David Sterns
on the 2020 Bill 161 class actions amendments, predominance, and access to justice
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Hello everyone, this is another episode of Yunusov Law YouTube show where I bring interesting professionals to you. I try to satisfy my own curiosity and learn something, but hopefully you will learn something also from these great people. And today we have a very special guest. His name is David Sterns. I'm sure most of you know him because I think everybody knows David. So without further ado, I will just let David introduce himself.
Thanks, Pulat. It's wonderful to be here. I think this is a great initiative that you're doing, and I'm truly honored and touched that you've asked me to speak. I'm here at your disposal. What do you got?
Well, I heard that you went to McGill. Is the rumor true?
The rumor is true. They tried to get me to deny it, tried to get me to sign documents that I wouldn't disclose it, but I will publicly disclose it. I'm very happy with my education. I love them, I support them, and I always encourage people, if you're interested in getting an interesting education, to try McGill, because I think really they provide a really good exposure to the two systems in our country, common law, civil law.
Yes, and I know that you got both degrees at McGill, right?
Yeah, they're trying to get me to change it into a JD, but I won't pay them. I won't pay the money. I refuse. I'm old school, Pulat.
Is McGill where you acquired your interest in Francophone culture and in the Francophone side of our legal system?
Well, my mother's a French teacher, and I always had a love for the language and for the literature. Obviously being, you know, I went to school, I did my undergrad in Montreal, so I was immersed in the culture there and I just wanted to carry on and continue with it. I ended up getting called to the bar in Quebec. I studied under the old civil code. They changed the civil code right around when I got called to the bar, so I haven't really had much exposure to the new civil code, but I've always kept my toes in the Quebec legal system and we have some cases there. And I do enjoy going back and I do enjoy going to the courts there.
We will talk about the amendments to the Class Proceedings Act today, but jumping ahead of the queue, Do you think you will do more cases in Quebec now that these amendments are enforced?
It's certainly possible. It's certainly possible. I mean, the Ontario government has taken some pretty radical steps, in my opinion, to make it harder to access justice here, make it harder for victims to get compensation here. And that's going to result in us looking at other jurisdictions. Every single time we have a new case, we've got to look at what is the best jurisdiction to start it in. And Quebec often comes up, but there are a lot of limitations there. And they, generally speaking, don't embrace national classes the way Ontario courts have and other provinces as well. But it's certainly one of the cards that we're going to be looking to play.
Before we get into the meat of this discussion, share with us how you got into class actions and what kind of experience you have in this field.
Well, I guess I'd be considered one of the pioneers in the class action field, and I came to it through our commercial law litigation practice. Our firm does class action law and also does franchise law, and franchising often involves disputes by a large number of franchisees against a franchisor. And, you know, we certainly, you know, learned through trial and error that, you know, suing on behalf of large bodies against one entity without a class action is very, very difficult. So I can speak with firsthand experience as to what that's like. I mean, you've got— say you've got 50 plaintiffs, let's say, you know, they've each got to swear an affidavit of documents. You have to get a retainer from them.
You have to have constant communications with them. You can't take instructions from one on behalf of the group. So when we started to think about how we could do those cases more efficiently, we started to look at class actions, and this was early days. So we tried them on, and sure enough, you know, it's challenging to bring class actions, but it's nothing like the challenges of trying to herd a large number of individuals or individual businesses into one case. And it also offloaded a lot of the burden from the clients onto us, which we were prepared to accept. And, you know, we were prepared to go forward on in the hope and expectation that, you know, eventually we would get a settlement or a judgment in our favor.
This summer, Ontario legislature passed some amendments to Ontario's class actions regime known as the Class Proceedings Act. Please tell us a little bit about these amendments and what issues you have with these amendments, if any.
Yeah, I mean, it's known as Bill 161. It's received third reading, royal assent, and it's about to be proclaimed into force. There are some good things about it. They certainly cleaned up a few things, like for example, appeal routes are now more streamlined. The timelines are tighter. But the thrust of the changes has to do with what we call the certification test. Certification is the process that determines whether or not a case can be brought as a class action or not. And up until now, it's not been a very onerous test. The, the Act and the judges interpreting the Act have considered it to be an important tool for accessing justice and achieving behaviour modification and also for saving judicial resources.
So they've looked favourably upon certification, they look favourably upon class actions, and this has been a very consistent trend. From pretty much the beginning of the Act until Bill 161 came into being. The Supreme Court of Canada has always praised class actions as providing access to justice. Their jurisprudence is very favorable towards class actions. And so it was a bit of a surprise when along came a government that claimed to be for the people, which took direct aim at the certification test and consciously and deliberately decided to make it harder for individuals, victims, vulnerable people to achieve access to justice. They did that through Bill 161, and I can tell you two ways in which they tried to achieve that.
All right, let's talk about this new certification test then and how you don't like it and for what reason.
Two reasons, really. One of them is they've introduced something called a predomination test. Something that comes out of the US law, but it's got even more teeth here. What it says is that the class action cannot be certified if the individual issues that remain to be decided after the common issues are decided will predominate over the common issues. And while that may sound somewhat logical, it goes against a long trend in our case law which has favored class actions, even if there are individual issues to be determined after the common issues in subsequent hearings. So the scheme of our current act, which has now changed, is, you know, you take what is common about a case.
So, for example, let's say you've got a situation like up in Elliott Lake where there's a roof that collapsed in a shopping mall. There are both individual issues to be determined, a lot of them, and there are common issues. What's common is why did the roof collapse and who's responsible. Those are very significant issues that involves expert reports, engineers, architects, structural people, you know, people who can look at, you know, concrete and decide, you know, whether or not it was suitable. To get a determination that there was negligence on the part of say the builder or the architect or the engineer, is a huge part of any person's, you know, road path to obtaining justice.
What remains from that though, is there will be people who were impacted in a very significant way, people who were impacted in a minor way, people who had emotional trauma as a result of it. Those are all what we call individual issues. And our courts have always said that it's okay to have individual issues once you've determined the common issues, if those common issues are a substantial ingredient in getting justice for each class member. Along comes Bill 161, and now the courts are gonna have to look at those individual issues, which are in many cases quite contentious. For example, you know, a business that failed because of the roof collapse may have been a profitable business, it may have been an unprofitable business, maybe it was about to close anyway.
There are a lot of questions that need to be answered. And now the courts are going to be urged to look at those individual issues and determine that they indeed predominate. And if they do predominate, you cannot have a class action. Everyone has to sue individually and everybody has to hire a lawyer. And what that really means is nobody's going to hire a lawyer, nobody's going to sue individually because the costs are overwhelming, because they have to prove the predicate issues in order to get any remedy. And that is to say the negligence and the neglect of the builders and the architects. That's the first point. The second point that they've introduced is something called superiority, which requires the courts to look at other means of remedying the wrong, let's say, and that could be, you know, government enforcement.
So we're now going to be hearing that, you know, I suppose for competition cases, well, you have a Competition Bureau, and surely they're in charge of all this, we don't need a class action. Those arguments never got any traction in our courts because courts know realistically that government enforcers and regulators have limited budgets and they don't really prosecute things very much. So there's always been a private attorney general function in class actions, and now that's going to be severely limited because the courts are going to be urged to view anything other than a class action as a superior way to obtain justice. Even, and the bill actually says this, a system created by the wrongdoer itself to provide some sort of a compensation, let's say, to class members.
So for example, you know, you've heard about the bread price-fixing conspiracy that's being litigated. A lot of money's involved in that case, a lot of a lot of people were allegedly overcharged for bread. Well, if all of a sudden one of the companies comes out with a $25 coupon and says, listen, we're going to give you this right now, you don't have to go to lawyers, you don't have to go to court, you know, will that be viewed as the superior way to provide access to justice? I don't know, but I can sure— I can sure tell you that people are going to be saying that it does, and that could undermine our class action regime.
So those two things put together have made Ontario, in my submission, a very unwelcoming place for class actions and possibly the most unwelcoming in North America.
What type of, what types of cases would not get certified under the old certification test? Can you give us a few examples?
Well, sure. I mean, there have always been cases that haven't been certified. I mean, typically they just don't really present a very strong case of wrongdoing. I mean, the courts have looked at it and said, listen, you know, there are some things that are in common here, but, you know, they've always taken individual issues into account. That was never a problem that needed to be fixed by the legislature. And if what was viewed as common really paled in comparison with all the individual suffering damages that would have had to be proven, then the courts didn't really hesitate to deny certification. Other cases have failed because they just didn't meet the cause of action test, for example.
That won't change here, right?
So it really puzzles me why our judicial system and our legal system would not do its best to extract commonalities akin to how engineers or software engineers extract commonalities and strive for reuse. The fundamental rationale is you don't want to do the same work twice. This is a fundamental rationale in engineering. You know, I was a software engineer before law school, So that was one of the number one principles in my work. You want to write a library that you can later reuse many, many times over and over. So when I think of cases where certain events, the same events, give rise to claims by many people, There is clearly commonality among these claims, such as negligence and causation.
There may be distinct features among these claims, such as damages or the amount of damages, right, or the nature of damages. But the commonality is so clear and obvious and, as you said, so costly, sometimes to litigate, that it simply defies logic that this commonality would not have some sort of regime for efficiently being litigated without doing the same work twice. So my question, I guess, is now that we have or almost have this new certification test. Do you think there are alternatives under the rules of civil procedure, and that may also play into the superiority branch, right, that can provide some sort of reuse that I was talking about for litigating this obvious commonality in mass plaintiff events?
Mm-hmm. Well, we've— we don't have a system of multi-district litigation. We don't have a mass tort system that's been developed in the US. For example, in the US, a lot of the pharmacy cases are done as mass torts, and they take elements of class actions and they take elements of individual cases and they sort of make a hybrid out of it. We don't really have that feature here. Will the courts develop that? Will that evolve? Potentially. Are there great savings? Are there any benefits to that? I don't really see it. You take the same pharma case that's being litigated as a mass tort in the US, where you have thousands of individual cases. Yes, they do what's called bellwether trials.
They'll do a round, they'll try to get a sample of cases, they'll go to trial in those cases, and they'll figure out what the results were, and they'll I'll usually apply that across the board on a settlement, but that requires some cooperation, right? What happens if you don't get cooperation? In Canada, we'll take the same set of facts and we'll generally litigate that in a class action because we've been more accepting of the individuality that remains after the common issues are determined, and that is not a bar to a class action. Where we're going to go from here remains to be seen. How, you know, strictly the courts are going to interpret these new requirements remains to be seen.
It certainly goes against the prevailing views of certainly many people in the Class Action Bar, and I know certainly many of the judges, that I don't think they're going to see this as an improvement. I don't think they're going to like the intrusion into the proper functioning of the courts. Let's not forget that one of the goals of the Class Proceedings Act is judicial economy and keeping the courts from being clogged up with individual cases. So when you have a legislature that is acting in a way that's contrary to that, you know, we'll see, we'll see what the end result is. You might ask, why did they do it? Because you're absolutely right. Why does anyone want redundancy?
Why do we want individual cases clogging up the courts when you can have one case that's run efficiently, that's case managed? I guess the answer has to come back to who was lobbying for these changes, and the reality is the people who were lobbying were two, you know, two very significant institutions. One of them was the American Chamber of Commerce and the other is the Canadian Bankers Association. The American Chamber of Commerce has a long-standing agenda to undermine class actions. It's not for the benefit of you or me or the person on the street or the courts. It's for the benefit of corporations who are their members, and they've taken this playbook across the United States.
Now they're moving into Canada. They made a submission to the Law Commission of Ontario that was very radical and would have, you know, resulted in a lot of bad changes. The Law Commission of Ontario, who did a very significant study of class actions, rejected those main submissions. The Ford government took them up, and so you see some of that in Bill 161. Same thing for the Canadian Bankers Association. Banks don't like getting sued, and if they have an opportunity to try to make the law more difficult for their customers to sue them, they're going to do it. In this case, they had an opportunity with this government, and the government granted them their wish, much to the surprise of people who may have thought that this government was really acting for the benefit of the little guy.
So I'm thinking of this policy argument— this is purely a hypothetical proposition. I don't really know what motivated the legislature. So I'll take your words at face value. But I want to talk about this policy argument. Often in class proceedings, individual damages are small and the number of plaintiffs is large. Let's say individual damages are in the range of hundreds of dollars or tens of dollars or dozens of dollars. And then the number of plaintiffs potentially is millions, right? So justice for each plaintiff is not really having a high value to that particular plaintiff, member of that class, right? And it is not really— on the face of it, a priority for our policy.
It is not, on the face of it, a priority for any policy to provide justice in claims that are worth a few dollars or a few dozens of dollars, right? However, when you combine all of these claims, especially when they have a common base, the total goes into millions, tens of millions, and hundreds of millions and can potentially bankrupt wrongdoers. So on one hand, we have little to no value to members of the class. Sometimes those class proceeding websites, they look like tokens for people to just pay what's due and give notice to class members to recover their pennies or dollars. But then, so that's on one hand. But then on the other hand, the defendant is potentially ruined by hundreds of millions or millions of dollars or billions sometimes in damages.
So I'm not saying that all cases are like that and there is nothing else to it. But let's take the simple situation without any moral background. I'm not talking about tobacco litigation, for example, or something like that. So a simple situation, there is a disparity between the recovery for each member of the class and a potential terrible impact on, on the defendant. So do you think it's a valid policy argument against the old certification test?
No. Well, if you do what I do, you have to believe in the fundamental objectives of the legislation. And for every example that you can provide where people get $25 and there's a massive liability and judgment on the part of the defendant, I can also give you examples where there are smaller numbers of class members, and I've had cases where some of them have actually gotten over $1 million, and that is per class member. So they're not all small cases, but let's just focus on the small cases. For example, you're, you know, in this system, you're not going to get a massive settlement or a massive judgment unless the defendant has done something wrong.
They've taken money that didn't belong to them, oftentimes knowingly, oftentimes on the expectation that no one's going to notice no one's going to catch them, or no one's going to take the trouble to actually do something about it. With class actions, they now know that if they're going to steal a little bit from a lot of people, there will be people like ourselves, like other firms, who will be very interested in suing, and it may stop their behavior before it even happens. And if it happens and they've taken money— and I don't think— I, I can't think of a case where a defendant has paid a lot of money to anybody where there really wasn't a very strong argument, if not a judgment, to the effect that they took that money illegally and now have to pay it back.
And if that means some of them have to go bankrupt, that's just the law of the jungle. That's called capitalism. And it's not even capitalistic to say, well, let people steal a little bit from a lot of people because that's good for our economy. It's actually bad for our economy. It's bad for individuals. It's even bad for competition because what it does is it favors the cheaters over the companies that follow the rules. So I have no problem, and I mean, obviously I'm biased, but I have no problem justifying the system as it exists and allowing people the right to certify their case and to move forward. Does that come as a big surprise to you, Pulat, that I would say that?
No. It does not, it does not. And I'm really enjoying this conversation because I feel neutral. I'm not a class action lawyer and I genuinely have these questions. I sometimes feel a little bit of anxiety when another class action comes out. It's lately seemed that Every month or so you see a new class action and I'm thinking, what if I become a big corporation? I really have to watch out for those class actions.
Just live an honest life, Pulat.
Exactly. Exactly. Look, under these amendments, under this new class actions regime, firms like yours, what would be some strategies? What would be some reasonable steps that firms what steps firms like yours could take to protect plaintiff classes that may be at risk of dropping outside of the scope of the new class actions regime?
Well, fortunately, the act is not retroactive, so the cases that were started before continue under the old regime. For the new cases, you know, we're, we're going to give them a real hard look. In Ontario, we have adverse costs, which really changed, changed the whole game as far as, you know, the cases that we start. So now we have to look at the possibility of adverse costs in addition to a much tougher certification test. And then we will look at other jurisdictions, whether it be B.C., Manitoba, Quebec, or federal court. All of which have either minimal or no costs in class actions, and see whether those are viable options. You know, we'll still bring cases in Ontario.
There will be cases that are really not affected by either predomination or superiority, but, you know, there will be people in Ontario who will not get access to justice as a result of this bill, and that's going to be the legacy of Bill 161.
I have a question about jurisdiction shopping. How important is any forum, inconvenient forum issue at the certification stage under both regimes?
Well, that hasn't been litigated all that much. I think it's going to come up, especially as what would otherwise be an Ontario case started in, for example, let's say BC. And there's going to be litigation over whether that is indeed the proper forum. You know, when you're dealing with national classes, you know, BC has what, 10, 12% of the population. Why are they not a natural forum for a national class? I don't know. Does it matter that the defendant's head office is here? I don't think so. You're selling— people are selling to people in BC and allegedly doing wrongful things. Why shouldn't the BC courts have, you know, why shouldn't that be the convenient forum?
But I do think we're going to start seeing that more and more. In fact, we already, we already are.
All right, and you will be at the forefront of all that new case law that we are looking forward to. I can't wait to see your reported decisions.
All right, well, stay tuned.
Thank you. This was a fascinating conversation. Thank you so much, David. I really appreciate it that you took time out of your schedule to talk to me and our viewers, and hopefully we'll be back with an update maybe 6 months, a year from now.
I would love to. This is great. I've enjoyed it. Thanks a lot, Pulat.
Thank you, David.