Opt-outs face hurdle to opt in, court rules

Laura Fric

May 28, 2014

Julius Melnitzer, Legal Post, National Post

(Extract)

Class members who exercise their right to opt out of a class action will have a very hard time opting back in, according to a recent decision of the Ontario Superior Court called Cannon v. Funds for Canada Foundation.

In Ontario, persons falling within the class definition are automatically included after certification unless they opt-out, meaning they would not participate in any settlement or judgment and are not bound by court orders in the proceedings. In B.C., non-residents must opt in to benefit from being class members.

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“The decision shows that there are clear limits on the courts’ generosity to class members and that these limits are being exercised rationally,” said Laura Fric in Osler, Hoskin & Harcourt LLP’s Toronto office.

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In Cannon, donors to an alleged charitable donation tax shelter scam sued the alleged charity.

The defendants to the class action sought indemnity by way of a third party action against the sales people who sold the charitable donation packages to the donors. Some of these sales people were also investors and therefore class members.

Some sales people opted out of the class proceeding, but when the case was settled and the third-party action ended, they asked to come back in. They said they had been confused about the third-party claim and did not know that it could be stayed. That wasn’t good enough for Justice Edward Belobaba, who refused the request. “Opting out does not mean ‘wait and see,’ the judge writes.

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