Canada: Confidential Individual Settlements Lead To Refusal Of Class Action Discontinuance In Québec
Litigation and Dispute Resolution Bulletin

In 2017, proposed class actions concerning allegedly defective hernia mesh were brought against Johnson & Johnson and other manufacturers in British Columbia, Saskatchewan, Ontario and Québec. In January 2018, the Superior Court of Québec agreed to stay the Québec class action in favour of the class action filed in Ontario.¹

Further to the suspension, Plaintiffs' lawyers from the four provinces and the manufacturers' lawyers attempted to settle the class actions without success. However, discussions did lead to a series of confidential individual settlements with 52 class members across the country, which provided for a negotiated confidential global settlement sum. As a condition of these individual settlements, the plaintiffs in the various class actions agreed that they would seek the permission of the provincial courts, where required, to discontinue the proposed class actions.

Under the terms of the agreements, the defendants agreed to attempt to settle the claims of other claimants, and to do this during a period of 180 days from the beginning of the judgment granting the discontinuance of the class actions.

Motions to Discontinue the Class Actions

In both British Columbia or Saskatchewan, there is no requirement for court approval of a discontinuance of a class action. In Ontario, the Superior Court of Justice authorized the requested discontinuance.² That left only Québec.

Evidently, both plaintiffs and the defendants agreed with the proposed discontinuance. The parties relied on the case law under article 585 of the Code of Civil Procedure³, which provides that a discontinuance should be allowed if it does not prejudice the interests of the putative class members and if it does not affect the integrity of the judicial system.

Intervention of the Fonds d'aide aux actions collectives

The Fonds d'aide aux actions collectives ("FAAC"), the publicly funded class action assistance fund, argued that the motion before the Court should not be granted as the "discontinuance" in question was not in reality a discontinuance but rather a settlement or a transaction that should be governed by the far more complex rules and requirements, including detailed notices to class members, governing a class action settlement, including allowing it to potentially benefit from funding depending on the terms of the settlement which were not disclosed.

The Superior Court Ruling

The Superior Court agreed with the FAAC and refused to authorize the discontinuance.⁴

In essence, the Court ruled that the individuals settled for a sum of money and that the manufacturers had obtained a release, the essential elements of a transaction pursuant to Québec civil law. Moreover, the parties failed to argue or convince the Court that there the motion for authorization to institute a class action was futile and should no longer go ahead. Importantly, this was not a case where the entirety of the claims were satisfied.

And although 3,100 putative class members had come forward, the Court ruled that there was no evidence that notices or advertisements on social media or elsewhere reached potential class members. It was argued that articles and bulletins were published, but the Court held that this was not sufficient. The Court also disagreed with the precedents that the parties relied upon, noting that they had never been cited.

The parties submitted that the publication of a notice of discontinuance was sufficient, but the Court disagreed, finding that there should be an attempt to reach the class members before the notice of discontinuance. The parties argued that the individuals who would manifest themselves after the publication of the notices could either settle with the manufacturers or file a new motion for authorization to institute a class action. The Court was not convinced, noting that this argument was "absurd."

Lastly, the Court held that the confidential character of the individual settlements, the details of which were not disclosed, was problematic by itself.

The Court thus decided that the discontinuances were in fact a transaction requiring court approval and the discontinuance was refused. The Court added and suggested that the parties could come back before the Court for another attempt at a discontinuance if further evidence or arguments could support such a request.

For now, it appears plaintiff did not heed the Court's suggestion, choosing instead to seek leave to appeal the Superior Court's decision.

Conclusion

This appeal will be closely watched across the country. Should the Superior Court's decision stand, it will no doubt raise important considerations and concerns for parties seeking to settle and dispose of individual claims covered by proposed class actions filed across Canada. Indeed, the risk that a discontinuance may be refused by the courts in Québec will likely deter further initiatives to settle individual claims in exchange for a release where the settlement is conditional on the discontinuance of related class actions across the country, and specifically in Québec. It would appear that the finality of claims required by settling defendants cannot be guaranteed where such agreements are reached, at least for now.

Footnotes

1. 2017 QCCS 6264.

2. Copland v. Johnson & Johnson Inc., 2022 ONSC 4595.

3. Article 585 of the Code of Civil Procedure reads as follows:

585. The representative plaintiff must have the authorization of the court to amend a pleading, to discontinue the application, to withdraw a pleading or to renounce rights arising from a judgment. The court may impose any conditions it considers necessary to protect the rights of the class members.

An admission by the representative plaintiff is binding on the class members unless the court considers that the admission causes them prejudice.

4. 2022 QCCS 4565

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