Dolden Wallace Folick’s Class Action Newsletter – May 2021

May 1, 2021

Dolden Wallace Folick’s Class Action Newsletter – May 2021

“Do You Yahoo?”: The Status of Privacy Breach Class Actions in Canada

By Chris Stribopoulos and Elka Dadmand, DWF Toronto,
Emails: cstribopoulos@dolden.com and edadmand@dolden.com

Yahoo! was a pioneer of web services in the early internet era. More recently, Yahoo! has the auspicious title of leading the development of privacy breach class actions in Canada. Described as a “burgeoning genre,” Karasik v Yahoo! Inc., 2021 ONSC 1063 (“Karasik”) provides a historical review of privacy breach class actions with a look towards its future development.

Factual Matrix
Between 2014 and 2015, Yahoo! sustained two cyberattacks of its worldwide database. In 2015 and 2016, perpetrators of the 2014 cyberattack engaged in targeted and untargeted computer cookie-minting efforts. The attacks compromised an estimated 5 million Canadian Yahoo! Accounts.

In 2016 and 2017, the class actions were commenced against Yahoo! in Ontario, British Columbia, Alberta, Quebec and Saskatchewan. By July 2020, Yahoo! and the class members in Ontario, British Columbia and Alberta (collectively, the “Ontario Action”) reached a settlement agreement. The parties motioned for settlement and lawyers’ fee approval. Class members in the Saskatchewan class action (the “Saskatchewan Action”) opposed the motion.

Review of Breach of Privacy Class Actions Case Law
Before rendering judgement, Justice Perell reviewed the privacy breach class actions case law, noting that although many cases were certified, none had proceeded to trial.

Reviewing the 36 reported privacy class actions between 2000 and 2021 Justice Perell reached two conclusions. First, the factual pattern common to privacy breach claims was the defendant’s loss of the class members’ personal information and the risk or reality of dissemination of information for malign purposes. Second, the likelihood of success at certification for privacy breach class actions was “very high.”

While the sample cases could not provide information on the likelihood of success of privacy breach class actions, Justice Perell determined that the defendants had a strong bargaining position. The strength of the defendants’ position derived from the lack of actualization of the risk of harm and the enormous difficulties class members faced in establishing causation. Justice Perell opined that it would take a trial decision to award more than notionalnominal general damages.

Application of Breach of Privacy Class Actions Case Law
Justice Perell dismissed the allegations of collusion or a “race to the bottom” raised by the plaintiffs’ lawyers, noting that he was not interested or helped by mudslinging between lawyers. Justice Perell further stated that the Saskatchewan class action members were entitled to retain counsel to prosecute the Saskatchewan Action and it was a matter for the Saskatchewan Court to stay, or to permit the Saskatchewan Action to proceed.

Justice Perell concluded that the $20.3 million settlement was fair, reasonable and in the best interests of the class action members. This amount fell within a zone of reasonableness. It also reflected the Court’s analysis of the desirability of certainty and immediate availability of settlement over the probabilities of failure or partial success at trial.

Justice Perell next turned to the issue of the fee approval. While the lawyers had undertaken risks in conducting the litigation, those risks pertained largely to the trial of the action which the lawyers avoided by settling. Accordingly, Justice Perell reduced the legal fees from $4.9 million to $3 million plus disbursement and taxes.

Takeaway
Defendants in privacy breach class actions have the upper hand because of the difficulties class members face in establishing actual harm and causation. It will take a trial decision on its merits for a Court to award more than nominal general damages. While lawyers’ fee approval remains substantial, the high likelihood of certification of privacy breach class actions reduces the risks of litigation and the legal fees that settling class action lawyers receive. The cumulative effect being a trend towards trials to obtain higher per capita damages and legal fees.

Sequencing in Class Action Proceedings: BC’s Court of Appeal to Provide Guidance

By Christine Galea, DWF Toronto, Email: cgalea@dolden.com

Timing is everything, especially when it comes to certain pre-certification motions and applications in class action proceedings. Given the significant expense associated with defending class actions, defendants will aim to narrow or dispose of the claim at an early stage, preferably prior to the certification hearing. If warranted, defendants will commonly seek leave for evidentiary issues to be addressed prior to certification by way of a sequencing order from the court.

In British Columbia, sequencing applications have become increasingly common. The BC courts have recognized that the question of whether an application ought to be heard prior to certification is a discretionary one to be determined on a case-by-case basis, taking into account the particular circumstances before the court. A non-exhaustive list of factors which may be considered by the court in exercising its discretion was articulated in Cannon v. Funds for Canada Foundation, 2010 ONSC 146 and has been subsequently adopted and expanded upon by the British Columbia Supreme Court.

As expressed in the recent leave to appeal decision in Achtymichuk v. Bayer Inc. 2021 BCCA 147 (CanLII), the BC Court of Appeal now wishes to weigh in on the issue of sequencing. The Acktymichuk case is a proposed pharmaceutical product liability class action. The representative plaintiff alleges that certain fluroquinolone antibiotics manufactured and sold by the defendants cause peripheral neuropathy. Following the delivery of the plaintiff’s Notice of Application for Certification, the defendants requested the case management judge to address the sequencing of their intended pre-certification applications to strike all or a portion of affidavits filed by the plaintiff in support of the application for certification.

The case management judge declined to schedule the applications to strike prior to certification. One of the primary findings of the judge was that scheduling the applications to strike in advance of the certification hearing would not dispose of the litigation and would require a ruling on the admissibility of the subject affidavits in the absence of a full evidentiary record (which would be available at the certification hearing). The case management judge did not refer to any of the case law submitted by the defendants in support of hearing applications on the admissibility of evidence in advance of certification.

The defendants appealed the decision, arguing inter alia that ruling on admissibility prior to certification would reduce the volume of material before the court at the certification hearing and eliminate the need for the defendants to adduce thousands of pages responding to potentially inadmissible evidence. It could also prevent the certification hearing from being re-argued if the subject affidavits were found inadmissible and the plaintiff were granted leave to adduce additional evidence.

The Court of Appeal granted leave to appeal, stating that the profession would benefit from guidance as to the proper procedures to be followed on sequencing applications, particularly with respect to applications to strike inadmissible evidence.

Take Away
There is no absolute rule when it comes to sequencing of motions and applications to strike and the certification hearing. Central to the court’s exercise of discretion are the objectives of judicial efficiency and timely resolution of legal disputes. The concern is that pre-certification motions and applications could lead to multiple appeals and years of litigation before the certification hearing, thereby unduly hindering the claim.

There is ample authority for the proposition that motions and applications to strike can be brought before certification in appropriate cases. However, case management judges are often reluctant to hear motions or applications to strike prior to certification. This is especially so where the motion or application will not dispose of the proceeding in its entirety.

It will be interesting to see how the BC Court of Appeal will weigh in on the procedural and substantive aspects of sequencing determinations, particularly in the context of evidentiary applications in advance of certification.

Notably, the Achtymichuk decision comes on the heels of leave to appeal from a sequencing order also being granted in British Columbia v. Apotex Inc. 2020 BCCA 186. In Apotex, the sequencing order at issue related to applications to strike the claims against two Quebec defendants on jurisdictional grounds. The Court of Appeal in Apotex stated its intention to provide additional guidance for the exercise of discretion in sequencing orders.

Editor
Christine Galea
Tel: 647 798 0614
Email: cgalea@dolden.com

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