Strategies To Avoid Or Mitigate Class Action Litigation - Quest For The Silver Bullet*

Article by Ian F. Leach2

PERSPECTIVES

Maleva: "A werewolf can only be killed by a silver bullet, or a silver knife, or a stick with a silver handle..."

Larry Talbot: "You're insane, I tell you!..." –

From "The Wolf Man". Universal Pictures (1941).3

Afraid of class actions? Hoping to avoid them?

It no doubt depends on your perspective.

There are reasons why plaintiffs and their counsel may be independently motivated to steer clear of class proceeding litigation, and look for alternative but effective options. For example, a sufficiently funded individual with a meritorious claim, able to litigate in the absence of a class action dimension, may very well want to avoid:

adding inevitable delay to resolution of his/her own claim, (e.g., treading the minefield of extended certification proceedings and appeals, waiting for notices to be published and opt out periods to expire, or waiting for relief for the entire class to be determined and distributed prior to receiving any individual entitlements); galvanizing the full litigation resources of a defendant or insurer, which otherwise might have been inclined to discuss early settlement of a much smaller individual claim; taking on the added work and responsibilities of a representative plaintiff; or risking added exposure to adverse cost awards in the event of failure, (at least in Ontario and Quebec).4 A plaintiff in that situation may stick to litigation of his/her individual claim, particularly if it can be done in a way that effectively benefits all similarly placed claimants anyway; (e.g., by way of a test case, or a request for injunctive relief that will benefit all those in a similar situation).

For most plaintiffs, however, class proceedings offer economies of scale, settlement leverage, safety in numbers, and corresponding incentives for plaintiff counsel involvement, all of which often combine to make litigation feasible where it otherwise could not have been pursued.5 For such litigants and their counsel, the obvious goal is to maximize a defendant's exposure and the scope of the class proceeding.

In short: only defendants focus on how to avoid or mitigate class action exposure risk and, viewed solely from their perspective, being targeted by a class action is not unlike the standard plot of a horror film classic.

Yes.

There you (the defendant) are, successful and happy, enjoying a situation that's seemingly benign - - perhaps even beautiful. (Just look at that moon!)

And then the danger is suddenly there, on a massive scale. Something not anticipated, and never seen before, threatening to maim or kill you. (Rare today is the class action not seeking sums in the seven to nine figure range, and not every defendant has access to that kind of insurance or asset portfolio. Regardless of whether the claim ultimately lacks merit, or whether the numbers set forth in the statement of claim are inflated beyond reason, it will have to be noted as a contingent liability, and explained to financiers, shareholders and other investors. The fall-out from bad publicity today will rarely be offset by vindication months or years down the road.)

You search for a gun, only to find that normal bullets just don't work (In Ontario, at least, the normal rules of court are supposed to apply to a class proceeding.6 It also has been said many times7, and emphasized in recent years by the Supreme Court of Canada,8 that the class proceeding statutes supposedly are procedural only, and create no new causes of action. However, a defendant facing a class action may feel, with some justification, that it really does not enjoy the same rights, tools and treatment extended to defendants in "normal" litigation. For example, the ability to rely on limitation periods is modified.9 The ability to enforce agreed arbitration provisions may be restricted, either by legislation or judicial discretion.10 Permission to proceed with certain preliminary motions, normally permitted by the rules of civil procedure, may be postponed or denied.11 Court willingness to address and resolve difficult constitutional issues relating to the assumption of extra-territorial jurisdiction seems markedly different in the class action context.12 The ability to raise possible issues of fact and law relating to individual claims effectively may be lost via aggregate damage assessments.13)

And even when you do apparently manage to wound or kill the monster, it rises again (Successfully dissuade an original representative plaintiff from continuing, or identify a fatal flaw in the named representative plaintiff's individual claim? All for naught if plaintiff counsel move to substitute another representative plaintiff before the action can be dismissed; e.g., before you can get a motion for summary judgment heard and decided.14 Successfully defeat certification at first instance, because the proposed common issues and theory of the plaintiff's case made a class action inappropriate? Prepare for the prospect of certification, on appeal, of a substantially different class action than that proposed and argued at first instance.15)

To those working in this area, and familiar with the background to class proceeding legislation, none of this is particularly surprising. Class actions were designed to redress historic and institutional factors favouring large defendants at the expense of multiple claimants, and therefore serve important goals;16 goals that the courts understandably will support in furtherance of the clear legislative policy.17 If certain aspects of the class proceeding landscape occasionally suggest an incline favouring plaintiffs, they were required to level the global playing field.

But to most defendants (even those who have experienced "normal" litigation), facing a class action will be a new, unfamiliar, challenging, and more than usually unpleasant litigation experience.

Small wonder, then, that the search...