Getting in on the class action

Nov 1, 2005

Ian Johncox

Ian Johncox is a lawyer with the Whitby firm Mason Bennett Johncox

It sure didn't surprise me to see that a class action had been started as a result of the outbreak of Legionnaires' disease in Toronto. What surprised me was how long it took.

Class actions are meant to be an effective tool to address wrongs that are committed against a large number of people. In my opinion, they have become a tool for abuse, used instead as an opportunity for lawyers to create income for themselves out of small problems.

For example:

There was a recent case where a phone company charged a lot of customers a couple bucks too much. Class action! Customers got a buck or two as a credit on their phone bill. Lawyer gets a few hundred thousand.

Anytime there is a situation where a few or more individuals have suffered something, there is a lawyer jumping in trying to make a class action out of it.

There are cases where more than one lawyer starts a class action for the same problem.

Then the lawyers start to fight over who gets to keep the action and who has to walk away. One of the deciding factors is whose action was started first.

The result: lawyers are jumping on possible class actions as soon as they can. The "ambulance chaser" has been reborn.

Class actions are still the appropriate tool to deal with mass wrongs.

However, I think we need to change the way the tool is used. I just don't see the point of a lawsuit to deal with a case where a lot of people have been ripped off of two bucks. No individual is going to be bothered to spend the time to recover it.

The only one who wants to spend the time is the lawyer who wants a few hundred thousand in fees.

To be fair, I have heard the opposite argument.

The argument goes that class actions are the way to prevent big companies from breaking the law by making it so costly for them when they do. It's a good argument, but you don't have to agree with it.

I'm going to go out on a limb here and make a prediction. You may have seen the news of the water problems in Kaschechewan, the First Nations reserve in Northern Ontario. Now that some of the residents are in Sudbury (where there are lawyers), how long do you think it will take for a class action to be started?

I'm guessing within two weeks.

I think that the situation is probably an appropriate one for a class action. There are a lot of people who have become sick because of (arguable) negligence in the location of the water intake pipe and the manner in which the band was left to look after a water treatment plant that they were not equipped to operate.

It just bothers me that when I see this situation, the first thing that comes to mind is the possibility of a class action and the speculation as to how fast one will be started.

!

Ian Johncox

Last week, the news was almost consumed with the fallout from the first report of the Gomery Commission on the sponsorship scandal.

I have read most of the report. It is depressing.

I have also read the summary of the MFP inquiry in Toronto. Madam Justice Bellamy writes it like a mystery novel. Of course, the MFP scandal is a story of intrigue, and Justice Bellamy makes it entertaining reading.

Public inquiries are very expensive endeavors. They are fact-finding missions. They cannot impose civil or criminal liability. They cannot punish the wrongdoers.

These two inquiries have shown that it is necessary to have significant controls and oversight in government to prevent abuse by people who have the authority or opportunity to abuse the system. It seems that whenever there is the opportunity, there is someone who is willing to supplement their income by questionable means.

In the MFP inquiry, Justice Bellamy wrote: "In the end there are two questions: is there enough credible evidence to conclude that Dash Domi gave Tom Jakobek a payoff? Yes, there is. Has either of them provided any believable evidence to contradict that conclusion? No, they have not." Pretty damning words.

In the Gomery inquiry, Mr. Justice Gomery wrote:

"Following Mr. GuitÈ's retirement in 1999, he incorporated Oro Communications. Revenues from consulting fees for fiscal years ending July 31, 2000, 2001 and 2002 totalled $1,039,431. It raises the question of how a former mid-level public servant could command such substantial fees - roughly three times his departing salary.

The only plausible explanation for the amount of the payments, which greatly exceeded any rational evaluation of the time and services rendered, is the contracts that [one of Guite's clients] received from [Guite's department] prior to Mr. GuitÈ's retirement."

It appears that we need some very severe laws to address corruption. Of course, severe laws mean nothing unless the courts are willing to impose severe penalties. In my opinion, this kind of corruption - so-called "white-collar crime" - has not been penalized sufficiently to deter people from doing it.

For example, consider the insider trading case of Andrew Rankin. He was convicted of tipping off his friend Daniel Duic, who made $4.5 million. Duic made a deal with the Ontario Securities Commission, whereby Duic paid a fine of $1.9 million and agreed to testify against Rankin.

Gimme a break. He gets to keep 2.6 million? This guy should have been prosecuted, too! A deal should involve a fine equal to more than the profits that he made. Otherwise, how can this activity be deterred? I'll bet a lot of people won't turn down such an opportunity if they know that getting caught would mean they only have to pay 40 per cent of it back.

Can you imagine what would happen in the U.S. of A.?

Gomery, Rankin, MFP: they can't help but make us cynical. Until we make the penalties for white-collar crime and corruption severe enough to deter people from doing it, it will continue unabated.