Third Party Funding for Class Actions: Problems and Solutions

This paper examines the rise of private third party funding for class actions in Ontario. It makes three contributions to the existing literature. First, it argues that the decisions in Dugal and Metzler, as well as academic commentary on this issue, do not adequately appreciate the potential Conflicts of interest associated with private third party funding. These conflicts may be so subtle as to go undetected by judges, but they nevertheless threaten to interfere with class counsel’s relationship with the class and erode public confidence in Ontario’s class actions regime. Second, it argues that Ontario can reap the benefits of private third party funding — namely, increased access to justice — while minimizing these conflicts by reforming the Class Proceedings Fund (CPF). Reforming the CPF to make it competitive with private investors would reduce demand for the latter. This, in turn, would minimize the consequences of private third party funding while offering the same benefits. Finally, this paper suggests concrete reforms that would make the CPF more competitive with private third party funding.