Class actions without borders
By Jane Mundy

National, Canadian Bar Association, June 29, 2007

http://www.cba.org/cba/newsletters/addendum04-07/news.aspx

It started out as a class action suit in Illinois against one of the world’s biggest multinationals, but it may have ended up redefining the Canadian class action.

The case in question, Boland et al. v. Simon Marketing and McDonald’s Corp. No. 1 CH 13803, began as an Illinois action against a marketing company McDonald’s had hired to run one of its contests. The plaintiffs held that employees of the marketing company had embezzled game pieces and redirected them to specific individuals, thus affecting the game’s overall payouts. The case was settled, and, as apart of that settlement, the defendants were released from most claims. The Illinois court held that the settlement also applied to potential Canadian class members.
But before the close of proceedings, a group of Canadians moved for leave to intervene, saying that the defandants’ notice to Canadians – conducted through ads in Macleans, La Presse, Le Journal de Québec and Le Journal de Montréal as well as some U.S. publications with Canadian circulation – was inadequate. The Illinois court rejected this argument.

In a twist, however, an employee of the marketing company testified during his criminal trial that McDonald’s had ordered that no large prizes should be awarded in Canada. This claim was never raised in the Illinois action, so a Canadian class action, headed by Greg Currie, was launched to collect $80 million in damages from McDonald’s. Currie also sought an order that the Boland settlement should not apply to Canada, while McDonald’s insisted that it should.

The Ontario Court of Appeal found that while there was a “real and substantial” connection to Illinois, the principles of “order and fairness” – two tests for the enforcement of foreign judgments laid out by the Supreme Court of Canada in Morguard Investments Ltd. v. De Savoye – had not been met, and rejected McDonald’s motion, freeing the Canadian class action to proceed despite the Illinois court’s finding that its judgment bound Canadian class members.

“The Currie case will not be appealed,” said Chris Paliare of Paliare Roland in Toronto, who represented Currie. “As a matter of comity, the Canadian courts will recommend jurisdiction-approved settlements of U.S. class actions as binding on Canadian members of the subject class.” He also said that would occur “if the foreign court has met the twin principles of real and substantial connection and proper notice of fairness.”
“The notice was found woefully inadequate both in terms of what it said, how it was said, and the method of distribution of notice, said Paliare. In addition, the notice wasn’t readable or understandable in any real way to the potential class. “Procedural fairness was the underpinning of Currie v. McDonald’s decision.”

“However, even with terrific notice, if the court didn’t have real and substantial connections to Canadians to ensure the class fell in with the American class, the decision would not be binding.”

Until recently, Canadian plaintiff lawyers mainly instituted “copycat” actions in co-operation with U.S. class counsel and defendants often found themselves fighting multiple battles. But as a result of Currie v. McDonald’s, the Ontario Court of Appeal decision confirmed that it is willing, given the proper circumstances, to enforce American class action rulings and settlements binding Canadian class participants, even against their will.
“We will now have Canadian class action companies that will be consulted by U.S. plaintiff and defendant lawyers, in order to determine what appropriate notice will be in Canada,” said Christopher Rhone of Branch McMaster’s Vancouver office. “So long as they comply, according to the Currie v. McDonald’s precedent, our courts would defer to the U.S. court’s ruling.”

But in a recent Supreme Court of Canada decision – Pro Swing v. Elta Golf [2006] SCC 52 – “the court stressed the need to protect Canadian citizens and Canadian domestic values,” said Rhone. “While this is nothing new, the emphasis placed on it by the court is new, so I think that the decision on the enforcement of an American judgment against a Canadian in Canada is important; the courts here should always scrutinize any order that is issued from the U.S.”

Does this mean that the “copycat” action is dead, and that American class action lawyers, who are generally quicker off the mark in filing such actions than their Canadian counterparts, will be recognized by the courts as representing Canadians as well as Americans, thereby increasing the likelihood of such filings?

“American lawyers won’t be coming in droves, but we will see a slow increase,” said Rhone. “They will not be coming here to argue cases themselves, but their courts will assert jurisdiction, or will try to, over Canadians, as they did in the Currie case.”
“The Currie v. McDonald’s case has caused the Canadian bar and the Canadian court to face the issues that arise with a cross-border settlement,” said Sandra Forbes of Davies Ward Phillips & Vineberg in Toronto. “It brings up questions such as, how should the rules about cross border settlements evolve and when do you enforce judgments from one country to another, even one province to another?

“Given the global nature of commerce, it is inevitable that, with issues such as medical inventions and pharmaceutical products, we will end up with more multi-lateral court cases or one jurisdiction over another as the primary place where the issues can be litigated.”

“Cross-border settlements can be advantageous to both plaintiffs and defendants, and from the plaintiff’s perspective, they can be more cost-effective by stream-lining administrative costs so more money is distributed amongst class members and less money administering the settlement,” said Forbes. “From the defendant’s perspective, if you have decided to settle in the U.S., it is more efficient to settle one time only, given the factual background and motivation is the same; the court should be developing principles that allow the judges and lawyers that deal with these cases to assess whether cross border cases make sense.”
Forbes also sees American plaintiff counsel becoming increasingly interested in the Canadian market – the larger the class, the greater amount of money. “There is a relationship developing between the American and Canadian plaintiff class action bar,” said Forbes. Plaintiff counsel works together by notifying each other of cases.
“Anyone here can duplicate, but there should be one action and complicated jurisdiction issues have to be figured out,” said Forbes. “We have a good plaintiff class action bar developing in Canada and a lot of good class action counsel that researches and thinks long and hard before starting an action. If a Canadian plaintiff lawyer feels it is worthwhile, I don’t see the fees as being a big issue.

“If you give effective notice, there’s a good chance of getting the settlement approved and if you give proper notice to Canadian class members, you will have a good chance of having them bound by the U.S. settlement,” said Forbes. She sees more cross-border settlements, as long as a U.S. plaintiff lawyer is satisfied that the jurisdiction is sufficient.

Given the global nature of commerce, it is inevitable that, with issues such as medical inventions and pharmaceutical products, we will end up with more multi-lateral court cases or one jurisdiction over another as the primary place where the issues can be litigated. However, proper care must be given of proceedings in both jurisdictions to achieve the best solutions for both defendants and plaintiffs. “As we can expect to see more of these cases, there will be more discussion in courts regarding what kind of notice is required,” said Forbes.

In a nutshell, there is the potential for a more efficient resolution of a claim that transcends the border, but there are many different considerations. “These cases tell us to be careful and it’s worth spending the money to do it right, otherwise the Canadian court will find the U.S. settlement will not bind Canadian class members,” said Forbes. What may have been sufficient notice of settlement and its implications for a judge in Illinois may not be enough for a judge in Ontario.

Jane Mundy is a freelance writer and contributor to National.