Class Action Risk Mitigation

What is a Class Action?

Each province in Canada has legislation which allows for class actions. A class action is a legal procedure that allows a single person to bring an action on behalf of a larger group of people who share some element of commonality in their complaints. The courts must assess whether a class action should be allowed to proceed in each instance which is referred to as “certification” of an individual action as a class action. If certified, the entire group, or “class,” are considered to be part of the lawsuit. The size of the class varies depending on the circumstances of the case, but very large classes of people can be certified.

The resulting increase in liability exposure for defendants can be of great significance.

Class Actions in the Automotive Industry

In the automotive industry, there have been many class actions certified covering a wide variety of circumstances. A few examples are alleged premature wear of tires (Thorpe v. Honda, 2011 SKQB 72), alleged defects in panoramic sun roofs (Engen v Hyundai, 2021 ABQB 740), alleged defects in the design, manufacture and sale of heavy-duty diesel truck engines equipped with exhaust control systems to meet regulatory standards regarding nitrous oxide emissions. (N&C Transportation v. Navistar, 2018 BCCA 312), and alleged defects in a cooling system (Evans v GMC, 2019 SKQB 98).

Class Actions in Agriculture

Surprisingly, few class actions appear to have been commenced involving agricultural equipment. One example is Sorotski v. CNH., 2007 SKCA 104 where a class action was certified on behalf of all persons who purchased Case Quadtrac 9370 tractors in Canada and who suffered financial losses due to problems with the tractor tracks (severe cracks, fraying and shredding).

While plaintiff class action law firms have not yet fully cast their gaze into the agricultural manufacturing space, class action risk will always be present to any manufacturer.

How to Mitigate Risk

One way to mitigate such risk is by using waiver and arbitration provisions within sale contracts.

A class action waiver is a contractual term stipulating that an individual will not participate in a class proceeding against the company and instead will resolve any dispute on an individual basis. A provision requiring any disputes to be arbitrated on an individual basis provides greater control over the litigation process to a manufacturer. Such terms mitigate a company’s risk of exposure to class proceedings, which can be very costly to defend, even when a claim lacks merit.

The enforcement of waiver and arbitration provisions are essentially a matter of contract but various statutes and common law doctrines may affect enforcement in certain circumstances. For example, the terms of the arbitration process cannot be so one-sided or costly to comply with that it makes it extremely difficult for any individual to participate in. Where there is clear evidence that the provision is so onerous as to deny access to justice, the Courts will not enforce the provision. For example, see Uber v Heller 2020 SCC 16 where the Court refused to enforce an arbitration provision requiring Uber drivers to submit to a costly international arbitration procedure.

However, there are instances where the Courts have enforced arbitration clauses which prevented proposed class actions from proceeding. See for example Difederico et. al. v., Inc. et. al., 2022 FC 1256 (where a price fixing action class action against Amazon was stayed) and Petty v Niantic Inc., 2022 BCSC 1077 (partially staying a proposed class action against an online gaming company).

Carefully crafted arbitration and waiver provisions are a tool for manufacturers and distributors of agricultural equipment to consider in their sale contracts.

The MLT Aikins legal team has significant experience in helping organization prepare for and respond to class actions. Contact a member of our class action team to learn more.

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice of opinion. Readers should consult a legal professional for specific advice in any particular situation.

This article was originally published by the Agricultural Manufacturers of Canada.