Year in Review: Ontario Class Actions 2012/2013
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Year in Review: Ontario Class Actions 2012/2013

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Dentons' Michael D. Schafler presented "Year in Review: Ontario Class Actions 2012/2013" at The Canadian Institute's 14th Annual National Forum on Class Actions on September 24, 2013 in Toronto.......

Dentons' Michael D. Schafler presented "Year in Review: Ontario Class Actions 2012/2013" at The Canadian Institute's 14th Annual National Forum on Class Actions on September 24, 2013 in Toronto. This presentation looks at the past year in Class Actions in Ontario, with an examination of Class Actions trends as well as Class Actions related to employment, securities, franchisee actions as well as government actions.

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  • 1. Year in Review: Ontario Class Actions 2012/2013 By Michael D. Schafler and Deepshikha Dutt September 2013 Dentons Canada LLP
  • 2. Certification Test (Class Proceedings Act, 1992) September 2013 Dentons Canada LLP NATDOCS | 4069104_1 s. 5(1) The court shall certify a class proceeding on a motion if: a) the pleadings or the Notice of Application discloses a cause of action; b) there is an identifiable class of two or more persons that would be represented by the representative plaintiff or defendant; c) the claims or defences of the class members raise common issues; d) a class proceeding would be the preferable procedure for the resolution of the common issues; and e) there is a representative plaintiff or defendant who, i. would fairly and adequately represent the interests of the class, ii. has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and iii. does not have, on the common issues for the class, an interest in conflict with the interests of other class members. 2
  • 3. 0 5 10 15 20 25 30 Contested Certification Motions Certifications Granted Certifications Denied 2010-2011 2011-2012 2012-2013 Class Certification Motions September 2013 Dentons Canada LLP NATDOCS | 4069104_1 *All data relates to the period August 1, 2012 – July 31, 2013 3
  • 4. Types of Motions September 2013 Dentons Canada LLP NATDOCS | 4069104_1 4 0 5 10 15 20 25 30 35 *All data relates to the period August 1, 2012 – July 31, 2013
  • 5. Class Action Trends September 2013 Dentons Canada LLP NATDOCS | 4069104_1 5 0 2 4 6 8 10 12 14 *All data relates to the period August 1, 2012 – July 31, 2013
  • 6. Consumer Services Cases of Note September 2013 Dentons Canada LLP NATDOCS | 4069104_1 6 Ramdath v. George Brown College, 2012 ONSC 6173 • The course syllabus for the International Business Management Program allegedly misrepresented that students would receive “three industry designations” upon completion. • The Court decided that students were consumers under the Consumer Protection Act (“CPA”), as “purchasers of educational services may be as much in need of protection against unfair or deceptive practices in their advertising and sale as are purchasers of any other service.” • Students in the program prevailed against the College on negligent misrepresentation and the CPA at a common issues trial.
  • 7. Consumer Services Cases of Note September 2013 Dentons Canada LLP NATDOCS | 4069104_1 7 Arora v. Whirlpool Canada LP, 2012 ONSC 4642 • A certification motion alleging that Whirlpool negligently designed its washing machines and failed to warn of the design defects contrary to s. 52 of the Competition Act. • The action was unsuccessful and certification was denied as there was no tenable cause of action. • Similar proceedings against Whirlpool have also been initiated in British Columbia and Quebec.
  • 8. Consumer Services Cases of Note September 2013 Dentons Canada LLP NATDOCS | 4069104_1 8 Magill v. Expedia, Inc., 2013 ONSC 683 • A certification motion alleging Expedia Canada Corp., a Canadian company with offices in Ontario, and Expedia, Inc., a U.S. corporation, headquartered in Washington, wrongfully charged customers services fees for hotel bookings. • The claim against Expedia, Inc., for the breach of contract claim, was certified. • The claim against Expedia Canada Corp. was not certified as it did not meet the definition of a “supplier” under the CPA.
  • 9. Consumer Services Cases of Note September 2013 Dentons Canada LLP NATDOCS | 4069104_1 9 Kang v. Sun Life Assurance Company of Canada, 2013 ONCA 118 • An appeal of the Court’s decision to strike out numerous paragrpahs of the plaintiffs’ Fresh as Ameneded Statement of Claim under r. 21.01(1)(b) of the Rules of Civil Procedure. • On a r. 21.01(1)(b) motion, the respondent is required to demonstrate: “that it was plain and obvious that the action cannot possibly succeed. Under this test, the motion judge was required to accept the factual pleadings as proven and to read the claim generously. In addition, the test requires that a claim not be dismissed simply because it asserts a novel cause of action.” • The appeal was allowed. Allegations concerning breach of the duty of good faith and fair dealing, breach of contract, deceit and fraud, and the material facts relevant to the pleas were allowed to be part of the claim.
  • 10. Franchise Cases of Note September 2013 Dentons Canada LLP NATDOCS | 4069104_1 10 1250264 Ontario Inc. v. Pet Valu Canada Inc., 2013 ONCA 279 • The Superior Court invalidated all opt-out notices filed by class members after a telephone campaign from an opposed franchisee group (CPVF) made concerted efforts to dissuade class members from participating in the claim. • On appeal, the court set aside the opt-out notices because the motion judge’s analysis was based on the mistaken view that the survival of the class action depended on the outcome of the opt-out motion. CPVF’s efforts to dissuade class members amount to the type of intra class debate which is acceptable during the opt-out period.
  • 11. Franchise Cases of Note September 2013 Dentons Canada LLP NATDOCS | 4069104_1 11 David Zwaniga v. Johnvince Foods Distribution et al, 2012 ONSC 5234 • Johnvince brought a pre-certification Summary Judgment motion to dismiss the proposed class action against them. Johnvince was neither the partner nor “franchisor’s associate” of the co-defendant, Revolution Technologies Inc. • The Court granted the Summary Judgment and stated that Johnvince did not meet the definition of the term “franchisor’s associate” as interpreted by the courts and stated in the Arthur Wishart Act. • The Court said that Johnvince was not “involved in reviewing or approving the grant of the franchisee” and was not a person who “exercises significant operational control over the franchisee and to whom the franchisee has a continuing financial obligation in respect of the franchisee.”
  • 12. Labour/Employment Cases of Note September 2013 Dentons Canada LLP NATDOCS | 4069104_1 12 • On June 26, 2012, the Ontario Court of Appeal permitted the “off-the- clock” overtime class actions to continue against the defendant banks in Fulawka v. Bank of Nova Scotia (“Fulawka”) and Fresco v. Canadian Imperial Bank of Commerce (“Fresco”). However, it refused to grant certification in McCracken v. Canadian National Railway Company, which involved a claim regarding the misclassification of employees as exempt from overtime requirements. Applications for leave to appeal to the Supreme Court were filed only in Fresco and Fulawka. • On March 21, 2013, the Supreme Court of Canada dismissed the applications for leave to appeal for Fresco and Fulawka from the Ontario Court of Appeal.
  • 13. Labour/Employment Cases of Note September 2013 Dentons Canada LLP NATDOCS | 4069104_1 13 Brown v. Canadian Imperial Bank of Commerce (“Brown”), 2013 ONSC 1284 • Alleged misclassification of employees to avoid payment of overtime. • Certification was denied. There was a lack of commonality among the class members as managerial employees were included (appears to have been endorsed in para. 92 of McCracken). The decision was upheld by the Divisional Court. Rosen v. BMO Nesbitt Burns Inc. (“Rosen”), 2013 ONSC 2144 • The proposed class in Rosen (much like the proposed class in Brown) comprises current and former BMO Investment Advisors, Associate Investment Advisors, and Investment Advisor Trainees who claim they were denied overtime pay contrary to the Employment Standards Act. • Certification was granted. Taking a cue from Brown, the class definition was revised to exclude Investment Advisors who perform managerial or supervisory work. Also, there was no mention of job “levels” or grades.
  • 14. Summarizing the key points: September 2013 Dentons Canada LLP NATDOCS | 4069104_1 14 • Class action not certified for managerial employees as their liability can only be determined through an individualized assessment of each employee’s duties and responsibilities. (McCracken and Brown ) • Class action certified for non managerial level employees as they have standard policies and procedures, and the liability of all class members can be determined uniformly. (Fulawka, Fresco and Rosen) • It is important for employers to ensure that their policies and procedures do not run afoul the ESA, and comply with the minimum statutory requirements.(Fulawka, Fresco and Rosen) • It is important for the plaintiff’s class to produce enough evidence to meet the “some basis in fact” test at certification and answer questions relating to the “employee's authority, autonomy, level of responsibility, degree of control over his or her hours of work and where and how that work is done”. (McCracken and Brown failed to meet the test)
  • 15. Labour/Employment Cases of Note September 2013 Dentons Canada LLP NATDOCS | 4069104_1 15 Perrenoud v. eHealth Ontario et al, 2012 ONSC 6704 • The Court certified a class action against eHealth and allowed the plaintiffs’ motion to amend their Statement of Claim to add a claim against eHealth, alleging that it breached its employment contract by cancelling Performance Awards to employees in 2010/2011 and 2011/2012. • The certification against the Ontario government, alleging the tort of inducing breach of contract, is refused as there is nothing wrong with the government asking eHealth to reevaluate its goals.
  • 16. Pensions Cases of Note September 2013 Dentons Canada LLP NATDOCS | 4069104_1 16 Chapman v. Benefit Plan Administrators et al, 2013 ONSC 3318 • A successful certification motion based on a claim that was from 2000- 2006. The Trustees of the Eastern Canada Car Carriers Pension Plan granted early retirement benefits to Plan members at a time when the Plan had ongoing solvency issues. • The Court allowed the claim to proceed against, among others, Benefits Plan Administrators Limited and its president, Mr. Harvey, in personal capacity, even though he was acting in course of his employment. The Court said that “officers or employees of a corporation can be held personally liable for tortious conduct, even when they are acting in the course of their duty, provided that the tort is properly pleaded against the individual”.
  • 17. Pensions Cases of Note September 2013 Dentons Canada LLP NATDOCS | 4069104_1 17 O’Neill v. General Motors of Canada, 2013 ONSC 4654 • A partial Summary Judgment and common issues trial arising out of a claim that General Motors of Canada Limited (“GMC”) unlawfully reduced. They eliminated the post-retirement benefits for executive and salaried employees after their retirement. • The Court allowed the common issues to proceed in favour of the salaried employees and dismissed the claim against the executive employees as GMC could only reduce benefits of salaried employees while they were actively employed.
  • 18. Securities Class Actions Statistics September 2013 Dentons Canada LLP NATDOCS | 4069104_1 18 Trends in Canadian Securities Class Actions: 2012 Update (NERA Economic Consulting) • 9 new Canadian securities class action: total claims ~ $8 billion. • 8 out of 9 claims were Bill 198 cases. • Each of the 9 new cases were filed in Ontario (2 of the cases were also filed in Quebec). • 2 cases were filed in British Columbia. • As of December 31, 2012, there are 51 active securities class actions ~ $19 billion in outstanding claims (including claims for punitive damages). • From 1997-2012, Canadian-domiciled companies named as defendants were in 83 filings in the U.S.; 25 also had parallel class actions in Canada.
  • 19. Securities Cases of Note September 2013 Dentons Canada LLP NATDOCS | 4069104_1 19 Silver v. IMAX, 2013 ONSC 1667 • IMAX, a Canadian public company dual-listed on the TSX and the NASDAQ, is a defendant in overlapping class proceedings in Ontario and the United States. • The Court granted the defendants’ motion to exclude from the certified class all NASDAQ purchasers who did not deliver an opt-out notice in the U.S. Action.
  • 20. Securities Cases of Note September 2013 Dentons Canada LLP NATDOCS | 4069104_1 20 Tucci v. Smart Technologies Inc., 2013 ONSC 802 • Smart Technologies issued shares in the secondary market following an Initial Public Offering in 2010. The plaintiffs bought shares and brought an action alleging that the offering materials were materially deficient. • The Court upheld the conventional application of s.130(1) of the Ontario Securities Act (“OSA”) to primary market purchases by refusing to provide a remedy for purchasers in the secondary market.
  • 21. Securities Cases of Note September 2013 Dentons Canada LLP NATDOCS | 4069104_1 21 Dugal v. Manulife Financial, 2013 ONSC 4083 • Plaintiffs sought leave to bring an action under s. 138.3 of the OSA. • The Court granted the leave and discussed the two interpretations of the threshold of “reasonable possibility of success” which the Plaintiff needs to meet in order to get leave to bring an action under s. 138.3 of the OSA. This section states that “the test is intended to do more than screen out clearly frivolous, scandalous or vexatious actions.”
  • 22. Securities Cases of Note September 2013 Dentons Canada LLP NATDOCS | 4069104_1 22 Gould v. Western Coal Corporation (“WCC”), 2012 ONSC 5184 • The plaintiff sought certification of the action and leave to commence an action for secondary misrepresentation under Part XXIII.1 of the OSA. The defendants allegedly fabricated a financial crisis in WCC in November, 2007 in order to artificially depress its stock price so that they could enhance their shareholdings in the company at a fraction of what the shares were worth. • The Plaintiff’s expert evidence failed to establish the cause of action which had “reasonable possibility of success at trial”. The plaintiff’s certification and leave motion were both denied.
  • 23. Procedural Updates September 2013 Dentons Canada LLP NATDOCS | 4069104_1 23 Treat America Limited v. Leonidas, 2012 ONCA 748 • The Court confirmed an Order deposing the former CEO of a Canadian company to give evidence in a U.S. class action, even though he is under investigation in a parallel criminal proceeding in Canada. Parsons v. The Canadian Red Cross Society, 2013 ONSC 3053 • The Superior Court held that a judge of the Ontario Superior Court could sit outside of Ontario to hear a case involving a pan-Canadian settlement.
  • 24. Procedural Updates September 2013 Dentons Canada LLP NATDOCS | 4069104_1 24 AIC Limited et al. v. Dennis Fischer et al, 2012 ONCA 47 • The case concerns “market timing” – the opportunistic trading of mutual fund units to take advantage of short-term discrepancies between the daily “net asset value”, which determines the price at which mutual fund units are sold, and the actual value of the underlying securities held by the mutual fund. • The mutual fund managers settled the allegations by Ontario Securities Commission (“OSC”) against them and agreed to pay $205.6 million to investors. The proposed class plaintiff claimed that the amount paid, pursuant to the OSC settlements, did not fully compensate the class and the claim damages were over and above the amount of the settlement. (cont.)
  • 25. Procedural Updates September 2013 Dentons Canada LLP NATDOCS | 4069104_1 25 • The plaintiffs’ motion for certification failed at first instance on the basis that a class proceeding was not the preferable procedure for the resolution of the claims asserted on behalf of the class. • That decision was overturned by the Divisional Court and was upheld by the Court of Appeal for Ontario. • The case was heard by the Supreme Court of Canada on April 18, 2013 and the decision was reserved.
  • 26. The Implications of Sharma v. Timminco Limited, 2012 ONCA 107 (“Timminco”) September 2013 Dentons Canada LLP NATDOCS | 4069104_1 26 • In 2009, the plaintiffs commenced a proposed class action alleging misrepresentations by the defendants that adversely affected the value of shares of Timminco Limited in the secondary market for 8 months in 2008. • The defendants appealed to the Court of Appeal on the issue of whether pleading the intention to seek leave was sufficient to suspend the limitation period. The Court of Appeal overturned the initial decision concluding that without leave having been obtained, no cause of action under s. 138.3 was being “asserted” so as to engage s. 28(1) of the CPA. • As such, the cause of action for secondary market misrepresentation was not a legal right and could not be enforced. The Supreme Court of Canada declined to review the decision.
  • 27. The Implications of Timminco (Cont.) September 2013 Dentons Canada LLP NATDOCS | 4069104_1 27 Trustees of the Millwright Regional Council of Ontario Pension Trust Fund v. Celestica Inc., 2012 ONSC 6083 • The plaintiffs purchased stock in Celestica (dual-listed on the TSX and NYSE) after a 2005 announcement of a +$200 million restructuring. In 2007, it was revealed that Celestica's representations were untrue and the stock dropped by 23%. • The claim was brought in the U.S. in 2007 and in Canada in 2008. The Canadian claim remained idle as the plaintiff’s waited for the American claim to be resolved. The defendant brought a motion to strike parts of the Canadian claim under Rule 21.01 of the Rules of Civil Procedure which dealt with the statutory cause of action under Part XXIII.1 of the OSA. • The Court granted the motion. The Court was bound by Timminco and held that the plaintiff’s claim under Part XXIII.1 of the OSA was time- barred because the limitation period in s.138.14 of the OSA was not suspended by s.28 of the Class Proceedings Act, 1992.
  • 28. The Implications of Timminco (Cont.) September 2013 Dentons Canada LLP NATDOCS | 4069104_1 28 Silver v. IMAX (“Silver”), 2012 ONSC 4881 • An action alleging that IMAX made misrepresentations to the secondary market in 2006. The Statement of Claim pleaded that the plaintiffs intended to bring a motion for an order to seek leave to proceed with claims pursuant to s. 138.3 of the OSA. • The Superior Court applied Timminco, but distinguished the case at bar because the plaintiffs advanced the motion for leave, delivered their Notice of Motion, a complete Motion Record and argued the motion within three years of the alleged misrepresentations.
  • 29. The Implications of Timminco September 2013 Dentons Canada LLP NATDOCS | 4069104_1 29 Green v. Canadian Imperial Bank of Commerce (“Green”), 2012 ONSC 3637 • Two shareholders of CIBC sought leave, under s.138.3 of the OSA, to pursue an action against CIBC and four senior officers for alleged misrepresentations in the secondary securities market concerning CIBC’s exposure to the U.S. residential mortgage market. • Following Timminco, the plaintiffs’ right to pursue a cause of action under s.138.3 of the OSA was time-barred, as leave was not obtained prior to the expiry of the three year limitation period. • At the request of the plaintiffs in Green and Silver, the Court of Appeal stated that it would appoint a special five-judge panel to hear the two appeals and reconsider the issues raised by Timminco. The panel was convened in May 2013. The decision of the panel is yet to be rendered.
  • 30. Topic of Interest 2013 : Fate and scope of antitrust class actions in Canada September 2013 Dentons Canada LLP NATDOCS | 4069104_1 30 • The Supreme Court heard the trilogy of competition law cases; Pro- Sys Consultants Ltd. v. Microsoft Corp., 2011 BCCA 186, Sun-Rype Products Ltd. v. Archer Daniels Midland Co., 2011 BCCA 187 and Option Consommateurs v. Infineon Technologies, 2011 QCCA 2116 on October 17, 2012. The decision is still pending. • The core issue before the Supreme Court is whether indirect purchasers (those who bought the product after the initial purchase from those involved in the anti-competitive conduct) have a class action remedy under s. 36 of the Competition Act, which allows for a private right of action to “any person” who has suffered loss as a result of criminal misconduct under the legislation. (cont.)
  • 31. Topic of Interest 2013 : Fate and scope of antitrust class actions in Canada September 2013 Dentons Canada LLP NATDOCS | 4069104_1 31 • By a 2-1 majority in the B.C. cases, the Court of Appeal held that such class actions were not available to indirect purchasers. However, the Quebec Court of Appeal adopted the reasoning of the minority judge in the B.C. cases and decided the case in favour of indirect purchasers. • Plaintiffs usually sue for indirect harm in Canada, so excluding indirect purchasers could be a crippling development for the plaintiffs’ class action bar.