The Ontario Court of Appeal recently dealt with whether a class member who failed to opt out of a class action can still pursue its rights outside the class action. In 3113736 Canada Ltd. v Cozy Corner Bedding Inc., 2020 ONCA 235 (“Cozy Corner”), the Court of Appeal elaborates on the relationship between “adequate” notice and “actual” notice in the context of an opt out deadline, and affirms the principle that actual notice is not required in matters were adequate notice has been given. However, the significance of Cozy Corner transcends issues of actual versus adequate notice, and leaves open the question of when, or whether a class member who does not wish to be bound by a class action can bring a motion to opt out of the class proceeding on the basis of lack of notice, and the test to be applied in those circumstances.
Background
The matter arose over the course of a business relationship between 3113736 Canada Ltd (“the numbered company”), a manufacturer and distributer of polyurethane foam products, and Cozy Corner Bedding (“Cozy”), a long-standing customer of the numbered company. Between August 5, 2011 and January 27, 2012, Cozy purchased foam products totalling $199,003.01, and received the products in good form. Despite receiving the products in good form, Cozy had not paid $190,882.00 of the total purchase price. On April 8, 2013, the numbered company sent a demand for payment. When Cozy did not pay the outstanding amount, the numbered company commenced an action.
In defending the action, Cozy alleged there were other factors that impacted its payment obligations to the numbered company. Specifically, Cozy concluded that the numbered company had engaged in an illegal price fixing scheme, and that as result of the price fixing, Cozy had chronically overpaid the numbered company for large quantities of foam products that it had purchased from them over the course of their 11-year business relationship. By counterclaim, Cozy pleaded that it had overpaid for the foam products by at least 10% by reason of inflated pricing, and that it was thereby entitled to recover $410,000.00 in set-off and/or counterclaim.
The numbered company brought a motion to dismiss Cozy’s counterclaim on the basis that the issues had already been resolved via a class action settlement, and that because Cozy had not opted out of the class action, Cozy was bound by the terms of the settlement, including a release of any claims against the numbered company. On this point, Cozy argued that it had not received actual notice of the class proceeding or its right to opt out and that, as such, its counterclaim for set-off should not be barred. Although the numbered company argued other bases for dismissal of the counterclaim, this case comment will focus only on issues and arguments relating to Cozy’s position regarding notice of the class action.[1]
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