Quebec’s Lawyers Are Mimicking Milberg Weiss’s US Class-Action Tactics
The law firm that was the king of shareholder “strike suits” in the 1990s has apparently inspired an international expansion of its litigious tactics:
Class reaction
Filing class action suits is at such a fevered pitch, lawyers are racing each other to the courthouseNICOLAS VAN PRAET, The Gazette
Published: Saturday, December 10, 2005….. The business of class actions in Quebec has reached such a fevered pitch that lawyers are racing to file suits. Some firms are using the same clients for unrelated proceedings. All of which begs the question: Who is really benefitting from this growing industry anyway?
“You could be forgiven for asking: ‘What’s going on here?’” said Francois Lebeau, a lawyer with Unterberg, Labelle, Lebeau & Morgan, one of the city’s original class action practices.
“There are a lot of new firms deciding to get into the business. Everyone wants a piece of it.”
Quebec is often called class action heaven.
It is the only place on the continent where taxpayer dollars are used to subsidize lawyer fees so potential plaintiffs don’t have to pay.
It’s also the province where launching a class action is considered easiest.
Recent changes to Quebec’s code of civil procedure, which nixed the need for petitioners to file affidavits, has sped up the process, although that doesn’t necessarily mean judges are awarding more payouts. Recent statistics show courts here reject about 45 per cent of class action requests.
Still, the requests are multiplying.
Since they were first instituted in Quebec in 1979, roughly 650 class action lawsuits have been filed. In the last three years, 134 were filed in Montreal alone, including 52 so far this year. That’s roughly one every week.
Lawyers, bound by a first-come-first-served rule, often scramble to assemble their cases and race each other to the courthouse.
Some say that means they’re also cutting corners and filing suits that aren’t necessarily well-prepared.
….. The Quebec Bar Association’s code of ethics forbids lawyers to actively seek out people who may have legal claims.
And yet, not only is it done regularly, but a judge essentially okayed the practice in a 2004 decision called Tardif vs. Hyundai, said Montreal lawyer Bruce Johnston, who championed that case.
You can’t blame the petitioner with the fact that the idea for the class action came from the lawyer, Johnston said.
“Lawyers do have a role to play as an entrepreneur in that respect,” he said.
“The government really has allowed and encouraged lawyers to act as a private attorney-general seeking out cases where there’s something illegal being done.”
You don’t really have to look hard to find class actions, said lawyer Jeff Orenstein, who sued Labatt.
“They kind of find you,” he said. “Consumers (and citizens) are getting abused.”
….. In the U.S., the situation can be much more extreme.
New York firm Milberg Weiss set up a system where as soon as the stock price of a company falls more than a certain percentage on the markets in one day, a class action suit is automatically filed.
The firm is now embroiled in an investigation by the U.S. attorney’s office into allegations its lawyers paid kickbacks to people who served as professional plaintiffs.
Some Quebec lawyers work with consumer groups like Option Consommateurs and Union des Consommateurs to jointly find petitioners and spearhead cases.
Firms that have made their name in the business say they get a lot of calls.
Others put out feelers with their network of contacts to get clients. In one recent case, a Montreal lawyer recruited another lawyer to sue over her defective iPod.
Nothing wrong with that, said Steve Whitter, a lawyer who recently filed a suit against Rogers Wireless over roaming fees.
“Part of the philosophy behind class actions is to even the paying field so that one big corporation cannot, by a process of pennies per person, make money that it is not entitled to get. One of the ways in which you prevent that is you reward attorneys for thinking or bringing these suits to justice.”
The proliferation of class action suits in Quebec in recent years means more consumers are finding retribution, said Sylvie Champagne, a research lawyer for the Quebec Bar Association.
On the other hand, she said the legal community is openly questioning whether the original purpose of class action - facilitating claims for a small sum of money most people wouldn’t bother to try to get back on their own - is being distorted by much larger claims.
The dollar amounts involved in some recent cases are certainly eye-popping.
Plaintiffs in the case of Cecilia Letourneau vs. Imperial Tobacco, Rothmans Benson & Hedges and JTI MacDonald have a total claim estimated at $10 billion.
….. That means millions of dollars in potential fees for lawyers on both sides. And a huge potential headache for companies and other class action targets.
Businesses are fighting back.
Some are pushing mandatory arbitration clauses into consumer contracts to force out-of-court settlements.
Some are revamping their advertisements and insurance policies to make them sue-proof. Others are watching lawsuits being filed in the U.S. to correct their business practices before anyone gets sued here.
A group of banks is now challenging the constitutionality of Quebec’s consumer protection act, on which many class actions are based.
“There’s a real danger that Quebec could become much more litigious than it already is,” said Pierre Boucher, an economist with Montreal consultancy Marcon-DDM.
The risk is that the plaintiffs, and pressure groups will deliberately try to identify sectors of consumer activity or entire swaths of companies where there’s money to be made, he said.
….. Fredy Adams, a class action lawyer who’s sued several major companies, including Wal-Mart, Bell Canada and GM, says his clients use the the courts because they don’t want to be had and they do believe it’s their best recourse.
“These are not people who are sitting at home with nothing to do looking for a quick buck,” he said.
“One of my clients told a judge that it’s costing her more in parking to show up for court than the amount of her claim. It’s a matter of principle.”
This does not bode well for Quebec’s economy, especially as it is “the only place on the continent where taxpayer dollars are used to subsidize lawyer fees so potential plaintiffs don’t have to pay.” Many companies don’t have to do business there, and if things keep up as they are, they won’t. It also appears more than a little likely, based on the same “victimized” consumers being involved in multiple cases, that these “victims” are getting some form of compensation other than their share of the class-action settlement. This is illegal in the US, and is the basis for the US government’s current investigation of Milberg Weiss. I would expect that the tactic is also illegal in Canada.
___________________________
Previous related posts:
Nov. 18 - Update: Investigation into Illegal Payments to Shareholder-Suit Plaintiffs
Aug. 19 - Update: Investigation Is Gaining Steam; Only the WSJ Cares
June 27 - Payoffs to Shareholder Suit Plaintiffs Alleged
