International class actions in the Canadian context: standing, funding, enforceability and trial.

AuthorZakaib, Glenn M.

CANADIAN CLASS proceedings are commonly brought simultaneously with parallel actions in other jurisdictions. Due to the legal and factual overlap between these actions and the ongoing litigation in other countries, the conduct and conclusion of the Canadian cases must be carefully managed in the process of achieving coordinated resolutions of global claims. Naturally, the most pressing questions legal advisors of multinational defendants have when their clients are facing ancillary actions in Canada are those that have the most significant impact on their global defense strategy: How are Canadian class actions different from class actions in other countries? Who may bring an action, and how large a class can be defined? What resources does that class have available? Will a successful judgment or satisfactory settlement be enforceable in Canada, and will it conclusively resolve all future Canadian claims in the matter?

The most pressing question, however, invariably is whether or not it will be necessary of desirable to take a Canadian class proceeding to trial. In order to come to a considered conclusion on this point, it is necessary to establish an understanding of the other critical concerns in managing an ancillary class action in Canada. This understanding will prove exceptionally important to defence counsel internationally in the increasing number of cases in which Canadian courts assume jurisdiction over global class actions, particularly in the securities and product liability contexts, it may not be long before concerns about ancillary actions in Canada evolve into concerns about bet-the-company, ostensibly conclusive global actions that happen to be tried in a Canadian court.

  1. Policy and Structure of the Canadian Class Action

    Class actions are actively promoted in Canada by both the judiciary and the various levels of government. The frequently expressed concern in many civil law jurisdictions that class actions do not facilitate recovery for class members and merely represent a form of "entrepreneurial lawyering" for the benefit of class counsel, who claim a percentage of class recovery or a multiple of their costs in the action, has been explicitly rejected by Canadian courts. Canadian courts consider class counsel to be taking on the role of "private attorneys general", fulfilling a necessary regulatory function by collecting individually non-viable actions into a single, efficient proceeding and requiring wrongdoers to internalize the costs associated with their wrongdoing.

    While class actions are universally encouraged by Canadian lawmakers, the structure of Canada's constitution and the interpretation of its class proceedings statutes have prevented Canadian class actions from operating as seamlessly as all interested parties would wish. The uniformity of Canadian class proceedings leaves something to be desired, and fundamental constitutional issues continue to plague the class actions bar with the persistent threat that a seminal case may challenge the very capacity of Canadian courts to determine class actions on a nationwide scale.

    1. Constitutional Considerations

      The conduct and structure of Canadian class proceedings are largely dictated by Canada's unique constitutional arrangement. The Canadian constitution divides powers between a federal government and ten provincial governments. Canada also has three sparsely populated northern territories that are in large part governed as though they were provinces. The Constitution assigns exclusive jurisdiction over property and civil rights, as well as power over the administration of justice, to the ten provincial governments. (1)

      As a result of this separation of powers, provincial courts of general competence have jurisdiction to hear class proceedings concerning most civil actions, and provincial governments have jurisdiction to legislate with regard to the conduct of class proceedings that concern property and civil rights. Provincial legislatures have no power to bind anyone outside their own province under their class proceedings statutes, however, and the constitutional capacity of provincial courts to assert jurisdiction over extra-provincial class members and defendants remains an open question.

      To the extent that a litigant seeks to enforce a class action settlement beyond the borders of the province in which the settlement was approved, there remains confusion regarding the basis for recognizing that litigant's enforcement pleading; was the settlement justified by the operation of a foreign statute that had no jurisdiction to bind the litigant, or from the judgment of a foreign court to which the litigant may be said never to have attorned? This uncertainty is a significant and ongoing concern both for plaintiff class members attempting to enforce class action settlements and defendants seeking to bar future actions on the basis of res judicata.

      A natural reaction to the threat of provincial disunity in the enforcement of judgments and settlements in class proceedings would be to consider using federal courts as a unifying influence. Federal courts in Canada are courts of parallel, not superior, jurisdiction, however, and are empowered by statute rather than constitutional enactment. Canada's federal courts thus decide matters only in a very narrow range of subjects that fall directly under federal jurisdiction such as national defence, immigration, tax and intellectual property. They have no plenary jurisdiction of their own, and are barred from hearing cases other than those within their explicit statutory mandate, which most often involve cases brought against the federal government itself.

      The Supreme Court of Canada is, however, a court of general competence. It can hear any case on appeal from any Canadian court, and its decisions are binding upon all other courts in the country. This unifying feature of the Canadian judicial system is complicated by the fact that one of the provinces, Quebec, is a civil law jurisdiction. As a result, absent explicit language, it is not always clear that Supreme Court decisions concerning common-law appeals apply to the residents of Quebec, or that decisions made on Quebec appeals are necessarily binding on the rest of the country. (2) It is in this context that Canada has attempted to establish a functioning, multijurisdictional system of class proceedings.

      These constitutional strictures have resulted in Canada's current class proceedings structure: a patchwork of provincial class proceedings statutes that are largely uniform but differ somewhat on class composition, costs and lee arrangements. As the federal government and its courts

      have no authority to coordinate provincial actions, there is no supervisory "traffic cop" court or Multi-District Litigation panel in Canada to streamline putative class proceedings into the most appropriate forum, as there is in the United States.

      Informal arrangements between various counsel and different provincial courts have thus far prevented a deluge of disputes over the carriage and forum of national class actions, but as class actions and class action firms continue to proliferate, these informal arrangements ate beginning to show some strain. In recent months, two of Canada's most respected and seasoned plaintiff-side class counsel firms apparently terminated a decades-old "gentleman's agreement" to settle carriage of the most high-profile actions behind closed doors, and took their dispute to the court and the press. (3)

    2. Managing a National or International Class Action in Canada

      One of the most difficult elements of class proceedings practice to contend with on a daily basis for a Canadian practitioner is the coordination of an action between various counsel. A defendant may retain different firms for different parts of its business; the defendant's preferred litigation counsel may not practice in all provinces (of, if they do, may not be expert in the law of all ten provinces); and the plaintiff class will generally retain different firms in different jurisdictions as only one Canadian class counsel purports to practice nationally. (4) As a result, any national or international class action being heard in Canada will almost certainly involve a multiplicity of law firms on both sides of the dispute, in some instances with no apparent command structure or organizational nexus.

      The organizational and procedural difficulties posed by this state of affairs ate obvious, particularly in terms of ordering and delivering discovery. Similar challenges abound when dealing with courts in various provinces. While most multijurisdictional class proceedings are now brought in a single court in an "opt-out" province (a province that purports to include all persons included in the class definition, wherever they reside, unless they take steps to remove themselves from that action), jurisdictional disputes and subtle differences between provincial statutes each still often require recourse to the bench of several other provinces.

      The result of these disparate actions and motions to stay collateral proceedings has been, in some of the largest class proceedings in Canada, a somewhat chaotic conferencing system at the best of times (what has been called a "Hollywood Squares" videoconference settlement hearing accommodated nine judges in Whiting v. Menu Foods Operating Limited Partnership, (5) and a politically charged settlement hearing fostered commendable judicial collaboration in Fontaine v. Canada (6) and transparently adversarial assumptions of jurisdiction at the worst, like Wuttunee v. Merck Frost Canada Ltd.). (7)

      Over and above the challenges of coordinating an action across multiple offices nationally--on one's own side of the action and the other--and among the benches of several provinces, plaintiff consortia and multinational corporations both increasingly have an interest in managing potential class actions on an international basis...

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