Collective Action and Class Action

Collective Action and Class Action

Description

Over the past 25 years, class actions have emerged as a central feature of Canadian law. The conceptual heart of these class actions comes from the Ontario Law Reform Commission's 1982 Report on Class Actions, particularly in common law Canada. Drawing on the experiences of the early-adopter provinces of Quebec, Ontario and British Columbia, the Report sets out the objectives of the modern class action: judicial economy, access to justice, and behavior modification. Today, each province except Prince Edward Island has enacted comprehensive class proceeding a legislation,--while Prince Edward Island relies on it indirectly, as the Report's logic was nationally enshrined by the Supreme Court in Western Canadian Shopping Centres, Inc. v. Dutton. From my personal vantage point in the U.S., it is difficult to argue with the stated premise of the Ontario Report: “No longer are we faced with only a single individual or small business against whom we have some grievance. Trite as the observation necessarily is, it bears emphasizing that we live in a corporate society, characterized by mass manufacturing, mass promotion, and mass consumption. … The mass production and sale of an inherently defective product has the potential to touch all consumers of that product. Misleading advertising by a large corporation can have province-wide or even national implications. Large scale pollution of rivers or the atmosphere can affect countless persons over a long period of time. Sophisticated securities frauds, discrimination in hiring, illegal strikes, and many other types of unlawful conduct have direct and indirect ramifications for all of society. And in the wake of such misconduct, the individual is very often unable or unwilling to stand alone in meaningful opposition.” Without wishing to compromise my ability to visit Canada again, I cannot let pass one concern. The reasoning in the Ontario Report points to the need for collective redress, as the term is now used in Europe. But as a defense of the class action, there is a fundamental incoherence in relying on the stated premises of efficient use of resources, access to justice, and behavior modification. Accepting that the scale of harm and the lack of individual redress are all reasons requiring collective action, there is nonetheless the question, about why any of these insights point to class actions. The ability to externalize the cost of conduct, as with a polluter or a mass marketer who may realize substantial gains from many small-scale frauds, is the classic problem that explains why private ordering through contract is insufficient to certain unwanted conducts. Policing the integrity of market transactions or preventing environmental depredation are examples of classic public goods, and the problem of the inability to internalize private gains from the creation of public goods is the reason that public good production has to be collectivized. In turn, the need for collective security forms the standard justifications for state-level activity. Class actions are not merely forms of collective action that overcome the limited ability of individuals to protect their rights through contract or private legal action. Rather, class actions are private sources of collective authority, even if formed pursuant to legal rules governing class certification and even if, as in Quebec, they may be eligible for formal public subsidies. The question that requires some explanation is not the need for collective redress, but rather the reliance on private ordering through court-supervised class actions rather than direct regulation by state authorities. Put simply, if it is public goods we seek, why not use public authority to obtain them? The conceptual limitation is even more pronounced given the lead role of Quebec in the development of class action law, and now in its implementation. Quebec is, after all, not perfectly part of common law Canada and is a significant outlier in the civil law world in its eager reliance on class litigation rather than state decrees to achieve regulatory economies of scale. As a general matter, common law jurisdictions incorporate private collective actions more readily than civil law jurisdictions, largely as a result of greater comfort with judge-made law. Put another way, could not the Ontario Report be the prelude to the creation of a more powerful regulatory body, perhaps akin to the objectives of the Consumer Finance Protection Board in the U.S.? The paradox is not the need for collective enforcement but the choice to use private collective enforcement through the class action rather than through the state regulators. Nor is the enforcement paradox unique to Canada. All societies already possess an institution designed to overcome collective action barriers to common security and the proper allocation of burdens and resources: the state, in its most basic, Hobbesian functions. The class action offers an alternative form of collective organization to the state-without the elements of popular participation, political consent, and electoral accountability that justify governmental authority in a democracy. That delegation of collective authority to an institution without the democratic pedigree of the state demands some justification. In what follows, I will trace the development of class action law in the U.S. from the perspective of the relation between the class action and state regulation. I do not take up the particular mechanisms of class creation in Canada, nor the details of the procedural requirements for the class. That task is best left to Canadian observers better versed in Canadian law. Rather, the aim is to show that the relation between private and public ordering is a central theme in the development of class actions thus far. For Europeans, even after numerous EU-level pronouncements on the need for collective redress, the ability to license private enforcement, including the need for a profit motive for private conduct, has resulted in efforts that are mostly stillborn. In the U.S., by contrast, the generalized and at times pathological distrust of the state made the turn to private enforcement an easier undertaking.

Source Publication

The Class Action Effect: L'effet de l'action collective

Source Editors/Authors

Catherine Piché

Publication Date

2018

Collective Action and Class Action

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