Kirk Baert

Kirk Baert

Kirk M. Baert is is a partner at Koskie Minsky LLP in Toronto and a member of the firm’s executive committee. His practice focuses on plaintiff-side class actions. He can be reached at kbaert@kmlaw.ca.

Column: Class Acts
Monday, 24 March 2014 09:15

Wal-Mart coming to Canada. Sorry, no.

b_150_0_16777215_00___images_stories_01-CANADIANLawyer_Columnists_kirkbaertnew2013.jpgIn Wal-Mart Stores Inc. v. Dukes, the Supreme Court of the United States held that in order for class certification to be granted, judges must undertake a “rigorous analysis.” Of course, judicial analysis should be rigorous so we know the court must have meant something else. It turns out it did.
Monday, 24 February 2014 08:00

Court of Appeal rights its own wrong

b_150_0_16777215_00___images_stories_01-CANADIANLawyer_Columnists_kirkbaertnew2013.jpgIn a stunning reversal, a five-judge panel of the Ontario Court of Appeal reversed its decision in Sharma v. Timminco Ltd. where it just recently held that the three-year limitation period for bringing a statutory claim for misrepresentation in respect of shares trading in the secondary market could not be suspended until a court had granted leave to commence the claim.
Monday, 27 January 2014 08:00

The Hollick approach is here to stay

b_150_0_16777215_00___images_stories_01-CANADIANLawyer_Columnists_kirkbaertnew2013.jpgIn October 2001, the Supreme Court of Canada advocated a liberal and flexible construction of the Ontario Class Proceedings Act, 1992 in Hollick v. Toronto (City). In particular, Chief Justice Beverley McLachlin, on behalf of the court, held the CPA is to be “construed generously” in a manner that gives “full effect to the benefits foreseen by the drafters” — the Hollick approach.
Monday, 16 December 2013 08:00

Managing and conducting common issues trials

The Class Proceedings Act, 1992, has been in force since Jan. 1, 1993. In those 20-plus years, Ontario has had a handful of class actions reach the trial stage each year. Ontario’s experience is typical of other common law jurisdictions that have also had few class actions proceed to a common issues trial, but stands in contrast to Quebec’s experience, where class action trials have become the norm.

The common issues on which a judgment is rendered will not necessarily be the same common issues that were certified. Changes are often made to the common issues list as a result of matters that arise during discoveries as well as other stages of the action, even as late as the last days of a common issues trial.

In 2004’s Cloud v. Canada (Attorney General), the Ontario Court of Appeal recognized the need to accommodate amendments, stating:  “. . . the Act provides for flexibility and adjustment at all stages of the proceeding . . . any potential efficiency in advancement of their claims through the flexibility provided by the Act should, where reasonable, be utilized.”

Jurisdiction for courts to amend common issues arises from both the CPA and Ontario’s Rules of Civil Procedure. Under the CPA, s. 8(3) provides the court with jurisdiction to amend certification orders. In addition, s. 12 provides that on the motion of a party or class member, the court has jurisdiction to make any order it considers appropriate regarding the conduct of the proceeding in order to ensure its fair and expeditious determination.

Finally, since the Rules of Civil Procedure apply to class proceedings, Rule 26.01 regarding amendments to pleadings also applies. The rule provides that a court shall grant leave to amend a pleading at any stage of an action unless prejudice would result that could not be compensated for by costs or an adjournment.

In recognizing that, under Regulation 194 of the Rules, “certification is a fluid, flexible procedural process,” courts have allowed amendments that are relevant to the action, flow logically from the existing certification order, and do not fundamentally alter the nature of the action. These amendments can occur at various stages of the proceedings, even towards the end of the common issues trial.

In Smith v. Inco, the plaintiffs brought a motion to amend the common issues during the last days of the common issues trial. The motion was contested and the defendants also brought a cross-motion requesting another common issue to also be added. Justice J.R. Henderson granted both motions and the common issues list was amended to clarify semantic confusion and to reflect what had actually been argued at trial.

Both s. 12 of the CPA and Rule 26.01 were recently considered in Andersen v. St. Jude Medical Inc. In the late justice Joan Lax’s decision allowing the plaintiffs to amend the fresh statement of claim and the certification order to include waiver of tort issues, she dismissed the defendant’s arguments the amendments were late, fundamentally changed the action, and were prejudicial.

So long as amendments are relevant to the action, flow logically from the existing certification order, and do not fundamentally alter the nature of the action, the CPA and courts have recognized the complex nature of class actions and have allowed amendments to be made at various stages of the action.

Common issues trials also allow for aggregate assessments. Where no individual issues remain other than assessment of monetary relief, CPA s. 24 permits an aggregate assessment of monetary relief for the benefit of the entire class to be included in the relief granted.

The purpose of the section is to prevent inefficient and impractical individual proceedings in order to determine class members’ losses where the amounts can be more reasonably and fairly determined as a common question.

Where a court determines that individual claims need to be made in order to give effect to an order under s. 24(1), the CPA provides for the determination of individual claims with emphasis on minimizing the burden placed on class members. To accomplish this, s. 24(6) authorizes the court to make individual claim determinations through the use of standardized proof of claim forms, affidavit evidence as to damages, or auditing of claims on a sample or other basis.

In addition, the act expressly provides the court with the power to admit as evidence statistical information that would not otherwise be admissible in determining the appropriate aggregate award.

Section 23(3) further provides that statistical information may be admitted as evidence if notice is provided and the opposing party is provided with the opportunity to cross-examine the expert that supports the evidence.

The Ontario Court of Appeal has stated a finding of (i) liability and (ii) an entitlement to a remedy are sufficient to trigger the application of ss. 23 and 24 of the act.

b_150_0_16777215_00___images_stories_01-CANADIANLawyer_Columnists_kirkbaertnew2013.jpgIn Markson v. MBNA Canada Bank, a case involving illegal interests being charged for cash transactions on credit cards, Ontario Court of Appeal Justice Marc Rosenberg recognized the difficulty faced in assessing individual damages and approved the use of aggregate damages. In addition, as a result of the recordkeeping of the bank, the number of accounts and the small amount of damages owed to the class members, the court in Markson awarded an aggregate sum to class members even though it meant some class members who did not actually suffer damages shared in the award.
Monday, 25 November 2013 08:00

The class action arms race

b_150_0_16777215_00___images_stories_01-CANADIANLawyer_Columnists_kirkbaertnew2013.jpgThis fall, Ontario Superior Court Justice Edward Belobaba released five decisions certifying proceedings as class actions and, as night follows day, five decisions on costs soon followed.
b_150_0_16777215_00___images_stories_01-CANADIANLawyer_Columnists_kirkbaertnew2013.jpgIn a recent decision on costs arising from a motion for certification, Justice Paul Perell of the Superior Court acknowledged the ever-upward spiral in costs awards in class proceedings are becoming an impediment to the viability of the class action regime.
Monday, 23 September 2013 09:00

Funding the sport of kings

b_150_0_16777215_00___images_stories_01-CANADIANLawyer_Columnists_kirkbaertnew2013.jpgIn July, plaintiffs in a securities class action styled Bayens v. Kinross Gold Corp. were granted approval of a litigation funding agreement whereby the plaintiffs would be indemnified against any potential adverse costs awards in this class action. In granting this funding arrangement, Ontario Superior Court Justice Paul Perell outlined a number of principles that should be considered where a proposed funding arrangement is before the court.
b_150_0_16777215_00___images_stories_01-CANADIANLawyer_Columnists_kirkbaertnew2013.jpgThe individual issues sections of the Class Proceedings Act, 1992, give the trial judge broad discretion to fashion proceedings for the resolution of individual issues. In particular, a court is authorized to dispense with any procedure it considers unnecessary, and to direct special procedures where necessary.
Monday, 22 July 2013 09:00

Duplicative class proceedings a no-no

b_150_0_16777215_00___images_stories_01-CANADIANLawyer_Columnists_kirkbaertnew2013.jpgWhat happens when duplicative class proceedings are filed in the same jurisdiction on behalf of plaintiffs working in concert to advance overlapping claims?
Monday, 24 June 2013 01:00

The case for cy-près distributions

“Such a settlement and payments largely serve the important policy objective of general and specific deterrence of wrongful conduct through price-fixing. That is, the private class action litigation bar functions as a regulator in the public interest for public policy objectives.”
So wrote Ontario Superior Court Justice Peter Cumming in the 2002 decision approving the settlement in Alfresh Beverages Canada Corp. v. Hoechst AG. Alfresh was a price-fixing case in which the corporate plaintiff alleged a number of defendants conspired to fix the prices and allocate the market share of sorbates between 1979 and 1996. Damages were sought pursuant to s. 36 of the Competition Act. Under the terms of the settlement, the defendants agreed to pay $3,055,743 plus interest. The settlement funds were distributed, partially through a claims process and partially cy-près.
The decision in Alfresh is noteworthy, not only in that it was one of the earliest settlement approvals where cy-près distributions were proposed. It is also significant in light of the Cumming’s express recognition of the role of the private class action bar in performing a “regulatory function,” effectively filling a void left by the absence of an appropriate or effective regulatory structure.
Notwithstanding this early recognition of the appropriateness of cy-près distributions in the context of class proceedings, academic discussion of the propriety and, at times, justifications underlying cy-près distributions in class proceedings are often viewed as suspect. Such discussions are framed with a narrow focus on one of the purposes underlying class proceedings legislation — access to justice — to the exclusion of other considerations, such as behaviour modification.
The goals of deterrence and behaviour modification stand on par with the goal of improving access to justice, and in certain types of cases, provide a full answer to concerns that a class proceeding has failed to compensate class members for their losses. This is particularly so where the remedy sought on behalf of the class is in the nature of a disgorgement remedy rather than compensation for the class.
While the court’s jurisdiction under the CPA to award settlement funds to a party or entity other than a class member has been, by analogy, commonly referred to as cy-près, it is important to note the jurisdiction for such payments flows directly from the language of the CPA and are not properly understood, true cy-près schemes as that term is commonly used by the courts of equity. As such, any analysis of the propriety of such proposed distributions must be analyzed through the lens of the CPA, and its underlying purposes.
The issue of cy-près distributions in the context of class proceedings was considered by the Ontario Law Reform Commission in its “Report on class actions.” Reviewing the experience of courts in the United States, as well as the historical role that the doctrine of cy-près had in equity, the committee recommended a cy-près provision be included, failing which the residue of the settlement would have to go back to the defendant.
After examining the experience in other jurisdictions, the OLRC stated: “For this reason, the commission is of the view that a provision should be adopted expressly authorizing forfeit distributions where an aggregate award cannot be applied for the immediate benefit of class members.”
The recommendations of the OLRC, at least with respect to cy-près distributions, were ultimately accepted, and resulted in the drafting of ss. 24 and 26 of the CPA. Section 24 permits the court to assess aggregate damages as against a defendant, and to award individual shares of such damages to class members on an average or proportional basis. Subsection 24(3) expressly requires the court to consider whether it would be “impractical or inefficient to identify the class members entitled to share in the award or to determine the exact shares that should be allocated to individual class members.”
Section 26(1) grants the court very broad discretion to direct distribution of awards; it is expressly authorized to direct “any means of distribution . . . that it considers appropriate.” Subsection 26(4) of the CPA also expressly grants the court the authority to make “cy-près” distributions.
Given the broad discretion granted to the court under ss. 24 and 26 to effect cy-près distributions, even where class members can be identified, there is nothing fundamentally objectionable about such distribution methods being used. The more appropriate question should be what considerations should govern the exercise of that discretion by the court not whether or not such distributions can be effected.
The OLRC concluded that “the justification for endorsing class actions aggregating individually recoverable and individually non-recoverable claims lies mainly in the ability of these types of class action to achieve either judicial economy or increased access to justice,” while behaviour modification was viewed as “an inevitable, albeit important, by-product of class actions.”
As other commentators have noted, cy-près distributions are generally approved, and can be reasonably justified, in two particular circumstances: (a) in circumstances where class members cannot be easily identified; or (b) where it would be uneconomical to effect a distribution to class members.
It is now common practice for settling parties to include a provision in settlement agreements providing for some form of cy-près distribution. In fact, according to one survey, at least 60 settlements have been approved in Canada involving fixed cy-près awards.
Perhaps the most common, and least controversial use of such awards involves the application of a remaining residue, following a claims process, to a specified charity. This type of cy-près provision was approved in cases such as Bilodeau v. Maple Leaf Foods Inc. The main purpose underlying such gift-over provisions is to prevent a reversion of funds to the defendants — clearly a laudable purpose.
Another, and at times more controversial, application involves a division of portions, some to class members, some to charities. This was the kind of award approved in Alfresh, and in Cassano v. Toronto-Dominion Bank.
Finally, and perhaps most controversially, in some cases, the courts have approved settlements where the entire corpus of a settlement fund has been applied cy-près. Such cases include the settlement in Currie v. McDonald’s Restaurants of Canada Ltd. and Walker v. Union Gas Ltd.
In those cases involving a residual cy-près provision, the rationale underlying the provision is clear and uncontroversial. The purpose is to prevent a reversion of funds to the defendant. Few would argue that such a provision contravenes the spirit and purpose of the CPA.
The greater issues arise where a portion, or all, of the settlement funds are distributed cy-près. The general justification raised by counsel in such cases, and approved by the courts, is that identification and payment to individual class members would be impracticable, overly costly, inefficient, or impossible. These considerations are fully aligned with the CPA, and notwithstanding issues related to the standard required of counsel in establishing such distributions are impossible, fully justifiable.
b_150_0_16777215_00___images_stories_01-CANADIANLawyer_Columnists_kirkbaertnew2013.jpg“Such a settlement and payments largely serve the important policy objective of general and specific deterrence of wrongful conduct through price-fixing. That is, the private class action litigation bar functions as a regulator in the public interest for public policy objectives.”
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