Class action reform: the Law Commission of Ontario review of the Class Proceedings Act.

• Author: McKee, S. Gordon

IN 2013, the Ontario government announced that it had asked the Law Commission of Ontario (the "LCO") to engage in a comprehensive review of the Ontario Class Proceedings Act, 1992 (1) and experiences with that legislation since it came into force in 1993. The LCO was created in 2007 by an agreement among the Law Foundation of Ontario, the Attorney General of Ontario, Osgoode Hall Law School of York University, the Law Society of Upper Canada and the Ontario Law Deans. Its mandate is to make the law more effective, relevant and accessible, to clarify and simplify the law, and to see how technology might be used to increase access to justice.

This ongoing review is likely to culminate in recommendations for reform of the Ontario class proceedings regime. Given Ontario's status as a leader in this area, the LCO's recommendations and any subsequent action taken by the Ontario government may

//influence reforms in other Canadian provinces and territories as well. This is an important moment for class actions in Ontario (and potentially in Canada more broadly). While many accept that class actions will be part of the litigation landscape in Canada for the long term and are an appropriate procedural vehicle in some cases, they also come with some costs. The LCO has the opportunity to consider whether the current regime strikes the right balance between the benefits and costs of a class action regime. (2)

The overarching objectives of the CPA are to promote access to justice, judicial economy and behavior modification. With respect to the first and perhaps most important of these objectives, the Supreme Court of Canada has expressly stated that "access to justice" requires access to just results, not simply access to the legal process for its own sake. (3)

While many writers in this area focus their remarks on the importance of substantive justice for claimants (class members), some Ontario courts have emphasized the obvious--that defendants, as well as plaintiffs, are entitled to access to justice, (4) in other words, access to just outcomes. However, certain aspects of the Ontario regime, including low certification standards, asymmetrical certification appeal rights (including the ability of plaintiffs to reframe their case for certification on appeal), a sometimes unbalanced application of the loser pays costs regime, and the increasing availability of third-party litigation funding, have led to the perception that Ontario is a very class action-friendly jurisdiction, and raise questions about whether it is fairly achieving its substantive access to justice objectives, properly understood.

As in the United States, the certification of a class proceeding in Ontario can result in significant pressure to settle the class's claims, even where they are seriously flawed or meritless. (5) Since the objective of the legislation is access to just results, one should look not only at the merits decisions but also at the settlements in assessing whether a class action regime is meeting that objective--providing access to justice to both plaintiffs and defendants. One should consider whether defendants are being or may be pressured to settle class proceedings for reasons unrelated to, or on terms disproportionate to, their merits. These pressures may arise from the sheer size of the damages exposure, the enormous costs of defense (which include both legal expenses and diverted employee time), potential effects on shareholder value, and reputational pressure. One must also consider whether businesses are incurring substantial and inordinate unrecoverable costs (both out of pocket and in employee time), and courts expending excessive time, to have class actions that should never have been brought dismissed on their merits, as well as the broader potential economic impacts of companies' being exposed to or incurring these unnecessary costs (e.g. increased prices for customers, lower stock prices for current shareholders, and less or delayed innovation). (6)

Economic impacts are, unfortunately, very difficult to measure, in part because of the confidential and competitively sensitive nature of the information that would need to be disclosed by businesses to do so. But logic supports the view that the risk of and costs of defending class actions with little or no merit have to have economic impacts beyond just the specific case, and there is some evidence that such economic impacts exist. (7) In the life sciences area, where innovation is strongly encouraged by Canadian governments to improve the well-being of Canadians and reduce health care costs, a number of studies have suggested that the possibility of large liability costs can discourage innovation.

The plaintiffs' bar will be vocal in the LCO review process. It is essential that the interests of defendants (many of which have been U.S.-based or based in other countries) and other businesses also be represented, and that the LCO receive extensive input from the business community--including companies that are (or may become) defendants in class proceedings, industry organizations, and insurers--in order to ensure a fair and balanced review.

This article provides a brief overview of the LCO review project and its current status. It then touches on four issues that are likely to be of particular importance to defense interests: certification standards and appeals, costs, the availability of third-party litigation funding, and settlement issues. Its purpose is to continue a dialogue among businesses about the potential reforms, and ultimately to encourage businesses to consider their views on these issues further and make them known to the LCO when it seeks feedback.

1. LCO Review of the Class Proceedings Act

   The LCO released a scoping document in November 2013, establishing a framework for the review and a preliminary list of issues to be addressed. (9) Since the release of the initial scoping paper, the LCO has also created a class action database that it intends to use for empirical analysis of class proceedings in Ontario; it includes nearly 630 cases commenced pursuant to the CPA since 1993. (10)

   The project head is a lawyer employed by the Ontario Ministry of the Attorney General, who has been seconded to the LCO for this purpose; a new project head is seconded each year. A project advisory group has also been established that includes representatives of the plaintiff and defense bars, industry, academia, and the judiciary.

   The LCO will likely release a substantive discussion paper in late 2015 or early 2016, which will be followed by a period of consultation with interested stakeholders (likely to involve some combination of an opportunity to make written submissions and possibly in-person focus groups). Following this period of consultation, the LCO will prepare and circulate for comment a draft report and set of recommendations. Following a further period of consultation, the Commission will prepare a final report and provide it to the Attorney General.

   While any individual or organization, including an individual company, may make submissions to the LCO, a number of organizations representing defense interests more broadly will likely be making submissions and are already seeking feedback from stakeholders.

2. A Relatively Low Bar: Certification Standards

   While certification is meant to be a meaningful screening device, there is a relatively low threshold for certification of a class proceeding in Ontario, the evidentiary burden on the plaintiff is low ("some basis in fact") and, conversely, the evidentiary burden on the defendants to show that the certification criteria have not been met is high once the plaintiff shows some basis in fact. (11) The court will not weigh competing expert evidence on a certification motion. It will simply assess whether the plaintiffs' expert provides a plausible and credible opinion relevant to the certification issues, assuming the evidence is admissible. (12)

   Moreover, although certification motions have been dismissed outright, Ontario courts are often prepared to give plaintiffs several opportunities to reformulate cases that are found not to be suitable for certification, by amending pleadings, proposed common issues or class definitions, or by adducing additional evidence. Some jurisprudence even permits plaintiffs to reframe their case on appeal from an order dismissing the certification motion, allowing them to address issues identified by the motions judge before the appellate court--rather than, for example, having to pay the costs of the original motion and then start again with the motions judge if they want to reframe...