What is a class action?

A class action allows a member of a group to institute a law suit on behalf of the entire group without obtaining permission from each member.

Class action proceedings are an efficient and economical means of obtaining justice. Moreover, a class action evens out the unequal balance of power that might exist between both sides.

CLASS ACTION PROCEEDINGS AND THEIR ADVANTAGES

A class action is a legal procedure that allows a member of a group to institute a law suit on behalf of other class members. The proceedings generally involve three separate stages: 1) authorization of the class action, 2) merit, and 3) recovery. A settlement can be reached during either of the first two stages.

I. Authorization of a class action

A member of a group can only institute a class action with permission from the court obtained by hearing a Motion for authorization to institute a class action. This stage prior to the actual lawsuit is in fact a screening process by which the court makes sure the planned class action meets well established criteria.

Thus the court must determine that:

  1. The recourses of the members raise identical, similar or related questions of law or fact;
  2. The facts alleged in the Motion for authorization to institute a class action seem to justify the conclusion sought;
  3. The composition of the group makes it difficult or impracticable to use the joinder of parties procedure or the possibility of a proxy going before the court on behalf of a group; and
  4. The member to whom the court intends to ascribe the status of representative is in a position to represent the members adequately.

This screening process is necessary because, once a class member is designated as its representative, that person more or less becomes its spokesperson and has a duty to undertake the class action on behalf of the members, who actually have not asked the court for anything.

Once authorization for the class action is granted, notices must be published informing class members of it. The notices primarily describe the class on whose behalf the class action has been authorized, the outcome sought by the lawsuit, as well as the procedure to follow for excluding oneself from the group.

Actually, no one is obliged to join a class action and one can withdraw from it in the days following publication of the notice. Yet unless one excludes oneself from a class action, a member of a group is considered part of it and bound by the ultimate ruling at the merit stage, whether positive or negative.

II. Merit

The "merit" stage involves the court hearing of the case. This is actually part of any legal trial and mainly involves an exchange of proceedings and evidence that leads to a trial and ultimately a final decision.

Once again a notice has to be published to inform class members of the final ruling. In the event of a victory, the notice also details the procedure for members to collect the sums to which they are entitled.

III. Recovery

When the evidence brought to court allows to do so, the final ruling orders collective recovery, in other words the court orders the defendant to pay an amount covering all the damages incurred by all the class members. The members are then asked to submit their claims to an administrator, who gives them the share of the total to which they are entitled.

Yet it is sometimes impossible to produce evidence that can be used to determine with sufficient accuracy the total amount of members' claims. In that case, individual claims have to be used. Thus each class member is asked to produce their claim and establish the value of the damages by a preponderance of evidence. The individual claims process can therefore entail a multitude of small court trials in which class members appear, one by one, to establish their right to be compensated.

Yet collective recovery is the rule, and the individual claims process the exception.

IV. Settlement

A settlement can be reached at any time before the final decision on the class action is handed down. In this case, notices are published informing the class members of the terms and conditions of the proposed settlement.

A hearing date is also set. At the hearing, class members can give the court their opinion of the proposed settlement. Following this hearing and after hearing the interested parties, the court can approve or deny the proposed settlement. Thus the court serves as a guardian of the class members' interests.

If, in the course of exercising its discretionary power, the court is satisfied with the conditions of the proposed settlement and approves it, the settlement then becomes binding upon the defendant and all members who have not excluded themselves from the class. Yet if the court denies the proposed settlement, the legal proceedings normally suspended during the negotiations resume.

V. Advantages for class members

The way of paying lawyers for the plaintiff is generally the main advantage of a class action for members. In fact, a class action makes it possible to share the cost of legal fees among all members. These fees are generally calculated as a percentage of the award and must absolutely be approved by the court. If the class action fails, the lawyers are generally the only ones to suffer a loss since the class members are not asked to pay.

Moreover, as in all court proceedings, the loser has to pay the winner's legal costs. These legal costs are in proportion to the amount in dispute. One could easily imagine that a class action can be extremely expensive. Yet that is not the case because the law sets a limit on class action legal costs to the equivalent of a case in which the amount in dispute is no more than $3,000.

In any event, lawmakers have also created a body to facilitate the institution of class action proceedings by financing part of them. Thus the Fonds d'aide aux recours collectifs can agree to cover the costs that the plaintiff might be ordered to pay, or even some of the expenses incurred by counsel for the plaintiff, which is often the case with expert opinions which can prove very costly.

The Fonds d'aide aux recours collectifs also sometimes agrees to cover part of the legal fees of counsel for the plaintiff. Regardless, if the class action is successful, the advances of funds provided by the Fonds d'aide aux recours collectifs have to be reimbursed out of the award. But if the suit fails, such advances do not have to be repaid.

Moreover, class members usually do not all have to appear in court to testify. In fact, the testimony of a minority of them can be enough to establish the plaintiff's evidence. Thus the overwhelming majority of people involved in a class action simply have to fill out a form and attach certain documents to it to make sure they can collect the amounts they might eventually be entitled to by a favourable ruling.

VI. Advantages for the administration of justice

When collective recovery is ordered, the class members who incurred damages are asked to claim their share. Yet often some of the class members eligible for a share fail to come forward with their claim. At that point, any leftover portion of the collective recovery is distributed to serve the group's interests. For example, one could very well imagine distributing the remainder of the sum recovered in a class action suit by shareholders among associations devoted to protecting investors.

Thus the class action procedure ensures that the defendant ordered to pay damages does not benefit from a low rate of claims by pocketing the remainder.

Also, the new balance of power created between class members and the defendant, combined with the inevitable media coverage these class action suits receive, generally increases the chances of reaching an out-of-court settlement.