What you need to know about class-action lawsuits

This article is part of a series addressing popular topics and questions that clients and the public may have about the legal profession.

When a person has a valid legal claim, but one that may not produce a payout justifying the legal fees it would entail, the class-action process can provide the strength-in-numbers to make it worthwhile.

The difference between a class action and a regular civil lawsuit, says class-action lawyer Matthew Baer, is that, while the latter consists of one claimant versus the defendant, a class action involves a named party representing a class of plaintiffs who all claim to have suffered similar harm at the hands of defendant.

“There’s pros and cons,” says Baer, who practises at McKenzie Lake Lawyers LLP, in London, Ont. With an individual lawsuit, the plaintiff can tailor the claim to their individual circumstances, as opposed to broadening it to fit into a class. “But, especially in cases where the recovery is smaller, it makes much more sense to do it as a class and spread the associated costs amongst the large group.”

Class actions are a relatively new form of litigation in Canada. Québec was first to introduce them, adding provisions addressing class actions into its Rules of Civil Procedure, in 1978. Ontario was the first common-law province to do so, enacting the Class Proceedings Act in 1992. British Columbia was next in 1995, and the last province to follow suit – Prince Edward Island – had its own Class Proceedings Act receive Royal Assent in November 2021.

The process begins with certification. In Québec, this process is called authorization.

The lawyers representing the class will serve a Statement of Claim against the defendant. Then, a case-management judge will convene a case conference, in which the parties will devise a schedule for certification. Class counsel will then file certification documents, which include their argument on why the class claim meets the five-part certification test:

• The pleadings must disclose a cause of action.
• The class must be clearly defined.
• The class members’ claims must raise common issues.
• Class proceedings must be the preferable procedure.
• And there must be a representative plaintiff who adequately represents the interests of the class.

When the court renders the decision on certification, if the defendant is not successful, they almost always appeal, says Baer. Once the case is heard on its merits, and concludes either by settlement or judgment, a notice will go out to the class that the claims period is now open. The notice instructs class members on what they need to do to submit their claim and the documentation they are required to produce. A claims administrator will approve or deny and determine what share of the award or settlement each individual class member receives, he says.

If a person has the same legal claim as members in an active class action, but they want to pursue their own legal action, that person is required to opt-out of the class action once it is certified. If they do not opt out, they are automatically included in the lawsuit and bound by the result, says Baer.

Class actions are “very expensive, and take a long time,” says Baer. In litigation of all kinds, judges will often order the unsuccessful party to pay the legal costs incurred by the winning side. On just the certification stage, it is common to see these cost decisions reaching as high as $300,000-to-$400,000. On average, class actions take three-to-five years, but those on the longer end can last from 12-to-15 years, he says.

While class actions are a useful method of spreading compensation to a large number of people who have suffered some sort of harm, according to “Top Class Action Cases in Canada,” an article from Klein Lawyers LLP, they are also a “tool for social change.”

In return for deceiving the public on the deadliness of their products, four major U.S. cigarette companies settled with 46 states attorneys general, and others, for more than US$206 billion, in 1998. The Big Tobacco class action was brought to cover medical costs caused by smoking-related illnesses. The Tobacco Master Settlement Agreement also created restrictions on tobacco marketing, which included a prohibition on targeting youth and limited sponsorships so that no concert, sporting or other event attended by young people could engage in a brand-name sponsorship with a tobacco company.

One of the largest Canadian class-action lawsuits involved the victims of the Residential School system. The suit was brought on behalf of the Indigenous children who were physically, sexually and emotionally abused and neglected in Canada’s Residential Schools and culminated in the Indian Residential Schools Settlement Agreement, in 2006. Former students, the Government of Canada, the Churches, the Assembly of First Nations and other Indigenous groups agreed to initial compensation of $1.9 billion. In 2021, the Final Report of the Independent Assessment Process Oversight Committee found that $3.23 billion had been paid out to claimants in 27,846 awards.

The Settlement Agreement also established the Truth and Reconciliation Commission, provided funding for the Aboriginal Healing Foundation and for various commemoration projects across the country.