From class actions over flight cancellations to business disputes over pandemic-related disruptions and continued insolvency filings by distressed companies, experts predict a rise in litigation in 2021.
In the early days of the COVID-19 pandemic, courts across Canada effectively shut down, hearing only emergency matters. But as the months went on and the legal system was forced to adapt, courts shifted to virtual hearings and electronic filing of documents. In many provinces, long-planned but never-delivered digital upgrades were suddenly slapped into place and litigation started to return to something like normal.
Many businesses turned to private arbitration during the height of the COVID-19 shutdowns and court delays, and while that trend is likely to continue, lawyers say the courts will also be busy next year.
“Given the anticipated economic challenges, we expect that 2021 will be a busy year for litigation and that many businesses will be forced to litigate business-critical disputes,” wrote the law firm Osler, Hoskin & Harcourt LLP in a year-end publication.
“The experience of 2020 has confirmed that, even if there are court closures and other shutdowns, litigation can still proceed effectively in a virtual setting to meet the needs of businesses in Canada.”
Osler noted that the pandemic has already led to dozens of class-action filings in Canada. Reidar Mogerman, a partner at Vancouver-based Camp Fiorante Matthews Mogerman LLP, says more such cases, where plaintiffs band together to allege mass wrongs were committed by one defendant, are on the horizon.
“COVID-related claims will be coming as the legal system tries to adjust to these massive shifts in our economy. Many of those shifts affect large groups of people,” said Mr. Mogerman, whose firm acts on behalf of plaintiffs in class actions. “Think of businesses that have common insurance policies, people whose travel was cancelled. Any large group of people that has a common story where there’s been a financial adjustment is going to think about a class action.”
He also points to a recent landmark settlement with Microsoft that his firm was involved in as a sign that interest in class actions is likely to grow. Camp Fiorante was one of three law firms that acted for plaintiffs over claims of price fixing related to the purchase of certain PC software products between 1998 and 2010.
The tech giant did not admit wrongdoing but will pay members of the class up to $517-million, or about $400-million after legal fees and expenses are deducted. Under the claims process that began in November, individual consumers who bought genuine Microsoft software, or a computer preloaded with it, can claim up to $250 without showing a receipt.
“As a procedural vehicle, the class action allowed millions of Canadians to come together in a single action and pursue a case against Microsoft that ended in a significant settlement,” Mr. Mogerman said. “That historic experience, I think, has meant more and more people are aware of class actions, more and more lawyers are interested in bringing them.”
Securities class actions filed by investors in a company’s stock who allege violations of securities laws could also be on the rise. In a year-end outlook, the law firm Cassels Brock & Blackwell LLP points to the cannabis market as a flashpoint for such lawsuits in recent years, noting the widespread optimism and opportunities that came from the legalization of marijuana in 2018.
“Since that time, the industry has been subject to significant restrictions and oversight by securities regulators and licensing authorities. Consequently, the volatility of the market, along with the dashed dreams of many investors, has caught a number of industry players in a web of litigation,” the Cassels report said.
The firm predicts publicly traded cannabis companies “will continue to attract intense scrutiny from regulators and participants in the public markets.”
Another issue class-action lawyers will confront in 2021 is new legislation in Ontario that came into effect in October and provides for a more restrictive test for certifying a class action, a crucial preliminary step for a case to proceed.
“Ontario now stands out as having a different set of rules,” Mr. Mogerman said, predicting that more cases will now be filed in jurisdictions seen as more friendly to plaintiffs, such as British Columbia.
Finally, major Canadian corporations have largely avoided formal insolvency proceedings so far, owing in part to government aid such as wage subsidies and rent-relief programs as well as patience on the part of lenders. Still, formal insolvency proceedings under the Companies’ Creditors Arrangement Act (CCAA) were up almost 40 per cent in the first three quarters of 2020 as 68 businesses filed for protection.
That trend is likely to continue next year, according to Torys LLP, which wrote in a recent publication: “COVID-19 has precipitated the insolvency of some companies in precarious positions. As the pandemic continues, healthy businesses with stronger balance sheets may also be forced to resort to CCAA protection.”
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