Companies doing business in Canada, and especially franchisors,
should review two recent decisions of the Ontario Superior Court of
Justice (Court) that considered the risks of communications to
members of a proposed or certified class: if such communications
persuade people not to participate in the lawsuit, courts have to
consider whether to step in to protect the class size and cohesion,
so that defendants do not weaken the economic viability of, and
possibly "dismember," the class action.
While the underlying principles of the decisions are
similar — protecting class members from
misinformation about the class action (whether from the defendant
or otherwise) — the fact situations and outcomes are
different in the two cases.
In VIA Rail Canada1, the defendants had
written prior to certification to some of the proposed class of
passengers involved in a derailment, and three passengers agreed to
settle. The plaintiffs asked the Court to set aside those
The Court found the defendants' letters to be acceptable.
While it could issue an "extraordinary" order to protect
the putative class members (persons not in a direct relationship,
prior to certification, with class counsel), it concluded that the
settlement offers did not threaten the integrity of the class
proceeding, as the letters referenced the lawsuit and the
individual's right to independent legal advice, provided
contact information for class counsel and were also sent to class
counsel. In the absence of evidence of coercion or other improper
behaviour, the settlements made by the defendants were
In Pet Valu Canada2, however, the Court
concluded that an "extraordinary" measure of judicial
intervention was required. There, the defendant franchisor, after
certification, had benefited from the successful efforts of a group
of franchisees who were opposed to the lawsuit to convince other
franchisees to opt-out of the class action. The plaintiff objected,
and the Court agreed to set aside certain opt-out notices because
the process had been "irreparably impaired" by those
The objecting franchisees, acting independently of the
defendant, had used a telephone blitz and a website to create a
noticeable spike in the delivery of opt-out forms. The Court found
the website to be exaggerated and misleading, and part of an
"unabashed attempt to destroy the class action." The
Court concluded that the campaign made no attempt to outline the
potential financial benefits of the lawsuit and that it exploited
the vulnerable position of the franchisees "by asking for an
electronic show of hands" on the website to put pressure on
the class members to opt-out. The Court concluded that the opt-out
process was subverted and declared certain of the opt-out forms to
The Bottom Line
Accordingly, any plan by a defendant or any third party to reach
out to class members before or after certification requires careful
consideration. The court is ready to step in to ensure that class
actions unfold in a fair manner, and while defendants have the
right in some circumstances to communicate with class members, the
court will act decisively to protect those persons from coercive
and misleading communications that threaten the integrity of class
proceedings in Canada.
1Lundy v. VIA Rail Canada
Inc., 2012 ONSC 4152, S.C.J.
21250264 Ontario Inc. v. Pet Valu Canada
Inc., 2012 ONSC 4317
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about your specific circumstances.
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