Published on November 5, 2013
Posted in: Blog
On October 31st, the Supreme Court of Canada released three important class action decisions: Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57; Sun-Rype Products Ltd. v. Archer Daniels Midland Company, 2013 SCC 58; and Infineon Technologies AG v. Option consommateurs, 2013 SCC 59.and of Sotos LLP represented an intervener in these cases.
The decisions are particularly important because they represent the first time the Supreme Court has considered class action issues in any depth since they first considered these issues over ten years ago in 2001.
The Supreme Court considered two categories of issues: one with implications for competition law, and another with far broader questions relating to class action certification.
The competition law issue was resolved as most predicted, without great fanfare.
The far more interesting aspect of the decisions involved what the Supreme Court of Canada had to say about the class action certification test more generally.
Ultimately, though, the Supreme Court’s decision broke no new ground here either. It reaffirmed many basic principles from the Court’s first consideration of class action issues in 2001. However, it did so in a way by categorically rejecting many doubts that had crept into the law in the intervening years: how strictly should expert evidence be scrutinized? Is there value in taking a more critical approach to class action certification, as the U.S. Supreme Court did in its Wal-Mart v. Dukes decision? How widely or narrowly should the door to certification be opened?
The Supreme Court of Canada categorically rejected many arguments seeking to limit class actions, relying largely on its earlier 2001 decisions. The bottom line implications arising from the Supreme Court of Canada’s trilogy of class action decisions in 2013 is that the class action certification test is clear:
- The court will allow creative claims to proceed (the Supreme Court refused to strike all but one cause of action attacked).
- The “some basis in fact” standard that is generally applicable at class action certification is a threshold that is less than a balance of probabilities but more than symbolic scrutiny. The analysis “does not allow for an extensive assessment of the complexities and challenges that a plaintiff may face.”
- Even “significant level[s] of difference among the class members does not preclude a finding of commonality.”
- If a plaintiff seeks to establish loss on a class-wide basis, this will generally require expert evidence at certification.
- In order to establish loss on a class wide-basis, the expert must provide a methodology to prove common impact to all class members. The expert must establish a “realistic prospect” of doing this. In reviewing the expert’s evidence, the methodology must be “sufficiently credible or plausible.” It must be “grounded in the facts of the particular case in question.” The methodology is not subject to “rigorous” analysis. A class action certification judge should not resolve conflicts between experts.
- “Aggregate damages” provisions contained in the Class Proceedings Act cannot be used to establish proof of loss, and thus liability. Ultimately, though, aggregate damages are always “up for grabs” because the ultimate decision as to whether aggregate damages should be available should be left up to the trial judge.
Supreme Court says indirect purchasers can sue for damages
The competition law issue related to illegal price-fixing agreements in which competitors agree on the price at which products are sold. In the United States, a federal law doctrine arising out of a 1977 U.S. Supreme Court decision called Illinois Brick Co. v. Illinois only allows “direct purchasers” (i.e. persons that purchase products directly from the persons alleged to be involved in price-fixing) to sue for damages under competition law. Indirect purchasers cannot. The issue the Supreme Court of Canada was asked to decide is whether the Canadian Competition Act likewise prohibited indirect purchaser claims. The Supreme Court decided not to adopt the Illinois Brick doctrine and said that indirect purchaser claims should be permitted in Canada.
The Supreme Court’s decision on the issue came with little surprise to most. There was little support for the Illinois Brick doctrine either in the language of the statute or the underlying policy reasons. The only real arguments supporting the doctrine were recent Supreme Court precedents that were easily distinguishable.
Supreme Court re-affirms basic principles from 2001 caselaw
The more interesting aspect of the decision related to the test for certification. Because some price-fixing cases can involve complicated methods for allocating loss among different class members, the defendants in the antitrust class action cases argued the expert methodologies for proving common losses should be subject to rigorous scrutiny. They argued the bar for certification should be raised because of the serious implications involved with certification of a class action.
The Supreme Court of Canada categorically rejected these arguments, including policy arguments made in favour of adopting the stricter U.S. approach to class action certification. The basic highlights from the Supreme Court of Canada’s decision are listed above. Although the stakes were high on both sides, with some arguing for strict scrutiny, while others argued for a more liberal approach – the principles contained in this new trilogy of class action decisions really does not represent a drastic change or evolution in class action law at the Supreme Court of Canada. Indeed, in its analysis of the “some basis in fact” test, Justice Rothstein in Pro-Sys simply referred back to the Court’s 2001 decision in Hollick, commenting that “had McLachlin C.J. intended that the standard of proof to meet the certification requirements was a ‘balance of probabilities’, that is what she would have stated. There is nothing obscure here. The Hollick standard has never been judicially interpreted to require evidence on a balance of probabilities.”
As we often do when the Supreme Court of Canada is asked to decide issues that are of critical importance to our areas of practice – in circumstances where the Court only seems to consider these issues on an infrequent basis – we sometimes expect ground-breaking developments in the area. Instead, what the Supreme Court has done in its decision is to re-affirm the bedrock principles from its original class action decisions, rejecting any “creep” towards a more U.S.-based style involving detailed merits-based analysis of cases at the class action certification stage. At the same time, the Supreme Court has made it clear that Canada is not the wild west of class actions. “Symbolic scrutiny” will not be sufficient.