Law Times

Page 8 April 15, 2013 Law Times • Focus On Class Actions Class action trends Fee premiums, competition lawsuits among key issues BY Julius Melnitzer For Law Times P rocedural issues and the fate of securities and competition class actions are likely to dominate what may be a watershed year in the evolution of class action litigation in Canada. "Three procedural issues that Canadian courts are looking at carefully are what to do about overlapping multijurisdictional class actions, the nature of the evidence plaintiffs are advancing to demonstrate loss or harm on a class-wide basis, and the granting of premiums to plaintiffs' counsel where class members have benefited very little from a settlement," says Kent Thomson of Davies Ward Phillips & Vineberg LLP's Toronto office. At press time, the courts had already dealt with two of the procedural issues. In Lavier v. MyTravel Canada Holidays Inc., the Ontario Court of Appeal ruled that a Toronto law firm representing plaintiffs in a class action couldn't collect fees that amounted to three times what members of the class recovered. Lavier revolved around allegations that a travel tour operator had wrongfully sent travellers to various resorts while an outbreak of norovirus was extant. A settlement that contained no admission of liability by the defendant created a fund of $2.25 million for 4,000 class members. It also provided for legal fees of $600,000 paid to Toronto's Rochon Genova LLP with the firm retaining the right to apply for additional amounts if anything remained in the fund after the claims process was complete. As it turned out, less than nine per cent of class members made claims and claimants took up only about $333,000 of the $2.5-million settlement. Rochon Genova then sought approval for additional fees of $395,000, which Ontario Superior Court Justice Paul Perell granted. But the Ontario Court of Appeal ruled in February that the additional fees were "manifestly disproportionate" to the results for the class. Perell's analysis, the court concluded, "minimizes  the significance of the actual recovery to the class in this case and leads him to award a fee that is grossly disproportionate to the results achieved and the risks." On the multijurisdictional front, Judge Katherine van Rensburg of the Superior Court agreed to remove NASDAQ investors from a class of Ontario investors certified in an action alleging misrepresentations in IMAX financial reports. The decision left only the 15 per cent of the class that had bought their shares on the Toronto Stock Exchange. appeal from a separate B.C. court judgment that had reached the same conclusion. If, however, the Supreme Court rules against indirect purchasers, the decision would significantly constrain price-fixing class actions. That's because these cases usually originate in global conspiracy prosecutions where foreign manufacturers have fixed the prices of ingredients in products that tend to go through a long chain of distribution before they reach Canada. "If indirect purchasers can't pursue these claims, it means that the people who suffer the real injury will have no claim," says Barry Glaspell of Borden Ladner Gervais LLP's Toronto office. 'If indirect purchasers can't "Direct purchasers tend to pass the excess costs pursue these claims, it means on down the distribution chain, so they don't have nearly as much incentive to go to court." that the people who suffer the Besides that issue, securities class actions are real injury will have no claim,' facing threats on two fronts. says Barry Glaspell. To begin with, the Supreme Court of Canada has granted leave in what has become known as The judge's March ruling followed the settlement of the market-timing case that will consider whether priparallel proceedings that a U.S. court had approved on vate class actions can coexist with regulatory enforcecondition that the Ontario class be reduced. The case ment proceedings. The matter is on the top court's docket is important, according to Andrea Laing, Ryan Mor- this month. ris, and Max Shapiro in a recent securities litigation The decision under appeal, which rocked Bay bulletin from Blake Cassels & Graydon LLP, because it Street,  stems from  the mutual fund market-timing dedemonstrates that class sizes can be reduced after certi- bacle of 2004. The Court of Appeal ruled that the settlefication, shows that globally certified cases don't need to ment of regulatory enforcement proceedings against the be settled on a global basis, and indicates that Ontario funds in which they paid $205 million to investors didn't courts are willing to show deference to U.S. judges in oust class action remedies in civil courts. multijurisdictional cases. But defendants' lawyers argue that class actions, which Meanwhile, in the competition arena, the Supreme are representative proceedings, shouldn't be piggybacking Court has reserved its decision in three related class ac- on matters in which a regulator acting in its statutory capaction price-fixing appeals, two from the British Columbia ity has recovered money for investors. Where regulatory Court of Appeal and one from the Quebec Court of Ap- enforcement has occurred, they say, class actions aren't the peal. The core issue in each instance of what are known as preferable procedure mandated by class action legislation. the DRAM cases is whether indirect purchasers — those Meanwhile, securities actions based on secondarywho bought a product after the initial purchase from market misrepresentations seemed to have suffered a tellthose involved in anticompetitive conduct — have a class ing blow when the Ontario Court of Appeal decided last action remedy under the Competition Act that allows a year in a case involving Timminco Ltd. that plaintiffs had to private right of action to any person who has suffered loss obtain the required leave to commence such actions within as a result of criminal misconduct under the legislation. three years of the date of the impugned misrepresentaBy a 2-1 majority in each case, the B.C. Court of Ap- tion. Plaintiffs' lawyers decried the decision, complaining peal held that such class actions weren't available to indi- that the inaccuracy of many representations didn't even berect purchasers.  The majorities adopted the position of come public until well into or after three years. the U.S. Supreme Court in a 1977 case known as Illinois But some lower court judges have since allowed plainBrick Co. v. Illinois. tiffs to get around the limitation period by invoking the The Quebec Court of Appeal, by contrast, ruled in legal doctrine known as special circumstances and nunc favour of indirect purchasers' right to sue. Some observ- pro tunc. What happens next will be up to a five-member ers believe the Supreme Court will confirm that decision. panel of the Ontario Court of Appeal that will commence They cite an earlier refusal by the Supreme Court to hear an a hearing into the propriety of these decisions in May. LT Get fast and easy access to l t yo ble to y u s and itt's availa s a day. 24 hour Canada's legal professionals! Canada's most comprehensive online directory of legal professionals gives you a direct route to the information you need. departments location and area of practice Visit www.CanadianLawList.com and find out how we're serving you better than ever. compiled by top Canadian legal researchers Untitled-1 1 www.lawtimesnews.com 13-01-03 9:02 AM

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