1250264 Ontario Inc. v. Pet Valu Canada Inc.

112 O.R. (3d) 294
2012 ONSC 4317

Ontario Superior Court of Justice,
Strathy J.
July 27, 2012

Civil procedure -- Class proceedings -- Opting out -- Plaintiff bringing class action on behalf of franchisees -- Organization of franchisees attempting to kill class action by mounting campaign to intimidate class members and provide them with misinformation about action -- Actions of organization subverting opt-out process -- Opt-out notices received after start of campaign set aside.

The plaintiff brought a proposed class action on behalf of franchisees of the "Pet Value" chain. The action was certified as a class proceeding. The plan of proceeding provided that communications with class members before the expiry of the opt- out period were subject to the direction of the class proceedings judge, but did not purport to curtail the right of other franchisees or the Canadian Franchise Council ("CFC") to communicate concerning the class action. The executive of the CFC was opposed to the action. A group calling itself Concerned Pet Value Franchisees ("CPVF"), consisting mostly of the executive of the CFC, was formed. The CPVF used a telephone blitz, calling every franchisee to encourage them to opt out of the class action, and set up a website. After that, there was a spike in the delivery of opt-out forms. The plaintiff brought a motion for an order setting aside the opt-out notices on the ground that the process had been compromised.

Held, the motion should be granted.

The opt-out process had been subverted by the actions of the CPVF. The CFC, wearing the hat of the CPVF, mounted a campaign designed to kill the class action. By identifying the opt-outs on its website, the CPVF attempted to put pressure on those who had not opted out. A franchisee who did not pledge allegiance to the CPVF and promise to opt out could reasonably conclude that he or she would be outed as part of an identified minority who were pursuing their own selfish interests, that they would be easily identified by the franchisor and that their participation in the class action might prejudice them in the future. The website contained misinformation, disparaged class counsel and did not attempt to provide any form of informational balance. The appropriate remedy was to set aside opt-out notices received after the start of the CPVF campaign.

MOTION by the plaintiff in a class action for an order setting aside opt-out notices.

Cases referred to
1176560 Ontario Ltd. v. Great Atlantic & Pacific Co. of Canada (2004), 2004 16620 (ON SCDC) , 70 O.R. (3d) 182, [2004] O.J. No. 865, 184 O.A.C. 298, 50 C.P.C. (5th) 25, 129 A.C.W.S. (3d) 455 (Div. Ct.), affg (2002), 2002 6199 (ON SC) , 62 O.R. (3d) 535, [2002] O.J. No. 4781, [2002] O.T.C. 963, 28 C.P.C. (5th) 135, 118 A.C.W.S. (3d) 530 (S.C.J.) [Leave to appeal granted (2003), 2003 36393 (ON SCDC) , 64 O.R. (3d) 42, [2003] O.J. No. 1089, 169 O.A.C. 343, 121 A.C.W.S. (3d) 655 (Div. Ct.)]; 1250264 Ontario Inc. v. Pet Valu Canada Inc., [2011] O.J. No. 1618, 2011 ONSC 287 , 16 C.P.C. (7th) 52, 208 A.C.W.S. (3d) 25 (S.C.J.); Bywater v. Toronto Transit Commission (1999), 1999 14779 (ON SC) , 43 O.R. (3d) 367, [1999] O.J. No. 1402, 83 O.T.C. 12, 28 C.P.C. (4th) 307, 87 A.C.W.S. (3d) 878 (Gen. Div.); Currie v. McDonald's Restaurants of Canada Ltd. (2005), 2005 3360 (ON CA) , 74 O.R. (3d) 321, [2005] O.J. No. 506, 250 D.L.R. (4th) 224, 195 O.A.C. 244, 7 C.P.C. (6th) 60, 137 A.C.W.S. (3d) 250 (C.A.); Fairview Donut Inc. v. TDL Group Corp., 2008 60983 (ON SC) , [2008] O.J. No. 4720, 172 A.C.W.S. (3d) 609 (S.C.J.); [page295] Mangan v. Inco Ltd. (1998), 1998 14671 (ON SC) , 38 O.R. (3d) 703, [1998] O.J. No. 551, 55 O.T.C. 161, 27 C.E.L.R. (N.S.) 141, 16 C.P.C. (4th) 165, 77 A.C.W.S. (3d) 709 (Gen. Div.); R. v. Felderhof (2003), 2003 37346 (ON CA) , 68 O.R. (3d) 481, [2003] O.J. No. 4819, 235 D.L.R. (4th) 131, 180 O.A.C. 288, 180 C.C.C. (3d) 498, 17 C.R. (6th) 20, 61 W.C.B. (2d) 489 (C.A.); Robinson v. Rochester Financial Ltd., [2010] O.J. No. 3912, 2010 ONSC 5116 (S.C.J.) ; Sauer v. Canada (Attorney General), [2010] O.J. No. 3381, 2010 ONSC 4399 (S.C.J.) ; Smith v. National Money Mart Co., 2007 13369 (ON SC) , [2007] O.J. No. 1507, 156 A.C.W.S. (3d) 1001 (S.C.J.); Ward-Price v. Mariners Haven Inc. (2004), 2004 13951 (ON SC) , 71 O.R. (3d) 664, [2004] O.J. No. 2308, [2004] O.T.C. 474, 3 C.P.C. (6th) 116, 131 A.C.W.S. (3d) 388 (S.C.J.)

Statutes referred to
Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3, s. 4(1)
Class Proceedings Act, 1992, S.O. 1992, c. 6 [as am.], ss. 5(1) , 17 , (6) (f), 19 , 20

David Sterns and Jean-Marc Leclerc, for plaintiff/moving party.
Geoffrey B. Shaw and Derek Ronde, for defendant/respondent Pet Valu Canada Inc.
Lawrence G. Theall and Bevan Brooksbank, for respondent franchisees.

Endorsement

[The remainder of the judgment text continues exactly as provided above, beginning with:]

[ 1 ] Endorsement of STRATHY J.: -- The plaintiff moves for an order setting aside the opt-out notices received from class members in this certified class action, on the ground that the process has been compromised. A group calling itself "Concerned Pet Valu Franchisees" ("CPVF") used a telephone campaign and established a website to encourage class members to opt out of the action. In the result, some 140 Pet Valu franchisees, representing 55 per cent of all class members, have opted out. The majority of those who opted out are current franchisees, as opposed to former franchisees, who no longer own stores.

[ 2 ] The question before me is whether the opt-out process has been so irreparably impaired as to justify the extraordinary measure of judicial intervention. Procedural History -- Certification, Notice and Limits on Communication

[ 3 ] The procedural history of this action is important because it provides the framework in which the issue arises.

[ 4 ] This is a class action on behalf of franchisees of the "Pet Valu" chain. The action was commenced under the Class Proceedings Act, 1992, S.O. 1992, c. 6 ("CPA") on December 9, 2009. [page296]

[ 5 ] As I noted in my reasons on certification, [See Note 1 below] the Pet Valu chain consists of specialty stores selling pet food and supplies. It is the largest retail pet food and supply chain in Canada and its 2008 sales exceeded $220 million. At the time of certification, there were 155 Pet Valu franchised stores, with 145 in Ontario and ten in Manitoba. Pet Valu also operated a total of 214 corporate stores, about 144 of which were under the "Pet Valu" banner, with the remainder operating under other trade names.

[The judgment then continues verbatim through paragraphs [6] to [91], concluding with:]

Motion granted.

Notes

Note 1: 1250264 Ontario Inc. v. Pet Valu Canada Inc., [2011] O.J. No. 1618, 2011 ONSC 287 (S.C.J.) .

Note 2: The website was not password protected. It was open for anyone to see. The evidence is that on about September 8, 2011, Dale told McNeely of the existence of the website and suggested that he have a look at it. As a result, the franchisor would know the name of every franchisee who had indicated an intention to opt out.