2 May 2019By Michael Bookman
The Ontario Court of Appeal’s recent decision in ALS Society of Essex County v. Windsor (City), 2019 ONCA 344, offers important guidance on the question of whether class members are “parties” in class action litigation. While class members are not “parties” in the normal sense, the Court of Appeal held that they are akin to parties, as their rights are being adjudicated by the court in the class proceedings.
Background: The City of Windsor and the Town of Tecumseh charged fees to charitable and religious groups for holding fund-raising lottery events, such as bingo games. The charities and religious groups sued each municipality for illegally charging these fees, in two class proceedings.
The class actions judged certified both proceedings with an opt-out period of 120 days. During that period, the defendant-municipalities engaged in a public campaign to encourage putative class members to opt out. The municipalities emphasized that a damage award against them would increase taxes and costs for services. The representative plaintiffs brought a motion to challenge the propriety of this campaign. The judge managing both proceedings held that the municipalities’ campaign had created undue influence and ordered a reconsideration period for class members who had previously opted out.
During this reconsideration period, the judge made an order protecting the identity of those opting out. After the reconsideration period was over, the municipalities moved to lift the protection order. The representative plaintiffs moved to keep a revised version of the protection order in place. Alternatively, they sought a declaration that the deemed undertaking rule applied to the identities and number of opt-outs. The deemed undertaking rule requires that parties only use information they obtain during the discovery process of the litigation for the purposes of that litigation and for no other (ulterior) purpose.
The judge granted the municipalities’ motion and lifted the protection order. The judge concluded that the identity of opt-outs could not be protected because there was no serious threat to the commercial interest of the opt-outs, and the open-court principle outweighed putative class member confidentiality. The judge made no decision about the deemed undertaking issue.
The class action judge’s decision was appealed to the Divisional Court. The Divisional Court held that the deemed undertaking rule applied to the opt-out information.
The Court of Appeal Decision: The municipalities appealed the Divisional Court’s decision to the Court of Appeal. The Court of Appeal held that the Divisional Court made two errors: (1) the Divisional Court incorrectly concluded that class members were not “parties” to the litigation; and (2) the Divisional Court incorrectly concluded that the deemed undertaking rule protected the opt-out information because it was made available as part of the discovery process.
Class members as parties
The Court of Appeal held that once the opt-out period has expired and putative class members become actual members of the class, they become part of the class of plaintiffs who is advancing a claim in the proceedings. They have submitted to having their rights determined by the court: “[w]hile class members may technically not be parties to the action, they are very much akin to parties … Class members are not parties in the normal sense … However, the fact that the [Class Proceedings Act] creates a distinction between “class members” and “parties” does not change the fact that they should be treated as akin to parties when issues affecting their rights arise in the proceeding.” On this basis, the Court held that class members are not entitled to maintain anonymity up until the point at which they have to prove their claim and collect any damages. In this decision, the Court of Appeal appears to be continuing its departure from its earlier decision in Dabbs v. Sun Life Assurance Co., 1998 CanLII 7165 (ON CA), which held that class members were not, in fact, parties per se to the litigation.
Deemed undertaking rule
The Court of Appeal held that the deemed undertaking rule had not been properly applied. The opt-out list is, in essence, statutorily created information under the Class Proceedings Act. It is not the private information of any party, and the parties are entitled to have it. The core purpose of the deemed undertaking rule is to protect the use to which the compelled production of a party’s private information can be put. The opt-out information, according to the Court of Appeal, is not captured by that purpose. Rather, the opt-out information is information that relates to the identities of the class members who have agreed to be bound by determinations in the class proceedings.
The Takeaway: The Court of Appeal has provided much needed guidance on the status of class members as parties in class proceedings. Class members are not merely part of an anonymous collection of individuals or entities represented by the representative plaintiff. Class members seek to have their rights adjudicated by a court within the context of class proceedings and, as such, are to be treated akin to parties. While there is an efficiency achieved by collectivizing members in a single class vehicle, members of the class are not invisible to the court. It will be interesting to track this developing principle as it applies to members of a class who seek to become more active in the class proceedings that affect them.