Deterring Compensation: Class Action Litigation and Damage Awards Against Corporate Defendants

The class action has been lauded as an efficient and effective procedural mechanism to modify a defendant’s wrongful behaviour and compensate the plaintiff. A damage award against the defendant may modify behaviour. If fault is established at a class action trial on the merits, the damage award forces the defendant to internalize the costs of its “wrongful” conduct, and simultaneously compensates the plaintiff. The recent Létourneau c JTI-MacDonald Corp decision in the Superior Court of Quebec appeared to support the theory that class actions achieve deterrence: Riordan J awarded the largest damage award in Canadian legal history against the three tobacco defendants. Although the damage award reflected the level of fault of the companies and was aimed at compensating the plaintiffs, the true costs of the award showed how compensation and deterrence in this case were inadequate and ineffective. This paper argues that the unique nature of the class action renders large damage awards counterproductive in achieving deterrence and compensation, particularly against corporate defendants. The fiduciary duty that directors owe to their corporations makes the deterrent effect of class actions questionable. Moreover, the fiduciary duty brings into question the specific faults alleged against the corporations and highlights an inherent contradiction in the law. Even if deterrence is not the primary aim in one particular case, the Létourneau decision illuminates a