By Leigh Kamping-Carder

Law360, New York (October 26, 2010) -- U.S. litigators are looking to Canada as an untapped market to expand their class action practices, but in a jurisdiction where the class action is still in its infancy, American attorneys may find some surprises north of the border.

In recent years class action litigators based in the U.S. have started teaming up with their counterparts in Canada, either forming strategic partnerships or coordinating parallel cases in the two countries, attorneys said.

"The world's longest undefended border is remarkably porous when it comes to class actions," Mary M. Thomson, a partner at Canadian law firm Gowling Lafleur Henderson LLP, said in an article titled "The Americanization of Canadian Class Actions."

The cross-border claims - which tend to crop up in the areas of securities, antitrust and product liability - have earned Canada a reputation, rightly or wrongly, as "the copycat jurisdiction," said Deborah Glendinning, a Toronto-based litigation partner at Osler Hoskin & Harcourt LLP.

"It's really unusual now not to have Canadian proceedings following closely on the heels of U.S. proceedings," said Robin Linley, a Toronto-based partner at Blake Cassels & Graydon LLP who focuses on product liability defense, citing the Canadian suits filed against Merck & Co. Inc. after its painkiller Vioxx was pulled off U.S. shelves.

Linley also could have pointed to parallel price-fixing cases filed against polyurethane foam makers; or the securities fraud litigation against Mississauga, Ontario-based Nortel Networks Inc. proceeding in New York; or the settlements resolving tainted pet food suits, which involved classes and counsel on both sides of the border.

It's possible that Canada will become an even more seductive venue for securities class actions following the U.S. Supreme Court's decision in Morrison v. National Australia Bank, which restricted the access of foreign investors to U.S. courts, attorneys said.

Strategic Alliances

In Canada, class actions are still a relatively new phenomenon, and it's not uncommon among the small number of plaintiffs firms that specialize in class actions to form strategic alliances with heavyweights in the U.S., said Victoria Paris, a principal at Toronto litigation boutique Kim Orr Barristers PC.

Likewise, many of the big class action and antitrust firms in the U.S. have contacts in Canada, said Milberg LLP partner Michael Spencer, who met Won Kim of Kim Orr at a conference five years ago and began exploring a collaboration. Currently, the firms are working together on a securities class action against the Toronto-based silicon supplier Timminco Ltd. and, Spencer said, looking at some "situations" that will likely result in future filings.

A cross-border collaboration can also take the form of a formal agreement, such as Lieff Cabraser Heimann & Bernstein LLP's ongoing partnership with Rochon Genova LLP. In other cases, Canadian and U.S. plaintiffs counsel consult after filing independent actions.

That happened in the polyurethane foam antitrust litigation, said Andrew Morganti of Sutts Strosberg LLP. Morganti, formerly of counsel at Milberg, joined Sutts Strosberg's Toronto and Windsor, Ontario, and offices a year and a half ago. Morganti said he spends roughly 10 percent of his time corresponding with U.S. counsel.

A Favorable Jurisdiction

After all, Canada is not only a next-door neighbor (or neighbour), it's America's largest trading partner. While there are obvious differences between the two legal systems, some of Canada's legislation - such as the Competition Act and the Ontario Securities Act - mirror U.S. laws. And the criteria for certifying class actions will also be familiar to American attorneys.

Some attorneys say the certification threshold is lower in Canada - there is no predominance requirement - and that courts look more kindly on certification. Whereas judges in the U.S. are restricting remedies for investors, courts in Canada are generally going in the opposite direction, Spencer said. In the area of mass torts, courts have said that product liability actions are the quintessential cases for class certification, Linley said.

"Overall, plaintiffs attorneys in the United States view Canada as having a lot of potential and being a very favorable jurisdiction for plaintiffs," Paris said.

Then there's the matter of the money: working on a parallel class action in Canada after filing one in the U.S. holds out the prospect of an additional payoff for little extra effort, according to Glendinning.

"It's still a pretty easy thing to do when you've already done the work in the U.S. We're right next door; you've got somebody on the ground you can work with," she said. "Why wouldn't I get in on that action, knowing that it's going to happen anyway, and I've already done the work in the U.S.?"

Some Surprises

If there is an answer to that question, it may lie in the stark differences between the Canadian and American systems - not the least of which is the lack of an equivalent to PACER - and the lingering uncertainty over how closely American attorneys can be involved in Canadian actions.

"Canada has a unique set of procedural rules which are wholly distinct from the U.S.," Morganti said, noting that it took him some months to fully acclimatize.

One difference, which Glendinning says tops the list of U.S. lawyers' pet peeves, is that there's no federal court system and no multidistrict litigation mechanism, forcing attorneys to file and fight cases across multiple provinces. Each province has its own class action legislation, although they are closely aligned.

Glendinning was involved in one case where the court used video conferencing equipment for hearings, beaming in eight other judges overseeing related litigation. "It sounds bizarre, but it's one way of trying to facilitate and streamline a process in our system because we don't have a higher court that we can elevate [cases] to when you have parallel cases going on in multiple jurisdictions," she said.

Another surprise for U.S. lawyers is the length of hearings themselves: they're often counted in days, not hours, said Glendinning, who participated in one class certification hearing that lasted more than a week.

"When you explain that to a U.S. trial attorney, that's shocking, but that's the nature of our process," she said.

And some attorneys say Canada is not so welcoming to plaintiffs: there are no jury trials, and there are caps on liability. Fees tend to be far lower and receive closer scrutiny from the court, attorneys said.

Firm Roles Still in Flux

It's also not clear how receptive Canadian judges are to the involvement of U.S. firms. The issue of whether - or if - American lawyers can split fees in Canadian class actions is still in flux, attorneys said.

In 2006 an Ontario judge frowned on an agreement Motley Rice LLC signed with Will Barristers: Morin & Miller LLP to fund litigation costs against Ford Motor Co. in exchange for a percentage of attorneys' fees, citing the U.S. firm's control of the action as one reason to deny class certification.

Another Ontario judge, in October 2009, allowed Milberg's participation in the Timminco case.

The ruling decided a carriage action - the Canadian equivalent of a lead counsel dispute - and the judge found that Milberg's strategic advice, investigative assistance and document management was a "sterile or neutral factor" in giving Kim Orr the lead on the case. (The question also revolved around Milberg's now-defunct association with disgraced plaintiffs attorney Bill Lerach.)

The lesson? Courts are reluctant to allow U.S. attorneys to participate if there's a sense that it's not Canadian attorneys "driving the boat," Linley said.

On the other side, however, it's no secret that U.S. defense firms are "calling the shots" for the defendants, bringing their resources and expertise to bear on cases with little criticism from the court, Paris noted. But she acknowledges that Canadian courts are more cautious about embracing the wholesale involvement of U.S. firms.

"Let's try it," she said, describing the courts' attitude, "but let's go step by step and make sure there's nothing inappropriate about either side's behavior.