The growing intersection of AI and class action litigation

In privacy law and data protection, AI systems are increasingly scrutinized for potential violations, especially as they process vast amounts of personal data¹. Class actions targeting companies for data breaches or improper data handling practices are on the rise, frequently revolving around the collection, storage, and use of data in relation to AI systems. For instance, in the United States, there has been a surge in class actions alleging that companies improperly obtained individuals’ biometric identifiers through AI-based machine-learning systems². This trend is also emerging in Québec, where, in 2024, a class action was authorized under privacy legislation against a company accused of “scraping” images of unsuspecting individuals from various websites and platforms³. These images were processed and converted into facial vectors, creating facial prints of each individual based on biometric data extracted from the images. The collected information was then sold and made accessible to third-party customers.

In the employment context, class actions concerning algorithmic discrimination in the hiring process, stemming from the use of AI in decision-making, have been filed in the United States. Companies that develop or use AI software designed to screen job applicants based on criteria such as age, ethnicity and disability may be held liable if the software exhibits hiring biases⁴. Businesses deploying AI in their hiring processes should exercise caution in selecting their software and are encouraged to actively monitor its impact to mitigate their risk of liability in discrimination lawsuits based on algorithmic bias. Additionally, some jurisdictions—including Ontario and New York City—have laws in place requiring businesses to disclose the use of AI in their hiring processes⁵. In Québec, privacy legislation also requires organizations to notify individuals when they render a decision based exclusively on an automated processing of personal information.

Concerns over algorithmic bias extend beyond the employment context. In Illinois, for example, a claim was brought against an insurance company for allegedly using an AI system that discriminated against Black policyholders⁶.

AI has also made its way into consumer fraud class actions. Notably, in Illinois, a class action was filed against an online subscription service using AI-powered “robot lawyers” to provide legal services to consumers⁷. The plaintiff claimed the defendant did not employ licensed attorneys and was not licensed to practice law, leading to allegations of consumer fraud, deceptive practices under Illinois law, and trademark infringement.

Similarly, in antitrust and competition law cases, AI’s role in price-fixing, market manipulation, and collusion offers new grounds for class action⁸. This presents a new compliance challenge for companies using price-matching and monitoring algorithms or blockchain technology to facilitate smart contracts, especially in markets with a few dominant players. The courts will face the challenge of determining liability for AI-driven decisions and actions, which will depend on the specific circumstances of each case.

The copyright domain also faces disruptions, with AI-generated content blurring the lines of ownership and infringement. Class actions in this area often intersect with questions of authorship and the misuse of copyrighted materials by AI⁹. Courts are likely to face challenges in determining whether AI companies are infringing on protected works through their technology, whether AI data sets themselves constitute infringing works, and to what extent the creation of those datasets involves the copying of protected works. In the United States, several cases are already underway¹⁰.

Moreover, AI’s influence on financial markets has given rise to securities class actions, where plaintiffs argue that AI-driven trading or analysis has led to financial losses due to securities fraud¹¹.

As Canada often looks to U.S. litigation as a predictor, these developments signal a future where AI and class actions will intersect, shaping the legal landscape on both sides of the border. We will continue to monitor new class actions being filed across Canada.