Court File and Parties

Court File No.: CV-20-00641990-00C Date: 2020-07-24 Superior Court of Justice - Ontario

Re: Badesha Harpreet, Plaintiff – AND – Cronos Group Inc., Michael Gorenstein, William Hilson, Jerry Barbato, Kevin C. Crosthwaite Jr., Bronwen Evans, Murray R. Garnick, Bruce A. Gates, Jason Adler, James Rudyk, Jody Begley, Alan Friedman and Michael Coa, Defendants

Before: Justice E.M. Morgan

Counsel: Serge Kalloghian, Garth Myers, Paul Bates, for the Plaintiff James Doris, for the Defendants, Cronos Group Inc., Michael Gorenstein, Jerry Barbato, Kevin C. Crosthwaite Jr., Bronwen Evans, Murray R. Garnick, Bruce A. Gates, Jason Adler, James Rudyk, Jody Begley, Alan Friedman and Michael Coa Catherine Francis, for the Defendant, William Hilson

Heard: July 21, 2020

Request for Exclusivity Order

[1] The Plaintiff in this proposed securities class action seeks what his counsel has called an “exclusivity order” – i.e. an order that no other action may be commenced in Ontario in respect of the subject matter of this action on behalf of the putative class without leave of this court. Counsel for the Defendants raise no objection to the order sought.

[2] The Statement of Claim sets out claims at common law and under the Securities Act, RSO 1990, c S.5 (“OSA”) for misrepresentation in a public filing by the Defendant, Cronos Group Inc., and its senior officers and directors. It is the Plaintiff’s stated desire to move the action forward expeditiously. His counsel submits that an order making it the exclusive claim dealing with this subject matter will foster that goal.

[3] Plaintiff’s counsel further contends that a number of specific policy goals of class actions will be fulfilled in the process. These goals, which articulate the various concerns that motivate the present motion, are set out in the Plaintiff’s factum:

(a) it is in the best interests of the plaintiff, the class members and the defendants, since it will facilitate settlement discussions and permit the parties to proceed unencumbered through their timetable to the return of the Motions [for leave to proceed under the OSA, certification, and summary judgment]; (b) it furthers this Court’s commitment to robust case management; and (c) it promotes the objectives or judicial economy and avoiding a multiplicity of proceedings, since imposing a leave requirement before duplicative and overlapping proceedings may be commenced in this Court will promote the efficient use of judicial resources.

[4] The Plaintiff’s concerns as expressed above are understandable. At the same time, they can be characterized as being somewhat more subjective in their approach to access to justice and case management than is generally the case with respect to the prospect of competing class actions.

[5] In Quebec, the rule for overlapping class actions is first-to-file. A second proposed class action claim issued with respect to the same subject matter as an existing class action (or proposed class action) is automatically stayed in favour of the first: Hotte c. Servier Canada Inc.. In Ontario, there is a similar concern that there not be two or more class actions representing the same class in relation to the same claim. However, as Chief Justice Strathy described it in Mancinelli v. Barrick Gold Corporation, 2016 ONCA 571, at para 11, the matter is handled differently:

Where there are rival actions, a practice has developed for a proposed representative plaintiff to bring a motion for authorization to have his or her action proceed on behalf of all class members and to stay pending or future proceedings relating to the same issues. This is referred to as a ‘carriage’ motion [emphasis added].

[6] In implementing this approach, the courts wait until rival class actions emerge. At that point, there is a carriage motion to evaluate which of the two is better suited to carry the claim on the class’ behalf.

[7] Generally speaking, the carriage analysis turns on assessing which of the two cases reflects the best interests of the class, since the upshot of a carriage motion is that the class is assigned representation by one set of counsel over another: Mignacca v. Merck Frosst Canada Ltd. (2009), 95 OR (3d) 269, at paras 8, 26 (Div Ct). That analysis, in turn, has developed into what can be a complex exercise in weighing multiple factors of varying degrees of importance. In fact, the case law demonstrates that there can be over a dozen different factors to consider in a contentious carriage motion: see Kowalyshyn v. Valeant Pharmaceuticals International, Inc., 2016 ONSC 3819, at para 143. That weighing of competing factors cannot be done where an exclusivity order is sought in advance of a rival claim appearing on the scene.

[8] Counsel for the Plaintiff has identified only one case which they submit illustrates the approach that they advocate – i.e. in which an exclusivity order was issued in the absence of a competitive carriage motion. In Heyder v. Canada (Attorney General), 2018 FC 432, the Federal Court considered claims brought in multiple jurisdictions regarding the same subject matter, described at paras 3-4 as follows:

[3] These proposed class actions concern allegations of sexual harassment, sexual assault and gender-based discrimination made by current and former women and men serving in the Canadian Armed Forces.

[4] Six overlapping class proceedings were commenced in late 2016 and early 2017 in different jurisdictions within Canada. In September 2017, the Plaintiffs in these proceedings entered into a consortium agreement with the Plaintiffs in the related class actions.

[9] It is not entirely clear what prompted the motion in Heyder, except that there was such a multiplicity of proceedings across the country that, even with the agreement of all counsel that they would work in a consortium, it was apparently thought necessary to have a court recognize the way in which the actions had been organized. An order was then fashioned to give the court’s imprimatur to the arrangement to which the various sets of counsel had themselves agreed. The background to this is set out at para 5 of the judgment, which describes the arrangement as presented to the court: “The parties to the Consortium Agreement have agreed that Court File Nos. T-2111-16 and T-460-17 will be pursued on behalf of national classes, and the Provincial Actions will be held in abeyance.”

[10] Although this was called a “carriage motion” by the court, it was not one that appears to have assessed any rival claims or that excluded any one claim or set of counsel. In fact, the court issued what could more accurately be called an “inclusivity order” rather than an “exclusivity order”. Its entire thrust seems to have been to ensure that all of the various claims were present and accounted for in the ongoing national litigation. It did not choose one action over another or declare any of the various actions to be the exclusive one.

[11] The Heyder order was no doubt a valuable step in litigation management by the Federal Court. But it does not serve to override the Ontario Court of Appeal’s endorsement of true carriage motions, nor does it really illustrate what the Plaintiff seeks here.

[12] I am inclined to view the Plaintiff’s request as a form of end-run around a potential carriage motion. This is not to suggest that the Plaintiff is doing anything improper in seeking an “exclusivity order”. However, the effect of such an order would be to circumvent the established Ontario procedure for dealing with multiple class actions on the same subject matter and representing the same class.

[13] I understand, of course, that Plaintiff’s counsel is not suggesting that the exclusivity order be immutable; indeed, their request is that no other similar action may be commenced without leave of the court. That would acknowledge the court’s discretion to vary the order if the occasion were to arise. Nevertheless, an order in the nature of an exclusivity order gives a leg up to the first case to file that the Ontario legislature, in its wisdom, has not seen fit to give. Moreover, it is an approach that is at odds with the carriage motion approach that the Ontario Court of Appeal has endorsed.

[14] If another proposed class action emerges that covers the same claim and the same class as the present action, we will deal with that at the time. For now, there is no order to be made as there is no known action that rivals the one before me.

[15] The Plaintiff’s request for an exclusivity order is denied. There will be no costs of this motion.

Morgan J. Date: July 24, 2020