Looking Forward: Class Actions in 2021
Written by Michael Eizenga
Clarity on the Enforcement of Settlements
In 3113736 Canada Ltd. v Cozy Corner Bedding Inc., the Ontario Court of Appeal provided an answer about whether a class member is bound by a class action release even if the party did not receive notice of the class action, the settlement which contained the release, or the right to opt-out. The Court held that while notice to class members must be adequate, the lack of actual notice to any particular class member does not prevent the class from being bound where sufficient steps have been taken to provide adequate notice.
This case involved a manufacturer and supplier of foam products, Valle Foam and their long-term customer, Cozy Corner Bedding. In 2010, Valle Foam was charged with price fixing and a class proceeding followed. Valle Foam settled the proceeding on terms that included no payment to class members, though they maintained their ability to advance their claims in subsequent insolvency proceedings. Right afterward, Valle Foam filed for insolvency protection under the Companies’ Creditors Arrangement Act (CCAA).
While under CCAA protection, Valle Foam sued Cozy Corner for unpaid invoices, and Cozy Corner counterclaimed that its overpayments due to price fixing exceeded the amount of the invoices. Valle Foam moved for summary judgment on its claim for unpaid invoices. It also moved to dismiss the counterclaim on the basis of the release in the class action. The motion judge rejected Cozy Corner's argument that it was not bound by the release because it had not received actual notice of the settlement or a right to opt out. Based on this finding, the motion judge granted summary judgment to Valle Form and dismissed Cozy Corner's counterclaim.
On appeal, the Ontario Court of Appeal agreed that Cozy Corner was bound by the class action release notwithstanding that Cozy Corner did not receive notice of the settlement, but it overturned the motion judge's decision on the basis that the release itself did not bar a claim for equitable set off in the context of an insolvency proceeding. The Court of Appeal set aside the prior judgment, and directed the matter to proceed to trial.
Another important recent case in the class action settlement landscape is the 2019 decision of the Ontario Court of Appeal in Bancroft-Snell v Visa Canada Corporation. The Court affirmed the prior decision of the Court of Appeal in Dabbs v Sun Life Assurance Company of Canada, which held that class members hold no rights to appeal a settlement approval order. The Court dismissed the challenge to the law from Dabbs, stating that giving individual class members the right to appeal settlement approval orders would lead to uncertainty and inefficiency in the class action process.
These two important decisions signify the Court's desire for class action settlements to provide finality to legal proceedings. Ensuring that class action defendants have confidence that the settlements they reach will be enforceable, so long as adequate notice is provided, promotes the efficient use of resources and further encourages settlements to take place, avoiding the costs and risks of protracted litigation. These two decisions will provide class action defendants, and their counsel, welcomed comfort in knowing that court-approved settlements will bring a complete end to their litigation exposure for released claims.
A Clearer Route of Appeal on Motions to Stay Proceedings
In 2019, two groups started class actions against SNC-Lavalin Group regarding disclosures affecting the value of SNC’s securities. One was based in Quebec, the other in Ontario. Both the Quebec plaintiff and SNC moved to stay the Ontario action, in favour of the Quebec proceeding, but their motions were dismissed. The motion judge held the Ontario action had not been established as an ‘abuse of process’. Instead, the Court noted that the Quebec plaintiff and SNC could argue at the certification stage that the Ontario action should not proceed, on more complete record.
The Quebec plaintiff, believing the dismissal to be a final order, appealed the decision to the Ontario Court of Appeal, while also filing a motion for leave to appeal the dismissal to the Divisional Court in case the dismissal was found to be an interlocutory order. SNC only moved for leave to appeal to the Divisional Court. The Ontario plaintiff argued that the dismissal was an interlocutory order, and moved to quash the Quebec plaintiff's appeal to the Court of Appeal.
In Drywall Acoustic Lathing Insulation Local 675 Pension Fund v SNC-Lavalin Group Inc., the Court of Appeal found that the dismissal of the motion for a stay of the Ontario action was an interlocutory order because it did not bring an end to the proceedings. The dismissal did not determine any substantive right to relief that either the Quebec or Ontario plaintiff had against SNC, or determine any substantive defence. The Court relied on its own 2012 decision, Locking v. Armtec Infrastructure, in which it found that an order resulting from a carriage dispute was interlocutory because the plaintiff's action was not stayed for all purposes, but only as a class action. The Court therefore quashed the Quebec plaintiff's appeal.
This decision makes it clear that any appeal of a decision to dismiss a motion to stay an Ontario class proceeding in favour of a class proceeding in another province, must be made to the Divisional Court with leave, as it is an interlocutory order. This is an important reminder by the Court which will be especially relevant in the years to come given the new amendments to Ontario's Class Proceedings Act, 1992, which have imposed a tougher test for certification.
Some of the content of this article originally appeared in a presentation by Mike Eizenga and Celeste Poltak at the LSO Civil Appeals Year in Review program on December 8, 2020.