Justice Morgan’s recent decision in David v Loblaw, 2018 ONSC 198 demonstrates that, absent misrepresentation, misinformation or oppressive conduct, the Courts are reluctant to intervene in pre-certification agreements between defendants and putative class members wherein the defendant limits its potential exposure by offering compensation in exchange for a limited release of liability.
The Claim
In this proposed class action, the Plaintiff alleges that the various Defendants, including the various Loblaw companies, conspired in a scheme to fix the price of bread. The putative class members include purchasers of bread from any of the Defendants since 2002.
Plaintiff's Motion
The issue before Justice Morgan was whether the terms of a card program put in place by Loblaw, wherein putative class members would be provided a gift card worth $25 redeemable at its stores in exchange for a limited release of Loblaw’s potential liability to the extent of $25, was a misleading and an improper dealing between Loblaw and the putative class members.
Card Program
Loblaw brought its involvement in the aforementioned scheme to the attention of the Competition Bureau. On December 19, 2017, the company issued a press release in which it expressed regret for its involvement and announced that it would offer consumers a $25 gift card redeemable at its stores. It further acknowledged the gift card as both an expression of remorse and as part of an effort to regain consumer confidence. Loblaw estimates that the card program will cost between $75 to $150 million. It also expects that the value of the cards will be offset against any award of damages or settlement payment it makes in the case.
In order to obtain the card, a consumer must complete an application form declaring him or herself to be a past purchaser of bread. The form refers to the class action and recommends that consumers obtain legal advice. It further notes that those who sign up for the card remain eligible for “incremental compensation”, meaning that the $25 value of the card will be deducted from any eventual damages award or settlement payment to class members. The form also contains a general Release purporting to release Loblaw from liability to the extent of $25.
Position of Parties
Although Plaintiff’s counsel conceded that imposing restrictions on communication by a defendant to a putative class member would be extraordinary, the Plaintiff argued that the Court’s intervention was warranted because the card program is misleading as it has hidden, or obscured, conditions. The Plaintiff also argued that the Release was not in the best interest of those who participate in the program as it requires consumers to give up rights which they may otherwise have as class members.
Counsel for Loblaw argued that the Court only has jurisdiction to intervene where a defendant’s communication to putative class members amounts to “misinformation, a threat, intimidation, coercion, or is made for some other improper purpose aimed at undermining the process”, and that such a test at this stage is stringent. Loblaw also argued that signing up for the card does not constitute “an abuse of bargaining power” or a “grossly unfair or improvident bargain” such as would make it unconscionable. Loblaw further argued that the form of Release does no more than reflect the setoff that would in any case occur by operation of law under subsection 120(1) of the Courts of Justice Act.
Analysis
The Court dismissed the motion and held that Loblaw had the right to reach out to consumers to settle part of its exposure as long as it did not mislead anyone. The usual grounds for intervening in a pre-certification arrangement between a defendant and putative class members did not exist as there was no evidence of misrepresentation, misinformation or oppressive conduct by Loblaw.
The application form and accompanying Release were found to be appropriate, ample and fair. The Court further held that Loblaw had countered any misinformation that consumers may have gathered from press coverage of the card program. Further, by advising participants of the class action and recommending they obtain legal advice, Loblaw did what was expected of it to fully inform any person participating in the program.
The Court noted that for those who accepted the card, setoff might apply to prevent double recovery if the card was indeed an advance on an award of damages or settlement payment. However, the Court refused to declare that setoff would apply or that the Release was enforceable as it was too early in the case and such a decision was better reserved for a settlement approval hearing at the end of the litigation process.
Key Takeaways
Justice Morgan’s decision demonstrates the reluctance of the Court to intervene in a pre-certification arrangement between a defendant and putative class members absent any misinformation, misrepresentation or oppressive conduct. As such, it would appear that consumer class action defendants are free to communicate and settle with putative class members in an effort to mitigate their potential exposure, provided there is no misinformation, misrepresentation, or oppressive conduct on the part of the defendants. However, whether those efforts will benefit the defendants in the long run remains to be seen as the Court is also reluctant to determine the applicability of setoff or the enforceability of a release at such an early stage in the litigation.
About the authors
Christopher Wirth and Michael Tersigni, Keel Cottrelle LLP