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Carriage battles

|Written By Glenn Kauth

Class action lawyers expected a case involving Canada Post might put an end to carriage battles and competing claims, but a recent Supreme Court of Canada ruling has dashed hopes for more clarity on national classes. “The court did not address head-on the issue of national class,” says Marie Audren, a partner in the commercial litigation group at Borden Ladner Gervais LLP in Montreal.

At issue was the long-running case of Canada Post Corp. v. Lépine, a class action suit in which consumers went after the company over its promised $9.95-Internet-for-life package dating back to 2000. At the time, the dot-com bubble had the Crown corporation optimistic it could make money off the seemingly improbable Internet and e-mail package it was offering, but the ensuing market crash kiboshed those hopes. Within a year, it chose to discontinue the service, designed and created by Cybersurf Corp.

Consumers and government agencies complained, and shortly afterwards, a series of competing class actions sprouted up across the country. In Quebec, Michel Lépine emerged as the representative plaintiff on behalf of residents in that province who bought the package, while in Ontario Paul McArthur became the face of a similar action purporting to involve “any person in Canada” who purchased it. In British Columbia a class action suit filed by John Chen only affected residents on that province.

The situation was ripe for jurisdictional conflict, a situation that came to pass in 2003 when Canada Post and lawyers for McArthur reached a settlement that would see the Crown corporation refund consumers their $9.95 in exchange for the CD-ROMs they had received to use the service. As well, they would actually get Internet service free for three months. In December of that year, an Ontario judge approved the deal and, in what other courts found to be a strange move, expanded it to include class members in all provinces except British Columbia. Lawyers for Lépine, meanwhile, wrote to the court expressing their objection to the agreement and asking the judge to leave out Quebec residents. The Ontario court declined to do so, a move that landed the case back in the hands of a Quebec judge as Lépine pressed on with his case. “The average life expectancy is more than three months. They made a deal which is not right,” says one of Lépine’s lawyers, Paul Unterberg of Unterberg Labelle Lebeau & Morgan in Montreal.

Complicating the case was the fact that Lépine had actually filed his lawsuit first, although it wasn’t until after the Ontario judge approved the settlement there that the Quebec court authorized his competing class action. Issues for the courts to sort out, then, included whether Quebec authorities had a duty to recognize a judgment elsewhere and whether the first-come-first-served principle applies when a litigant launches a class action lawsuit or when a judge certifies it.

But after Canada Post unsuccessfully attempted to enforce the Ontario ruling through the Quebec courts, the Supreme Court found itself ruling largely on a technical issue involving conflicting class action notices sent out to Quebec residents in 2004. The first, published on Feb. 21, 2004, informed potential class members of the certification of Lépine’s action in Quebec. The second, about six weeks later, informed Quebecers about a settlement reached among Canada Post, Cybersurf, and “the plaintiffs in a class action in Ontario and British Columbia.”

In assessing the case, and in rejecting Canada Post’s appeal of the Quebec courts’ judgments, the Supreme Court ruled the Ontario notice “contravened the fundamental principles of procedure” in class actions. “The Ontario notice was likely to confuse its intended recipients, as it did not properly explain the impact of the judgment certifying the class proceeding on Quebec members of the national class established by the Ontario Superior Court of Justice,” Justice Louis LeBel wrote in the top court’s ruling. “It could have led those who read it in Quebec to conclude that it simply did not concern them.”

At the same time, the Supreme Court considered the question of which action began first. Because the Quebec court didn’t certify Lépine’s case until after the Ontario judge approved the settlement there, Canada Post argued lis pendens, the notion that a lawsuit is pending, bolstered its bid to apply the agreement in Quebec. But the Supreme Court ruled certification was not necessary for a class action to be considered pending since Lépine had nevertheless filed his suit. “Like the contravention of the fundamental principles of procedure, the lis pendens situation precluded judicial recognition of the decision of the Ontario Superior Court of Justice,” wrote LeBel.

The decision means Lépine can continue his bid for compensation in the Quebec courts. But in doing so, the Supreme Court skirted substantively tackling the issue of national classes, something lawyers and litigants have been looking for clarity on as disputes such as the Canada Post one arise. It did, however, acknowledge the problem of overlapping lawsuits. “This case shows that the decisions made may sometimes cause friction between courts in different provinces. . . . However, the provincial legislatures should pay more attention to the framework for national class actions and the problems they present.”

For his part, Unterberg argues the ruling actually bolsters the notion of national classes since the court clarified the lis pendens question. “Whoever is fastest, first-come first-served,” he says, insisting an action filed earliest in one jurisdiction would now likely take precedence over lawsuits launched elsewhere. “I believe that that’s the most efficient system.”

But other lawyers aren’t so sure, particularly given that the top court’s decision doesn’t specifically authorize national class actions and instead leaves the issue to politicians to settle. For her part, Bonnie Tough, one of the class action lawyers scarred by the ongoing carriage battle over the high-profile Vioxx lawsuit, says she’s not sure first-come first-served is always best anyway, particularly since it would simply encourage litigants and their counsel to file cases immediately after something goes wrong.

Tough, of Tough and Podrebarac LLP in Toronto, also believes having national classes is important in cases spanning the country. “I really believe it has become an impediment to justice,” she says, noting plaintiffs’ lawyers such as herself worry about copycat claims from competing counsel whenever they launch a lawsuit. “National classes make a lot of sense. We don’t want to have 10 trials.”

The issue has taken on particular resonance given the ongoing litigation against Merck Frosst Canada Ltd. over cardiac problems allegedly caused by the painkiller Vioxx. For years, plaintiffs’ lawyers have been battling over carriage in the case, with Saskatchewan lawyer Tony Merchant having achieved certification in his home province covering everywhere but Quebec. Before that, however, an Ontario court had authorized a national class action in that province, putting many plaintiffs under two separate proceedings.

Recently, the case took another turn when the Saskatchewan Court of Appeal quashed Merchant’s certification. But like the Supreme Court in Lépine, it also acknowledged, but largely skirted, the issue of overlapping claims, instead tossing the case on the merits that it presented neither an identifiable class nor common issues worthy of certification. As a result, the competing litigation might be over for the moment, but the Saskatchewan decision is still subject to possible appeal at the Supreme Court.

So, the question of national classes and battles over carriage likely will continue. But as for Lépine, BLG’s Audren says she wasn’t expecting the top court to deal substantively with that issue anyway given the obvious concerns over the conflicting notices and lis pendens that made Canada Post’s appeal a fairly easy one to reject. “I totally agree with them not to have done so because they were such bad facts.”

Even one of the lawyers who represented McArthur in Ontario is on side with the Supreme Court decision to sever the Quebec action given the problems with the notice he was involved in drafting. “On that basis, I certainly understand the court’s decision and quite frankly agree with it,” says David Thompson, a class action lawyer with Scarfone Hawkins LLP in Hamilton. “The reason it was structured that way really was at Canada Post’s request,” he adds, arguing the Crown corporation was essentially trying to expand the settlement to Quebecers in a bid to “ram it down their throats.” He says, too, the seemingly odd decision in the Ontario court ruling to exclude B.C. residents was an effort to avoid interfering with a similar settlement that was at hand in that province.

For her part, Audren remains skeptical about the viability of national class actions given the constitutional questions that inevitably arise whenever jurisdictional battles come up. Good results have come in cases where the lawyers involved have agreed to put aside their carriage disputes, but as Audren points out, that scenario happens most often when the parties reach a settlement. At the same time, she notes that different consumer protection laws in each province can make it impractical to have one court handle a national class action over product liability.

Tough, though, argues it is possible to overcome that conundrum by creating different subclasses of residents from each affected province who would try to prove the product in question violated their own jurisdiction’s laws. But ultimately, she feels the issue is one the profession has to tackle in order to come up with a system for resolving carriage disputes. “I think the solution has to be a bench and bar committee that sets protocols that the courts agree to follow,” she says, noting she has seen cases in the past, such as the Hepatitis C actions in the 1990s, where the courts have agreed to co-ordinate amongst themselves. In that instance, judges in three provinces decided a particular order wouldn’t be valid until the other two courts followed suit, she points out.

In the meantime, the Lépine decision does add judicial weight in a few areas. First, it emphasizes the importance of clarity in drafting class action notices,  says Audren. At the same time, Unterberg argues, it will put an end to litigants — who in his view are usually defendants — from shopping for the most favourable jurisdiction to handle a case since “the guy who files first will have priority.”

Now, he’s back to litigating against Canada Post, an effort in which he vows to seek “a hell of a lot more” for the estimated 50,000 Quebec claimants than those who fell under the Ontario settlement got. He’s still crunching the numbers but argues that instead of three months, the company should compensate customers for the lifetime’s worth of Internet service they say they were promised. “They tried to unilaterally cancel a contract. You can’t do that.”