISDICTIONAL PREFERENCES
Changes to the Ontario Class Proceedings Act in 2020 have made certification for class actions more challenging within the province - with the addition of superiority and predominance criteria to the certification test - creating a more favourable environment in other jurisdictions such as British Columbia.
Sabrina Lombardi, Partner, McKenzie Lake Lawyers
Kevin McLaren, a partner at Hammerco Lawyers LLP in BC agreed, adding that while the province is still seeing a lot of activity in class actions, it is no longer at the peak levels that were seen in 2021 and 2022 that occurred as Ontario firms reacted to the change in legislation.
Lombardi noted that we are now starting to see a swing back to Ontario and other jurisdictions, however. A recent change in procedure in BC means it is no longer a given that a class action will be approved for case management, causing some plaintiffs to look elsewhere.
“There was a flood of activity with cases starting to be commenced in other jurisdictions that didn't have those same criteria as part of their test - most notably in British Columbia, because it was also favorable in the sense that it was a no-cost jurisdiction,” said Sabrina Lombardi, partner at McKenzie Lake Lawyers LLP.
BC is a no-cost jurisdiction for the purposes of certification, which can reduce risk on the plaintiff side.
Kevin McLaren, Partner, Hammerco Lawyers
“With class actions you do have to first schedule a case plan proposal, meet a criteria or submit a test to the associate judge or judge who then submits it to the Chief Justice to determine whether it is in fact, case managed,” said McLaren.
On the defence side, Alex Payne, a partner at Bennett Jones LLP noted that since plaintiffs choose where to commence their action, defence lawyers follow suit.
“Every jurisdiction has its pros and cons, both procedurally and in terms of costs and in terms of the rules, and the experience level of the judges,” said Payne.
CLASS ACTION COMPOSITION
Panelists also noted a shift in the composition of class actions with fewer product cases and more securities cases coming forward. Lombardi has seen a significant reduction in the number of litigation cases involving pharmaceutical products and medical devices.
Meanwhile, litigation cases involving data breaches are on the rise amid the explosion of data over the past decade. Some technology companies have found themselves accused of using customer data for purposes not approved in the user agreement. Most notably, The British Columbia Supreme Court recently approved a $51-million settlement agreement in a class action lawsuit against Facebook, in which the tech giant was accused of violating provincial privacy statutes through its “Sponsored Stories” advertising program.
As McLaren commented, privacy legislation has yet to catch up with the tech industry.
“Privacy legislation was drafted in an era that was not contemplating the mass use of data in these tech platforms, so it's drastically behind, and by the time they catch up, I think the tech industry will be on to something else,” said McLaren. He added that some provinces such as BC are more friendly than others for bringing data breach class actions, as proof of damages is not required to make a claim.
Lombardi commented that class action cases are typically taking longer to complete so lawyers are applying a greater level of scrutiny to determine whether or not a case is worth the investment.
MASS TORTS
In another interesting trend, Canada is seeing a pivot from class actions to mass tort litigation in the product liability space, particularly involving medical devices, cosmetic products and pharmaceutical products.
“You can advance cases by creating an inventory of individuals and commencing individual actions across Canada. I'm definitely seeing more people taking that mass tort approach,” said Payne.
The advantage of mass tort litigation is that there is an opportunity for the defence to work with the plaintiff's counsel to discuss which cases are going to move forward and how to manage the litigation. However, it can be more challenging to get judicial relief to resolve disputes.
Another benefit with mass torts is that the defence counsel may have more insight into the individual plaintiffs and their specific injuries or their experience.
Class actions lawyers must keep a close eye on the changing regulatory landscape within their own jurisdiction including changes to product safety standards, for example, as such changes tend to come with litigation risk.
It is also wise to monitor changes in other jurisdictions, Payne advised. Changes in the pharmaceutical space in the US or in Europe are commonly followed by changes in the pharmaceutical space in Canada, for example.
“When litigation is developing in the US and Europe, there shouldn't be an assumption that those are US and Europe issues. Those could be multinational issues. It could just be that the other jurisdictions are ahead somewhat in terms of having those issues blossom into litigation,” said Payne.
LITIGATION FUNDING
The Canadian class action landscape has seen a recent increase in the utilization of insurance products and third party funders to help firms manage the risk involved.
Funding class actions can be a significant obstacle, so some plaintiffs in Ontario turn to the Class Proceedings Fund which provides financial support to approved class action plaintiffs for legal disbursements. Insurance companies and litigation funders also offer viable solutions.
Alex Payne, Partner, Bennet Jones
Firms on the defence side are also dealing with vast competition from competing firms.
“There's a robust, talented class actions defense bar in Canada…and a lot of these large cases are competitively tendered, so there are business considerations in terms of fighting for that large mandate,” said Payne.
Nick Robson, President, TheJudge
“It’s great to have the Class Proceedings Fund there in the background, but it is quite slow and expensive compared to the insurance market,” said Nick Robson, president at TheJudge, an international broker for specialty legal risk insurances including After The Event (ATE) insurance, and contingency fee insurance. “We can offer a policy that's non-recourse, fully deferred and contingent upon success, to cover you for anywhere up to $15 million, as we've done so far in Canada,” he added.
Robson noted that insurers do not get involved in the management of the class action case.
After insurance - which is approved by the courts in Ontario - provides indemnities which are far cheaper than any third party funding would be, Robson added.
From the UK perspective, Matt Amey, co-founder at Erso Capital - a litigation finance company and an affiliate of TheJudge - has seen a trend towards more investment in class actions in general. He noted that while there is a lot of anti-litigation funding lobbying going on, there remains a high requirement for funding in order for class actions to get off the ground.
Most international funders are looking at Canada as an example of how things should be done in relation to class actions - particularly with regard to carriage disputes, according to Amey.
“We've seen an absolute bloodbath in the UK CAT [Competition Appeal Tribunal] in relation to cases involving carriage where there were lessons to be learned about how the Canadians deal with that particular issue,” said Amey. “It's an interesting time in the UK and Europe, and we'll be looking to Canadians to work out the best way forward.”
Matt Amey, Co-Founder, Erso Capital