Class actions are a growing threat to Canadian businesses

As class actions increase in volume, variety and complexity, in-house counsel must take action to prepare

Class actions are a growing threat to Canadian businesses

Class actions are a growing threat in Canada as consumers have developed a deeper understanding of their rights, and they have become increasingly creative in the types of class action cases they can pursue. From packaged bread price fixing to the LifeLabs data breach, organizations are defending themselves against class actions in a wide variety of areas including competition law, data breaches and privacy, securities, product liability and sexual abuse.

“Class actions continue to be on the rise and certainly from my perspective at a bank they are really focused on consumer protection and privacy issues,” says Sandeep Joshi, associate general counsel at BMO Financial Group. “Consumers have a heightened awareness of their rights in those areas and a desire to hold corporations accountable in what they perceive as alleged wrongdoings.”

In recent years, there has been an increase in data privacy class actions involving institutions that own large amounts of data, such as hospitals, while pharmaceutical companies are often the target of product liability cases. 

 “Virtually any type of organization can be at risk of facing a class action,” says Mirilyn Sharp, a class action litigation lawyer at Sharp Legal. “It is important for in-house counsel to be aware of the types of claims that could arise in their industry and not to underestimate the repercussions of what may seem like a small or insignificant issue.” 

Most organizations do not do enough to prepare for the possibility of a class action, according to Harpreet Sidhu, general counsel, corporate secretary and privacy officer at Pethealth Inc. Ensuring enough corporate insurance coverage is in place is the first step, she says. 

“If you are sending out emails in accordance with CASL [Canada’s anti-spam legislation], make sure your insurance policy says you are covered for any breach of CASL in case you make a miss on something,” she says. Additional steps include updating privacy policies and closely monitoring and tracking activities that colleagues are proposing.  

Read more: Canadian anti-spam legislation: when does an email break the law?

“When teams come to us for advice as in-house counsel, we need to get into the weeds to see exactly what they want to do, how many people it will impact and how we can track it on the back end to ensure we have the proper followup,” says Sidhu. 

Joshi recommends taking a close look at individual customer issues as soon as they arise.

“Be thoughtful and considerate about whether or not that issue is isolated or potentially widespread or systemic and could give rise to a class action, and take proactive steps to take a deeper dive to understand the issue rather than being reactive after a claim is brought,” says Joshi.

Sharp recommends having a plan in place to deal with the prospect of a class action in the event of a data breach or a product liability case, together with careful documentation of issues that arise. Having a plan of action such as a product recall or an offer of compensation may be necessary in some cases.

“In-house counsel might want to retain outside counsel who are familiar with defending class actions in different provinces so they don’t have to hire separate lawyers in each jurisdiction,” adds Sharp.

Staying abreast of new developments in the law and new cases that give rise to exposure is key, according to Rahool Agarwal, partner at Lax O’Sullivan Lisus Gottlieb LLP. 

“Class actions are a product of ingenious plaintiff counsel,” he says. “They are looking for issues in the news that can be financially lucrative that they can use as a launching pad for a class action case.” Agarwal expects to see a rise this year in the number of class actions involving big data as well as securities class actions against cannabis companies. 

In-house counsel in Ontario are awaiting the outcome of bill 161, which was announced by the provincial government in July 2019 and includes significant amendments to the Class Proceedings Act, 1992. Named the Smarter and Stronger Justice Act, bill 161 proposes to place U.S.-style certification tests on potential class action cases, making the process of certification far more onerous. 

The proposed changes appear to be more defendant friendly, which is good news for in-house counsel at institutions that are regularly the subject of class actions. However, according to Sharp, the number of class actions will not be reduced as potential claimants in Ontario will simply take their actions to other provinces. 

“If the amendments proposed by the government are enacted in their current form, we can expect to see a lot more class actions brought to more plaintiff-friendly jurisdictions like British Columbia where there is not such a high bar for certification and no costs; so, from a plaintiff’s perspective, it’s ideal,” says Sharp.

A rise in litigation funding options has spurred new claims that might otherwise not be made due to a lack of resources. Global company Woodsford Litigation Funding recently entered the Canadian market, adding new options for claimants pursuing litigations, including class actions. 

“We ensure that litigation opportunities that are good and meritorious see the light of day,” says Woodsford CEO Steven Friel, who is based at the company headquarters in London, UK. “Class action cases that should already have been brought in Canada where defendants have engaged in wrongdoing will now be pursued.” Friel says the goal is to replicate in Canada the work Woodsford has been doing in other parts of the world. He anticipates considerable opportunities in the Canadian market including many cases in securities class actions and anti-trust class actions.  

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