A recent motion decision out of the Ontario Superior Court of
Justice confirms that once a class member has opted out of a class,
there are very limited opportunities for that class member to opt
back in.
The motion was brought in the case of Cannon v. Funds for
Canada Foundation1 by four class members (the
"Moving Parties") who wished to "opt back in"
to a class proceeding after class counsel achieved a multi-million
dollar settlement with some of the defendants. The motion was
dismissed, with costs, by Justice Belobaba on April 22, 2014.
The court dismissed the motion to opt back into the class because
(1) there was no evidence of any misinformation or improper conduct
by class members; and (2) the evidence submitted by the Moving
Parties was not believable and was irrelevant. In a telling
observation from the introduction to his written reasons, Justice
Belobaba noted that "opting out does not mean 'wait and
see.' "
Background
The class action in this case was brought on behalf of donors to
an alleged charitable donation tax shelter scam (the
"Donors") and certified in early 2012. The defendants to
the class action brought third party claims against the sales
people or "distributors" who sold the charitable donation
packages to the donors (the "Distributors"). Some of the
Donors were also Distributors, and accordingly, were class members
(the "Donor-Distributors").
The Moving Parties were four Donor-Distributors who had
voluntarily opted out of the class action. They filed a motion to
opt back in after class counsel achieved a multi-million dollar
settlement and the defendants' third party claim against the
Distributors was stayed.
The Court's Analysis
No Evidence of Misinformation or Misconduct
In its 2013 decision in 1250264 Ontario Inc. v. Pet Valu
Canada Inc., the Ontario Court of Appeal established that
while invalidating opt-outs was within the court's discretion,
that discretion should be exercised in line with the principle that
class members "ought to be free to exercise their right to
participate in or abstain from [a] class action on an informed
voluntary basis, free from undue influence."2
Cassels Brock acted as counsel for the successful franchisor on
this motion (further details on the Pet Valu decision can be found
here).
In the Cannon case, Justice Belobaba applied this principle from
the Pet Valu case and distilled it in his statement that "to
re-open and invalidate a voluntary opt-out, the court must find
evidence of misinformation or misconduct."
Justice Belobaba concluded that no evidence existed to suggest
that the Moving Parties were misinformed about the class proceeding
or the opt-out procedure, or were coerced, threatened or
intimidated. Furthermore, the Moving Parties were not victims of
undue influence and there was no suggestion that they did not see,
read or understand the certification notice and the opt-out
procedure.
Moving Parties' Explanation for Confusion was not Believable and was Irrelevant
The Moving Parties claimed that their decision to opt out of the
class action was a result of confusion and concern about the third
party claim. Justice Belobaba found that the evidence contradicted
that argument. For instance, one of the Moving Parties was a vocal
opponent of the class action. Also, each of the Moving Parties had
"every opportunity to obtain legal advice."
Furthermore, according to Justice Belobaba, the Moving
Parties' rationale was irrelevant because "the absence of
independent legal advice is not and should not become a basis for
invalidating an otherwise legitimate opt-out by a responsible
adult." In this regard, the Moving Parties, as class members,
always had the opportunity to discuss the case with class counsel,
as identified on the notice to the class.
Closing Thoughts
The Cannon decision underscores the importance the court places
on maintaining the integrity and finality of class action opt-outs
and further clarifies the very limited basis upon which it will
exercise its supervisory discretion to invalidate a voluntary
opt-out.
Class action defendants can be assured that any attempts by opted
out class members to re-insert themselves in the class proceeding
process will face serious challenges in Ontario courts.
1 Cannon v. Funds for Canada Foundation, 2014 ONSC 2259
2 [2013] O.J. No. 2012 (ONCA)
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