Potential class action exposure in Canada in the wake of COVID-19

Canadian companies are facing sweeping and unprecedented challenges in the wake of the COVID-19 pandemic. Companies also face a risk of class actions being filed arising from a company’s response to COVID-19. In the United States, several class actions have already been filed in relation to companies’ responses to COVID-19:

  • Securities class actions alleging that companies made false and misleading statements in the wake of the outbreak of COVID-19, for example:
     
    • A class action complaint against Norwegian Cruise Lines for violations of federal securities laws, alleging that Norwegian reported positive outlooks for the Company despite the “current known impact from the COVID-19 coronavirus outbreak”, and pressured its sales team to mislead potential customers about COVID-19 in order to entice customers to purchase cruises; and
       
    • A class action complaint against Inovio Pharmaceuticals, Inc., alleging that Inovio and its CEO made false and misleading claims that Inovio had developed a vaccine for COVID-19.

      Both claims state that when the allegedly false statement was exposed as being false, share prices plummeted, resulting in losses to shareholders.

  • Deceptive advertising and business practices class action complaint against Target alleging that Target engaged in misleading promotion of its hand sanitizer product that it “kills up to 99% of germs”.

Mass employee layoffs also pose risk of employment-related class actions.

Similarities between US and Canada raise a risk of both independent and "copycat" claims being filed in Canada, particularly in the following areas, which have had fair degree of success in being certified as class action in Canada:

  • Consumer protection claims, including alleged unfair, deceptive or unconscionable business practices, like deceptive marketing, or predatory business practices;
     
  • Securities-related (secondary market liability) claims; and
     
  • Employment-related claims, including those based on wrongful dismissal.

In light of the unprecedented and fast changing environment, class action risk is just one of the many risks companies need to manage. The US experience shows that companies should, among other things, consider carefully how they communicate with investors, customers, and the public more generally about COVID-19 and its impact on business.

For more information about the content of this update, please contact one of the authors, and for up-to-date information on COVID-19 and McCarthy Tétrault’s perspective on the legal issues it presents, please visit our dedicated hub here.

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