Rare Guidance On Class Action Damage Awards

The Ontario Class Proceedings Act (“CPA”), along with its counterparts in all Canadian provinces, is rightly lauded for creating a simple, accessible way for plaintiffs collectively to bring claims before the courts when they would not have had the resources to do so as individuals. While Ontario has become a busy class proceeding jurisdiction, very few class actions have proceeded to trial. Of the few trials, most have merely determined liability; few have dealt with the question of damages. The dearth of judicial decisions on damages in class actions is just one reason Ramdath v. George Brown College, 2014 ONSC 3066 (“GBC”), sent shockwaves through the class actions bar when it was released in July 2014. This decision is the clearest guidance the courts have provided to date on determining damages on a class-wide, aggregate basis. This article analyzes some of the key lessons of the GBC decision.

In an earlier decision, Justice Edward Belobaba determined that George Brown College was liable for making misrepresentations to students who had enrolled in its International Business Management program. The college had stated in its promotional materials that graduates of this program would be entitled to certain industry certifications. This was not true.  Once liability was determined, the parties were unable to agree on damages. The trial resumed, and the plaintiffs asked Justice Belobaba to determine class members’ damages on an aggregate basis.

Discussion

Aggregate damages are an essential component of the CPA. Section 24 of the CPA allows for damages to be determined on an aggregate basis where such damages can “reasonably be determined without proof by individual class members.”

Without aggregate damages, the CPA risks becoming a hollow shell for class members. Any advantages gained by determining liability on a class-wide basis, including accessibility and efficiency, could be lost if each class member was cast off to fight an individual trial on the determination of damages.

But any claim for aggregate damages must, of course, balance the goals of the CPA with the defendant’s reasonable expectation to only pay damages that are fairly owing to class members based on solid evidence.

In GBC, Justice Belobaba awarded damages in the aggregate where they could be reasonably determined, even if the aggregate approach resulted in a calculation that is less accurate than an a series of individual ones. This approach will not necessarily do justice to each and every class member. Some class members may be undercompensated, and others may be overcompensated. However, an aggregate award is allowed, so long as it is fair to the defendant and does not overstate its overall liability.

In applying these principles, Justice Belobaba first analyzed the class’s claim for out-of-pocket costs. He noted that most students would not have retained documentation showing these expenses. Individual proof would thus be difficult to provide, and failure to allow aggregate damages might unfairly reward the defendant. He ruled that reasonable estimates of the students’ out-of-pocket costs could be arrived at based on the college’s own publications.

On the other hand, Justice Belobaba ruled that he was in no position to award aggregate damages for students’ foregone income during their time in the program. The plaintiffs’ economist used statistical data on students’ average income prior to entering the program to estimate foregone income during the period of enrollment. Justice Belobaba offered three objections to awarding aggregate damages on this basis:

• Following the Court of Appeal’s ruling in Fulawka v. Bank of Nova Scotia (2012 ONCA 443), aggregate damages cannot be based on information that is derived from individual plaintiffs and then extrapolated to the rest of the class.

• The plaintiffs’ economist assumed that all of the Canadian plaintiffs were university graduates, when in fact only 1/3^rd of them were.

• The average pre-enrollment income of the plaintiffs, as estimated by the economist, was significantly higher than the income of several of the plaintiffs whose income was identified for the court.

GBC involved a relatively small number of class members. An individual approach to some issues, while cumbersome, will likely not be completely impracticable. But what if the class had been significantly larger, involving thousands of claims for foregone income? We offer the following brief comments based on our reading of GBC:

• His invocation of Fulawka notwithstanding, Justice Belobaba’s objections relate to the particular inputs into the economist’s model, and not to the basic methodology. If the economist had grouped the plaintiffs into income categories that better reflected their demographic characteristics, a statistical approach may have been accepted.

• Fulawka restricts the class’s ability to estimate aggregate damages based on data from individual class members. In Nolevaux v. King and John Festival Corporation, (2013 ONSC 5451), Justice Belobaba offered a cogent critique of Fulawka before yielding to the authority of the appellate court. In GBC, Justice Belobaba used information from a sample of individual plaintiffs to reject the economic model put forth. If this lopsided treatment of evidence from individual plaintiffs is to continue, it is difficult to see how the aggregate damages of the CPA will ever be fully able to serve the purpose the courts have ascribed to it.

While GBC does provide some much-needed guidance on awarding aggregate damages, it leaves many key questions unanswered. Given the low frequency at which class actions are arriving at the damages stage, more answers may be a long time coming.

By Ephraim Stulberg (and Shane Murphy of Sotos LLP). Published in the December 5, 2014 edition of Lawyers Weekly.

The statements or comments contained within this article are based on the author’s own knowledge and experience and do not necessarily represent those of the firm, other partners, our clients, or other business partners.