No cutting class: OCA confirms that individual class members cannot appeal settlement orders

The Ontario Court of Appeal has confirmed that class members in a class action do not have a right to appeal a settlement approval order under the Class Proceedings Act, 1992, S.O. 1992, c. 6 (the CPA). In the recent decision of Bancroft-Snell v. Visa Corporation Canada,^[1] the Court of Appeal held that two class members, neither of which was a representative plaintiff to the action, were precluded from appealing a settlement order approved by Justice Perell because the CPA does not provide class members with a route for appealing settlement orders.

The settlement approval order and ensuing appeal

This case involves a class proceeding brought on behalf of merchants against certain credit card companies and several large credit-card issuing banks regarding certain fees in relation to credit card transactions. Wal-Mart and Home Depot (together, the Appellants) are members of the class of merchants who accepted payment by way of the credit cards at issue, though neither is a representative plaintiff to the action. Both had an opportunity to opt out of the class at the time of an earlier settlement against certain defendants, but neither chose to do so. Accordingly, Wal-Mart and Home Depot remained a part of the certified settlement class and, subject to their right to object to a settlement at a settlement approval hearing, were bound by any judgment or settlement in the action. A new settlement was reached with additional defendants and the proposed settlement was brought before Justice Perell of the Superior Court at the settlement approval hearing. Wal-Mart and Home Depot were unsatisfied with the settlement and objected at the hearing. Justice Perell, however, did not grant their objections and approved a partial settlement.

Wal-Mart and Home Depot appealed Justice Perell’s order to the Court of Appeal. In particular, they argued that:

1. Dabbs v. Sun Life Assurance Company of Canada, a 1998 Ontario Court of Appeal decision that held that class members cannot appeal settlement approval orders, should be overturned to allow their appeal;
2. a settlement approval order should be understood as a “judgment on common issues” or a determination of aggregate damages, with the result that a class member may appeal the disposition with leave if the representative plaintiff fails to pursue an appeal, pursuant to ss. 30(3) and 30(5) of the CPA; and
3. in light of how prevalent settlements are in class actions, it would be unreasonable to accept that the legislature intended that there be no avenue of appellate review of settlement approvals.

For their part, the representative plaintiff and two defendants to the action (together, the moving parties) moved to quash the appeal on the ground that Home Depot and Wal-Mart have no standing to appeal the settlement approval order.

Court of Appeal confirms: Dabbs remains good law, class members cannot appeal settlement approval orders

The Court of Appeal granted the moving parties’ motion and dismissed Home Depot and Wal-Mart’s appeal. The Court considered each of the arguments in the appeal in turn.

First, a five-judge panel was convened to consider the question of whether Dabbs should be overturned. In Dabbs, the Court of Appeal held that s. 6(1)(b) of the Court of Justice Act, R.S.O. 1990 c. C. 43 (the CJA), which provides a right of appeal from a final order of a judge of the Ontario Court (General Division), was excluded by the appeal provisions of the CPA. Wal-Mart and Home Depot argued that subsequent decisions have established that s. 6(1)(b) of the CJA can provide an appeal route where the matter is not specifically addressed in the CPA.

The Court of Appeal rejected this position, underscoring that Dabbs has been consistently applied in Ontario for over 20 years. The Court held that the Appellants failed to demonstrate a flaw in the ratio of Dabbs. In particular, the Court highlighted that appeal rights are statutory, and that Dabbs was decided on the basis of statutory interpretation. The Appellants did not advance any submissions to suggest that the CPA should be interpreted any differently than it was in Dabbs.

Second, the Court of Appeal rejected the Appellants’ argument that a settlement approval order ought to be construed as a “judgment on common issues” or a determination of damages in the aggregate. The Court held that the settlement approval order was simply a determination that the settlement was fair, reasonable, and in the best interests of the class. The Court found that nothing in the settlement agreement, the order approving the agreement, or Justice Perell’s reasons indicated that the court was pronouncing judgment on a common issue or making an aggregate assessment of damages.

Last, the Court rejected the Appellants’ argument relating to the intention of the legislature with respect to appellate review of settlement approvals. The Court of Appeal held that giving individual class members the right to appeal the settlement of a class action would lead to uncertainty and inefficiency. The Court stressed that sound policy reasons exist for precluding such appeals by class members. Specifically, the Court noted that such appeals would introduce uncertainty into the negotiation and approval of class action settlements, undermine the authority of the representative plaintiff and class counsel, and impede settlement.

Looking ahead

This decision serves as a reminder that, in a class action, the court’s focus will be on the best interests of the class as a whole – and not necessarily on those of a particular class member. It is also welcome news for defendants, insofar as the ruling reflects the court’s willingness to enforce agreements that have been entered into with class representatives, and make them binding on the broader class.

In light of the Court of Appeal’s confirmation that class members are precluded from appealing settlement orders, class members must give serious thought as to whether they ought to opt out of a class action or remain a part of the class.