Small financial risks with joining class-action lawsuits, but cases can drag on
Lee Kennedy was left homeless in 2008 after a transformer exploded in the underground parking garage of his Toronto apartment building
When he was finally allowed to return home six weeks later, he found that smoke had damaged most of his belongings beyond repair. So, along with 800 of his neighbours, Kennedy sued Toronto Hydro, Toronto Fire and the city of Toronto.
According to lawyer Michael Robb, such class-action lawsuits are an appealing option for groups who want to make claims that may be too small or expensive to be pursued alone.
“Class actions are a mechanism designed to provide access to the courts for claims that are too small to be prosecuted economically on their own,” said Robb, a partner in class actions at Siskinds LLP in London, Ont.
One of the main benefits of taking part in a class-action is that the plaintiffs do not personally assume the financial risk of the litigation process.
Law firms that take over these large cases, which can involve hundreds or even tens of thousands of members, cover their own fees and the costs associated with hiring experts and commissioning reports under the expectation that they will be paid when a settlement is reached.
The support of similar plaintiffs will help with building the validity of a claim, but the downside is that, if the lawsuit is successful, the payout will need to be distributed to all parties.
In an individual lawsuit, the plaintiff takes on all the costs of hiring a lawyer, but has the benefit of not having to share a settlement.
“Class actions can also help people who are particularly vulnerable, like in institutional abuse cases, by allowing somebody in a stronger position, emotionally or economically or otherwise, to take the lead in the litigation,” added Robb. “It allows others to sort of enjoy the benefit of that litigation, without subjecting themselves to the stresses directly involved.”
Halifax lawyer Ray Wagner said in some cases, a third-party lender or a special fund, which exists in some provinces, may cover the legal costs in a class action for an agreed-upon portion of any settlement.
But more often, law firms take on the financial risk of working on class actions because they believe in the causes.
“There are some lawyers who do class action for the money, but most do it for the purpose of the issue that is involved, and the harm it’s caused for the people they represent,” said Wagner, who has worked on nearly three dozen class-actions including those related to the Sydney Tar Ponds, a formerly hazardous waste site in Nova Scotia, and the labelling and marketing of the popular opioid, Oxycontin.
“Lawyers that practise this, most of them will take cases on the basis that it’s an important issue to be decided. We’ll marshal on that basis, irrespective if that person has any money.”
Although clients “don’t have to worry about mortgaging the house” if they sign up for a class action, they’ll need to devote something just as valuable: their time.
“I always tell clients it’s the beginning of a long-term relationship,” said Wagner.
Kennedy said his class-action lawsuit was about being compensated for inconvenience and not about getting rich. After six years, a settlement was finalized last month for $6.8 million. The payout amounts to each plaintiff receiving a minimum of $2,250 for costs plus various expenses.
“You’re never going to make money, quite honestly,” he said.
“You’re going to recover what you lost, but it’s not a money-making venture. Any expectation of getting rich off a class action — it’s not going to happen.”
Last month, the Supreme Court of Nova Scotia approved a $29 million settlement between the province and alleged survivors of abuse from the Nova Scotia Home for Colored Children.
The plaintiffs, who launched the lawsuit 15 years ago, alleged that they suffered physical, psychological and sexual abuse mostly at the hands of caregivers while living in the orphanage, which opened in 1921 and operated for nearly 70 years. So far, about 185 claims have been filed since the settlement was announced.
Meanwhile, last September, four of the largest chocolate producers in Canada agreed to pay more $23.2 million in a class-action lawsuit alleging price-fixing.
The defendants — Cadbury Adams Canada Inc., Hershey Canada Inc., Nestle Canada Inc. and Mars Canada Inc., as well as distributor ITWAL Limited — all denied the allegations but said they settled to avoid the expense, inconvenience and distraction of further litigation.
Anyone who purchased at least $1,000 of chocolate between October 2005 and September 2007 is eligible to make claim. Those without receipts can only claim a maximum of $50.