Plaintiff class action legal fees under the microscope

A $28-million settlement reached with a Catholic religious order in a sexual abuse class action was rejected by Quebec Superior Court because of the high legal fees associated with the agreement, the second Quebec class action settlement in the past month whose legal fees have been the subject of a critical assessment.

The decision by Quebec Superior Court Justice Thomas Davis to rebuff a settlement for more than 375 alleged victims of sexual assaults committed by members and employees of the Clercs de Saint-Viateur of Canada follows on the heels of a ruling in mid-June by Quebec Superior Court Justice Daniel Dumais to curb plaintiff class action legal fees by 20 per cent in the so-called Dieselgate scandal in which German carmaker Volkswagen AG violated Canadian emissions standards.

The decisions underline that settlement approvals are not a rubber stamping exercise, demonstrate that the courts will take into account the Code of Professional Conduct of Lawyers (Code) when examining plaintiff class action legal fees, reiterate the importance of transparency vis-à-vis clients even in a class action setting, and illustrate why settlement approvals should be separate from and not contingent on class counsel fee approvals, according to class action legal experts.

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Quebec Consumer Protection Act does not apply to sale of prescription drugs, rules appeal court

In a resounding victory for the pharmaceutical industry, the Quebec Court of Appeal held that the province’s consumer protection law does not apply to the sale of prescription drugs, jettisoning a legal avenue a growing number of class action plaintiffs were using to sue the industry.

Continue reading “Quebec Consumer Protection Act does not apply to sale of prescription drugs, rules appeal court”

Bell Canada facing yet another class action

Barely a week after Bell Canada’s wireless provider was compelled to pay $1.6 million to some 76,000 clients who paid excessive cancellation fees after the Supreme Court of Canada refused to hear its appeal, the telecommunication giant now faces another potentially costly legal battle after Quebec Superior Court authorized a class action over fee increases on internet, mobile, telephone, television services.

Joseph Frainetti, the class action’s representative plaintiff, alleges that Bell made unilateral changes to contracts without providing clear notifications beginning in April 2012. Frainetti maintains Bell infringed article 11.2 of the Quebec Consumer Protection Act by unilaterally increasing service charges and advising him of the changes in his monthly bill while his contract was in effect. Frainetti argues that under article 11.2 written notification of all fee increases during a contract must be provided at least 30 days before the changes go into effect.

Bell argued that Frainetti’s interpretation of the province’s consumer protection law was erroneous. The telecom giant contended that an increase – or decrease of fees through discounts – in an open-ended contract is allowed under the Act given that “it is not a new clause in the contract but simply an increase in the cost of services being offered.”

But Quebec Superior Court Justice Robert Castiglio would have none of it.

“The Court is of the option that Frainetti’s interpretation of article 11.2 of the Act is not without foundation and constitutes a reasonable and defendable interpretation of this legislative provision,” said Justice Castiglio in a 19-page decision that authorized – or certified – the class.

While Justice Castiglio specifically underlined that at the authorization stage an applicant is required to establish nothing more than an arguable case and that judges at this stage are not supposed to render pre-emptive decisions on the merits, he appears to done just that when shooting down one of Bell’s arguments.

Justice Castiglio noted that since an increase in the cost of service constitutes a change in the contract, “a modification that is an essential component of a contract,” Frainetti’s claim that such changes cannot be made without a written notice respecting the conditions of article 11.2 of the Act appears to be founded.

“In this regard, the distinction put forward by Bell between a change in the price or a modification of the clause is not a convincing argument,” added Justice Castiglio in Frainetti c. Bell Canada, 2017 QCCS 3081.

Apart from seeking $100 in punitive damages for each member of the class, the class action wants all contractual clauses that can unilaterally increase service charges to be declared null and void.

In April, Quebec Superior Court authorized a class-action against Bell in which a plaintiff alleged that the company had falsely advertised its Fibe fibreoptic network.

More recently still, the Supreme Court of Canada refused to hear appeals lodged by Bell and Rogers Communications over early cancellation fee clauses. The Quebec Court of Appeal held in two separate decisions that the two telecom companies overcharged clients who were billed early cancellation fees.

Class action against Bell certified

Joey Zukran is a busy man. The Montreal lawyer who spearheaded a class action over photo radar tickets following a series of decisions that have put thousands of tickets in jeopardy after the courts called into question the rules around the province’s use of the automated speed and red-light enforcement technology is at again.

This time, he has Bell Canada in his sights. Zukran has launched a class action on behalf of Montreal resident Shay Abicidan that alleges that the largest telecommunications firm in the country is misleading customers that its high-speed internet service delivers a fibre optic network to homes.

The class action, certified yesterday by Quebec Superior Court Daniel Bisson, alleges that the company has falsely advertised its Fibe television and Internet service. An Internet-based television service, Bell Fibe uses a fibre optic internet network to connect to homes. In many cases however the fibre optic wiring is sent to a neighborhood node which in turn is connected to residential homes through copper phone wires. The class alleges that Bell is misrepresenting its adverstisements, in violation of article 41 of the Quebec Consumer Protection Act.

Compensatory and punitive damages in amounts have yet to be determined.

Quebec appeal court sets high bar for leave to appeal in class action certification cases

The Quebec Court of Appeal upheld a ruling that certified a class-action lawsuit following an outbreak of Legionnaires’ disease in Quebec City in 2012 that is believed to have contributed to 14 deaths and lead 181 others to become ill from bacteria found to be in a cooling tower of a downtown office building.

The class action alleges that the building’s owner, the Centrale des syndicats du Québec, failed to properly clean its cooling towers and that public health officials authorities were too slow to act and inform the public about the outbreak. The suit is claiming $50,000 for people who fell ill, $140,000 for surviving spouses and $30,000 for the deceased victims’ children.

The appeal court found in Centrale des syndicats du Québec v. Allen 2016 QCCA 1878 that the trial judge was right to assert that, at the authorization or the certification stage, the class action respondents could legitimately claim that the union had committed a fault that led to its liability. The appeal court also dismissed arguments by the Attorney General of Quebec that the judge of first instance committed a palpable error of law or of fact. According to the case law, it is up to the trial judge to analyze the value of a defence based on State immunity, noted the appeal court.

But the ruling, along with two concurrent decisions issued on the same day by the Quebec appeal court, has far wider implications. One of the most important changes that was introduced to the new Quebec Code of Civil Procedure, in force since January 2016, is that it once again grants defendants the right to seek leave to appeal before the Quebec Court of Appeal a lower court decision that certified a class action. When the Act respecting the class action was adopted in 1978, both plaintiffs and defendants could appeal, as of right, from a judgment on an application for authorization to institute a class action. In 1982, the defendant’s right to appeal a judgment authorizing a class action was revoked.

The three decisions outlines a new test that sets out the conditions that the appeal court will consider in deciding whether to grant leave to appeal a judgment authorizing a class action. While the legislator did not specify the criteria required to grant such leave, the appeal court relied on comments made by the Quebec Minister of Justice Stéphanie Vallée in which she said that “the appeal of the authorization should only deal with the conditions for granting it.” The appeal court held that to mean that the test should not be so strict that it “neutralizes” the right to appeal but neither should it be “so flexible” that it places both parties to the class action on an equal footing with respect to the right of appeal. In defining the test, the appeal court noted that the threshold required to obtain authorization to institute a class action is low and that the judge has broad discretion to grant the motion.

According to the three decisions, the appeal grant will grant permission to file leave to appeal only when the lower court decision appears to be riddled with a “decisive error“ in its interpretation of class action legislation or in its appreciation of the facts regarding the class action. The other situation where leave to appeal may be granted is in the case of “flagrant incompetence” by Quebec Superior Court. In short, the appeal court makes it clear that it will grant defendants leave to appeal only in “exceptional circumstances.”

This test respects the legislative intent that plainly states only the conditions for instituting class actions should be subject to appeal, said Quebec appeal court Justice Jacques Chamberland in a 15-page ruling in Allen, findings that were echoed in Énergie éolienne des Moulins, s.e.c.c. c. Labranche 2016 QCCA 1879 and in DuProprio inc. c. Fédération des chambres immobilières du Québec 2016 QCCA 1880. The test also respects the discretionary power of the judge who authorized the class action. Moreover it is “not so inflexible” that “it will indirectly increase the burden of those seeking to institute class actions and see that that they are heard within a reasonable time,” said Justice Chamberland. The test also avoids a long and costly debate on the merits where the class action is ill-founded, added Justice Chamberland.

Defense bar are disappointed with the ruling. According to Montreal class action expert Jean Saint-Onge of Lavery, de Billy, this ruling once again demonstrates the “liberal approach” adopted by the Quebec Court of Appeal regarding class actions. “I think the appeal court went too far,” said Saint-Onge, Ad.E., who heads the Quebec law society’s class action committee. “I’m not sure that, as Justice Chamberland suggests, that it really respects the legislator’s intention. We did not think that the appeal court would have imposed such a robust test. I have a hard time imagining what case will be granted leave to appeal.”

Saint-Onge believes that the appeal court wanted to avoid at all costs being overwhelmed by numerous appeals launched by class action defendants which in turn would have taxed the courts in terms of time and costs.

Montreal lawyer Catherine McKenzie too is surprised by the hardiness of the test. “I was surprised when the provincial government re-instituted the right to appeal because they got rid of it a long time ago and there were constitutional challenges to that that did not succeed,” said McKenzie, a partner with Irving Mitchell Kalichman. “The decision puts in a very high barrier to getting a leave to appeal in certification judgments, and even a higher or harder barrier than would normally be the case. The court is sending a very strong message – don’t bring us your leave applications unless you can show us that this is just wrong.”

But Montreal litigator and class action expert Sylvain Lussier was not surprised by the toughness of the test, particularly since comments made during hearings that examined the new Code of Civil Procedure before it was implemented clearly indicated that it would not be an “open bar.” Lussier also noted that in Charles v. Boiron Canada 2016 QCCA 1716, another Quebec appeal court decision issued in November, Justice Marie-France Bich invited in obiter the provincial legislator to reconsider the usefulness of the authorization stage. “It was clear that the Quebec appeal court would not open the floodgates to appeals on the granting of authorizations,” said Lussier, Ad.E. “The Allen decision corresponds to the appeal court’s philosophy regarding class action authorizations.”

Montreal class action lawyer Bruce Johnston, who acts for plaintiffs, is pleased that the test will mean that the right to file a leave to appeal in class action by defendants will be granted “parsimoniously and not systematically.” Johnston is not against the notion that class action defendants should have a right to appeal a judgement authorizing a class action. On the contrary. “It’s already happened to us that we have had a class action that was authorized, won the case before Quebec Superior Court only for the Quebec Court of Appeal to have said that the case should never have been certified and we lost the case,” said Johnston, a co-founder of Trudel Johnston & Lespérance. “So all that work was for naught, and that is not a good investment and a loss of energy, time and resources.”

While the defence bar may be discouraged by the robustness of the test, that will not prevent them from trying. “The amounts at issue are so important and the stakes so high that there will be other attempts,” said McKenzie. “People will be testing the limits of the test to find out what it means.”

This story was originally published in The Lawyers Weekly.

Appeal court authorizes class action against Mazda

A class action against an automobile manufacturer that was dismissed by a lower court was partially overturned by the Quebec Court of Appeal after it held that Mazda Canada Inc. failed to disclose “important information” to consumers in a timely manner.

Hailed as a victory for consumers, the appeal court’s decision bucks the nationwide growing trend against economic loss based tort claims, and serves a clear reminder to manufacturers that it is in their best interests to promptly inform consumers over “important facts” regarding their products and to fix products afflicted with latent defects expeditiously, according to consumer law experts.

“In this decision the Quebec Court of Appeal recognizes the social role that consumer protection legislation plays, and the importance of interpreting it liberally,” remarked Alexandre Plourde, a lawyer with the non-profit consumer advocacy group Option consommateurs in Montreal. “That’s significant because this law seeks to rebalance the power between consumers and business.”

The Quebec class action against Mazda, certified in 2010, sought damages for an alleged defect of the locking mechanism on Mazda 3 models. The suit, stemming from a rash of thefts, alleged that a design defect permitted the driver’s side door in the Mazda 3 model for the years 2004-2007 to be unlocked by simple pressure or a blow above the front driver’s side door handle. The claim also alleged that the defect rendered the Mazda 3 highly vulnerable to theft. The class action was divided into two sub-classes: those who were victims of theft or an attack near the handle of the driver’s door (Group 1), and those who alleged they suffered inconveniences associated with the installation of the strengthening device (Group 2).

Thefts using this technique first surfaced in British Columbia in fall 2006. Following an increase in the number of reported break-ins, Mazda developed in December 2006 a device to strengthen the door locking mechanism for new vehicles. After the media got wind of the issue, break-ins to Mazda 3 vehicles increased dramatically, and Mazda introduced a service campaign in British Columbia in February 2007 to install the strengthening device on existing vehicles. Mazda, concerned about its image, advised its dealers that it would be “counter to the public interest to publicize the situation.” The service program was eventually extended to the whole country, and launched in Quebec in April 2008.

The trial judge dismissed the class’ argument that the “substantial weakness” of the locking mechanism was a sufficiently serious breach of the usage warranty to bind Mazda under the Quebec Consumer Protection Act (CPA). The judge held that the mere presence of a deficiency does not give rise to a breach of the statutory warranty. The lower court judge also found that the lock complied with federal statutes and industry standards, and performed as it should in its ordinary usage. The real issue was one of quality, held the judge, who also rejected the allegation that Mazda concealed the alleged defect.

The Quebec appeal court overturned the lower court decision, and held that the defective locking mechanism “caused significant loss of use to its owners.” After examining the scope of the Quebec consumer law, the appeal court reiterated that section 37 of the CPA requires that purchased goods live up to the “legitimate expectations” of consumers while section 38 requires that goods be “durable in normal use” for a reasonable length of time. If goods are not “fit” and do not “serve” a reasonable period, then there is a presumption that the defect in the product occurred before the sale of the item, held appeal court Justice Guy Gagnon in a 38-page ruling in Fortin c. Mazda Canada inc. 2016 QCCA 31.

Heeding guidance from the Supreme Court of Canada ruling in ABB Inc. v. Domtar Inc., [2007] 3 S.C.R. 461, the appeal court noted that consumers must show that the loss of use must be serious and must render the good unfit for its intended use or must so diminish its usefulness that the buyer would not have purchased it at the price paid. That does not mean however that the defect must render the good completely unusable. Rather the consumer must show that its usefulness was reduced significantly in relation to the “legitimate expectations” of a prudent and diligent buyer. The other element that consumers must show when asserting that a product is defective is that they did not know that the defect existed at the time of purchase, held Justice Guy Gagnon. Once a consumer has shown that the product was defective and that they did not know about it, consumers have the right to claim punitive damages under section 272 of the CPA.

“This is an important ruling because it considerably diminishes the burden of proof consumers face when they have to prove that a product has a latent defect under the CPA,” said Luc Thibaudeau, a Montreal commercial lawyer with an expertise in consumer law. “The appeal court reminds us that consumers benefit from certain presumptions under articles 37 and 38. The moment that a consumer is able to show there is a significant loss in the product, the consumer will benefit from the presumption that a latent defect exists.”

While the defective locking mechanism caused “significant loss of use” to its owners, the appeal court found that Mazda “performed its obligation” by correcting the flaw. Group 1 members therefore cannot obtain additional compensation through a reduction of their “obligation” (such as a reduction in the price of the vehicle) based on the design flaw. However they – just like Group 2 members — are entitled to a reduction of their obligation because Mazda breached the CPA by failing to disclose important information. Group 1 members are also entitled to compensatory damages under section 272 of the CPA.

“The fact that Mazda voluntarily chose to perform its contractual obligations does not limit the possibility for members of this group (Group 1) to obtain extracontractual compensation damages, such as the cost of repairs, the cost of the insurance deductible, or the value of the stolen goods,” held Justice Gagnon. “In this respect, the causal connection between Mazda’s fault and the damages claimed has been shown.”

The appeal court also found that while industry norms or regulatory standards understandably are often used by the courts to determine whether a good is fit, it should at most serve as a starting point to analyze the issue. Even though a product meets industry norms or regulatory standards, a manufacturer can nevertheless still be held liable for producing a good that is defective, held Justice Gagnon.

“The judge of first instance put a lot of emphasis over the fact that Mazda did not breach industry norms to come to the conclusion that there was no latent defect” in the locking mechanisms, noted Sébastien Richemont, a Montreal commercial litigator with Woods LLP who successfully plead the case. “The appeal court remedied the situation by saying that although it can be a criteria that can be analyzed to determine whether or not there is a latent defect, the central element that must be considered is the legitimate expectations of the consumer. That is an important finding.”

But the ruling does have a silver lining for manufacturers, said Thibaudeau. The decision underscores the importance for manufacturers to act as soon as they discover their products have a latent defect, said Thibaudeau. By refusing to award punitive damages against Mazda, the appeal court recognized that the carmaker made an effort to remedy the situation when it launched its service campaign. “That’s not bad news for manufacturers, especially for those who act as soon as they find out their product is affected by a defect,” said Thibaudeau, a partner with Lavery.

Marc Lacoursière, a law professor specializing in consumer law and whose work was cited by the appeal court ruling, believes that consumers come out winning following the ruling, if only because it makes it clear that the central criteria that must be taken into account when determining whether a product has a latent defect are the legitimate expectations of consumers. “The ruling clarifies the importance of the consumers’ legitimate expectations to the detriment of industry standards,” said Lacoursière. “It’s the consumer’s point of view that matters and the reasonable expectation that a product that is purchased should function well.”

Class action legal landscape in Canada is maturing

Class action lawsuits appear to be an increasingly pervasive force in today’s business world, with organizations of all stripes, from top publicly-traded companies to small regional enterprises, looking over their shoulders, anxiously watching an ever-evolving legal landscape to see where things are heading next.

And it’s not necessarily looking good as recent rulings appear to be favouring consumers, and not companies.When a deeply divided Supreme Court of Canada recently held that disgruntled customers in British Columbia can launch class action proceedings even though the fine print of their contracts calls for disputes to be settled through private and confidential mediation and arbitration, it seemed that the long-awaited decision in Seidel v. TELUS Communications Inc. 2011 SCC 15 was but the latest in a growing line of cases that highlights the growing exposure Corporate Canada faces over class action proceedings.

No less than 95 new class actions were filed across the country last year, 47 alone in Quebec, a trend that shows no signs of abating as 17 new class actions were launched in the first three months of this year, according to the Canadian Bar Association’s National Class Action Database. In 2005, only 29 class actions were filed, prompting some legal observers to speculate that the Canadian class action legal landscape is beginning to follow in the footsteps of the United States where a staggering 30 per cent of U.S. companies had a class action filed against them in 2009, revealed a report published in the legal publication L.A. Daily Journal. Statistics from the U.S. Federal Judicial Center suggest that new class action cases filed in or removed to federal court increased 72 per cent between 2001 and 2007, reaching approximately 4,000 to 5,000 annually as of mid-2007 (the last period for which data are available).

“What we’re seeing is an extension of what’s been happening in the U.S. for decades,” remarked Adrian Lang, a partner specializing in class actions at Stikeman Elliott in Toronto. Indeed, class actions are now stretching their reach beyond traditional areas such as consumer protection and product liability, and have begun targeting, with growing success, areas once deemed unassailable such as securities, competition law and employment law as well as franchisors and polluters. “All we’re seeing is the evolution of a healthy and robust plaintiff class action bar, and so an increase in the types of claims we see,” added Lang. Continue reading “Class action legal landscape in Canada is maturing”

Class actions seemingly alive and well in Quebec

Class actions appear to be thriving in Quebec. A series of suits launched recently seem to enhance the province’s reputation as a have for class action suits. But that may be illusory.

Yesterday FTQ-Construction, the largest construction union in Quebec, was slapped with a class action following an illegal strike that paralyzed much of the industry in late October.

Launched by two entrepreneurs, Turenne Briques et Pierres and Maçonnerie Magloire Gosselinon, the suit is seeking to recoup approximately $10,000 in damages that they claim they suffered during three days of wildcat strikes. The suit is also seeking damages suffered by construction workers who were not paid during the walkout.

In late October, unionized workers demonstrated at dozens of sites across the province in protest over the Liberal government’s proposed reforms for construction union rules. Bill 33 would limit the unions’ power to choose who works on which sites and compel them to open their books to the public.

In another class action development, The Gazette revealed that a class action launched against convicted sex offender Renwick Spence and the English Montreal School Board will go to trial on May 2013, nearly seven years after the motion to institute the lawsuit was first filed in court. Twenty days have been set aside for the trial.

Spence, 82, a former Montreal West High School teacher, pleaded guilty to abusing eight male students between 1967 and 1981. He was sentenced four years ago to 30 months in prison.

And then there’s the class action that caught the atttention of the business community worldwide. A Montreal law firm launched a class action against Research in Motion Ltd. (RIM) on behalf of individuals who lost the use of their BlackBerry devices during a service outage in October. The system-wide failure of the service left tens of millions of frustrated Blackberry users on five continents without email, instant messaging and browsing. The suit alleges that failed to compensate BlackBerry users with refunds for loss of service and must “take full responsibility for these damages.”

But while the latest spate of suits give rise to the impression that Quebec is a class action haven, that is far from the case.

”The jurisprudence in Quebec has evolved, and it can no longer be said that Quebec is a class action haven,” said Jean Saint-Onge, a class action expert with Lavery, de Billy in Montreal.  “Even if it is easier to launch class actions in Quebec, making it more accessible to consumers and by reducing the procedural barriers, the Quebec Court of Appeal has adopted a more rigorous approach to certification.”

Class actions targeting law firms

During a luncheon with colleagues recently, Eric Hoaken gave an informal presentation that turned out to be quite unappetizing as it raised the spectre of broader duties of care accompanied by prohibitive financial exposure and skyrocketing insurance costs for practitioners and law firms alike.

In what appears to be the emergence of an unsettling development that has begun to attract the attention of the legal community, a series of class action suits armed with significant claims has waded its way through the Ontario courts, all of whom have named major law firms as defendants. In two of the three cases, the claims were brought by parties other than the clients of the law firm.

“It’s an area that has to be watched,” noted Eric Hoaken, a partner with Bennett Jones LLP in Toronto who regularly represents defendants in proceedings commenced pursuant to the Ontario Class Proceedings Act (Act). “A relatively generous approach is being taken to common issues in preferable procedure, and that is permitting claims that perhaps at one time would not passed the certification stage.” Continue reading “Class actions targeting law firms”