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Member of a Class Action Lawsuit? The Relevance of Opting Out

2020-06-25

Authors

Sarah Woods 514-982-4519 • swoods@woods.qc.ca
Patrick Ouellet
 514-982-2551 • pouellet@woods.qc.ca
Carolan Villeneuve 514-982-5627 • cvilleneuve@woods.qc.ca

Being a member of a class action can have many benefits, providing members are well informed of the legal consequences of being part of it. In Quebec, the legislator has chosen the “opt-out” or exclusion system, which means that any person covered by the class definition qualifies as a member of the class action and is automatically included in it.[1] It is therefore crucial that the members of a class action be able to knowingly exercise their right of opting out. This article addresses the main considerations that a person who qualifies as a member of a class action needs to know, and in particular:

  • The fact that legal persons established for a private interest with more than 50 employees can now be members of a class action;
  • The fact that as a member, the person (natural or legal person) will, with few exceptions, have a passive role at all stages of the proceedings, whether in the context of strategic decision-making, choice of cause of action, representations at the authorization stage, on the merits or in the context of an application for authorization of an out-of-court settlement;
  • Unless a person excludes itself from the class within the required time period, the member will be bound by the final judgment, or out-of-court settlement, as the case may be, and may not sue the defendant for the same cause of action, despite being dissatisfied with the judgment or the out-of-court settlement;
  • To exclude itself, the member must submit a written notice in the class action court file within the period prescribed in the notice to members following the authorization judgment, usually ranging from 30 days to 6 months.

We invite you to read on for more information and/or to contact one of our class action professionals if you have any questions on the subject.

Being a Class Action Member

A class action is a legal procedure which allows a person to act as plaintiff, without a mandate, on behalf of and representing all members of a class to which he belongs.[2] This recourse is reserved for claims arising from a prejudice suffered collectively, in that each person of the class has the same recourse against one or more defendants.[3]

The members likely to be covered by a class action are any natural person or legal person established for a private interest, partnerships and associations or other groups not endowed with juridical personality.[4]Since the reform of the Code of Civil Procedure in 2016, legal persons established for a private interest with more than 50 employees may now also be members of a class action, [5]which increases the number of members of certain class actions and, as a result, potentially the number of opt-outs.

The status of a class action member is akin to the status of the party itself, “no more, no less”.[6] A class action member has party status, either as a “virtual” party before authorization and a “deemed” or “delegated” party after authorization, but before the final judgment.[7] The member may only intervene voluntarily with the permission of the court and only to assist the representative, to support his or her application or to support his or her claims.[8] For example, if a member disagrees with the instructions given by the representative to his or her counselor with the direction of the case, the member cannot intervene since the representative has the authority to act on his or her behalf and to bind all members.[9] Moreover, a representative’s admission binds the members unless the court considers that the admission causes them serious prejudice.[10]

The circumstances in which a class member may intervene are very limited, for example, where the representative is no longer able to provide adequate representation for the members,[11] where he has claims to assert on a proposed transaction and on the distribution of the balance,[12] or on appeal from a judgment refusing the authorization or from a judgment disposing of the class action under certain conditions.[13]

The Effects of the Class Action on the Class Members

The main effect of this characterization is that the final judgment, like the out-of-court settlement (transaction),[14] binds the members who have not excluded themselves[15] and has the authority of res judicata in their regard.[16] Res judicatais an absolute presumption that precludes the redetermination of what has already been decided.[17] It extends to all final judgments rendered by a court in civil and contentious matters, and relies on the existence of a triple identity between the first judgment and the claim subsequently made: the identity of the parties, the identity of the cause of action and the identity of the subject-matter.[18] Thus, members of a class action  who do not opt-out within the prescribed time limit will not be able to sue the same opposing party for the same cause of action, even if the claim is not perfectly identical. This is one of the main advantages of a class action for a defendant since it must only defend itself against the allegations once.[19]

As a result, while class actions carry several advantages for class action members, including not having to directly incur legal fees and disbursements, the potential disadvantages for members are that they are not able to direct the judicial process and must accept a judgment that may not fully reflect their personal and individual circumstances.

The Right to Opt-Out: A Free and Informed Choice

Considering the system of automatic inclusion of members in a class action in Quebec, members wishing to opt-out must take a positive step to exclude themselves.

At the authorization stage of a class action, the authorization judgment, inter alia, describes the class whose members will be bound by the class action judgment, determines the time limit for opting out of the class and orders the publication of a notice to class members informing them of this deadline.[20]

The notification procedure plays an indispensable role in informing the members of the effects of the authorization judgment and, in particular, the possibility of opting out of the class action,[21] which is an essential component of the class action process.[22] Without the opt-out right, the representative of the class would have the power to bind individuals without a mandate to do so, without their consent and sometimes without their knowledge.[23] It is crucial, for natural justice purposes, to enable members to make an informed decision regarding their potential opt-out.[24]

The right of opting out respects members’ freedom of choice.[25] Someone who would qualify to be  a member of a class action may prefer, for various reasons, to be in control of his or her own case by opting out of the class action and by filing his or her own claim. In addition to having control over strategic decisions, those who wish to file their own lawsuit also have control over the type of claims, the amounts claimed, the defendants sued and the theory of the case that they feel best suits their claim.

The decision of opting out of a class action may also be motivated by a desire to avoid delays associated with a class action, as individual actions can generally proceed more quickly before the court, as well as a desire to fund the claim other than through a percentage agreement with the representative’s lawyers, a frequent practice.

The Process of Opting Out

To opt out, the member must notify the court clerk of its decision before the expiration of the exclusion period stipulated in the judgment of authorization[26] by means of a written notice filed in the class action court record. The exclusion period may not be less than 30 days or more than six months after the date of the notice to the members. This time limit is mandatory, whereby a class member may opt out after the expiry of this period only with the permission of the court and by demonstrating that it was, in fact, unable to act within the prescribed period.[27] The formalities to be followed and the time limit for opting out will be set out in the notice to the members following the rendering of the authorization judgment.[28] In this regard, when a person who may be a member of a class action clearly indicates, following the judgment of authorization, that he or she intends to opt out from the class and files a notice to that effect in the court file, this decision must be respected and that person will not have to reiterate his or her choice once the notice is published.[29]

A member shall also be deemed to be excluded if it is already a plaintiff in another legal proceeding having the same object as the class action and if it does not withdraw before the expiry of the exclusion period.[30]

In principle, opting out of the class action is total, in the sense that either the member participates in the class action (in which case it will be bound by the judgment on the merits) or is excluded from it (in which case it will not be bound by the judgment on the merits). Exceptionally, however, a partial opt-out was considered adequate to take into account the fact that some members had already accepted partial compensation and signed a settlement agreement for part of the period of the class action.[31]

Conclusion

Whether they wish to be part of the class action or opt-out, it is important that members involved in a class action be able to exercise their choice in an informed manner. Independent legal advice (either from a lawyer other than the representative’s lawyer) may prove beneficial in this context and allow one or more members to properly consider the advantages and disadvantages of each option. For members opting out, the exclusion process provided for by law and in the notice to members following the authorization judgment must be followed, considering the important consequences of failing to do so. In this regard, it is recommended to regularly consult the Québec Registry of Class Actions where all pending class actions are registered (https://www.registredesactionscollectives.quebec/en).

 

The authors wish to thank Arielle Reeves-Breton for her precious contribution to this text.


1 Art 576 CCP.

2 Art 571 CCP.

3 Art 575 CCP.

4 Art 571 al 2 CCP;Filion v Québec (PG), 2015 QCCA 352 at para 30.

5 Art 571 CCP.

6 Filion, supra note 4 at para 48;Engler-Stringer vVille de Montréal2019 QCCS 1404at para 25.

7 Engler-Stringer, supranote 6; Belley v TD Auto Finance Services Inc./Services de financement, 2018 QCCA 1727 at para 30.

8 Art 586 CCP.

9 Art 571 CCP; see regarding representation Shaun E. Finn, L’action collective au Québec, Yvon Blais, 2016 at pp 62-63, 80-85.

10 Art 585 al 2 CCP.

11 Art 589 al 2 CCP.

12 Art 590 CCP.

13 Art 578 et 602 CCP.

14 Art 2633 CCQ; art. 590 CCP.

15 Art 591 CCP; see also Meubles Léon ltée v Option consommateurs, 2020 QCCA 44 at paras 41, 69-74;Filion, supra note 4 at para 43Société des loteries du Québec v Brochu2006 QCCA 1117at para 15-21.

16 Art 2848 CCQ.; see for example Blouin v Banque Amex du Canada, 2003 CanLII 14485.

17 Ibid.;Jean-Paul Beaudry ltéec 4013964 Canada inc., 2013 QCCA 792 at para 36.

18 Beaudry,supra note 17 at paras 36-37.

19 W. K. Winkler et al, The Law of Class Actions in Canada, 2014 at p 5.

20 Art 576 CCP.

21 Société canadienne des postes v Lépine, 2009 CSC 16 at para 42.

22 M.G. v Association Selwyn House, 2008 QCCS 3695; Currie v McDonald’s Restaurant of Canada Ltd, [2005] O.J. No. 506 at para 28; P.-C. LAFOND, Le recours collectif comme voie d'accès à la justice pour les consommateurs, Thémis, 1996 at pp 355-356.

23 M.G., supra note 23.

24 McCarthy Tétrault, Defending Class Action in Canada, 4th ed, LexisNexis, Toronto, 2012 at p 132; Hocking c Haziza, 2008 QCCA 800.

25 W. K. Winkler, supra note 19 at p 213.

26 Art 580 al 1 CCP; There is no specific requirement in the CCP as to how to inform the court clerk of an opting out; See Labranche c Énergie éolienne des Moulins, 2017 QCCS 1237 at para 28.

27 Art 576 CCP; See Cie de matériaux de construction BP Canada vFitzsimmons, 2017 QCCA 1329.

28 Art 579 (5) CCP.

29 Ouellet vCanadian Pacific Railway Compagny, 2016 QCCS 6450 at para 31.

30 Art 580 al 2 CCP.; Nosseir v Coopérative d'habitation Qurtuba, 2020 QCCS 7 at para 73.

31 Trottier v Canadian Malartic Mine, 2018 QCCS 4777, application for leave to appeal dismissed see 2019 QCCA 138; Meese v Corporation Financière Globex, 1999 CanLII 11536 (QC CS), confirmation on other grounds see J.E. 2001-975 (C.A.).