Ontario Superior Court’s detailed analysis of privacy class actions in Canada

A recent decision of the Ontario Superior Court of Justice offers a useful overview of the history and status of privacy class actions in Canada. Justice Perell describes his analysis in Karasik v. Yahoo! Inc.^[1] as a “deep dive into the case law about privacy breach class actions, which are a burgeoning genre of cases but nascent because, although many cases have been certified, none have yet proceeded to a trial.” His reasons include many salient observations for those practising in the field of privacy class actions – and class actions, more generally.

Background: Karasik v. Yahoo! Inc.

In Karasik, Justice Perell considered whether to approve the settlement of a privacy class action, which centered on allegations that hackers gained access to user information. Putative class actions regarding the same allegations are also pending in several other provinces. Plaintiffs’ counsel in the parallel BC and Alberta actions supported the settlement, but plaintiff’s counsel in the Saskatchewan action objected. According to the decision, the main argument by the objectors was essentially that the statutory privacy claims available to residents of Saskatchewan and three other provinces offered a higher prospect of recovery than the claims pursued in Ontario.

Justice Perell approved the settlement over the objections.  

“Formidable obstacles” for plaintiffs

Justice Perell supported his reasons with a detailed review of privacy class actions in Canada. He started by noting that the current sample of cases does not provide information about the likelihood of success on the merits because none of the cases have gone to trial. He found, however, that it could be deduced from the settlements that defendants in the settled actions had “very strong cases” because although many of the cases involved the risk of harm from the lost, stolen, or misused data, there was no evidence that harm was actually suffered. He added that the “class members are confronted with ultra-enormous difficulty in establishing specific causation.”

Justice Perell also offered two reasons why that the statutory privacy claims relied on by the Saskatchewan objectors raised significant challenges for plaintiffs. First, he explained that “[u]nder these statutes, whether the plaintiff has a reasonable expectation to privacy and whether there has been an invasion of privacy is a fact specific inquiry in the circumstances of each case”. Second, he explained that “there is a significant and difficult to prove mental element to be proven in the statutory privacy torts.”

Justice Perell added that if the Ontario plaintiffs had pleaded the privacy statues in Karasik, “they would have been met with formidable arguments [….] [T]he defendants had good arguments that defences based on causation and the absence of the mental elements for liability would present formidable obstacles to the plaintiffs’ success.”

Quantitative analysis of privacy class action settlements

Justice Perell also performed a quantitative review of settlements in Canadian privacy class actions. Based on a sample of 36 cases between 2000 to 2021, he found that the sample settlements reflect “very modest per capita recoveries for class members” and noted that there is the “aura of nuisance value settlements from mega-wealthy organizations or settlements designed to maintain good commercial relationships with clientele.” Justice Perell added the following observations:

The settlements in the above sample, by and large, reveal that Class Counsel’s aspirations for enormous per capita awards of general damages (moral or symbolic damages) for intrusion on seclusion or breach of privacy statutes have been rebuffed by the settling defendants.

It seems that it will take a trial decision awarding more than notional-nominal general damages, to break the will of defendants, who as I have already noted are sustained by the strength of their defences on causation and by the difficulties associated with proving negligence or the wilfulness required to establish liability for the privacy statutes or the intentionality required to establish liability for intrusion on seclusion.

Key takeaway

This case helpfully recognizes that defendants in putative privacy class actions in Canada will often have strong defences to both common law and statutory privacy claims. It also confirms that despite the proliferation of these types of actions in recent years, even a certified privacy class action will not necessarily lead to significant liability. As Justice Perell recognizes, plaintiffs face significant hurdles in proving these types of claims. Accordingly, defendants facing privacy class actions will often have a range of tools to defend privacy class actions and/or to seek to resolve them at an early stage.