Class Action Backgrounder
FLIGHT PS752 CLASS ACTION
What is a Class Action?
Class action lawsuits allow parties to seek justice and compensation where public regulators or individual law suits are ineffective or inefficient. The three overriding policy objectives of class actions in Canada are: (1) improving access to justice (2) improving judicial economy, and (3) modifying behaviour of persons who have or potentially will cause widespread injury in our society (aka behaviour modification). Class actions allow plaintiffs to share the costs and risks of litigation. Class actions also ensure judicial decisions on similar issues are consistent and generally avoid multiple legal claims using up valuable judicial resources. The sizeable damage claims and settlements that can result from a class action lawsuit help deter major commercial enterprises and governments away from potentially harmful activities that affect two or more people.
How Do They Help Clients?
Class action lawsuits overcome economical and emotional barriers to pursuing litigation by providing vulnerable plaintiffs a way to access justice without the need for all plaintiffs to participate in the public court process.
The parties to class actions also benefit by the application of consistent and ongoing court oversight, typically a single judge is appointed to manage the class action lawsuit.
Class members’ interests are also protected by the requirement that a judge approve any settlement between parties and the lawyers’ fees. Plaintiffs are given notice and can opt out of a class action if they do not wish to be bound by the result of the class action (settlement or court imposed decision). Often overlooked, class actions also help defendants by establishing a resolution (settlement or court imposed decision) to a risk with all class members, with limited exceptions, in one lawsuit allowing the defendants to cleanse themselves of that the risk.
National class actions are becoming more common in Canada. Thus a class action lawsuit brought in Ontario can be certified to include all plaintiffs the Canadian courts will take jurisdiction over. This increases judicial efficiency and avoids the risk of inconsistent results.
What is a Litigation Funding Agreement?
A recent development in Canada is the use of litigation funding agreements, which allow class action plaintiffs to shed their liability from the lawsuit costs altogether. Litigation funding agreements, which historically may have been outlawed as maintenance and champerty, are permitted in Canada. Funders can pay the plaintiffs’ lawyer’s fees, and agree to pay adverse cost awards, disbursements, and security for costs, in exchange for a percentage of the return from the case. Litigation funding agreements are subject to court approval and the funders return must be approved by the court.
Tom Arndt has been counsel on class actions in Canada for over 20 years. In the 1990s he acted on the tainted blood (Hep C and HIV) class actions and litigation. He has acted for plaintiffs and defendants. Most recently, he was lead class counsel in nation-wide $1.2Billion franchise class litigation and obtained court approval for an innovative litigation funding agreement in a widely reported decision. Tom Arndt is an editor of the Consulegis newsletter: Class Actions Around the World. The above content is largely based on an article he published in Winter 2019.