Canada: The Devil Is In The Detail: The Importance Of Drafting In Enforcing A Class Action Settlement

A recent decision from Manitoba, Meeking v The Cash Store Inc., highlights both the potential and the peril of national class action settlements and the importance of carefully drafting notices to class members. (A copy of the decision can be accessed here.)

In Meeking, the defendants – which owned the "payday" loan chains Instaloans and The Cash Store – brought a motion to enforce a multi-jurisdictional class action settlement that had previously been negotiated and approved in Ontario by the Ontario Superior Court.

The motion was filed after a Manitoba resident brought a new proposed class action that was argued to involve the same allegations and claims as those at issue in the Ontario settlement. The Manitoba resident argued that the portion of the Ontario settlement and judgment releasing the defendants from liability for loans made in Manitoba to residents of Manitoba should not be enforced because the Ontario court had no jurisdiction with respect to those transactions.

Requirements for enforcement

In considering the motion, the Manitoba court referred to the Supreme Court of Canada's 2009 decision in Canada Post Corp. v Lepine, which had refused to recognize an Ontario class action judgment in Quebec. Based on the principles set out in that case, the Manitoba Queen's Bench found that the Ontario class action settlement would only be enforceable if: (a) jurisdiction was properly assumed by the Ontario court; (2) there was no common law or statutory rule in Manitoba precluding enforcement of the judgment; and (3) the principles of order and fairness were met in so far as Manitoba class members are concerned.

Application to the facts

The Manitoba court concluded that the Ontario court could and did properly assume jurisdiction because the defendants to the action were carrying on business in Ontario. In addition, Ontario was found to be a reasonable place for the action that led to the settlement to be heard in that the nature of the common issues was such that they could be conveniently and fairly determined by the Ontario court on behalf of all class members, including residents of Manitoba. Further, there was no rule in Manitoba that precluded enforcing the judgment, noting that Manitoba's own class action procedure was similar to Ontario and allowed national class actions.

The court noted as well that there is nothing inherently unfair in the court of one province making an order affecting class members in another province so long as the non-resident members receive adequate notice and an opportunity to opt out.

Notice insufficient

However, after examining the process by which Manitoba class members had been notified – which included mailing the settlement notice to all class members, posting the notice in all stores and issuing a press release announcing the settlement – the Manitoba court found that the principles of order and fairness had only been met with respect to one of the two payday loan stores in question. This was because even though the body of the settlement notice itself had made clear that the settlement applied to both Instaloans and The Cash Store, the heading of the notice had only referred to The Cash Store.

The Manitoba court found that the notice was therefore insufficient for Instaloans customers because they may not have realized that the notice affected them. This decision was made even though the defendants had presented evidence that more Instaloans customers had taken up the settlement than The Cash Store customers. The Manitoba Court also found that the Ontario settlement was only enforceable for certain types of loans made by both chains, as other loan types had not been covered in the language of the Ontario settlement.

Lessons learned

This decision demonstrates the importance of a carefully crafted class action settlement and notice program. It also suggests that courts outside of the jurisdiction within which settlement has been approved will closely scrutinize the terms of the settlement to ensure there is order and fairness for class members within their jurisdiction.

Parties who have reached a settlement of a class action must be extremely diligent in ensuring the terms of the settlement and the form of the notice are accurate, fair and have reached all potential class members. Failure to do so may preclude a supposedly multi-jurisdictional settlement from being enforced, although this case does indicate that in the right circumstances multi-jurisdictional class action settlements will be enforced in other provinces.

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