Headline-grabbing class-action lawsuits are keeping Faculty of Law alumni busy across Canada. Nexus takes a look at this growing, complex area of specialization, where the payoff for firms can be big—or a big bust.
By Randi Chapnik Myers
Photography by Colleen Heslin and Keri Knapp
From the Spring/Summer 2010 issue of Nexus.
Ward Branch, LLB 1991: “No one reports on the losses or the cases where the lawyer breaks even.”
Just mention the phrase “class action,” and people start thinking big. Big case, big fight, big bucks.
And it’s no wonder. Just like in the US, Canadian class-action drama is unfolding fast. From the SARS crisis, to anti-smoking laws, to climate change, just about any issue affecting a group of people can become the subject of a class action and make its mark not just on our laws but also on our social and economic life. But to kickstart a case this complex and costly, the first stop is a lawyer who is ready, willing and able to take it on.
Top class-action lawyers—many of them Faculty of Law alumni— are busier than ever bringing and defending cutting edge cases on behalf of their fellow Canadians. They report that practicing in this evolving field of law is exciting and challenging at the same time.
“Because class actions involve enormous sums of money, and engage such important policy and social issues, the area is affecting more lawyers’ lives,” says Prof. Lorne Sossin, who taught first-year students about class actions as part of the legal process, professionalism and ethics course at the University of Toronto.Take, for example, the many cases going after utility companies charging interest on late payments. People are charged about five dollars on their bill, a penalty calculated on an exorbitant annual rate that violates legal standards. But who would sue for a measly five bucks or less? A class-action lawyer, that’s who.
“We’re seeing the first generation of lawyers in Ontario with class actions in the legal system. So it’s still early days here,” he says. But already, you can tell the story of Canada in the last 15 years through class-action cases: hepatitis C, tainted blood, mad cow disease, Walkerton, institutional sexual abuse and the list goes on. “You would be hard-pressed to find a significant event that captivates Canadian life that doesn’t have a class action attached,” Sossin says.
Take, for example, the many cases going after utility companies charging interest on late payments. People are charged about five dollars on their bill, a penalty calculated on an exorbitant annual rate that violates legal standards. But who would sue for a measly five bucks or less? A class-action lawyer, that’s who.
While Canada’s first major class action—Quebec’s asbestos case— was brought back in the ’70s, Ontario legislation allowing class actions only arrived in 1993. Today, all provinces except PEI are on board, which means more cases in more jurisdictions.
“The most popular defendant is the government, which is ironic, since governments passed the legislation that allowed the lawsuits in the first place,” says Ward Branch, LLB 1991, co-founder of Branch MacMaster LLP in Vancouver and author of the textbook Class Actions in Canada.
They did so to achieve two important societal goals: to extend access to justice to those who otherwise could not afford to bring an individual case, and to keep big business in line. “Now that companies know that class-action lawyers are out hunting for them, the hope is that they are more likely to treat people fairly,” Sossin says.
Take, for example, the many cases going after utility companies charging interest on late payments. People are charged about five dollars on their bill, a penalty calculated on an exorbitant annual rate that violates legal standards. But who would sue for a measly five bucks or less? A class-action lawyer, that’s who.
“The lawyer aggregates the five-dollar claims of everyone affected then uses a single plaintiff to bring a case for tens of millions of dollars on behalf of a very large group,” Sossin says.
The plaintiff class gets paid from the proceeds of a win. And so does the lawyer, who works strictly on a contingency fee basis. While in a typical civil case a client pays a lawyer to take a dispute to court, a class-action lawyer funds the litigation, then takes a share of the proceeds only in the case of a win or settlement.
Contingency fee payment poses an ethical dilemma because it can hold out a financial carrot to plaintiff lawyers, thus encouraging them to pick fights. As a result, Sossin says they can end up trolling for clients because if they can find a lucrative one, they stand to profit handsomely. “If you’re getting a percentage of the proceeds, you can put in two weeks of work and potentially get a thousand times the payout you would if you were paid by the hour,” he says.
Class-action lawyers tend to get a bad rap, operating as they do in the shadow of litigators such as Tony Merchant, the Jaguar-driving former politician who was accused of capitalizing on the tragic residential schools scandal. His letters to former students promised they had “nothing to lose” by joining the suit that could land them up to $150,000 in compensation for being victims of sexual assault.
Keeper of the caseload: Linda Rothstein, LLB 1980, restricts the firm’s class action cases to 20 per cent of the practice at Paliare Roland Rosenberg and Rothstein.
With such headline-grabbing stories front and centre, it’s easy to forget that to initiate a claim, the lawyer has to dig into the firm coffers and work for free, Branch says. “The public perception is misleading since only the big wins make it into the papers. No one reports on the losses or the cases where the lawyer breaks even,” he says.
There are also checks against financial abuse built right into the system. Class-action legislation requires that a Canadian court not only decide whether a case is properly brought at the outset of a claim, but that it also approves the lawyer’s fee at its end. That fee is generally between 10 and 35 per cent of the award, Branch says.
It’s generally a lot lower than in the US, he points out. “Canadian courts are more conservative about lawyer’s fees. We are not paid so excessively that we are motivated to bring silly cases in the hopes of a windfall.”
Too much focus on what a lawyer gets out of a case can detract from the bigger issue: what society gets out of it, says Linda Rothstein, LLB 1980, managing partner at the litigation boutique firm Paliare Roland Rosenberg Rothstein LLP in Toronto. Without the power of a class behind a claim—whether it’s individuals harmed by unsafe products, or victims of unfair consumer practices or other abuses— important cases could never be litigated, she says. “On an individual basis, they would have faced enormous legal hurdles and been bogged down in court forever.”
Not many firms can afford to take on class-action risk. As a result, there is a small, specialized plaintiff bar. “Approximately 90 per cent of class-actions are brought by 10 firms across Canada because it’s such a complex field. It’s not something you can just dabble in,” says Branch, who has been retained in more than 90 class actions in B.C, Alberta, Saskatchewan, Quebec, Ontario and Nova Scotia.
He’s busy because Branch MacMaster is one of few Canadian firms to practice on both sides of class-action claims. With 15 cases active at any one time, the firm recently wrapped up acting for the plaintiff class in the Maple Leaf Foods contamination case (it settled for $27 million), and is vigorously defending the province of Alberta against a class asserting its constitutional right to nursing-home care.
At Ogilvy Renault LLP in Toronto, Steve Tenai, LLB 1990, and Jeremy Devereux, LLB 1992, devote much of their time to class action work, defence only. “That’s what happens when most of your clients are corporations and the directors and advisers who work for them,” Tenai says.
The challenges that make class-action cases difficult—they are complex, time-consuming, multi-jurisdictional—are also what make them interesting, Tenai says. “You are exposed to some cutting edge theories of liability, working with lawyers who really know their stuff.”
“It’s still a relatively new area but it’s caught on,” Devereux says. He predicts that along with the rise in cases across the country, the number that will battle it out at trial is bound to increase.
Ironically, more cases make it harder for people in different jurisdictions to have their day in court. “Managing cross-country cases is hard because now firms in different provinces can file a claim in the same case, and in class actions, you really only need one lawyer in charge, and one plaintiff standing in the shoes of all the rest,” Branch says.
To help solve “inter-jurisdictional catfights,” which cause delay and create public confusion, he was appointed to the Canadian Bar Association’s new National Class Actions Task Force, which was recently struck to address the problem of overlapping claims in various provinces.
“The cases are so large, you get to chase down every legal avenue. And the class-action tool gets layered over all of the big political and social issues. In any one day, I find myself working on the Charter, securities law, products liability, pensions and melting sperm banks. Not too many lawyers get to do that.”
Judges should also consider ways to improve the public’s ability to collect on settlements, Branch says. Although the lawyer must issue a notice inviting members of the public affected by the case to come forward and claim their share, in his experience, only two to 40 per cent of people do. That’s because in many class-action cases, there is no database listing who was harmed.
“In the Maple Leaf Foods case, for instance, you don’t know who ate the product. So all you can do is use broad-based media advertising—if you were affected, call this number— and hope the claim comes to their attention,” he says.
Also, there is no one tracking how many people get paid out, says Jasminka Kalajdzic, LLB 1995, LLM 2009, an assistant professor at the University of Windsor’s Faculty of Law. Her master’s thesis, now being converted into a book, questions whether class actions go far enough in increasing access to justice.
“The concept of access to justice should not be limited to giving someone a day in court. It has to be about knowing how many people are actually being compensated in the end, and ensuring class members have an opportunity to participate in the settlement process,” Kalajdzic says. It also has to be about lawyers taking on cases that are in the public interest—even if they are not the most profitable, she says.
As part of her research, she asked Canadian class-action law firms what types of cases they pursue. The results, representing the work of approximately 77 class-action lawyers working in 13 firms, show that as of the end of 2008, the majority of claims were defective drug and medical devices, followed by Competition Act claims, product liability and securities. At the bottom end were employment actions.
To maximize access to justice, she suggests the courts grant higher fees to lawyers in cases involving novel causes or having social significance.
Despite its growing pains, or perhaps because of them, the booming class-action field has U of T law students talking. “The ability of these cases to transform policy plus the ethical issues they bring to the table make for some very vibrant class discussions,” Sossin says.
As for the lawyers who are helping to write Canada’s history, they are busy managing their class-action caseloads. At Paliare Roland, Rothstein spends hundreds of hours deciding which cases to take on. “Plaintiff firms typically turn down at least 10 cases for every one accepted,” she says. To keep the caseload from getting overwhelming, she sticks to the firm’s commitment to restrict class actions to 20 per cent of the practice.
On a day-to-day basis, she says working on cases with such high stakes and a real chance to make a systemic impact is hugely rewarding.
Branch agrees. “I love being a specialist in this area because the cases are so large, you get to chase down every legal avenue. And the class-action tool gets layered over all of the big political and social issues. In any one day, I find myself working on the Charter, securities law, products liability, pensions and melting sperm banks. Not too many lawyers get to do that.”
