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Class actions: Getting the word out

By : Jean-Benoît Nadeau

Class action lawsuits make justice more accessible, but justice is only served when class members get compensated. First they have to file a claim.

Eighty million dollars – that’s how much microchip manufacturers had to pay Canadian consumers in 2015 after admitting to price-fixing of dynamic random-access memory (DRAM) chips – a widely used computer component. For the prosecutors who launched the 2004 class action on behalf of consumer rights association Option consommateurs, this legal victory created another challenge typical of class action lawsuits: how to make sure everyone represented by the class action suit filed a claim for compensation.

Canadian courts have authorized several thousand class action lawsuits since the first ones were filed in Canada in the 1970s. Hundreds of millions of dollars in compensation are paid out for class actions every year in Canada. Whether for petty theft, price-fixing schemes for bread or major fraud, like the 2015 Volkswagen diesel emissions rigging scandal, class action lawsuits have become a tool that gives consumers better access to justice and helps regulate business and public services.

But the question still remains: how can you tell if everyone who was affected in a case received compensation? And if they didn’t, what proportion did receive some, and why? The study Class Actions: How can take-up rates be improved? examines the different factors that influence the rate of claims for class-action lawsuits in Canada, and the problem of a lack of comparable data to study the issue. “It’s all very well to see a class action resolved from a legal point of view, but getting justice really means giving compensation to as many claimants possible,” says Josiane Fréchette, lawyer at Option consommateurs and co-author of the study.

There’s a big communication challenge in almost every class action.”

Sylvie De Bellefeuille, lawyer at Option consommateurs who co-authored the study

Infineon Technologies is a good example. On one hand, almost every household and company in Canada was eligible for compensation, in principle – because many people purchased a computer, a printer or a programmable device of some sort between April 1 1999 and June 30, 2002.  However, since the lawsuit concerned transactions that went back 15 years or more, almost no one still owned the devices in question or had receipts for them. “Fortunately, the judge authorized the use of a simplified claim form and a 3-million dollar communications plan, which included TV and radio ads in English and French and a special website for the case,” De Bellefeuille explained. The result showed how useful these tools are: one million Canadians presented a claim for the class action against Infineon Technologies, which at that time was a record number of claims for a class action of this type in Canada.

Fact-finding Problems

The study examines in detail the factors that influence the rate of claims; among these are poor communications, overly complicated claim forms, poor translations and simple public distrust. “One important factor is whether the members of a class action can be identified or not,” De Bellefeuille says. “If you are suing a bank or a car manufacturer, those companies know who their customers are, so it’s easy to reach them by name. The job gets harder in cases such as price fixing, which affect consumers anonymously, or cases such as defective medical implants, where it needs to be determined which customers were victims, and to what degree.”

“Some groups are harder to reach than others, such as indigenous or elderly people, or the heirs of a deceased person,” says Josiane Fréchette, who adds that every class action is to some degree unique. How does one compare the rate of claims in Volkswagen’s “Dieselgate” to that in a case of defective breast implants?

“The important thing is to be able to get the maximum claim rate for each suit,” says Sylvie De Bellefeuille. “The issue really boils down to this: the simpler it is, the higher the claim rate is likely to be.” The various focus groups consulted during the study showed that in addition to distrusting web publicity, rights holders are put off by complex procedures. “In health-related claims, the nature and degree of harm suffered is generally measured, and that’s a complex procedure, but the compensation is usually high,” De Bellefeuille adds.

No Evidence

The authors’ biggest surprise was discovering how little verifiable and comparable data existed about claim rates, and how hard it was to find or use what little there was. “We suspected that collecting data would be a laborious task, but it was even harder than we thought. We had to overcome a lot of obstacles to find solid data,” says Josiane Fréchette. In Canada, only Quebec has a compulsory Registry of Class Actions and until recently, this registry was abstruse and difficult to use. “Even though it’s public information, some law offices actually refused to answer our questions. They claimed to be protecting professional secrets!”

The lack of a compulsory national claims registry makes it impossible to get a clear picture of the overall situation. This, in turn, creates a real problem of social justice. Class actions were, after all, created to serve the public interest. Over the years, they have made it possible for consumers to obtain billions of dollars in compensation. But at the moment, there is no simple way to get an overall statistical picture of basic data. One of the main recommendations of the study is that governments work together to create a compulsory national class action registry that would include standard data such as the take-up rate.

The study concluded that in spite of these problems, what saves the system is the fact that Canadian legislators have given judges the major responsibility of being “guardians of the members” of a class action. The study found that lawyers’ offices and judges are increasingly careful to make sure that members can easily get the information they need to make claims. “Judges can decide on their own what measures they consider appropriate to defend the interests of class members,” Josiane Fréchette says. The study notes that law firms and judges are doing more to ensure that members receive the information. “In one suit against the Société de transport de Montréal, a judge even approved placing human sandwich boards at metro stations to tell users about the class action. It shows what an important role judges can play in improving claim rates.”

The Study

Class Actions: How can take-up rates be improved? is the third study Option consommateurs has carried out on the topic of class actions. The organization’s previous studies on the topic focussed on coupon settlements and notices phrased in clear language. The latest study, published in June 2017, sheds light on the factors that determine a high claim rate, while criticizing the lack of clarity with regard to claim rates in general.

After comparing the legal frameworks of three major Canadian jurisdictions (Ontario, Quebec and British Columbia), as well as the United States and Brazil, the study examines the factors that favour a high claim rate. These observations were validated through focus groups composed of 20 people in Montreal and 20 in Toronto. The study deplores the lack of data available to enable a comparison of claim rates.

The authors recommend that judges more closely monitor the factors that influence communication and use their discretionary powers to require clearer figures from prosecutors. Finally, the authors encourage governments to create a compulsory national registry that would be easy to consult.