Canada: Class Actions: Opting Out Does Not Mean "Wait And See"

Last Updated: April 25 2014
Article by Emily Larose, Derek Ronde and Glenn Zakaib

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.' "


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)

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.

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