Class Action Law Firm Breaches Carriage Order in Volkswagen Litigation

As anticipated, the multiplicity of class actions commenced in Canada in the Volkswagen Litigation has given rise to carriage wars across the country. We have previously written about carriage wars generally, as well as their specific application in the context of the Volkswagen Litigation.

Contested Carriage of Ontario Class Action

In November 2015, the Ontario Superior Court of Justice heard a motion to determine carriage of the proposed Volkswagen national class action in Ontario. Two firms contested carriage: a national consortium of class action firms (the “Consortium”) and The Merchant Law Group (“MLG”). MLG also filed class actions against Volkswagen in other Canadian provinces, and is engaged in ongoing carriage battles with the Consortium in respect of those class actions.

On December 4, 2015, Justice Belobaba granted carriage of the Ontario Volkswagen Class Action to the Consortium. MLG agreed not to contest carriage in Ontario, and its Ontario action was stayed.

However, on January 22, 2016, MLG sent an email to approximately 9500 potential class members, including 3500 Ontario residents, requesting them to sign a “Contingency Fee Arrangement and Instructions.” The email did not make any reference to the fact that MLG does not have carriage of the Ontario class action. In response to this email, 150 Ontario residents signed a retainer agreement.

The Consortium brought a motion before Justice Belobaba raising a number of concerns regarding the MLG email, claiming breach of the carriage order, seeking an injunction preventing MLG from sending similar emails in the future, and other relief.

Breach of Carriage Order “Reprehensible”

Justice Belobaba held that the MLG email breached the carriage order and was an “undisguised attempt to scoop potential class members with misleading information.” The Court ordered MLG to send a court-approved “clarifying email” to the 9500 recipients of the MLG email. Although an injunction was not ultimately granted against MLG, the Court held that any further breaches of the Court Order could be addressed with a motion for contempt of court. The Court also ordered that MLG will not execute the 150 retainer agreements. Finding MLG’s conduct “deserving of censure and condemnation, and therefore, by definition, reprehensible”, Justice Belobaba ordered MLG to pay $40,000 in substantial indemnity costs to the Consortium.

The outcomes of Saskatchewan and Alberta carriage motions between MLG and the Consortium are pending, but will certainly be closely followed, as will the outcome of the Ontario Volkswagen Class Action certification motion scheduled to be heard on June 7 and June 8, 2016.

Certainty of Representation

Justice Belobaba’s decision is instructive insofar as it confirms that class representation, once confirmed by a judicial order in the context of a contested carriage fight, is not subject to collateral attack thereafter. This is particularly helpful from the perspective of putative class defendants, who are entitled to certainty that class counsel is able to take a position on behalf of the entirety of the class without fear of having such positions “second-guessed” or opposed by counsel purporting to represent particular constituents of the class.