Justice Perell's decision in Fantl v. ivari, teaches class action defendants an important lesson in being careful what they wish for. In a rare decision, he ordered that a defendant contribute the majority of the costs of providing potential class members with notice of certification.
Background
When a class action is certified by a court, efforts must be made to notify potential class members of the decision so that they are able to exercise their right to opt-out of the class. Notice is usually provided by newspaper publication, advertisements and dedicated website, among other things.
Typically, the successful plaintiff bears the financial costs of providing notice of certification (see Quinte v. Eastwood Mall Inc., 2014 ONSC 249). However, defendants have an interest in ensuring that the form of the notice and the plan for its distribution are sufficiently robust to ensure they will constitute a binding issue estoppel—which bars future claims by class members who did not opt-out.
The Defendant in Fantl v. ivari was concerned that the plan of notice would not reach all class members and challenged the notice plan on the basis that it was not robust enough to create binding issue estoppels should the class action be resolved by settlement or judgment. ivari proposed a more expensive direct notice plan and argued that the plaintiff should be the one to pay for it. The plaintiff defended its proposed notice plan as satisfactory, but did not oppose ivari's notice plan provided that ivari was footing the bill.
The Decision
Justice Perell's decision took place in relatively uncommon procedural circumstances. The plaintiff's class action had been commenced in 2003 and alleged i) that the defendant's insurance contract investments underperformed and ii) that management fees on those investments were overcharged. The management fee allegations were settled in 2009. The remainder of the class action continued to a certification hearing and was certified by Justice Perell in 2013.
Five years after granting certification, Justice Perell was called on to resolve the parties' dispute on the form of notice of certification. Justice Perell noted the general rule that plaintiffs should bear the cost of notice of certification but also emphasized that the costs of notice is always a matter of discretion. He quoted Justice Nordheimer's statement from Markle v. Toronto (City), [2004] O.J. No. 3024 (S.C.):
"5. In terms of the costs of notice to the class members and recognizing that this is always a matter of discretion, the normal order is that the representative plaintiff has to bear the costs of that notice. I say that is the normal order because it is the representative plaintiff that seeks certification and one of the consequences of certification is the requirement under section 17 of the Act that notice be given to the class members. [...] The burden of notice therefore clearly falls on the representative plaintiff. This general rule is not without possible exceptions. For example, if a defendant admitted liability and the class proceeding was certified just to determine the relief to which the class members were entitled, then that might be a case where the defendant would be ordered to bear the cost of the notice programme. There may be other situations which would warrant a departure from the general rule. This case is not one of those exceptions, however. I would also note that the class is estimated at approximately 600 potential members. If notice were to be given by mail to each member of the class, it would not then represent a significant expense for the representative plaintiffs."
Justice Perell noted that the defendant's request took place in the context where the first 'half' of the class action, the management overcharge claim, had been settled in 2009 and the notice of that settlement included direct mail notices to policy-holders along with newspaper publications, internet notices and emails to distributors and key advisors. About 1.5% percent of potential class members opted out of the management overcharge claim. In constructing its plan of notice of certification in respect to underperformance claim, which was now certified but not settled, the plaintiff wanted to take advantage of the earlier notice by directly mailing notice only to: those who had opted-out of the management fee settlement, the defendant's professional advisor network, and anyone who had previously contacted class counsel about the class action.
Although the plan of notice for the underperformance claim did not follow the same plan of distribution as the settled management fee overcharge claim, Justice Perell held that there was not necessarily a good reason for these two notices to be symmetrical. In his view, generally speaking, a robust notice plan alerting potential class members of the right to opt-out following certification "is far, far less important than a robust notice plan where there is a settlement fund to be distributed".
In conclusion, Justice Perell held that there was substance to the defendant's position that the notice plan needed to be more robust in order to protect the defendant from future claims. However, he exercised his discretion to order that 2/3 of the costs of notice be paid by the defendant. The defendant was, after-all, the predominant beneficiary of the robust notice plan.
Justice Perell's decision is a lesson in the discretionary powers of the court to determine who pays for notice of procedural developments in a class action. In some cases it may be in the interest of defendants to contest the notice plan. However, defendants to all types of class actions should be cautioned that in some circumstances the court may require them to write the cheque for improvements that they seek.
About Norton Rose Fulbright Canada LLP
Norton Rose Fulbright is a global law firm. We provide the world's preeminent corporations and financial institutions with a full business law service. We have 3800 lawyers and other legal staff based in more than 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.
Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.
Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.
For more information about Norton Rose Fulbright, see nortonrosefulbright.com/legal-notices.
Law around the world
nortonrosefulbright.com
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.
