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Individuals have no right to settle class actions: court

|Written By Michael McKiernan

Individual litigants lose their right to settle once a class action has been certified, according to a recent decision in the Ontario Superior Court of Justice.

Kirk Baert

Justice Paul Perell found that only class representatives acting on the advice of class counsel have the right to accept settlement offers and that they can reject them without notifying class members about their contents.

“Class members do not have the right to individually accept settlement offers. Giving them the right to do so destroys the representative nature of the proceedings,” Perell wrote in his March 3 decision in Berry v. Pulley, a class action involving pilots from Air Canada and the former Air Ontario airline. “

It follows from this conclusion that if class members do not have the right to individually accept settlement offers during the communal stages of the action, they need not be given notice and be tantalized by a settlement offer that they cannot accept and which is opposed by their representative.”

The right to settle will revive once the common issues trial is complete and matters dealing with individual issues begin for specific class members, according to the decision.

Kirk Baert, a class actions lawyer at Koskie Minsky LLP, says the decision makes sense because of the huge numbers involved in many class actions.

“Those who aren’t keen on being part of a group have complete freedom of action at the opt-out stage and they can object to a settlement, but you couldn’t have a situation where you need the approval of 1,000 or 10,000 people to make offers to settle or to accept them,” he says.

The Class Proceedings Act enshrines the special status of class representatives. At the same time, the representative’s duty to act in the best interests of the class as a whole tempers the lack of democracy, says Baert.

“It’s not like a regular lawsuit. If you want to have a regular lawsuit, you’re free to have one at your own expense with your own risk. Then you’ll have 100-per-cent control over whether it’s settled or litigated.

If you consent to being part of a larger entity, you lose power, especially if the representative plaintiff is on the hook if the case goes south.

In Berry, the plaintiff class includes 171 Air Ontario pilots.

The case also involves a defendant class certified by the court: 1,682 Air Canada pilots who quit their union in a dispute over the integration of their Air Ontario counterparts following the airline’s purchase by the national carrier in 1991.

The Air Canada pilots were divided into subclasses based on their involvement in the dispute when the action was certified in 2001.

The plaintiffs allege conspiracy, breach of fiduciary duty, and negligent misrepresentation in the claim that hasn’t been proven in court. Experts for the plaintiffs have estimated the damages suffered at around $150 million or $80,000 to $100,000 per defendant class member.

Perell made the ruling after counsel for the plaintiff class made an offer to settle with individual members of two subclasses as the common issues trial approached. It’s still set to begin on March 14 and run for 10 weeks.

In December, plaintiff counsel Russell Raikes submitted an offer to settle the claim against the vast majority of rank-and-file members of the Air Canada union who publicly opposed the Air Ontario integration for $5,000.

He also asked that the offer be circulated to members of the class. The representative defendants rejected the offer.

Steve Waller, who’s acting for the defendants, says the ability to settle claims with individual class members could be particularly damaging in the more typical case where a plaintiff class takes on a corporate defendant.

“If a corporate defendant could make offers and pick members off one by one until the class is half the size it was before, it would virtually destroy the benefit of having a class action,” he says.

The defendants in the case are seeking indemnification from the Air Line Pilots Association in a third-party action. Brian Shell, who represents the association, says he was happy with the judgment. Without limiting individual settlement offers, he believes few counsel would be willing to take on class actions.

“It’s the unity of the class that’s critical to making the whole system work. If you don’t have that, you might as well have 5,000 individual actions,” he says.

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