Manitoba court grants stay of abusive carbon copy class action

The Manitoba Court of Appeal has added its voice to judicial criticisms of the approach used by certain class counsel of commencing in parallel and then “parking” substantially identical class actions in provinces across the country. In Hafichuk-Walkin et al v BCE Inc et al,¹ the court dismissed an appeal from a motion judge’s order permanently staying a Manitoba class action as an abuse of process where a duplicate action had been certified and was proceeding to trial in Saskatchewan.

For defendants who face multiple outstanding class actions over the same allegations brought by the same counsel, the decision provides a means of cleaning up dormant duplicative actions after one action has been certified.

Background

In 2004, Merchant Law Group commenced class proceedings in Saskatchewan against more than a dozen telecommunications providers alleging they had been improperly charging “system access fees” to their wireless customers.  Thereafter, Merchant commenced similar actions in eight other jurisdictions across Canada. The Saskatchewan action was certified as a national opt-in class action in 2007.

In 2008, amendments to the Saskatchewan legislation changed the province to an opt-out jurisdiction, and Merchant tried unsuccessfully to have the Saskatchewan action converted to an opt-out action.

After the Saskatchewan action was certified, defendants in numerous provinces outside Saskatchewan moved to stay the actions against them based on abuse of process. Stays were granted in BC, Alberta and Nova Scotia.²

Abuse of process

In its decision released on March 14, 2016, the Manitoba Court of Appeal dismissed an appeal from a decision of the Manitoba Court of Queen’s Bench that granted an unconditional stay of the Manitoba action after finding it was unnecessary and duplicative of the certified Saskatchewan action.

The Court of Appeal observed that while the commencement of similar class actions in multiple jurisdictions is not presumptively abusive, such class actions become abusive when they are duplicative and no legitimate purpose would be served by allowing more than one such action to proceed on behalf of overlapping class members. The court cautioned that the determination of whether an action is abusive must be made considering the entire context in which the action is brought.

In Hafichuk-Walkin, that context included a 10-year delay in the prosecution of the action; evidence that Merchant had no intention of moving the action forward; duplication with eight other actions based on the identical nature of the claims, the similarity of the plaintiffs and the involvement of the same class counsel in all jurisdictions; and the fact that the parallel Saskatchewan action had been certified and was advancing to trial. The court concluded that there was simply no evidence justifying the filing of multiple similar claims.

Merchant argued unsuccessfully that the Manitoba action should be allowed to continue because, in contrast to the certified Saskatchewan proceeding, it was an opt-out action. The court held that the only critical consideration for the opt-in/opt-out distinction was fairness to the class members—in particular, whether there were reasonable safeguards to guarantee the principles of access to justice. Absent cogent evidence to the contrary, the motion judge was entitled to proceed on the basis that the Saskatchewan courts would protect the interests of Manitoba residents by ensuring that they received adequate and timely notice to opt-in to the Saskatchewan action.

The court concluded that Merchant was maintaining the Manitoba action in hibernation as a form of insurance for the possibility of an unsuccessful result in Saskatchewan. This was inappropriate and an abuse of process. The court noted that the class members, including Manitoba residents, had a legal proceeding in Saskatchewan where their rights would be adjudicated, and “[j]ustice did not require an identical proceeding in Manitoba.” To allow otherwise would offend “the principles of comity and exposes the parties and the courts to incurring the evils that a multiplicity of proceedings can give rise to in a multi-jurisdictional dispute.”

Conclusion

Hafichuk-Walkin is now the third appellate court and the fourth jurisdiction to conclude that, once a multi-jurisdictional class action has been finally certified in one province, to allow “carbon copy” class actions involving the same plaintiffs, defendants, lawyers and allegations to proceed in other jurisdictions constitutes an abuse of process and warrants an unconditional stay of proceedings.

This is a welcome development. Defendants should only have to defend a national class action relating to the same matter and seeking essentially the same relief once. Once an action is certified in one province, defendants should not be exposed to the expense and uncertainty of dormant, duplicative actions lying in wait in other jurisdictions. However, how the courts will apply these principles in circumstances where parallel actions are less than completely identical, such as where parallel overlapping actions are brought in different jurisdictions by different class counsel, remains to be seen.

Footnotes

¹ Hafichuk-Walkin et al v BCE Inc et al, 2016 MBCA 32.

² Drover v BCE Inc., 2013 BCSC 1341; Turner v Bell Mobility Inc., 2016 ABCA 21; BCE Inc. v Gillis, 2015 NSCA 32.