Top Class Action Decisions of Q3 2024

Q3 2024 saw the release of several significant class action decisions, including appellate rulings, that we consider especially relevant to our clients. These decisions underscore that:

• There must be “some basis in fact” that a proposed common issue actually exists, rather than simply being answerable in common across the entire class for the purposes of class certification.
• Limitation periods are not suspended for prospective class members whose claim only accrued post-certification.
• A certification motion sent back on appeal to be reheard is not bound by prior findings and conclusions and is to be heard de novo.
• Class counsel fees in mega-settlements must be proportionate, and timeliness in achieving settlement is a consideration in the award of fees.
• Canada’s patchwork of privacy statutes leaves open data breach class actions arising from hackers in some provinces that otherwise are not available in Ontario.

‘Some Basis in Fact’ Requirement for Existence of Common Issue

In August, the Ontario Court of Appeal returned to the “some basis in fact” standard for certification. Lilleyman v. Bumble Bee Foods LLC, 2024 ONCA 606 involves a class action where the plaintiff claims that several companies conspired to fix the price of canned tuna sold in Canada. The claim built on the findings of price-fixing in anti-trust proceedings in the U.S. against three entities. The Court of Appeal affirmed the motion judge’s refusal to certify the proposed class action because there was no basis in fact that the alleged conspiracy could or might have affected Canadian consumers.

Key Takeaways

• Bare allegations and conclusory statements based on assumptions or speculation, or which are incapable of proof, are not material facts and are not assumed to be true for the purposes of a motion determining whether a legally viable cause of action is pleaded.
• It is a “necessary requirement” that a plaintiff on a certification motion provide some minimal basis in fact that an alleged conspiracy could or might have occurred.
• This decision reinforces the importance of presenting evidence that ties the alleged misconduct to the specific market in question.

Certification Decision

The motion judge dismissed the motion for certification on three grounds: (i) the claim failed to plead material facts sufficient to disclose a reasonable cause of action; (ii) there was no “some basis in fact” to support the existence of common issues for class members; and (iii) a class proceeding was not shown to be the preferable procedure for resolving the issues raised.

The motion judge noted that bare allegations and conclusory statements based on assumptions or speculation, or which are incapable of proof, are not material facts and are not assumed to be true for the purposes of a motion determining whether a legally viable cause of action is pleaded. Among the many defects in the pleading set out by the motion judge was that the claim assumed that a proven price-fixing conspiracy in the U.S. could simply be extended to Canada.

With respect to the “common issues” criterion, the motion judge confirmed that the onus was on the plaintiff to establish “some basis in fact” both that (a) a proposed common issue actually exists, and (b) it can be answered in common across the entire class and that, in a conspiracy case, where the appearance of injury to a group is not obvious, the plaintiff is required to show “some basis in fact” that the alleged conspiracy could or might have existed. The “some basis in fact” standard was noted not to require evidence on a balance of probabilities, and the court should not attempt to resolve conflicts in the evidence at the certification stage. But, in this case, the evidence had nothing to do with Canada. As well, the plaintiff failed to provide a methodology that was sufficiently credible or plausible to establish loss on a class-wide basis.

Appellate Decision

The Court of Appeal upheld the dismissal.

Among other things, in appealing the motion judge’s finding that the claim failed to disclose a reasonable cause of action, the appellant had argued that the motion judge failed to assume the facts pleaded were true and, in fact, made findings that contradicted the pleadings. The appellant further contended that the motion judge erred in deciding the merits of the claim. The Court of Appeal held that the motion judge was not obliged to assume as true bare allegations and conclusory statements based on assumptions or speculation, or which are otherwise incapable of proof. In this case, the participants in the alleged conspiracy, who are claimed to have sold tuna in Canada, operated at distinct levels of the supply chain and hence were not competitors with each other to support the existence of a conspiracy. For one of the other defendants found liable in the U.S., there were no pleaded facts as to its involvement in the sale of tuna to Canadian consumers, such that the claim was based on a bare allegation unsupported by material facts. As well, the court rejected that dismissal of a motion for certification for failing to plead the material facts necessary to support the alleged conspiracy rises to a determination of the merits.

On the motion judge’s finding that the commonality requirement had not been met, the appellant argued that a plaintiff is not required to provide evidence that the proposed common issues actually exist, citing the statement of Rothstein J. of the Supreme Court of Canada in Pro-Sys Consultants Ltd. v. Microsoft Corporation that, on a certification motion, “evidence that the acts alleged actually occurred is not required” and that “factual evidence … goes only to establish whether these questions are common to all the class members.” The Court of Appeal noted that whether the necessary analysis is described as involving one or two steps is beside the point. As a matter of common sense, if there is no basis in fact to suppose that a conspiracy with attendant harm occurred, it necessarily follows that there is no basis to suppose that such a non-existent conspiracy could have caused harm across members of the proposed class. As such, the appellate court held it was a “necessary requirement” that a plaintiff on a certification motion must provide some minimal basis in evidence that an alleged conspiracy could or might have occurred. If a claim of conspiracy with no factual underpinning whatsoever could proceed as a class action merely by alleging that the purported conspiracy caused harm to a group of individuals, virtually any such conspiracy claim would have to be certified, undermining a key rationale and purpose of the certification process in rooting out frivolous and unfounded claims. Requiring a plaintiff to satisfy this minimal evidentiary standard is entirely different from requiring proof of the claim. The standard requires “some basis in fact,” not proof of fact; there is no weighing of the merits of the claims or resolution of conflicts in the evidence. A court must merely ask whether there is some minimal evidence in support of the proposed common issue.

As to the appellant’s submission that requiring “some basis in fact” as the existence of the proposed common issue was inconsistent with comments by Rothstein J. In Pro-Sys, the Court of Appeal commented that, read in their proper context, Rothstein J.’s comments were merely reaffirming that the “some basis in fact” standard does not equate with a balance of probabilities test and was not suggesting that a conspiracy claim lacking any evidentiary foundation should nevertheless be certified as a class proceeding. The approach of requiring “some basis in fact” on the existence of the proposed common issue was noted as being consistent with a prior decision of the Court of Appeal and multiple recent decisions of the Divisional Court.

Suspension of Limitation Periods on Claims Accruing After Certification

Under the Class Proceedings Act, a court may amend a certification order, including composition of the class. In Gilani v. BMO Investments Inc., 2024 ONSC 3674, the plaintiff moved to expand the class definition. The class action concerned challenges to the payment of trailing commissions in respect of a BMO mutual fund acquired through a discount broker. In May 2021, the motion judge certified the class to include persons up to certification date, there having been no end date to the proposed class in the pleading. The plaintiff later moved to expand the class definition to include persons who acquired units in a BMO mutual fund through a discount broker after certification up to May 31, 2022, the day before regulatory ban on the payment of trialing commissions to discount brokers came into effect. The defendant opposed the amendment, submitting that it would admit persons whose claims are statute barred, thereby raising the issue of who qualifies as a “class member” for purposes of the suspension of limitation period under the former section 28(1) of the Class Proceedings Act.

Key Takeaways

• Prior to certification, limitation periods are suspended only for persons who fulfil the criteria for the proposed class as pleaded.
• After certification, limitation periods are suspended only for persons who meet the criteria for the certified class, regardless of whether they could have been identified as putative class members proposed in the pleading.
• The Class Proceedings Act does not suspend the limitation period for persons whose claims arose after the class was certified.
• While a motion to amend the class to encompass after-arising claims should be brought within the limitation period applicable to those claims, where discoverability of a claim is an issue, limitation defences should not be resolved on the motion to modify the certification order.

Original Certification Motion

In this proceeding, a claim was brought alleging the defendant improperly paid trailing commissions to discount brokers on behalf of unitholders of BMO mutual funds acquired through discount brokers. The claim, commenced by way of Notice of Action in December 2018, defined the putative class to include any person who held or hold, at any time prior to the conclusion of the trial of the common issues, units of a BMO mutual fund through a discount broker. At the certification motion in 2021, the motion judge held it was not appropriate to include prospective class members when there is no evidence before the court on membership past the certification date.

Motion to Expand Class Definition

The plaintiff sought to amend the class definition to extend the end date of the class period from May 18 to May 31, 2022, the day before regulations prohibited the payment of trailing commissions to discount brokers. The defendant resisted the order on the basis that doing so would admit claimants whose claims are clearly statute barred to the class. The court granted the plaintiff’s motion to amend the class definition, without prejudice to the defendant’s right to assert a limitation period defence against the proposed new class members.

On the question of whether limitation periods were tolled for prospective class members whose claims had not yet accrued at the time of certification, the court found the proposed additional class members failed to qualify as “class members” for purposes of section 28 of the Class Proceedings Act (pre-amendment), both when the claim was commenced and later at certification. Specifically, the court explained that, at the time the claim was commenced up to the time of certification, the proposed new class members did not hold units in BMO mutual funds and were strangers to the action. Post-certification, once they began holding units of the BMO mutual funds, they could have been identified as putative class members under the definition proposed in the Notice of Action, but that was no longer the operable reference for who qualifies as a “class member” as the certification order defines the class. Once certification is reached, persons with accrued claims know where they stand and have the information to enable them to decide what to do: commence an individual action, opt out of a class proceeding or remain in a certified class. As such, the court held that section 28 does not operate to toll the limitation period of persons whose claims arose after the class was certified. A motion can be brought to amend the class definition to include after-arising claims, but such a motion should be brought within the limitation period applicable to those claims.

Even while section 28 of the Class Proceedings Act does not operate to toll the limitation period of potential new class members, whether an amendment should nonetheless be granted to class definition will depend on whether it is clear that their claims are statute barred. Where the application of the limitation period is unclear and depends upon a factual inquiry about when the class members knew or ought to have known about the facts constituting his or her cause of action, the limitation issues should not be resolved on the motion. Instead, an amendment will be granted without prejudice to the defendant’s right to assert a limitation period defence against the new proposed class members. That is what occurred in this case.

Therefore, the proposed new class members’ claims were not tolled by virtue of section 28 of the Class Proceedings Act.

Scope on Rehearing of Certification Motion

On the dismissal of certification being ordered on appeal to be remitted back for rehearing, what is the scope of the court rehearing certification in terms of considering prior findings and conclusions? This was the question that arose in Mackinnon v. Volkswagen Group Canada Inc., et al., 2024 ONSC 4988, a proposed class action on behalf of excluded persons from VW’s settlement of claims arising from emissions data in certain of their car models. Certification was dismissed. On appeal, the Divisional Court overturned the decision and remitted certification back to rehear the certification motion apart from whether the proposed class suffered harm. Disagreement arose during the rehearing on the impact of the Divisional Court’s decision on the issue of compensable harm.

Key Takeaways

• On the re-hearing of a certification motion, the motion judge is to approach the hearing as a hearing de novo on all matters, not bound by prior findings and conclusions on the former certification motion or of the Divisional Court, except which the motion judge has been specifically instructed not to address by the appellate court.
• The plaintiff’s disagreement with the Divisional Court’s determination on compensable harm was the subject of a leave application to the Court of Appeal (which was denied) and is not for reargument at the rehearing motion, given the Divisional Court’s explicit exclusion of compensable harm from being further addressed.

Denial of Certification

The proposed class action was denied certification in 2021, based on the findings that: (i) there was no factual basis to conclude that the proposed class members had suffered a compensable loss; and (ii) the plaintiff failed to provide a plausible methodology to measure that loss on a class-wide basis​.

Divisional Court Decision

On appeal, the Divisional Court unanimously overturned the motion judge’s decision on the basis that: (i) there was a basis in fact to conclude that the class members overpaid for their vehicles because they did not receive the advertised “low emissions” feature; (ii) there was a plausible methodology for measuring damages on a class-wide basis; and (iii) the methodology for quantifying damages could be addressed later.

The Divisional Court ordered that the matter be remitted to a different judge of the Ontario Superior Court of Justice to rehear the balance of the certification motion, apart from ​the question of whether the proposed class suffered harm and the question of whether there is a plausible methodology for measuring damages on a class-wide basis, as these issues had already been resolved. The defendants sought leave to appeal the Divisional Court’s order to the Court of Appeal, but leave was not granted.

Rehearing of Certification Motion

At the rehearing of the certification motion, a question was raised before the motion of “What is this court’s mandate in view of the decision of the Divisional Court remitting this matter for a rehearing ‘apart from the question of whether the proposed class suffered harm and the question of whether there is a plausible methodology for measuring damages on a class-wide basis?’”

The defendants took the position that the motion for reconsideration is, apart from the issues identified by the Divisional Court, a rehearing, in which the motion judge is not bound by any findings of fact or conclusions made by either the motion judge or the Divisional Court and is free to consider the question of compensable harm afresh. The plaintiff argued that the motion judge is bound by the conclusion that the proposed class suffered harm on the basis that the Divisional Court has determined, for purposes of certification, the question of harm and methodology of calculating loss on a class-wide basis, which necessarily includes the findings it made in support of those conclusions.

The motion judge approached the motion as a hearing de novo on all matters, not bound by prior findings and conclusions on the certification motion, except which the Divisional Court specifically instructed the court not to address. The motion judge further clarified that, on a rehearing, a motion should not assume an appellate role reviewing the Divisional Court’s determination, and particularly not when the Court of Appeal has declined to exercise that role itself. The certification was ultimately granted on 10 common issues.

Setting Class Counsel Fees in Mega-Settlements

In Fresco v. Canadian Imperial Bank of Commerce, 2024 ONCA 628, an “overtime” class action, the Ontario Court of Appeal dismissed the appeal and upheld the motion judge’s award of a class counsel fee award of $25 million in fees. This represented $19 million less than the 30% contingency fee it agreed to with the representative plaintiff. The appeal court’s decision reinforces the need for proportionality in class counsel fees, particularly in mega-settlement cases.

Key Takeaways

• Appellate courts will not interfere with what are discretionary decisions, absent the judge having clearly misdirected him or herself on the facts or the law, proceeded arbitrarily or the decision is so clearly wrong as to amount to an injustice.
• In mega-settlements, fees will not be awarded simply based on agreed-upon contingency fee rates, if the fees would be disproportionate to the risks incurred and returns generated by class counsel.
• Timeliness in achieving settlement is a relevant consideration of counsel fee awards in class action settlements.

The Motion

In 2007, a CIBC employee commenced this class proceeding, which involved claims on behalf of approximately 31,000 current and former front-line employees at the bank’s retail branches who worked unpaid overtime from 1993-2009. The claim sought $600 million in general, aggravated and punitive damages. In 2012, the class action was certified.

The parties reached a settlement in 2022, with CIBC agreeing to pay $153 million. Class counsel sought $44 million in fees (30% contingency fee or 2.66 times their docketed time) and appealed when it was awarded $19 million less. Request for a $30,000 honorarium was also denied for the representative plaintiff.

Before the motion judge, class counsel sought a 30% contingency fee, amounting to $44 million and equivalent to a multiplier of 2.66 on their docketed time to that date. The motion judge wrote at length on the challenges associated with settlement and counsel fee approval motions. The court approved a $25-million fee award for class counsel, which represented 17% of the total settlement, a reduction from the 30% initially requested. This was considered reasonable and proportionate given the complexity and risks involved in the 15-year litigation​.

Ontario Court of Appeal Decision

The appellant class counsel requested a $19-million increase for a total of $44 million in class counsel fees. The Court of Appeal emphasized the discretionary nature of fee approvals in class actions and found no error in the lower court’s reasoning regarding the risks and proportionality of the fee relative to the settlement. Specifically, it noted that appellate courts should review discretionary decisions with a posture of deference and may not interfere, absent the judge having clearly misdirected him or herself on the facts or the law, proceeded arbitrarily, or if the decision is so clearly wrong as to amount to an injustice.

While acknowledging that the need to provide compensation that is sufficient to provide a real economic incentive to lawyers to take on a class proceeding and to do it well, this is not an easy estimation.

The appellate court described the need to approve fees that are fair and reasonable, and the factors to consider.

On risk as one of those factors, the Court of Appeal agreed with the motion judge that risk should be assessed over the duration of the case. As well, such a high fee recovery was not needed, given the nature of the case to have incentivized a class counsel to pursue this case rather than taking alternative cases. Reference was made to submissions made by appointed amicus that the practice relating to class proceedings has evolved considerably since the inception of class proceedings with there now being a large, sophisticated class action bar that has developed a business model that spreads risk over multiple firms, frequently engages in hotly contested carriage motions and relies on funding from the Class Proceedings Fund. Moreover, ensuring a proportional balance between class counsel fees and the net class settlement is integral to protecting the integrity of the profession.

In considering the results achieved, the appellate court rejected arguments as to the motion judge’s consideration of Fulawka v. Bank of Nova Scotia, 2014 ONSC 4743, 69 C.P.C.(7th) 134, and 2016 ONSC 1576, a similar class action. In Fulawka, the settlement was achieved sooner (in approximately 6.5 years) and the defendant bank’s liability payment was undiluted by legal fees and disbursements, and taxes on those amounts, which were paid separately by the bank. By contrast, the $153-million settlement with CIBC took more than 15 years to achieve and was diluted by legal fees and other deductions. Timeliness in achieving settlement is a relevant consideration in a motion judge’s exercise of discretion.

The representative plaintiff, Dara Fresco, was denied a $30,000 honorarium by the motion judge. The court reasoned that, although her involvement was commendable, it was not extraordinary enough to warrant an honorarium. Exceptional circumstances should exist to justify the award of an honorarium to a representative plaintiff, such as exposure to a real risk of costs or significant personal hardship in connection with the prosecution of the action (e.g., putting their personal experience forward and reliving their trauma, while relieving other class members from having to do so). An additional payment should be available only where the representative plaintiff can demonstrate a level of involvement and effort that is “truly extraordinary.”

B.C. Permits Hacker Data Breach Class Actions to Proceed

In a trilogy of decisions (discussed in our prior bulletin), the Ontario Court of Appeal ruled that the common law tort of intrusion upon seclusion does not apply where a data breach occurs due to the actions of an independent hacker. However, unlike Ontario, breach of privacy is a statutory tort in British Columbia, Saskatchewan, Manitoba, Quebec and Newfoundland and Labrador. The British Columbia Court of Appeal in G.D. v. South Coast British Columbia Transportation Authority, 2024 BCCA 252 and Campbell v. Capital One Financial Corporation, 2024 BCCA 253 has accepted that a defendant can be liable under B.C. privacy legislation in such circumstances and without need for proof of damages.

Key Takeaways

• A data custodian might be found to have wilfully violated the persons statutory privacy rights even in instances of a hack.
• There is a spectrum of privacy-affecting behaviour on the part of a data custodian, by way of actions or omissions, even in the context of strangers hacking into a custodian’s storage of individuals’ personal information. A judge will have to determine whether the facts of a particular case meet the requirements for a statutory breach.
• The statutory requirement in B.C.’s statutory privacy tort of a wilful violation of the privacy of another could include the reckless failure to safeguard a person’s private information in a defendant’s possession, thereby enabling the information to be disclosed to other persons.

G.D. v. South Coast British Columbia Transportation Authority, 2024 BCCA 252

The certification action arose in the context of a data breach involving a malicious cyberattack and an allegedly reckless data custodian. The cyberattack targeted a public body, South Coast British Columbia Transportation Authority (“TransLink”), and resulted in a third-party hacker gaining access to sensitive employee information, affecting at least 39,000 persons. On appeal, the primary question was whether it was at least arguable that the parties affected by the breach have a cause of action directly against the data custodian for failure to reasonably safeguard the information entrusted to it.

The Court of Appeal went to lengths setting out the history and purpose of legal privacy protections, tracing these origins to the unique challenges for informational privacy posed by modern technologies. Through this discussion, the court draws attention to a distinction between two competing concerns that have animated the unsettled and evolving jurisprudence in the area of privacy class actions, including the present appeal.

The application judge, for example, was persuaded by Ontario’s narrow view of privacy protections, concerned “not to open the floodgates” to routine and large damages claims against organizations for data breaches caused by third-party actors (para 99). In contrast, the appeal judge took a different view, highlighting the need for the common law to be responsive to changes in technology and the potential “…flood of unprotected personal information…” (para 137).

Motivated by a concern for informational privacy, the B.C. Court of Appeal proceeded to address the substance of the pleadings to determine whether they present an arguable cause of action.

The first claim was based in section 1(1) of B.C.’s Privacy Act (the “Act”). The application had set out the essential elements for a claim pursuant to the Act, namely, that the defendant (i) wilfully and (ii) without a claim of right (iii) violated the privacy of the plaintiff. Whether it is arguable that TransLink’s alleged security failures could satisfy these elements turned on the interpretation of “wilfully” in the context of the Act. Using the modern approach to statutory interpretation to give appropriate weight to the purpose of the statute, the appeal court concluded that the language of the provision could extend to a data custodian’s reckless conduct. Whether the threshold for recklessness is satisfied will depend on findings of fact, and in particular whether TransLink violated reasonable expectations of privacy, but the statutory claim was not bound to fail.

The court then turned to the second claim based on a common law duty of care owed by TransLink to its employees. On this issue, the court first clearly rejected the proposition that the Freedom of Information and Protection of Privacy Act displaced the common law duty of care, precluding claims against public bodies in negligence for breaches of privacy. On the substance of the negligence claim, the court further held that it is at least arguable that the employer and employee relationship between TransLink and the class was sufficiently proximate to ground a duty of care and that, considering the novelty and significance of the issue, it would be premature to conclude that the claim was bound to fail.

Campbell v. Capital One Financial Corporation, 2024 BCCA 253

In Capital One, the B.C. Court of Appeal upheld the decision of the court below, which certified the balance of claims in a multi-jurisdictional class action. Like G.D. v. TransLink , the class action arose out of a cyberattack on a data custodian. However, unlike G.D. v. TransLink, the third-party hacker was identified and arrested before the information was misused.

On the appeal, the court declined to address the issue of whether the tort of intrusion upon seclusion exists in British Columbia and, if it does, whether it can extend to capture reckless conduct by a data custodian. The court did find that reckless security practices could constitute “wilful” conduct for the purpose of the Privacy Acts. The court reasoned that the unsettled authority on the issue, paired with a recognition that privacy law must develop alongside technological advancements, militate against dismissing the claim at this early stage.

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The Class Actions Group at Aird & Berlis LLP has broad class action defence experience in securities law, financial services, mining, oil and gas, consumer products, product liability, pharmaceutical, natural health products, telecommunications, condominiums, competition, copyright, privacy and insurance defence. Please contact the authors or a member of the group for further information.