CANADA: Class actions rising
Posted: April 27th, 2009 - 10:40am
Within days of the initial reports of a listeria outbreak at a Maple Leafs Foods plant last summer, the company was facing its first class-action lawsuit. It was followed by 13 more lawsuits on behalf of plaintiffs from every province in the country.
Four months later, Maple Leaf agreed to pay out at least $25-million in an agreement with a consortium of nine law firms. It was an unusually fast resolution, both on the side of the corporate defendant and of the many law firms agreeing to work together.
The deal should be finalized at the end of this month, after the final appeal period expires in Quebec, following approval in court proceedings in three separate provinces.
But if the speed of the Maple Leaf agreement was unusual, the settlement terms were not. The vast majority of claimaints will receive a small amount of money. A tiny fraction of those who sought redress will qualify for a substantial payment. And the greatest single beneficiaries are the lawyers involved.
While the big-payout, mass-claimant lawsuit has often been thought of as a U. S. phenomenon, there has been a jump in such class actions in Canada in the past decade. These types of settlements have some critics asking whether the model, which tends to direct smaller payouts to larger numbers of people, is the best way to address alleged corporate wrongdoing.
In the case of Maple Leaf Foods, the largest pool of money, $7.5-million, has been set aside for "level 1" claims. Only a declaration of consuming the product and of suffering short-term symptoms must be signed. No doctor's note or proof of purchase is required to receive $750. If more than 10,000 people sign up for this level of compensation, the $7.5-million will be divided equally.
While there is a maximum potential compensation of $120,000 for the estate of someone who died last year as a result of symptoms consistent with listeriosis, that is likely to involve fewer than 20 claims.
Meanwhile, the nine firms received court approval to share just over $3.1-million in legal fees and expenses.
They are eligible to seek more fees if there is a "residue" left over after all the claims have been paid out.
"This is what has evolved," said Bruce Cran, president of the Consumers' Association of Canada, about the class-action system that has developed in this country. "As for the best way, I do not think it is even close."
But the class-action route is more efficient than thousands of small legal actions, countered Ted Charney, whose law firm was involved in the Maple Leaf case. "Access to justice" is one of the fundamental principles, he said.
His view is shared by Erik Knutsen, a law professor at Queen's University in Kingston. "I don't know lawyers who would take a lawsuit for $750 in damages, or even individuals who would go to small-claims court for that amount," he said.
While class-action lawsuits have been around in the United States for more than 40 years, they are a relatively new phenomenon in Canada.
The Class Proceedings Act that became law in Ontario in 1992 set out the rules for these legal actions and it is only in the past five to 10 years that they have become commonplace across the country.