Canada: Settling Class Actions - Some Strategic Issues For Pension Plan Sponsors And Administrators

This article was originally published in Blakes Bulletin on Pension & Benefits - January 2004

Since the late 1990s, there has been a significant increase in the number of "class actions" in respect of pension and benefit plans. This trend is attributable to the nature of many pension and benefit claims, increasing sophistication of plan members and their counsel with respect to the claims that may be raised with respect to plans and the possibility of significant financial rewards for successful plaintiffs and their lawyers. This article focuses on class actions under Ontario law, but the principles discussed will generally be applicable to class actions in other Canadian jurisdictions.

Mr. Justice Warren Winkler, in a recent paper entitled "Pensions, Benefits and the Canadian Class Action Experience", noted that: "pension and benefit matters are generally well-suited to be handled as class actions … As counsel and the courts gain experience in this area, it appears that pension and benefit claims, that previously would never have been commenced, will proceed as class actions before the courts."

Where an employer/administrator has a strong legal case, it may be prepared to defend a class action on its merits. However, in many instances, even where the employer/administrator has a strong case, there may still be concerns relating to legal costs and time lost by the employer/administrator in connection with the litigation, as well as concerns relating to the effect of the class action on the reputation of the employer/administrator among employees who are not involved in the class action, clients and the public at large. For these reasons, an employer/administrator may consider the possibility of a settlement.

Settlements

Class action settlements will be affected by the terms of the applicable class action legislation. Under the Ontario Class Proceedings Act, 1992, the provisions that will be most relevant to a settlement will often be the provisions governing certification, i.e., the process by which a class action is initiated, as well as the provisions that are expressly directed towards class action settlements.

Regarding certification, an action can only be a class action if it is certified as such by the court. To obtain certification, the plaintiffs in the proposed action must be able to demonstrate that:

one. There is a sustainable cause of action;

two. Such cause of action is shared by an identifiable class of two or more persons;

three. There are common (but not necessarily identical) issues of fact or law among the proposed class members;

four. A class action is the preferable proceeding for resolving the common issues; and

five. The proposed class representatives adequately represent the interests of the class and have a workable litigation plan for the proceeding.

Assuming a class action is certified, any settlement of that class action must be approved by the court. A decision of the court approving a settlement binds all members of the class who have not chosen to opt out of the class action. In general, courts wish to encourage settlements. In the class action context, this means that courts will try to give effect to settlements that are fair and reasonable and in the best interests of the class as a whole, i.e., it is not necessary that every member of the class be treated equally. This is reflected in the 2002 Ontario Superior Court of Justice decision in Fraser v. Falconbridge.

Having regard to the statutory requirements for certification and settlement of class actions, employer/administrators should, among other things, take into account the following strategic considerations at an early stage in the class action process.

Should Certification Be Opposed?

If an early settlement is not anticipated, the employer/administrator may wish to oppose certification of the class action. Certification could be opposed on a number of grounds, including conflicts or diversity of interest among the various categories of plan members (e.g., pensioners, deferred vested members, active members). A class action may also not be the most effective means of bringing the actions (e.g., a simple application for declaratory relief might work just as well or, where a collective agreement is involved, arbitration may be the preferred approach). If the employer/administrator is successful, the class action cannot proceed.

On the other hand, opposing certification can be costly and in some cases may reduce the likelihood of a settlement if it causes class members to become more entrenched in their position. In addition, even if the employer/administrator is not successful, and the action is certified, class members may see settlement as preferable to a long and costly battle with a strong defendant.

Is The Class Definition Appropriate?

If a settlement can be reached, an employer/administrator will typically want the settlement to bind as many persons as possible who could be affected by the actions of the employer/administrator that led to the class action. Consequently, it will often be desirable for settlement purposes to define the class quite broadly (e.g., if class members’ claims relate to employer contribution holidays taken over many years, the employer may want the class to include everyone who was entitled to benefits under the plan at any time during the period in which the contribution holidays were taken plus their spouses and beneficiaries, whether or not they are currently entitled to benefits under the plan).

However, where the claims are such that the quantum of potential employer/administrator liability increases with each new member added to the class (e.g., where a claim is made with respect to the improper calculation of individual benefit entitlements), a broad class definition will increase the employer/administrator’s potential liability.

Further, if the class is defined too broadly, such that there are material conflicts between different members of the class, the court may decline to certify the action and allow the settlement to proceed unless the class is limited to a more homogeneous group.

What Level Of Opt Outs Will Be Acceptable?

Class action legislation permits persons who satisfy the criteria for class membership to opt out of the class and not be bound by a settlement. The employer/administrator could be subject to individual claims by the opt outs and thus may want to reserve the right to withdraw from the settlement if there are a large number of opt outs, or the opt outs’ share of the claims in the class action is relative to the share of the other class members.

Perfecting The Settlement—Are Other Court Proceedings Required?

It will also be necessary to determine whether there are any other court proceedings required to "perfect" the settlement. For example, in the case of a plan governed by a trust, it may be necessary to vary the trust in order to ensure that persons who become beneficiaries of the plan after the settlement of the class action (and thus are not class members), cannot raise the same claims as are dealt with in the settlement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
26 Oct 2018, Other, Vancouver, Canada

Cybersecurity, including data privacy and security obligations, has become a critical chapter in every company’s risk management playbook.

30 Oct 2018, Other, Toronto, Canada

Please join us for discussions on recent updates and legal developments in pension and employee benefits as well as employment law issues.

12 Nov 2018, Other, Toronto, Canada

Stories aren’t falsehoods. Stories are the root of all effective human communications: they motivate, animate and clarify. If you aren’t telling stories, you probably aren’t getting your point across.

 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions