One of the key considerations in class action litigation is whether to bring an interim application to dismiss the proposed class action. One such basis for dismissal is where the class proceeding serves no legitimate purpose and constitutes an abuse of process. Stays in these cases are motivated by the judicial policy of promoting access to justice through judicial economy.
The advantage of a single, national class proceeding has received judicial and academic attention for maximizing efficiency and promoting the interests of justice. Specifically, avoiding duplication and inconsistent findings, along with efficient use of judicial resources are key considerations.
In a detailed survey of the issue, the Ontario Superior Court in Kowalyshyn v Valeant Pharmaceuticals International Inc., held that “judicial economy and the avoidance of a multiplicity of proceedings is a foundational principle of civil procedure generally”.[1]
However, the court found that serving the goal of judicial economy by limiting duplicate class proceedings was fraught with numerous discrete problems:
- The right of a putative class member to opt-out of class proceedings;
- The influence and importance of class size and class member loyalty;
- A putative class whose members opt-out may fail to be certified or may be de-certified or settlement may fail.
- A law firm prospecting for quick profit from class action work;
- Firms may start proceedings in multiple jurisdictions with the design that its stake will be purchased by other law firms.
- Culpable defendants may see their liability discharged en-masse, and perhaps at bargain prices that may be a just license fee for ill-gotten gains;
- No mechanism in Canada, unlike in the United States, to consolidate proceedings that are initiated in several different jurisdictions; and
- The rarity of purely local class actions and the prevalence of parallel regional, national or global class actions that are difficult to cull.[2]
The court went on to cite decisions across Canada holding that duplicative class proceedings may be an abuse of process, though not always.
The problem of duplicative class proceedings has also been considered by British Columbia courts. For example, in Asquith v George Weston Limited, building on the prior decision of McKay v Air Canada, 2016 BCSC 1761, the court confirmed that multijurisdictional class actions are abusive when they are duplicative and serve no legitimate purpose. That said, a class action is not abusive simply because there is another class action ongoing in another jurisdiction dealing with similar subject matter. The focus is always on whether there is a legitimate purpose served in running a parallel class action.[3]
Central to the court’s assessment of whether a legitimate purpose is served by running parallel class actions was whether there were “legitimate and substantive differences” between the parallel actions.[4]
The more recent case of Gomel v Ticketmaster[5], dealt with an allegation that the defendant, a group of related corporate entities whose business is the sale of tickets for entertainment and sporting events, committed malfeasance in relation to ticket sales practices.
Actions had been brought concurrently in four Canadian jurisdictions. The B.C. action related solely to the business practices of the defendant in the re-sale, or secondary ticket market. It was alleged that the defendant had actively developed software that allowed a single purchaser to purchase a large number of tickets online, in contravention of the defendant’s stated representations that it would limit ticket purchases per customer in order to ensure fairness. The class was restricted to plaintiffs residing in British Columbia.
The Saskatchewan action was a truly multijurisdictional action in that it proposed a class of all persons resident in Canada who had purchased tickets from the defendant from 2009 to the date of the suit. The Saskatchewan claim advanced allegations that the defendant had conspired with others in the resale of tickets in the secondary market. The Saskatchewan claim further alleged malfeasance in the primary ticket sale market, accusing the defendant of engaging in “drip pricing”, which is the practice of building hidden fees and surcharges into the online purchasing process which only become evident once the purchaser moves closer to the actual purchase. The Quebec action was substantively identical to the Saskatchewan claim, except the class was restricted to Quebec residents.
Two actions were commenced in Ontario. Both actions proposed a national class and related to the secondary sales market. These two claims were eventually consolidated into one by court order, which proposed a national class and pleaded conspiracy.
The defendants argued in an interim application on the basis that the action should be stayed in favour of a multijurisdictional class action brought in Saskatchewan.
The court found that pursuant to the common law, it had the authority to stay duplicative proceedings where the duplication is abusive. The court found this authority was also grounded in two provincial statutes: the Law and Equity Act,[6] and the provincial Class Proceedings Act,[7] the latter enabling the court to stay class proceedings at any time on terms the judge considers appropriate.
Echoing many of the concerns discussed above, the court found that duplicative proceedings were not judicially economical and rife with problems:
In the case of multiple class actions, there is often no useful or legitimate purpose served by permitting two or more identical actions covering the same class members to proceed in different jurisdictions. Indeed, there is the potential for much mischief, such as the risk of inconsistent decisions, waste of judicial and court resources, duplication of work by counsel, and the possibility of “forum shopping” by counsel.[8]
The court determined that finding the B.C. action was substantively similar to the Saskatchewan action would favour a stay but is not determinative. Rather, other factors need to be considered to inform an analysis of any “legitimate purpose” in permitting the B.C. action to continue.
Ultimately, the court declined to stay the proceedings, providing four reasons: (1)It was unclear that the B.C. class was subsumed within the Saskatchewan class, or that there is even significant overlap between the two classes; (2) There were significant differences in the causes of action, clearly evident from the pleadings, which make it completely inappropriate to defer to the Saskatchewan action; (3)There may be relief available to the B.C. class through the B.C. action, pursuant to the BPCPA, that is not available to them in Saskatchewan, at least as that claim is presently framed; and (4)It would be inappropriate to decide the stay question at this preliminary stage of the litigation. The appropriate time to decide the issue is the certification motion, when all parties can be heard, and full arguments can be made on the broader interests of justice.[9]
Conclusion:
Thus, the current state of the law in B.C. indicates that it will be very difficult to succeed on an interim application to dismiss class proceedings on the basis of abuse of process. Only those cases where there is clear and unequivocal overlap of the class members might find success. However, even then, the court will likely be reluctant to make that determination on an interim application as opposed to the certification motion, where a more fulsome evidentiary record and arguments are available. That said, the obvious benefit to obtaining a dismissal at such an early stage will likely continue to prompt these types of interim motions.
If you have any questions, please contact David McKnight or Hollis Bromley.
[1] Kowalyshyn v Valeant Pharmaceuticals International Inc, 2016 ONSC 3819 at para 237 [Valeant].
[3] Asquith v George Weston Limited, 2018 BCSC 1557 at paras 76-77.
[5] Gomel v Ticketmaster, 2019 BCSC 2178
[7] RSBC 1996 c 50 [“CPA”]
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