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It's been called a class-action paradise, but Quebec last week fell a long way back toward Earth after a landmark court decision that will severely curtail the powers of injured parties to launch sweeping lawsuits against businesses.

In a case hailed by corporate defence lawyers, Quebec's Court of Appeal effectively banned the controversial practice of "multiple-defendant" class actions, in which plaintiffs seek damages from entire industry sectors, not just the companies with which they have done business.

The decision is seen as a boon, especially to companies that deal in major consumer products such as automobiles, as well as insurance, securities and pharmaceuticals -- sectors that have borne the brunt of such lawsuits. It also reverses what many defence lawyers regarded as a perverse development over the past five years, which has helped earn Quebec the dubious distinction as the most plaintiff-friendly jurisdiction for class-action lawsuits in North America.

"I think because of [this decision] Quebec might lose its reputation as what they call the class-action paradise," said Marie Audren, regional leader of the Montreal class-actions group at national law firm Borden Ladner Gervais LLP, who recently published a study on industry-wide lawsuits with colleague Emmanuelle Rolland. "It is a big, big turning point."

The case in question even elicited a bit of good-natured chortling among some lawyers who say it involved an issue that could only have gained traction in cheese-loving Quebec: allegations of unjust enrichment by dairies for allegedly short-changing consumers on the fat content of their milk.

The plaintiff, André Bouchard, had sought $89-million in damages against Agropur Cooperative and 11 other dairies, even though he had purchased milk from only one of the dairies. His claim: About half the milk sold as either 1 per cent, 2 per cent or whole milk (which carries a 3.25-per-cent fat content) fell slightly short of the mark on fat content, sometimes by as much as 0.03 per cent. The implication, lawyers say, was that the dairies had been skimming the fat for use in cheese production.

But Mr. Bouchard's allegations were found to be about as pervious as fromage suisse. In a 2004 judgment, Quebec's Superior Court sided with the dairies, mainly on the grounds that the shortfalls were within the calibration limits of their measuring equipment. In fact, the court noted that much of the milk exceeded the advertised levels by a similar margin of error.

Last week's appeal court ruling not only upheld the trial court's key findings but also took the unusual step of weighing in on the much-debated multiple-defendant issue, declaring that Mr. Bouchard's case could not have been certified as a class-action against the dairies he did not buy milk from in any event because he did not have a cause of action against them.

That cause-of-action principle is considered sacrosanct in most other jurisdictions in North America and has been upheld in several landmark cases, both in the United States and in other provinces, including a 1967 U.S. district court decision and a 2000 Ontario decision involving the tobacco industry and a fire ignited by a cigarette.

But lawyers say that in the legal solitude of Quebec, an anomalous trend began in 2001, when the province's Superior Court surprisingly granted class-action status to a claim launched by a consumer who alleged that three auto insurers had been repairing damaged vehicles with generic, as opposed to original-equipment, parts. The consumer had only done business with one of the insurers.

That claim, which was eventually settled out of court last year and was ultimately signed by 77 insurers, opened the floodgates, lawyers say. Although the province doesn't break down statistics on multiple-defendant cases, dozens of similar class actions were subsequently launched, many of which are still pending before the courts. They include a suit against property insurers stemming from Quebec's devastating ice storm of 1998 and against 19 mutual fund companies alleged to have taken part in a market-timing scandal that benefited some investors over others.

"Our firm alone is involved in a dozen cases in which this decision will have a huge impact," said Yves Martineau of Stikeman Elliott LLP in Montreal, who acted for one of the dairies in the milk case.

Mr. Martineau and others say the pace of multiple-defendant suits accelerated after 2003, when Quebec passed controversial class-action amendments that generally lowered the bar for plaintiffs. Among those changes, which were aimed at improving access to justice, was the removal of the right of defendants to cross-examine plaintiffs on the veracity of their allegations prior to class-action certification. "Our rules are the most plaintiff-friendly in Canada, if not North America," said David Stolow, a litigator with Davies Ward Phillips & Vineberg LLP in Montreal.

Last week's decision, which brings Quebec into line with the rest of Canada and the U.S., is expected to send defence lawyers scurrying to demand courts dismiss actions against their clients.

Among the first in line will be Guy Lemay, a partner at Montreal firm Lavery de Billy SENCRL, who is representing Toyota in a class action certified last year against 19 car makers for allegedly failing to fully disclose a $46 registration fee on the price of each vehicle.

Mr. Lemay says multiple-defendant suits explode the cost of lawsuits because defendants will usually choose to hire separate counsel, in part to safeguard potential trade secrets. He adds it also throws a wrench into conventional defence work. "If a person bought a Volkswagen but never bought a Toyota, what am I going to ask him as a question? . . . It makes it very difficult for a defendant to argue a case before a judge."

Not all lawyers agree with the appeal court ruling. Litigation firms specializing in plaintiff work say the move will force injured parties to launch actions against each firm accused of wrongdoing, which places a financial hardship on victims and is likely to clog the courts.

"We are going to be forced to file 10 class actions instead of one, and then what are the courts going to do?" says Pierre Sylvestre of Montreal litigation boutique Sylvestre Fafard Painchaud. "It will result in more class actions, more defendants, more legal fees."

bcrosariol@globeandmail.com