Voltage Pictures, LLC v. Salna

Voltage Pictures, LLC v. Salna
Court (s) Database
Federal Court Decisions
Date
2023-06-26
Neutral citation
2023 FC 893
File numbers
T-662-16
Notes
A correction was made on June 27, 2023
Decision Content
Date: 20220626
Docket: T-662-16
Citation: 2023 FC 893
Ottawa, Ontario, June 26, 2023
PRESENT: The Honourable Mr. Justice Fothergill
BETWEEN:
VOLTAGE PICTURES, LLC, COBBLER NEVADA, LLC, PTG NEVADA, LLC, CLEAR SKIES NEVADA, LLC, GLACIER ENTERTAINMENT S.A.R.L. OF LUXEMBOURG, GLACIER FILMS 1, LLC, AND FATHERS & DAUGHTERS NEVADA, LLC
Applicants
and
ROBERT SALNA, JAMES ROSE AND LOREDANA CERILLI, PROPOSED REPRESENTATIVE RESPONDENTS ON BEHALF OF A CLASS OF RESPONDENTS
Respondents
and
SAMUELSON-GLUSHKO CANADIAN INTERNET POLICY & PUBLIC INTEREST CLINIC, BELL CANADA, COGECO CONNEXION INC., ROGERS COMMUNICATIONS CANADA INC., SASKTEL, TELUS COMMUNICATIONS INC., VIDEOTRON LTD., AND XPLORE INC.
Interveners
ORDER AND REASONS
I. Overview [1] The Applicants Voltage Pictures, LLC, Cobbler Nevada, LLC, PTG Nevada, LLC, Clear Skies Nevada, LLC, Glacier Entertainment S.A.R.L. of Luxembourg, Glacier Films 1, LLC, and Fathers & Daughters Nevada, LLC [collectively Voltage] are motion picture production companies that form a part of the Voltage film studio. Voltage asks this Court to certify a class proceeding against approximately 874 unknown Class Members whose Internet Protocol [IP] addresses were allegedly used to upload and download films produced by Voltage without authorization, thereby infringing Voltage’s copyright in the films.
[2] The proposed Representative Respondent, Robert Salna, opposes certification of the proposed class action. He says that a class action is not the preferable procedure for resolving Voltage’s claims, and he is not a suitable Representative Respondent.
[3] The Interveners, Samuelson-Glushko Canadian Internet Policy & Public Interest Clinic [CIPPIC], Bell Canada, Cogeco Connexion Inc, Rogers Communications Canada Inc [Rogers], Sasktel, Telus Communications Inc, Videotron Ltd, and Xplore Inc [collectively the Interveners] agree that a class action is not the preferable procedure. They also take the position that Voltage’s litigation plan is deficient. Mr. Salna endorses the Interveners’ opposition to Voltage’s proposed use of the “notice-and-notice” regime under the Copyright Act, RSC 1985, c C-42, to notify Class Members of the class proceeding and subsequent steps in the proceeding.
[4] For the reasons that follow, Voltage has discharged its onus of demonstrating “some basis in fact” for the conclusion that a class action is the preferable procedure for resolving its claims of copyright infringement against hundreds of unidentified Class Members. Subject to a reasonable assurance of funding for Class Counsel, Mr. Salna is a suitable Representative Respondent. The risk that Class Members may opt out in sufficient numbers to undermine the viability of the proceeding is speculative, and can be addressed through case management as the proceeding unfolds.
[5] The notice-and-notice regime under the Copyright Act cannot be used to notify Class Members of the class action or subsequent steps in the proceeding. Nor can it be used to give Class Members an opportunity to opt out of the proceeding in exchange for proof of ceasing to infringe or mitigating damages.
[6] Given the deficiencies in the litigation plan, the proposed class proceeding cannot be certified at this time. Voltage remains at liberty to present a revised litigation plan that does not depend on the notice-and-notice regime in the Copyright Act to identify and communicate with Class Members, and that makes adequate provision for the funding of Class Counsel.
[7] In the exceptional circumstances of this case, costs of the motion are awarded to Mr. Salna.
II. Background [8] Voltage commenced this application in 2016. The proceeding has been ongoing for over six years. Aspects have been elevated to the Federal Court of Appeal [FCA] three times and to the Supreme Court of Canada once. This is the second hearing of the certification motion.
[9] Voltage alleges copyright infringement with respect to five films: The Cobbler, Pay the Ghost, Good Kill, Fathers and Daughters, and American Heist [collectively the Works]. In Salna v Voltage Pictures, LLC, 2021 FCA 176 [Salna], the FCA described the circumstances of the alleged copyright infringement as follows (at paras 15-16):
Forensic software deployed by Voltage identified the internet protocol (IP) addresses of BitTorrent users who downloaded any of the Works. The software also collected information on the BitTorrent users offering to upload these films. This included the IP address used by the uploader, the date and time the film was made available for upload in the form of a computer file and the file’s metadata, including the name and size of the computer file containing the film and the BitTorrent hash number.
An IP address allows data sent over the internet to be received by the intended recipient device. Every IP address in existence is assigned, in groups or blocks, to different Internet Service Providers (ISPs), such as Rogers, Telus or Bell. ISPs, in turn, allocate individual IP addresses to the internet-connecting devices of their customers, those contractually obligated to an ISP to pay for internet services (Internet Account Subscribers). An example of an internet-connecting device is an internet router. Although each internet-connecting device has its own IP address, that device can in turn connect to a variety of other internet using devices, such as computers, tablets, cellphones, etc. Multiple devices can thus simultaneously use an internet connection under the same IP address.
[10] Following a review of the IP addresses identified by the forensic software, Voltage determined that one had been used to upload all five Works. Voltage obtained a Norwich order (named after Norwich Pharmacal Co v Customs & Excise Commissioners, [1974] AC 133 (HL)) to compel Rogers to disclose the identity of the subscriber who had been assigned this IP address at the relevant times. Following an appeal to the Supreme Court of Canada (Rogers Communications Inc v Voltage Pictures, LLC, 2018 SCC 38 [Rogers]), Rogers identified Robert Salna as the internet account subscriber (Salna at para 20).
[11] Voltage alleges that the Respondent Class Members have committed one or more of three unlawful acts: (a) making a film available for download by means of the BitTorrent network, offering the file for uploading, or actually uploading a film; (b) advertising by way of the BitTorrent protocol that a film is available for download; and (c) authorizing copyright infringement by failing to take reasonable steps to ensure the first and second unlawful acts did not take place in respect of an internet account controlled by a subscriber. The FCA determined in Salna that Voltage’s application discloses reasonable causes of action for the purposes of a certification motion (Salna at para 92).
[12] Mr. Salna owns several rental properties. He provides Internet access to his tenants. He says that his tenants must be responsible for the alleged copyright infringement, but the tenants deny this. Voltage added the tenants as proposed named Representative Respondents, but then discontinued the proceeding against them. The proposed Respondent Class Members are currently limited to internet account subscribers who received notice from their Internet Service Provider [ISP] within a specified time period.
[13] On November 12, 2019, Justice Keith Boswell dismissed Voltage’s motion for certification of the class proceeding, finding that Voltage had failed to meet any part of the conjunctive test for certification (Voltage Pictures, LLC v Salna, 2019 FC 1412 [Voltage]; Federal Courts Rules, SOR/98-106, R 334.16).
[14] On September 8, 2021, the FCA allowed Voltage’s appeal in part. It set aside this Court’s decision, and found in Voltage’s favour with respect to the first three parts of the certification test, namely: (a) reasonable cause of action, (b) identifiable class of two or more persons, and (c) common issues. The FCA directed that the certification motion be returned to this Court for reconsideration of parts (d) and (e) of the test, namely preferable procedure and suitable class representative.
[15] The FCA was unable to decide whether a class action was the preferable procedure for the just and efficient resolution of the claims advanced by Voltage. The FCA found that evidence regarding the size and shape of the class was weak, and some of Justice Boswell’s conclusions lacked sufficient explanation. The FCA acknowledged that Respondent Class Members could opt out and reduce the class to a miniscule size. Conversely, the FCA hypothesized that a class action might be preferable, because it could allow Class Members to share the costs of their defence and reduce the pressure on them to settle. If every member opted out, then the proceeding could be decertified. The FCA therefore found concerns about the size of the class to be premature.
[16] Justice Boswell held that Mr. Salna lacked “the necessary incentive to defend the application with diligence and vigor” because he would at most be liable for $5,000 in statutory damages (Voltage at para 155; Salna at para 122). The FCA rejected this reasoning, because it would lead to the conclusion that reverse class proceedings would never have a suitable representative respondent where the monetary consequence for each class member was low. This would be incompatible with the purpose of class actions, which is to allow recovery for claims that are non-viable individually (Salna at paras 123-126).
III. Reverse Class Actions: Guiding Principles [17] The Federal Courts Rules allow for the certification of both plaintiff/applicant and defendant/respondent class proceedings. In conventional class actions, a representative plaintiff voluntarily sues a defendant on behalf of a class of similarly situated persons. In “reverse” class actions, a plaintiff sues a group of defendants who are alleged to have engaged in similar wrongful conduct, and names one or more defendants to serve as representative(s) for the defendant class.
[18] Reverse class actions are rare in Canada. Examples of cases in which certification of a reverse class action has been sought include the following:
(a)by an Indigenous Band asserting ownership of disputed lands against a proposed class of government and corporate entities holding legal title to the lands (Chippewas of Sarnia Band v Canada (Attorney General), [1996] 137 DLR (4th) 239 (ONCA) [Chippewas]);
(b)to contest the seniority between the pilots of two merging airlines (Berry v Pulley, [2001] 197 DLR (4th) 317 (ONSC) [Berry]);
(c)by a proposed class of employees against their employers for failing to make contributions to their trust funds (Sutherland v Hudson’s Bay Co, [2005] 74 OR (3d) 608 (ONSC));
(d)by the former directors of a bankrupt aircraft maintenance company against 1,691 former employees respecting an award made pursuant to the Canada Labour Code, RSC 1985, c L-2 (Bernlohr v Former Employees of Aveos Fleet Performance Inc, 2019 FC 837 and 2021 FC 113); and
(e)by a proposed class of automobile purchasers against a proposed class of automobile dealers and parts manufacturers for selling vehicles equipped with a “defeat device” to circumvent government emissions tests (Marcinkiewicz v General Motors of Canada Co, 2022 ONSC 2180 [Marcinkiewicz]).
[19] In Salna, the FCA confirmed that the objectives of plaintiff or applicant class proceedings apply equally to reverse class proceedings (at para 67):
The objectives of class proceedings are well known: (i) facilitating access to justice through the distribution of legal fees across a large number of class members, (ii) conserving judicial resources by reducing unnecessary duplication in the fact-finding and legal-analysis process, and (iii) modifying harmful behaviours by ensuring that actual and potential wrongdoers take into full account the harm they are causing or might cause (Dutton at paras. 27, 29; Hollick at paras. 15, 16, and 25). These advantages exist not only in a typical plaintiff class proceeding, but also in the case of a reverse class proceeding, where specific plaintiffs bring a proceeding against a class of defendants. Defendant/respondent class proceedings have been described “[…] as a means of providing plaintiffs with an enforceable remedy where it was otherwise impractical to secure the attendance of all potential defendants, while at the same time ensuring that those affected by the outcome of a lawsuit, although absent, were sufficiently protected” (Chippewas at paras. 16-17).
[20] Conventional class actions are intended to level the playing field between vulnerable individual plaintiffs and well-resourced corporate entities. By contrast, reverse class actions allow powerful corporations to pursue compensation from those much less powerful. Nevertheless, reverse class action may advance judicial economy by reducing “the financial implications of mounting a defence for each class member” and alleviating the pressure on class members to settle (Salna at para 115).
[21] In Marcinkiewicz, Justice Paul Perell of the Ontario Superior Court of Justice endorsed five guiding principles for determining when a reverse class action is appropriate (at para 186, citing William E. McNally and Barbara E. Cotton, “Guiding Principles Regarding the Constitution of a Representative Defendant and a Defendant Class in a Class Actions Proceeding” (2003), 27 Advocates’ Quarterly 114):
(1) In assessing whether a representative defendant and a defendant class action should be constituted, the court should primarily ascertain whether the proposed class of defendants has any common interest.
(2) Further, where there is a possibility of different defences, a class action binding prospective defendants is inappropriate.
(3) In assessing whether a representative defendant and a defendant class action should be constituted, the court should primarily ascertain whether the representative defendant would likely defend the action in a vigorous manner. This is most frequently expressed as a requirement that the court ascertain whether the representative defendant could be said to “fairly and honestly try the right.”
(4) The guidance in John v. Rees and Others [[1914] 2 K.B. 930 (C.A.)] that the constitution of a representative action is primarily for the benefit of the convenient administration of justice is overarching. It is a fundamental tenet that guides the courts.
(5) An objective [sic] of a named defendant to acting in a representative capacity is to be given only token weight if the court is satisfied that the defendant will vigorously defend.
[22] A significant challenge in reverse class actions arises from the fact that the representative defendant or respondent is chosen by the plaintiff or applicant to represent the class, often against the representative’s will. However, while the absence of a consenting or willing representative may be fatal to certification of plaintiff class actions, this impediment does not arise in reverse class actions so long as the representative vigorously defends the common interests of the proposed class (Chippewas at paras 45-46).
[23] There is a risk that all respondent class members may opt out, reducing the class size to zero. However, it cannot be assumed that every class member will opt out, even if there is a good chance this may happen. Decertification is one possible option, although going through a contested certification motion that is later decertified would be a waste of court and litigant resources – the very problem reverse class actions purport to address (Salna at para 114).
IV. Issues [24] The sole issues referred to this Court for determination by the FCA in Salna are (a) whether the proposed class action is the preferable procedure and (b) whether Mr. Salna is a suitable Representative Respondent.
V. Analysis [25] The test for certification of a proposed class action is found in Rule 334.16(1):
334.16(1) Subject to subsection (3), a judge shall, by order, certify a proceeding as a class proceeding if
(a) the pleadings disclose a reasonable cause of action;
(b) there is an identifiable class of two or more persons;
(c) the claims of the class members raise common questions of law or fact, whether or not those common questions predominate over questions affecting only individual members;
(d) a class proceeding is the preferable procedure for the just and efficient resolution of the common questions of law or fact; and
(e) there is a representative plaintiff or applicant who
i. would fairly and adequately represent the interests of the class,
ii. has prepared a plan for the proceeding that sets out a workable method of advancing the proceedings on behalf of the class and of notifying class members as to how the proceeding is progressing,
iii. does not have, on the common questions of law or fact, an interest that is in conflict with the interests of other class members, and
iv. provides a summary of any agreements respecting fees and disbursements between the representative plaintiff of application and the solicitor of record.
334.16(1) Sous réserve du paragraphe (3), le juge autorise une instance comme recours collectif si les conditions suivantes sont réunies:
(a) les actes de procédure révèlent une cause d’action valable;
(b) il existe un groupe identifiable formé d’au moins deux personnes;
(c) les réclamations des membres du groupe soulèvent des points de droit ou de fait communs, que ceux-ci prédominent ou non sur ceux qui ne concernent qu’un membre;
(d) le recours collectif est le meilleur moyen de régler, de façon juste et efficace, les points de droit ou de fait communs;
(e) il existe un représentant demandeur qui:
i. représenterait de façon équitable et adéquate les intérêts du groupe,
ii. a élaboré un plan qui propose une méthode efficace pour poursuivre l’instance au nom du groupe et tenir les membres du groupe informés de son déroulement,
iii. n’a pas de conflit d’intérêts avec d’autres membres du groupe en ce qui concerne les points de droit ou de fait communs,
iv. communique un sommaire des conventions relatives aux honoraires et débours qui sont intervenues entre lui et l’avocat inscrit au dossier.
A. Preferable Procedure [26] An applicant seeking certification must demonstrate some basis in fact for the conclusion that a class action is the preferable procedure for resolving the common issues. Courts are to conduct the assessment “through the lens of the three principal goals of class actions, namely judicial economy, behaviour modification and access to justice” (Salna at para 105, citing AIC Limited v Fischer, 2013 SCC 69 at para 22).
[27] The preferability requirement has two concepts at its core: (a) whether the class proceeding would be a fair, efficient and manageable method of advancing the claim; and (b) whether the class proceeding would be preferable to other reasonably available means of resolving the claims of class members. This determination requires an examination of the common issues in their context, taking into account the importance of the common issues in relation to the claim as a whole. The preferability requirement can be met even where there are substantial individual issues; the common issues need not predominate over individual issues (Salna at para 105, citing Wenham v Canada (Attorney General), 2018 FCA 199 at para 77 [Wenham] and Brake v Canada (Attorney General), 2019 FCA 274 at para 85).
[28] It is an error of law to merge concerns with the litigation plan into the consideration of the preferability test. The preferability criteria entails a higher-level macro analysis that asks whether a class proceeding is the best procedure for resolving the issues. By contrast, the litigation plan is a specific micro-level consideration that asks, if a class proceeding is the preferable procedure, whether there is a workable organizational plan to advance the litigation (Salna at para 108).
[29] The preferability analysis involves a weighing of the pros and cons of different procedures to determine which, in light of the objectives of class proceedings, would be preferable to answer the questions of fact and/or law. Exceptionally, analysis of the proposed litigation plan may be appropriate if a specific detail of the plan becomes especially pertinent to the preferable procedure analysis, for example, by addressing one of the potentially relevant matters enunciated in Rule 334.16(2) (Salna at para 109).
[30] Voltage has identified numerous IP addresses that were allegedly used to infringe its copyright in the Works. In Salna, the FCA acknowledged that identification of the internet account subscribers associated with those IP addresses could present a challenge. Many potential members may be excluded from the proposed class due to the six-month time limit for the retention of data by ISPs. However, even a small percentage of the IP addresses could result in the identification of hundreds of potential infringers (Salna at para 112).
[31] In conducting the preferability analysis, it is important to consider the feasibility of joinder of a large number of individual claims, and the implications for the administration of justice of issuing statements of claim in even a small percentage of those cases, including the impact on court administration, judicial resources, and the resources of the parties. The mechanics and feasibility of enforcing default judgments must also be considered (Salna at para 112).
[32] The FCA has previously determined that “[i]n circumstances such as these, where there are multiple respondents, each potentially liable for small amounts of money, a class action is a ‘fair, efficient and manageable method of advancing the claim’” (Salna at paras 115-116, citing Wenham at para 77):
[…] Class actions reduce the financial implications of mounting a defence for each class member through the sharing of counsel, expert witnesses and fees. This reduced financial burden can also alleviate the pressure on class members to settle prior to a determination of the matter on its merits.
Additionally, a class proceeding will allow for the resolution of at least some of the legal questions. Further, if the individual circumstances of various class members becomes determinative of liability on a case-by-case basis, the Federal Courts Rules provide a mechanism for the determination of those individual, or smaller group, questions (Rules 334.26 and 334.27). A common resolution or framework for resolution, applicable to even some of the common questions of fact and law, will save judicial resources and reduce inconsistencies that can arise should similar, individual actions come before the Courts.
[33] There was scant evidence before Justice Boswell in the first certification motion, and subsequently before the FCA, regarding the approximate size and shape of the potential class, particularly given its “revolving and ever mutating nature” (Salna at para 118). Without evidence of how membership was to be determined and preserved, and the scale of membership, the FCA was unable to determine whether a class proceeding would be preferable over other reasonably available options. This is because the preferability analysis differs depending on the size of the class. The Court does not need to know the exact number of class members nor the ultimate boundaries of the class with precision. However, there must be some evidence on which the Court can conclude that a class proceeding is the preferred approach (Salna at paras 118-119).
[34] As of September 16, 2022, there were fewer than 1,000 potential Class Members, i.e., internet account subscribers who had allegedly infringed Voltage’s copyright in the Works during the prior six-month period. According to Voltage, if this certification motion had been determined sooner, then the number of potential infringers, and the size of the respondent class, could have been in the tens of thousands. At one time, Voltage asserted a class size of more than 55,000 individuals.
[35] Voltage therefore argues that its case for certification should not be limited to a Respondent Class of under 1,000 persons, but should encompass a much larger class size “given the precedential nature of this motion and to be fair to the Court and the other parties (such as the ISP Interveners) who would need to deal with a much larger class size”.
[36] Even if the Respondent Class is estimated to comprise 874 members, I am satisfied that Voltage has demonstrated “some basis in fact” for the conclusion that a class proceeding is the preferable procedure.
[37] A class proceeding will permit the determination of common issues based upon a single set of pleadings. The common issues will be decided on the basis of common evidence, including expert evidence. Respondent Class Members may pool resources to fund the defence, and may advance a coordinated position with the assistance of Class Counsel. This in turn alleviates the risk of inconsistent judgments.
[38] A class proceeding may permit Respondents to benefit from a higher degree of anonymity. They may choose to identify themselves only to Class Counsel. By contrast, individual applications, including those commenced against multiple respondents, will require identification of each respondent by name unless the Court grants a confidentiality order.
[39] Another major advantage of a reverse class proceeding is that any settlement must be approved by the Court. This is an important safeguard against “copyright trolling”, where respondents are pressured to settle unmeritorious claims under threat of significant litigation costs.
[40] Mr. Salna cautions that the myriad individual issues will inevitably overwhelm the common issues and render a class proceeding unworkable. The Interveners maintain that the common issues will likely be limited to the subsistence of Voltage’s copyright in the Works and whether the methodology used to detect unauthorized uploading and downloading is reliable. Individual assessments will be required to establish the culpability of each Respondent, including the possibility of misidentification, and any damages payable.
[41] Mr. Salna and the Interveners note that one of the guiding principles endorsed by Justice Perell in Marcinkiewicz is: “where there is a possibility of different defences, a class action binding prospective defendants is inappropriate” (at paras 186, 188).
[42] This must be tempered by the observations of the FCA in Salna (at paras 102-104):
[…] While an overwhelmingly large number of individual fact assessments pose challenges to the management of a class action, these differences must be viewed through the lens of whether certifying the class will advance the three principal goals of class proceedings: judicial economy, behaviour modification, and access to justice (Fischer at para. 22). Resolving even a single issue among many may achieve these goals, for example, by both eliminating the inconsistencies that can occur when different judges are asked to answer the same question as well as by reducing the judicial resources spent in analysing that single issue.
As such, I do not find speculative concern about misidentification or that there may be a number of potentially different factual scenarios persuasive. Second, flexibility is infused into the Federal Courts Rules class proceedings rules in that the Rules provide numerous avenues to resolve individual issues that may arise (Brake at para. 92). Options include the ability to create subclasses based on similar fact scenarios (Rule 334.16(3)) and the ability for a court-supervised individual assessment process (Rule 334.26). Additionally, if the class proceeding does become unmanageable as it proceeds, the Federal Courts Rules allow for amendments to the pleadings or even decertification if the conditions for certification are no longer satisfied (Rule 334.19).
The argument that the statutory remedies requested by Voltage will require an individual assessment (see Appellants’ Memorandum of Fact and Law in Response to the Cross-Appeal at subparas. 43(d) and (e)), receives the same answer [citing Rule 334.18(a)].
[43] In light of the guidance provided by the FCA in Salna, I am persuaded that speculative concerns about the potential for different fact scenarios do not outweigh the benefits of a reverse class action in these circumstances. If the class proceeding becomes unmanageable, then it may be adjusted or ultimately decertified (Rule 334.19). At this stage in the proceeding, Voltage has met its burden of demonstrating “some basis in fact” for the conclusion that a reverse class proceeding is a preferable procedure to the alternatives of individual actions or joinder.
[44] Mr. Salna proposed site-blocking orders as another alternative to a reverse class proceeding. Voltage acknowledged that this may be an avenue worth exploring, but none of the parties addressed this possibility in depth. Site-blocking orders would not permit Voltage to recover damages, and it is therefore doubtful (although not impossible) that this would be a viable alternative to a class proceeding for the purposes of the preferability analysis under Rule 334.16(1)(d). In any event, this potential alternative mode of proceeding was not sufficiently canvassed by the parties to permit the Court to conclude that site-blocking orders present a preferable procedure to a reverse class action in the present circumstances.
B. Representative Respondent [45] Mr. Salna objects to being named as the Representative Respondent on a number of grounds. He argues that he has no incentive to defend the proceeding on behalf of all Respondent Class Members, and there is no mechanism to ensure the payment of Class Counsel’s fees and disbursements. He cautions that this may give rise to conflicts of interest between himself and other Class Members.
[46] Mr. Salna notes that Class Members may opt out in sufficient numbers to undermine the viability of a class proceeding altogether, and there will be no opportunity for him to seek contribution or indemnity for his legal costs.
[47] The Interveners say that complying with Voltage’s litigation plan will force them to redesign their systems, which will be both expensive and disruptive to their relationships with their subscribers. They also maintain that Voltage’s proposed use of the notice-and-notice regime in the Copyright Act to require ISPs to inform Class Members of the class action and subsequent steps in the proceeding is not authorized by the statute, and is therefore illegal.
(1) Class Counsel Fees and Conflicts of Interest [48] According to Mr. Salna, if he is ultimately found to be liable for copyright infringement, then his “worst day in court” is a requirement to pay damages in the range of a “parking ticket”. There is nothing in the litigation plan to assure him of any meaningful cost sharing among Class Members, or anything to lessen the financial burden of litigation on him personally. He says it would be manifestly unfair and legally untenable for this Court to compel him to bear the entire cost of a vigorous defence on behalf of the Respondent Class.
[49] The costs of defending against Voltage’s allegations may be considerable, and may include:
(a)retaining one or more experts to assess the reliability of Voltage’s forensic software;
(b)advancing legal or factual positions on the common issues trial that may not pertain to Mr. Salna’s personal circumstances for the benefit of the class (for example, Voltage’s proposed “common issue” of whether fair dealing is a defence); and
(c)retaining and paying Respondent Class Counsel to manage and oversee class-related matters as they arise, including: (i) supervising the class website proposed by Voltage, (ii) fielding questions, marshalling evidence, or taking instructions from interested Class Members before trial, (iii) managing and tracking opt-outs, and (iv) case management on behalf of the class, e.g., implementing the litigation plan, establishing subclasses if appropriate, or moving to decertify the proceeding if too many Class Members opt-out.
[50] Mr. Salna says it would be better for him to defend himself against Voltage’s claims without retaining counsel, or raise no opposition to a common issues trial and risk suffering the proverbial “parking ticket”. Either approach would preclude any vigorous defence, or any meaningful representation of the Respondent Class. Indeed, the latter option would create a conflict of interest between Mr. Salna and other Class Members.
[51] Voltage argues that Mr. Salna’s alleged lack of motivation is not a barrier to certification. Mr. Salna has proven himself to be anything but disinterested in this proceeding, and has been very litigious throughout. He appealed the costs order in the first certification motion before Voltage commenced its appeal of the merits, with the result that Voltage was a Cross-Appellant in Salna. Mr. Salna also brought an unsuccessful motion for reconsideration of the FCA’s decision. He sought to obtain leave to appeal Salna to the Supreme Court of Canada, but this was refused. Mr. Salna has taken a keen interest in this proceeding since its inception, and has mounted a formidable defence.
[52] In Salna, the FCA disagreed with Justice Boswell’s conclusion that certification must be refused because Mr. Salna lacked any financial incentive to defend the class action on behalf of the class. The FCA held that this would effectively foreclose any representative being found suitable in any reverse class action when the monetary consequences are low.
[53] To date, Mr. Salna has shown himself to be adept at defending against this proposed reverse class proceeding in a vigorous manner. Should this change in the future, then it may be necessary to identify alternative class representatives.
[54] The funding of class counsel is of paramount importance. If this is not sufficiently addressed in the litigation plan, then this may ultimately prove fatal to certification. However, this is not in itself a barrier to appointing a reluctant representative respondent who has shown himself to be capable of vigorously and fairly defending the interests of the class as a whole.
(2) Use of the Opt-Out Mechanism [55] In Salna, the FCA noted that the ability to opt-out of the class proceeding is codified in Rules 334.17(1)(f) and 334.21, and is not a reason to refuse certification (at para 114, citing Chippewas at paras 34, 37 and Berry at para 46). In light of this observation, there is little scope for this Court to refuse certification on the ground that the Respondent Class may ultimately be too small to be viable.
[56] Concerns of this nature may be addressed through case management as and when they arise. If the Respondent Class size is ultimately too small, then decertification is an option.
(3) Cost and Inconvenience to ISPs [57] The evidence adduced by the Interveners is broadly consistent, and was not challenged by Voltage in cross-examination. Voltage nevertheless urges this Court to be circumspect in accepting general statements regarding the cost and inconvenience to the ISPs of complying with the litigation plan.
[58] According to the affidavit evidence adduced by the ISPs, their systems have been designed to forward only notices of claimed infringement that comply with the Copyright Act. Each system is different, and not all systems are automated, but in general the ISPs’ systems are designed to:
(a)receive the notice of claimed infringement as defined by the Copyright Act;
(b)ingest that information and perform initial validation steps;
(c)use the IP address provided in the notice to look up the email address on file for the relevant account holder at the relevant time;
(d)forward the notice of claimed infringement to the account holder;
(e)advise the sender of the notice that the notice was forwarded or the reason it could not be forwarded; and
(f)store specified records for six months or one year.
[59] The Interveners object that Voltage’s litigation plan would require them to deliver a class action “Certification Notice”. The litigation plan also contemplates that Voltage may instruct the ISPs to “retain data on identities of their subscribers until following final determination of the hearing on the merits (including any appeals)”. In oral submissions, counsel for Voltage acknowledged that retention of subscriber data for any periods beyond those prescribed by the Copyright Act would necessitate a court order.
[60] Voltage’s litigation plan also contemplates that ISPs will forward “Order Notices” when asked to do so. Respondent Class Members who do not respond to an Order Notice will then be identified by the ISP pursuant to a Norwich order. Voltage accepts that it will have to reimburse the ISPs for the reasonable costs of responding to such requests, but it has not undertaken to pay any other expenses that may be incurred by ISPs as the class action unfolds.
[61] According to the Interveners, if they are required to retain subscriber data for this and other class proceedings, then they will have to: (a) store all data for all customers for years, which is an unrealistic proposition; (b) redesign their complex software systems and related databases to automatically preserve only data retroactively selected by Voltage; or (c) manually save data for potentially tens of thousands of customers. Purchasing the necessary redundant and reliable storage will be expensive and time consuming, as will be redesigning the complex software.
[62] Specifically, to comply with Voltage’s litigation plan, ISPs will have to redesign their systems to handle:
(a)additional text: the Sample Certification Notice includes two pages of introductory text, as well as the entire text of the proposed certification order;
(b)reference numbers: every communication to an ISP account holder must incorporate a unique reference number that is then shared with Voltage; and
(c)attachments: if legal documents are to be attached to the notices, this will necessitate extensive re-design and may have the effect of undermining measures to prevent the forwarding of spam or malicious software.
[63] The Interveners also raise concerns about ongoing communications with subscribers about “how the proceeding is progressing”, and say this clearly falls outside the scope of the notice-and-notice regime. Account holders who receive “Certification Notices” may believe that ISPs are wrongly accusing them of infringement, or taking the side of copyright owners against their own customers. Many will call their ISPs to complain, or to seek advice or information. This will lead to increased call volumes requiring more customer service agents, and the need for more complex training to deal with legally sensitive discussions. None of the resulting costs is addressed in Voltage’s litigation plan.
[64] The Interveners say that Voltage’s litigation plan, if approved, may cause customers to change service providers, or submit unusable contact information to avoid legal liability. Unusable contact information will prevent ISPs from contacting their customers about their accounts or additional service offerings, jeopardizing the ISPs’ businesses.
[65] If it were possible to use the notice-and-notice regime under the Copyright Act in the manner proposed by Voltage, then it is conceivable that the ISPs’ concerns regarding cost and inconvenience could be addressed in a revised litigation plan. To the extent that the expenses incurred by the ISPs exceed those that necessarily result from compliance with the notice-and-notice regime, they would be recoverable from Voltage (Rogers at paras 52-53). However, as I discuss below, Voltage’s proposed use of the n