An Ontario judge has ordered both a plaintiff and defendant in a national class action to pay for the process of alerting class members directly about the action, particularly their right to opt out of the proceeding, if they wish.
“The notice must be informative, accurate, balanced, and independent. It must enable the class members to make informed decisions about their legal rights and enable them to decide on an informed basis whether to remain in or to opt out of the class litigation and thereby exercise their own litigation autonomy and make their own decisions about suing or not suing the defendant,” said the ruling.
The action against ivari, which was launched in 2003 when the company was known as Transamerica Life Canada, involved two separate claims.
One part of the action was for “management fee overcharges,” and involved about 307,000 class members, the ruling states, while another part of the action was a subclass, for those affected by the “alleged underperformance of the Can-Am fund,” and impacted about 92,000 Can-Am insurance policy contracts.
In Fantl, which involves giving notice to the subclass of people allegedly affected by the performance of the Can-Am fund, Perell ruled that ivari should pay for two-thirds the cost of a notice plan, and Fantl should bear one-third of the cost.
Part of the issue Perell determined hinged on giving notice to those both inside and outside Ontario about the proceeding, because Perell pointed out if the matter didn’t settle and ended up being determined by a judgment, a question would exist about “whether the notice of the right to opt out of the certified class action is adequate to underpin a judgment that would be recognized by a court outside of Ontario.”
“It is a dilemma because, how is an Ontario court to know whether or not its judgment will be recognized by another jurisdiction?,” said the ruling, by Perell.
“For example, a Québec court may decline to recognize a judgment in a class action in another jurisdiction where in the view of the Québec court, the other court did not adhere to the fundamental principles of procedure, including giving an adequate notice of the effect of the judgment on the Québec class member’s rights to participate in a class proceeding in his or her domestic courts.”
Therefore, Perell ruled that the direct notice plan should be covered by both parties, with ivari picking up a greater part of the tab.
“In my opinion, although it is somewhat counter-intuitive and unexpected for a defendant to seek to robustly announce that it is subject to a certified class action or for a defendant to seek to protect the litigation autonomy of class members to opt out of an action, it does make sense and it is reasonable that a defendant would seek a direct notice program in a national class action where a substantial number of class members reside outside Ontario, which is the circumstances of the case at bar,” said Perell.
David O’Connor, a partner at Roy O’Connor LLP who represented Joseph Fantl, says the decision was a “practical consideration of the reality of notice in class actions.”
O’Connor says he believes that Perell’s ruling was based on the notion that a notice plan that was originally proposed by the plaintiff was adequate, except for issues that the defendant pointed out “about the potential enforceability of any judgment and proposing a more extensive notice plan.”
“Quite rightly, I think Justice Perell felt that the defendant should bear the lion’s share of the cost of that,” he says.
“I think that’s a very practical approach and frankly, I would always encourage a practical approach to issues like notice and many other issues in class actions.”
James Sayce, an associate at Koskie Minsky LLP, says the case is
unusual because defendants in class actions don’t usually want a more
extensive notice plan.
“Normally, it’s the plaintiff, or class counsel, who is pushing for a
broader and more effective notice campaign, because they want class
members to find out the case and reach out to class counsel,” says
Sayce, who is not acting in the matter.
“But this is a strange circumstance where it seems that the defendant
thinks they have a strong case, on the merits, so they want the notice
to be as robust as possible.”
O’Connor says in Fantl, with an estimated 70,000 to 90,000 class members, direct notice by mail to all could cost an estimated $100,000 or more. In other cases, where notice could be given in a different form, like purchased media advertisements, the cost of notice could be “hundreds and hundreds of thousands of dollars,” he says.
“The point we were trying to convey on the motion. . .is that sometimes it’s better to spend more money on notice, when you are at the stage of settling the class action, if the case is going to settle, rather than spending a lot of money long before that, especially a case that doesn’t involve a huge return for each class member, where they would not have a rational incentive to opt out,” he says.
“I think Justice Perell quite rightly points out that in certain class actions, particularly those where the potential recovery by any class member is relatively low, there is a very low level of interest at times and there is really no incentive for class members to opt out and start their own action,” he says.“I actually was quite impressed that Justice Perell looked at the practical realities and employed that in his decision.”
Ivari was represented by Jeff Galway of Blake, Cassels & Graydon LLP, who declined comment comment because the case is an ongoing matter.