What The Pet Valu Decision Does Not Say About Opt-Outs

In its recent decision in Pet Valu, the Ontario Court of Appeal overturned the Superior Court’s landmark decision to invalidate opt-out notices because of the conduct of non-parties. Given the attention that the Court of Appeal’s decision has garnered, it’s important to be clear on what the Chief Justice did not say in his reasons for judgment.

First, a quick word on the facts: A franchise class action was certified with Pet Valu Canada Inc. as the defendant. During the opt-out process, a group of franchisees opposed to the action launched a campaign to get other franchisees to opt out. The activities of this group of non-parties was in no way directed by the defendant – but the motions judge still invalidated the opt-outs on the basis that the campaign undermined the opt-out process.This decision was overturned largely on its facts. But it’s important to be clear that the Court of Appeal did not say that the conduct of legal strangers could never result in opt-out notices being set aside. Quite the contrary: The Chief Justice actually accepted that there was a risk that the group’s campaign could have crossed the line and pressured class members to opt-out on an involuntary basis. The risk just didn’t materialize in this case.

Pet Valu clarifies what it would take for communications to undermine the opt-out process (and it increases the standard). But it does not close the door on improper third-party conduct resulting in opt-out notices being invalidated. The lower court’s decision may have been set aside, but (at least) that one important aspect remains intact. Defendants still need to be careful not to allow others to undermine the opt-out process.

For more on the Court of Appeal’s decision in Pet Valu, see this Osler Update.