Authors: Jeremy Devereux and Ted Brook, Norton Rose Fulbright Canada LLP[i]
It can be difficult to identify the boundaries of permissible pre-certification communication by a defendant with putative class members. This ambiguity can give rise to disputes between counsel regarding what is appropriate, what crosses the line, and whether a defendant should obtain court approval before communicating with putative class members.[ii]
In Del Giudice v Thompson, 2021 ONSC 2206, Perell J. provided valuable guidance to the class action bar regarding pre-certification communications with putative class members. In this article, we review how the law in Ontario has developed and suggest that this decision—and in particular, Perell J.’s postface—offers a promising path forward.
Development of the Case Law
It is well-established in Ontario that, although there is no general prohibition against defendants communicating with putative class members before certification, the court will exercise its authority under s. 12 of the Class Proceedings Act, 1992 to intervene where a defendant’s communication amounts to misinformation, intimidation, or coercion, or is otherwise made for an improper purpose aimed at undermining the class action process.[iii]
In 1176560 Ontario Ltd. v Great Atlantic & Pacific Co., 2002 CanLII 6199, for example, the court found that the defendant had used its position as franchisor improperly to monitor payments being made to plaintiffs’ counsel and increase rent on franchisees which refused to execute a release regarding the claims raised in the proposed class action.[iv] The court concluded that the defendant’s conduct and communications had a “chilling effect” on the putative class members’ attempts to assert their legal rights or obtain the information needed to make an informed decision regarding their claims.[v] In a less extreme case, Lewis v Shell, 2000 CanLII 22379, the court held that a settlement notice issued by the defendant was unfair because it did not ensure that the putative class members were acutely aware of all their rights in the class proceeding before settling.[vi] The court emphasized that “the advantage of a transparent process that ensures greater fairness to claimants through full disclosure outweighs the cost of minimal intrusion upon Shell’s otherwise freedom of action.”[vii]
In Lundy v Via Rail, 2012 ONSC 4152,[viii] the defendants in a proposed class action communicated with, and made settlement offers to, several putative class members, who had been passengers on a train that had derailed on route to Toronto. Although the defendants did not know it, some putative class members already had individual lawyer-and-client relationships with proposed class counsel. The court reviewed the existing case law and summarized the key principles regarding pre-certification communication as follows:
- not every communication to members of the class needs to receive court approval;[ix]
- if there is evidence of inappropriate behaviour, the court can exercise its discretion and impose conditions on communications to ensure the integrity of the class proceeding;[x]
- an order restricting communication by the defendant to class members is extraordinary;[xi]
- where there is sufficient evidence of inappropriate behaviour, the court can impose conditions on communications between the parties and putative class members in order to ensure the integrity of the class proceeding;[xii] and
- defendants may not make misleading statements to putative class members or try to convince them to act adversely to their interests.[xiii]
Ultimately, the court in Lundy found that there was no evidence that the defendants had acted inappropriately and no evidence that would provide a factual basis to set aside the releases that had been obtained by the defendants from putative class members who accepted the defendants’ offer. The court ordered that the defendants could complete the settlements for which releases had been signed, and continue communicating with the putative class members so long as the plaintiff was provided with a copy of the correspondence seven days before distribution and there were no communications to the putative class members known to have retained individual counsel.[xiv]
In de Muelenaere v Great Gulf Homes, 2015 ONSC 7442, the court again addressed the scope of pre-certification communication in the context of settlement offers. The defendant in that case made a settlement offer to certain putative class members who had contacted the defendant directly. The settlement offer did not reference the proposed class action and the defendant did not inform plaintiff’s counsel of these communications. The plaintiff brought a motion seeking to have releases signed by 24 putative class members rescinded by the court.
The court in Great Gulf Homes dismissed the plaintiff’s motion, finding that there did not appear to be any breach of the guidelines established by the case law or the Rules of Professional Conduct. The court acknowledged that the issue of regulating pre-certification communications with putative class members is complicated, particularly because it involves not only the provisions of the applicable class proceedings legislation but also the ethical and professional duties of lawyers. The court reviewed Lundy and summarized the applicable legal framework relating to pre-certification communication as follows: before certification, a defendant may communicate with the putative class members, but with the exception that “the defendant may not communicate in a manner that would visit an injustice on the putative class members or would otherwise undermine the integrity of the class proceeding by disparaging the plaintiff or by intimidating the putative class members to not support the class proceeding.”[xv]
Despite these summaries of the applicable governing principles, however, the inevitably fact-specific nature of such decisions—combined with the sensitivity and importance of the issues—has continued to cause uncertainty regarding the scope of permissible pre-certification communication. Decisions such as Great Atlantic & Pacific and Lewis may provide specific examples of what cannot be done, and decisions such as Lundy and Great Gulf Homes may provide specific examples of what can be done, particularly with respect to settlement offers, but reasonable disagreements between counsel arising from the application of these general principles to a particular case continue to persist, resulting in pre-certification motions and court intervention.
This uncertainty regarding permissible pre-certification communication is especially difficult to navigate in situations where a defendant has an ongoing relationship with the putative class members. As the court noted in Great Gulf Homes, depending upon the circumstances of the particular case, “the defendant may have legitimate and proper reasons to communicate with the putative class members” because of its ongoing relationship with the proposed class.[xvi]
Background to Del Giudice
Del Giudice is an ongoing, proposed data breach class action relating to a March 2019 computer hack involving the personal information of an estimated 90 million individuals, including an estimated 6 million Canadians. On July 29, 2019, prior to the commencement of the proposed class action on August 6, 2019, the defendant in Del Giudice notified its customers of the data breach. The notice provided the customers with information about the data breach, including details about the personal and confidential information that may have been compromised, and information about the defendant’s proposal to provide free credit monitoring and identity theft insurance for all impacted individuals.
On February 24, 2021, counsel for the defendant advised plaintiffs’ counsel that it had discovered an additional 51,000 Canadian customers whose information may have been compromised in the 2019 hack. These putative class members had not received the original breach notice. The defendant indicated that it intended to provide a similar notice to this group as well. The notice would provide information on the data breach, the personal and confidential information that may have been compromised, the steps that the defendant had taken since the breach, and that a proposed class action had been commenced but not yet certified.[xvii]
In response to the defendant’s proposed notice, the plaintiffs brought a motion for an injunction prohibiting any and all communication from the defendants to the putative class members without either an order of the court or consent of putative class counsel. The plaintiffs also requested a direction that any communication to the putative class members from the defendants include an announcement that a class proceeding has been commenced and a direction to their website.[xviii]
Analysis in Del Giudice
The plaintiffs’ motion was dismissed. Justice Perell held that there was no reason for the court to intervene in the defendants’ communication with the putative class members. The impugned notice did not impact the integrity of the proposed class proceeding and it did not compromise the putative class members’ right to participate or not participate in the class proceeding.[xix]
Justice Perell also rejected the plaintiffs’ unarticulated premise that a court must approach pre-certification communications from the perspective of a “protector” of the putative class members.[xx] Although the court is responsible for protecting class members’ rights during the settlement/fee approval stage, Perell J. emphasized that the litigation of a class proceeding remains otherwise an adversarial process that requires an impartial, even-handed judge who does not take sides. It is for class counsel to be the guardian and “avenging angel” for the class members. The court’s role, however, is to judge, not be a partisan.[xxi] Although the court has the jurisdiction to intervene, it has no duty to intervene, as suggested by the plaintiffs, but instead must be persuaded to do so based on the evidence.[xxii] Furthermore, Perell J. emphasized that oversight of compliance with the Personal Information Protection and Electronic Documents Act, including its requirements for notification to impacted individuals, is generally speaking a matter for the Privacy Commissioner and the Federal Court. It is not the role of a case management judge, Perell J. explained, “to be a compliance officer for the Privacy Commissioner”.[xxiii]
Guidance and Way Forward
In addition to Perell J.’s clarification of the role of the court with respect to pre-certification communication, the Del Giudice decision is also notable for its obiter dicta guidance regarding how counsel should manage pre-certification communication disputes in the future. Writing in a postface, Perell J. recommended that the following steps be taken by parties when engaging in pre-certification communications with putative class members:
- where a defendant intends to communicate with putative class members and the communication is not a part of their normal course of business or is a topic that is substantively significant to the class, then they should ask class counsel if there are any problems or objections to the notice;
- any objections should be voiced by class counsel, with the understanding that the court has a high threshold for intervening and supervising the communication;
- counsel for the defendant should then consider any comments and objections made by class counsel seriously;
- if there are still disagreements between the parties regarding the notice, then both should consider scheduling a case management conference to determine whether a motion is actually warranted to address the propriety of the notice;
- if a case management conference is not suggested by defence counsel then the defendant runs the risk that the plaintiff will move to have the court intervene at their expense; and
- neither side should use communications in an opportunistic or tactical way.[xxiv]
Key Takeaways from Del Giudice
The permissible scope of pre-certification communication by defendants can be a sensitive issue for counsel. In addition to clarifying the court’s necessarily impartial role with respect to this issue, Del Giudice offers helpful guidance regarding such disputes. In particular, Justice Perell’s six-point postface strikes a effective balance between the rights of defendants and the vulnerability of unrepresented, putative class members.
Pre-certification communication disputes will no doubt continue to arise in certain cases, and those that do will continue to turn on their facts and require the cooperation, communication and common sense of counsel for the parties. The lasting value of Del Giudice is not that it will necessarily prevent such disputes, but rather, that it outlines a practical methodology for resolving them when they arise, thereby reducing the need for unnecessary judicial intervention.
[i] The authors would like thank articling student, Kevin Acuna, for his assistance with this article.
[ii] While this article focuses on pre-certification communications, similar disputes can arise during the opt-out period. See, for example, Amyotrophic Lateral Sclerosis Society of Essex County v. Windsor (City), 2016 ONSC 67, leave to appeal dismissed, 2016 ONSC 1929, which involved a heated dispute regarding the permissible scope of a multi-media opt-out campaign by the defendants, as well as a subsequent contempt motion.
[iii] 1176560 Ontario Ltd. v Great Atlantic & Pacific Co. of Canada Ltd., 2002 CanLII 6199 (Ont Sup Ct J) at para 70 [Great Atlantic & Pacific]; see also Pearson v Inco Ltd., 2001 CanLII 28084 (Ont Sup Ct J) [Pearson] at para 18.
[v] Great Atlantic & Pacific at para 80. The court specifically identified the importance of maintaining the integrity of the opt-out process. See para 75. This is an animating that runs through many restraint of communication decisions.
[vi] Lewis v Shell Canada Ltd., 2000 CanLII 22379 (Ont Sup Ct J) [Lewis] at para 13.
[viii] Lundy v Via Rail, 2012 ONSC 4152 [Lundy].
[xiv] Lundy at para 10-11.
[xv] de Muelenaere v Great Gulf Homes, 2015 ONSC 7442 at para 34 [Great Gulf Homes].
[xvi] Great Gulf Homes at para 34.
[xvii] Del Giudice v Thompson, 2021 ONSC 2206 [Del Giudice] at para 16.
[xix] Del Giudice at para 44.
[xx] Del Giudice at para 24.
[xxi] Del Giudice at para 25.
[xxii] Del Giudice at para 29.
[xxiv] Del Giudice at para 53.
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