Court of Appeal Upholds Brewer’s Retail’s Ability to Enter into Reverse Class Action with Pensioners
A recent decision in the Ontario Court of Appeal has made new class actions law, recognizing the right of pension administrators to use the judicial system to resolve disputes with their pensioners on a consensual basis, over the objections of the Ontario pension regulator.
In Brewers Retail Inc. v. Campbell, 2023 ONCA 534, the Ontario Court of Appeal rejected an appeal from the pensions regulator, the Financial Services Regulatory Authority of Ontario (“FSRA”), which disputed the Court’s jurisdiction to consider a pension-related class action (with an agreed settlement agreement between its parties – a pension administrator and a committee of pensioners). FSRA did not seek leave to appeal the Court of Appeal decision.
McCarthy Tétrault (Dana Peebles and Leah Ostler from our Litigation Group, with Randy Bauslaugh, former lead of our Pension Group), represent Brewers Retail Inc. (“BRI”) in a dispute with a Committee of its pensioners which began in 2013, relating to certain pension plan provisions regarding indexing. The Committee claimed compensation for pensioners arising from such provisions going back to 1974, and disputed BRI’s right to revise the indexing provisions in the company’s pension plan going forward.
In a negotiation over several years, BRI and the Committee agreed to a settlement to provide compensation to current and prior plan participants in a manner that would fully and finally resolve all the issues relating to the indexing provisions going back to 1974. As part of that negotiation, the parties collaborated with the then-regulator (FSCO), from 2014 to 2018, to resolve technical compliance issues under the Pension Benefits Act in order to obtain regulatory consent for the agreement between the parties to use a reverse class action (to be issued by BRI) to implement the settlement. Court approval of the settlement agreement would allow the parties to resolve certain issues that could not be addressed within the authority of the regulator, such as settlement of the entitlements of unidentifiable persons who may have been members of the Plan in the period from 1974 (the “Unknown Members”). FSCO ultimately approved of the proposed settlement, subject to it also receiving court approval through the class action process.
However, in a unique change in circumstances, the pensions regulator changed in 2019, when FSRA replaced FSCO. The new regulator withdrew FSCO’s acceptance of the plan, and then issued a Notice of Intended Decision rejecting BRI’s proposed pension plan amendments. BRI appealed that Decision to the regulatory tribunal (the Financial Services Tribunal – “the FST”) and separately commenced its class action (with the co-operation of the Committee), in spite of FSRA’s opposition. FSRA opposed BRI at the FST, and hired outside counsel to oppose certification of the BRI class action, and to bring a motion to stay the class proceeding on the basis of jurisdiction.
In 2022, BRI and the Committee were successful at both the FST and in Superior Court:
- At the FST, the Tribunal granted a motion by BRI and the Committee to adjourn that proceeding, to allow the parties to pursue certification of the class action in Court: Brewers Retail v. Ontario (CEO of FSRA), 2021 ONFST 15.
- Then, in the Superior Court, BRI succeeded on the motion for conditional certification of the reverse class action, with the consent of the Committee, and defeated FSRA’s motion to stay the class action entirely on the basis of lack of jurisdiction: Brewers Retail v. Campbell, 2022 ONSC 850. The Court also granted a significant cost award against FSRA: Brewers Retail v. Campbell, 2022 ONSC 2795.
FSRA appealed the SCJ decision on the two motions.
The Ontario Court of Appeal Decision
The Ontario Court of Appeal held that permitting BRI and the Committee to reach a resolution through a class proceeding was preferable, and perhaps necessary to address certain issues that could not be resolved by FSRA or at the FST (i.e. the treatment of the group of “Unknown Members” as part of the settlement). The Court concluded that allowing the class action to proceed did not undermine the regulatory regime set out in the Pensions Benefits Act, and indeed, that prohibiting the parties from proceeding in Court in the appropriate circumstances could be harmful: “Forcing Brewers and the Committee to abandon the Application in favour of the FST hearing places both sides at risk. Against their wishes, those parties would be forced into an FST hearing, an ‘all or nothing’ forum. After a decade of negotiations, with the full participation and approval of the previous regulator, both sides would risk losing all that they had bargained for. In my view, that is harm.”
This case has been closely watched by the pension law community and has significant implications for companies that elect to work with their pensioners to solve pension disputes – but prefer to do so through a class action (with its procedural advantages, and broad release), rather then through the regulator, which sometimes cannot offer the same flexible solutions to historical issues.