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LAW 122 (625)
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Chapter 2

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Law and Business
LAW 122
Jane Monro

Chapter 2: Litigation and Alternative Dispute Resolution This handout was adapted from Chapter 2 in McInnes et al., Managing the Law: The Legal Aspects of Doing Business, 3rd edition (Toronto: Pearson Canada, 2011). The Litigation Process: Who Can Sue and Be Sued? Who has access to the courts in Ontario? Who can be sued in an Ontario court?  All adults, regardless of their citizenship.  Corporations, even if they are incorporated outside of Ontario. (Remember that the law treats corporations as legal persons for some purposes.  Trade unions.  Special cases: o Children: children can sue and be sued, but a parent or litigation guardian must represent them. o Adults suffering from a mental incapacity (e.g., dementia or Alzheimer’s): they can sue and be sued, but they must be represented by a litigation guardian. Unincorporated organizations, such as clubs, amateur teams, and community groups, are generally not recognized in law as “persons”. Thus, these organizations cannot sue or be sued as an organization. If you want to sue a club, you must sue individual members of the club. If members of a club wish to pursue legal action against another party, they must bring their legal action as individuals. They cannot sue in the name of the club or organization. Trade unions, however, are an important exception to this rule. Historically, it was not possible to sue the government. However, legislation has now made it possible to sue the government under some circumstances. The person who initiates a law suit is called the plaintiff. The person being sued is called the defendant. The law suit as a whole is frequently called the action. The Litigation Process: Class Actions Case 1: Why do we have class actions? George v. Shark Loans When George’s car unexpectedly broke down, he needed a loan to cover the repair costs. Because he had bad credit, George went to Shark Loans, a company that makes relatively small loans to people who are considered bad credit risks. Shark Loans not only charges high interest rates, but it also imposes a major penalty for any late payments. George was charged a $75 late penalty when he paid an installment on the loan three days late. George wondered if charging this late penalty was legal, so he asked his friend Wendy, who is a lawyer, for advice. Wendy did some quick calculations, reviewed the case law, and then told George that the late penalty very likely violated the criminal interest rate provisions in the Criminal Code. She told George that he could sue Shark Loans to get the late penalty back, but that he would have a hard time finding a lawyer who would take a case worth $75. Even if George represented himself, the cost of the filing fees and the time wasted on pursuing the matter would be far more than $75. At first, George was content to let the matter go. But as he thought about it, he started to become angry. How many other people were stuck paying this late penalty? Shark Loans was breaking the law – and profiting from it. Shark Loans knew that hardly anyone would bother to challenge the late penalty in court; it simply would not be worth the time and money. At the same time, George estimated that Shark Loans could be making up to $7 million from the collection of the late penalties. Something had to be done. George went back to his friend Wendy for more advice. “You see, if it is just me, then the law suit is only worth $75. But what if there were 100,000 people in my position? Or even 250,000 people? Shark Loans is a pretty big company; it has locations all over Ontario. Shark Loans claims that it has given over 400,000 loans. So what would Shark Loans do if we all sued the company, all at once – and all together? Is that possible?” Wendy thought about the matter, and replied, “You would need a class action. You would ask the court for permission to join all the claims against Shark Bank in one proceeding, with a representative plaintiff. You wouldn’t sue for $75. You would sue for $7 million – the value of all the claims combined. Since the claims are all very similar, it makes sense for the court to hear one or two cases and apply its decision from those cases to the rest of the cases. It’s a better use of the court’s limited resources to decide these cases altogether than to hear very similar claims separately.” George smiled. “Shark Loans might not care about $75 claims, but a $7 million claim will get its attention!” What are the benefits of class actions? 
 In this Case, who would be the plaintiff and who would be the defendant if George decides to sue Shark Loans? In Case 1, George is contemplating bring a class action against Shark Loans. A class action allows a single person (like George) or a small group of people to bring a legal claim on behalf of a larger group of people. Theclassisthegroupofpeopleonwhosebehalfthelegalclaimisbrought;aclasscanrangein size from very small (even just two people) to very large (thousands of people). In Ontario, the Class Proceedings Act governs class actions. You should read this Act, particularly s. 1, 5, 6,and9. In order to bring a class action, a representative plaintiff must take steps to have the class certified. (CertificationbasicallymeansthattheCourthasdecidedtoallowtheclaimsoftheindividual members of a proposed class to be joined together; this allows someone like George to initiate a lawsuit on behalf of everyone else.) The Class Proceeding Act states that a judge will certify a class if the following requirements are met:  There is a “cause of action” (a legitimate claim recognized by the law). The representative plaintiff does not have to prove his case during the certification phase, but he must show that there is some basis in law and in fact for the claim being mad  Members of the proposed class must have common issues. That is, the claims of class members must involve similar (but not necessarily identical) questions of fact or law. Here are some examples:  The class members are all suing the same defendant in relation to the same product line or service or in relation to the defendant’s employment practices  The class members all suffered the same sort of injury.  The class members suffered different injuries, but the injuries arose from the same incident. Sometim
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