A rising tide of class action lawsuits is becoming a threat to Canadian businesses and, ultimately, their customers. Courts have to recognize that the class action is not a social benefit if it’s being misused.
In a joint event, we, along with the U.S. Chamber Institute for Legal Reform (ILR), be releasing an analysis of class actions in Canada, Painting an Unsettling Landscape: Canadian Class Actions 2011–2014, showing a sharp increase in most jurisdictions.
"Class action was invented to save the court system from needless duplication by grouping similar claims into a single lawsuit. Through the years, policymakers have seen this as a way to balance the scales for individual plaintiffs confronting big business or government. But what we see today wanders far from that goal," says Warren Everson, our Senior Vice President, Policy.
We call on the court system to be more rigorous and transparent when judges consider an application to form a class. Almost all cases are settled when the class is certified by the court. The decision to certify is sometimes a guarantee the plaintiffs will win something. That’s not a very fair situation and not what we expect from the courts.
The analysis also points to an increased presence of third party litigation funders in class actions—individuals unconnected to the class investing in the suit. "When a hedge fund invests in litigation that wouldn’t otherwise be brought forward, and it is at the expense of the class, you can hardly call that social justice, that’s business development,” says Everson.
We note that, today, there is an opportunity to correct the direction of class actions in Ontario—through the review process currently underway with the Law Commission of Ontario.
We are urging the business and legal communities to participate in the discussion by advocating for a Canadian class action regime that limits abusive behaviour while respecting the intended role of these actions.
“Our neighbours south of the border provide a clear example of a class action regime that is in serious trouble,” says Everson. “We’re headed down the same road, and it’s critical that we raise the alarm on this issue. Let’s not follow in their footsteps.”
Access the paper.
For more information, please contact Mary Anne Carter, Director, Competition Policy and Business Law.