Canada: Managing Class Actions For Success Part 1: Blueprinting To Define And Achieve Success

Being named as a defendant in a class action is often one of the most significant (and traumatic) events an organization can face. Many defendants are quick to react, immediately deploying counsel to gear up for a hotly contested certification motion and issuing statements promising a vigorous defence. But is this the correct response? Perhaps, but how can one say a response is the right one if the company has not yet defined what it wants to achieve and how it plans to achieve it.

The defence of a class action is a project. It is a temporary endeavour to achieve a desired result. It has a beginning, it has an end, it has a scope, and it has resources. It has inputs and it has outputs. It will certainly involve people from different organizations and it may involve people in multiple locations. Applying project management principles can therefore help the defence of a class action by increasing predictability, managing costs and ultimately improving the chances of achieving success.

In the first of what will be a multi-part blog series discussing how principles of project management can be applied to the defence of a class action, we address the advantages of employing a clearly defined "blueprinting" phase at the outset of a class action to define and achieve success.

Defining Success

It is important at the outset of any class action to establish what success looks like. Is success receiving a vindicating judgment from the court? Protecting relationships with stakeholders in the class, such as customers, employees, franchisees or shareholders? Avoiding public findings of liability? Avoiding significant financial exposure? Minimizing impact on ongoing business activities? Success may have multiple dimensions: financial, reputational, organizational, to name but a few. Sophisticated parties know that "winning" is a possible definition of success, but it is not necessarily the only one.

Developing a Strategy

Once success is defined, a class action defendant should decide how best to achieve it by developing a strategy. It is self-evident that the defence of a class action is significantly different from other projects, such as building construction or software development, in that achieving success in class action litigation is at least in part contingent on the behaviour of at least two other independent parties: a decision-maker and an opponent. A strategy, then, is the chosen approach for achieving success, taking into account the potential behaviour of these other parties.

In the context of a class action, viable strategies for achieving success could include: attempting to settle, either before or after certification; attempting to defeat certification, in whole or in part; consenting to certification and seeking a favourable decision on the merits; or vigorously contesting certification and, even if certified (in whole or in part), defending the class action on the merits. These strategies are not necessarily mutually exclusive; a defendant could make a strong attempt to defeat certification while simultaneously pursuing settlement.

"Blueprinting" the Case

Success cannot be defined, and a strategy cannot be selected, in a vacuum. It is important to assess the case before defining success and developing a strategy.

To be clear, no sophisticated organization embarks on the defence of a class action without some preliminary assessment of its position. What we are describing is the combination of a number of different activities that may be undertaken at different times during a case and carrying them out at the outset of the case, as part of a single case assessment phase, which we call "blueprinting", with the goal of informing the definition of success and the selection of a strategy for the overall case. Without taking pause at the outset, it is easy for any organization to get caught up in the frenzy of the class action and find itself reacting to events as they happen, as opposed to controlling the litigation.

This blueprinting phase necessarily requires an investment of time, effort and money. Documents may need to be collected and reviewed, witnesses may need to be interviewed, experts may need to be consulted, legal issues may need to be researched, and legal fees and other costs may need to be estimated.

The assessment phase should therefore have clearly defined deliverables. These could include a formal legal opinion on the merits of the organization's position and/or the likelihood of defeating certification, witness statements from key witnesses, preliminary expert reports, a collection of key documents, a preliminary financial analysis of the company's potential exposure to damages, or an estimate of the legal and other costs of a certification motion and other steps in the litigation.

As they are being prepared at an early stage, these deliverables are likely to change or expand as the case evolves and new information becomes known. Sometimes the case to be met doesn't become clear until well after the class action has been commenced, and even then the case can change, amendments made, arguments recast. It is important to remember that the immediate purpose of these early stage deliverables is to help define success and develop a strategy. Keeping in mind this purpose, it is not necessary, and perhaps not advisable, to assess the case exhaustively. The scope of the deliverables should therefore be clearly defined at the outset so that any limitations or qualifications are understood and accepted by both counsel and client and there is alignment on the anticipated costs of meeting the deliverables.

Putting It Together

The deliverables created through the blueprinting phase are valuable inputs into the definition of success and development of a strategy. For example, the discovery of incautiously worded e-mails, a determination that defending the case will require the involvement of multiple executives, or the need to rely on evidence from an individual who is hostile or a poor witness, may all militate in favour of defining success as early resolution. Alternatively, the identification of compelling documents supporting the defence or favourable case law on an important point of law could be used to persuade class counsel to discontinue or settle at an early stage, thus helping with strategy selection.

Besides helping to define success and develop a strategy, the blueprinting phase may also serve a number of other important business purposes by:

  • facilitating reporting to senior executives and/or boards of directors;
  • aligning internal legal and business teams on their respective understandings of the case and the work required to defend it;
  • identifying cost-saving measures that can be implemented at the outset, such as allocating responsibilities for certain tasks to the internal legal group, and
  • facilitating more accurate and precise budgeting of future stages of the litigation, such as certification, discovery, and trial, thus creating opportunities for alternative fee arrangements or other value-based billing options.

The blueprinting phase serves legal purposes as well by:

  • helping the company comply with its obligation to preserve potentially relevant data;
  • facilitating identification of areas where expert evidence may be required;
  • capturing the evidence of key witnesses before memories fade or employees depart;
  • assisting in delivering a formal statement of defence prior to certification, which is increasingly required by case management judges, particularly in Ontario;
  • assessing co-defendant or third party responsibly/liability; and
  • helping with future discovery planning, which is a requirement in Ontario.

Blueprinting and Costs

Spending time and money on blueprinting a case is not necessarily an incremental cost; it largely shifts forward certain legal spend that would otherwise be incurred during the certification motion, pleadings, discovery or before trial. Case assessment is also very suitable for an alternative fee arrangement, such as a fixed fee or blended rate, because it has a clear scope, a clear budget and a clear deliverable.

Blueprinting may also help to avoid legal costs. For example, if it leads to the conclusion that the probability of certification is high, that may favour a strategy of negotiating certification on consent and avoiding the cost of vigorous but ultimately unsuccessful opposition to the certification motion. If it reveals a weak case or other costs to the business from ongoing litigation, that may favour a strategy of pursuing early settlement to avoid an adverse judgment or the other costs.

While an important first step, blueprinting should not end at the beginning of the case. Class counsel may change their theories, the legal landscape may evolve, key witnesses may leave the company, and new business exigencies may arise. Whatever happens, however, a well-executed assessment at the outset of a class action positions the defendant to be agile in response to future developments.

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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