Law Times

Page 14 September 2, 2013 Law Times • FOCUS Banking rules, overtime among key upcoming class actions BY Julius Melnitzer allowed the appeals in part. It reBut the court had a great deal of difficulty with the versed the lower court's award of issue as the decision was on reserve for longer than punitive damages and held that the any judgment in the previous decade. SCC DECISIONS COULD AFFECT subsequent disclosure complied The decision in the Quebec cases could also have FINANCIAL SERVICES MARKET with both federal and provincial important ramifications for the future of Canada's The Supreme Court of Canada has agreed to con- law. The court did uphold the finddigital payment systems that lie at the heart of the sider three Quebec class actions whose resolution ing that the initial non-disclosure electronic commerce sector. could have a profound effect on Canada's financial was unlawful, offending both the In 2010, the federal task force for the payments services market even as Canadian banks continue Bank Act and the Quebec legislasystem review proposed a radically new regulatheir push to provide one-stop shopping for finan- tion. The court, however, didn't tory framework for the payments industry that cial services by moving into such industries as bro- find it necessary to resolve the conincluded a self-governing organization and public kerage and insurance. stitutional issues as it concluded oversight body. Only banking activities that are integral to banking that the requirements for discloMore particularly, the task force recommended as defined by the courts are immune from the reach of sure were similar under both the that payment industry participants, such as proprovincial legislation. The difficulty is that the greater federal and provincial statutes. cessor, software, and hardware manufacturers, acthe scope of the applicability of provincial regulation, Still, it remains open to the quirers, loyalty-point program operators, and authe more the banks will have to deal with a checker- Supreme Court to deal with the tomated banking machine operators that were not board system involving all of the provinces and terri- financial institutions' arguments previously subject to specific payments legislation, tories. That scenario, the banks insist, could create an on constitutionality, and the fact 'The amount allocated to consumers in would now fall under the definition of payments administrative nightmare. that it granted leave to appeal may settlements these days is typically between system providers and the new proposed payments The class actions currently before the Supreme indicate that the court is leaning to- zero to 10 per cent of the total settlement,' governance regime. Court centre on fees rolled into credit card currency wards doing so. Constitutional issues are, however, among the foresays Michael Osborne. conversion rates reported to customers of 10 major "The financial institutions conmost barriers to the implementation of these recombanks and credit card issuers operating in Quebec. tended that the application of the [Quebec legislation] mendations. Indeed, the task force noted that full implementation of its The Superior Court of Quebec ruled that both the to their operations would impair credit card services recommendations would require constructive interaction with provinnon-disclosure of these fees and subsequent attempts and foreign exchange conversion services, vital and cial legislation. at remedying the situation failed to comply with integral components of their banking activities," exBut even if the top court decides not to tackle the constitutional issue, Quebec's consumer protection legislation. The court plains Brett Harrison of McMillan LLP. it could add some clarity and certainty to disclosure issues surrounding also ruled that where the Quebec law's compliance In 2007, the Supreme Court ruled that federally consumer protection legislation. requirements differed from those in the federal Bank regulated banks selling credit insurance are subject "The jurisprudence on what amounts to proper disclosure is still Act, credit card issuers in that province had to com- to provincial insurance legislation. The court rejected evolving," says Jean Martel, a partner at Lavery de Billy in Montreal. ply with both pieces of legislation. The court awarded the banks' argument that credit insurance was part of "There's quite a discrepancy in the way proper disclosure is interpretmore than $200 million against the various credit the "unassailable core of banking." The mere fact that ed and applied by courts across the country, and a Supreme Court procard issuers in Quebec. federal banking law authorized banks to sell insur- nouncement on the subject could help rationalize the law." In August 2012, the Quebec Court of Appeal  ance didn't make it a core banking activity. MISCLASSIFICATION OVERTIME CLAIM CERTIFIED In August, Justice Edward Belobaba of the Ontario Supreme Court of Justice certified a class action alleging that BMO Nesbitt Burns Inc. wrongfully failed to pay overtime to some 1,500 current and former investment advisers. This is the first misclassification case of its kind to reach certification. The plaintiff alleges Nesbitt Burns breached its duties to the class members by systematically and improperly denying statutory overtime to them. The allegations have not yet been proven, and you're putting your reputation on the line. BMO argues the advisers fall within exemptions permitted under provincial legislation. It's all about trust well placed. In certifying the case, Belobaba distinguished a number of previous decisions, including Brown v. Canadian Imperial Bank of Commerce, that refused to certify such actions on the basis that determining whether employees exercised managerial functions required individual consideration of each person's circumstances. Here, Belobaba concluded, there were sufficient similarities in proposed class members' job functions to allow for determination of eligibility for overtime as a common issue. Jonathan Ptak and Jody Brown of Toronto's Koskie Minsky LLP, along with Eli Karp of the Merchant Law Group LLP, represent the class. Peter Griffin and Monique Jilesen of Lenczner Slaght Royce Smith Griffin LLP, along with Hugh Christie of Gowling Lafleur Henderson LLP, represent the bank. ROUNDUP For Law Times TRUST STACEY STEVENS | DAVID MACDONALD | MICHAEL BENNETT Since 1936 Thomson, Rogers has built a strong, trusting, and collegial relationship with hundreds of lawyers across the province. As a law firm specializing in civil litigation, we have a record of accomplishment second to none. With a group of 30 litigators and a support staff of over 100 people, we have the resources to achieve the best possible result for your client. Moreover, we are exceptionally fair when it comes to referral fees. We welcome the chance to speak or meet with you about any potential referral. We look forward to creating a solid relationship with you that will benefit the clients we serve. YOUR ADVANTAGE, in and out of the courtroom. TF: 1.888.223.0448 T: 416.868.3100 W: www.thomsonrogers.com Untitled-2 1 www.lawtimesnews.com 3:06 PM 13-08-29 PRICE-FIXING CLASS ACTIONS NOT BENEFITING CONSUMERS If consumers (as opposed to those higher in the distribution chain) are the ones who really suffer from price-fixing conspiracies, they're certainly not cashing in from litigating the issue, at least not in Canadian class actions. "The amount allocated to consumers in settlements these days is typically between zero to 10 per cent of the total settlement," says Michael Osborne of Affleck Greene McMurtry LLP. "This is simply not consistent with the notion that it is consumers that ultimately suffer the loss." Osborne also notes that of the $200 million or so in price-fixing class action settlements to date, exactly nothing has gone to consumers. The consumer portion has always gone to organizations under the cy-près doctrine that can advance the interests of class members or to charities rather than to individuals who have suffered losses. As it turns out, the Supreme Court of Canada has several cases on reserve in which it must determine whether indirect purchasers, including consumers, are properly part of price-fixing class actions. One of the arguments in favour of including consumers is that a ruling against them would significantly constrain price-fixing class actions 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 Canadian purchasers. And direct purchasers, say the proponents of including consumers in price-fixing cases, tend to pass the excess costs on down the distribution chain and therefore don't have nearly as much incentive to go to court. LT

• Cover