What to expect in class action law in 2019

Torys Quarterly: What to expect in 2019

The Supreme Court of Canada and other courts of appeal heard cases in 2018 that dealt with important issues in class action practice that are currently under reserve. We review key cases and the impact they may have in 2019, both on class action procedure and various areas of law.

Competition law: who gets to be part of the class?

Canadian courts are currently split over whether a category of claimants known as “umbrella purchasers” can be included in a class seeking damages from alleged conspirators in a class action. In mid-December, the Supreme Court heard arguments in Pioneer et al. v. Neil Godfrey,1 which gives the Court the opportunity to provide the definitive answer: are they in or are they out?

Plaintiffs in competition class actions usually seek damages from co-conspirators who are alleged to have raised prices of their goods, on behalf of both direct purchasers (those who bought the good directly from a defendant) and indirect purchasers (usually end-users, though there can be other intermediate purchasers in the supply chain). Umbrella purchasers are in a different category: they purchased the affected product from non-conspirators—however, they allege the conspiracy created a price “umbrella” allowing other firms to charge higher prices than they otherwise would have.

In Godfrey, the defendants are alleged to have fixed the prices of optical disk drives (ODDs). Direct purchasers bought ODDs from the defendants and assembled them into other products—like laptops—which were purchased by end users. The umbrella purchasers, included in the proposed class, did not purchase ODDs made by the defendants, or products containing them. Instead, they purchased their ODDs from non-conspirators. The umbrella purchasers allege the ODDs they purchased from the non-conspirators cost more than they would have in the absence of the conspiracy.

Godfrey has the potential to expand the size of plaintiff classes involved in competition class actions and thus the potential to increase exposure for defendants.

Some judges in Ontario have reasoned that principles of indeterminate liability justify refusing to certify umbrella claims, while British Columbia courts have expressly rejected the Ontario courts’ analysis and found that those purchasers could be part of a class action. Although the Ontario Court of Appeal sided with the BC courts in its mid-October decision in Shah v. LG Chem Ltd.,2 the Supreme Court will have the final word when it releases its reasons in Godfrey.

Godfrey has the potential to expand the size of plaintiff classes involved in competition class actions and thus the potential to increase exposure for defendants. If umbrella purchasers’ claims are permitted then assessing harm in these claims will be made even more complex as they move toward trial, because another group of claimants will have to be considered in the damages analysis.

Expert evidence: how much evidence is enough?

The Godfrey case also presents the Supreme Court with the opportunity to provide more guidance on the nature of expert evidence required to meet the test for certification. In three cases decided in 2013,3 the Supreme Court held that plaintiffs needed to submit evidence of a methodology for demonstrating commonality of harm offering “a realistic prospect of establishing loss on a class-wide basis” that is “grounded in the facts of the particular case.” There must also be “some evidence of the availability of the data to which the methodology is to be applied.”4

Since the decisions were released, plaintiffs and defendants have disagreed over what these phrases mean. The trilogy arose in the context of price-fixing claims under the Competition Act, but the principles have been widely applied and debated, including, for example, in product liability cases5 and in securities class actions.6

In the competition area, the debate boils down to this: does the expert need to show that the proposed method for determining harm can identify specific purchasers who suffered harm and calculate their damages, or only that overcharges have been passed on from the direct purchasers to the indirect purchaser class? If the Supreme Court accepts the former, it will likely make it more difficult (and more expensive) for plaintiffs to succeed in certifying competition class actions.

The British Columbia Court of Appeal will tackle a different aspect of the expert evidence question in a case called Ewert v. Nippon Yusen Kabushiki Kaisha, argued in late 2018.7 In that case, the application judge applied what he characterized as the “low threshold” for scrutiny of expert opinions described in the Pro-Sys case and declined to certify the case because the plaintiffs’ expert had not identified the specific sources of data needed for his damages model. In other words, there was no evidence of the availability of the data to which the methodology would be applied. The application judge stated that “in the absence of providing some evidence of the data [the expert] says is necessary, his opinion is ultimately purely theoretical.”8 This case is one of the only examples in competition class actions of a judge denying certification because of deficiencies with the expert evidence. The BCCA’s decision will provide plaintiffs and defendants with guidance about how much scrutiny courts are allowed to give to expert opinions at the certification stage, and how far experts must go in these cases to identify data sources.

Employment: are class actions viable vehicles for discrimination claims?

We have previously written about the rising number of sexual harassment and discrimination class actions in Canada in “Class Actions in Canada Part 3: Sexual Harassment and Discrimination Class Actions.” One of these cases, Lewis v. WestJet Airlines Ltd, is currently on appeal to the BC Court of Appeal, which will hear WestJet’s appeal from the denial of its motion to strike the claim in late January 2019.9 The Court of Appeal’s decision may provide clarity on the extent to which these claims are viable as proposed class actions (rather than complaints to human rights tribunals).

WestJet argued that the plaintiff’s claim concerned gender-based discrimination, and should therefore be before the Canadian Human Rights Commission, not the courts.

In Lewis, a former flight attendant commenced a proposed class action on behalf of all present and former flight attendants seeking damages for breach of contract and systemic gender-based discrimination. The claim alleges that WestJet’s failure to properly investigate and respond to claims of sexual harassment amounts to a systemic breach of employees’ employment contracts, which incorporate the company’s anti-harassment policy.

On its motion to strike, WestJet argued that the plaintiff’s claim concerned gender-based discrimination, and should therefore be before the Canadian Human Rights Commission, not the courts. The BC Supreme Court accepted that the damages claim for discrimination was misconceived, but found that it was not plain and obvious that the claim for breach of contract had no reasonable prospect of success, and allowed it to continue.

A decision allowing WestJet’s appeal will signal that claims for sexual harassment or gender discrimination may not be certifiable (at least in BC), and may be better suited to federal or provincial human rights tribunals. The Ontario Superior Court recently reached this conclusion in Rivers v. Waterloo Regional Police Services Board.10 The Court in Rivers concluded that the proposed action against the Waterloo Regional Police Services Board by current and former police officers was, at its core, a claim for gender-based discrimination and sexual harassment in the workplace. The Court held that such claims essentially seek to enforce the Ontario Human Rights Code prohibition on discrimination in the workplace. Without an independent cause of action, there was no viable cause of action.11 The result for employers may mean fewer class actions in courts, and a rise of collective actions in federal and provincial tribunals that permit such actions.12

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1SCC File Nos. 37809 and 37810, on appeal from Godfrey v. Sony Corporation, 2017 BCCA 302.

2 Shah v. LG Chem Ltd., 2018 ONCA 819.

3 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.

4 Microsoft, para. 118.

5 See for example Charlton v. Abbott Laboratories, 2015 BCCA 26 and O’Brien v. Bard Canada Inc., 2015 ONSC 2470.

6 See for example Andriuk v. Merrill Lynch Canada Inc., 2014 ABCA 177.

7 On appeal from Ewert v. Nippon Yusen Kabushiki Kaisha, 2017 BCSC 2357.

8 2017 BCSC 2357, para. 53.

9 BC Court File No. CA45034, on appeal from 2017 BCSC 2327.

10 Rivers v. Waterloo Regional Police Services Board, 2018 ONSC 4307.

11 Rivers, paras. 50-58.

12 To date collective actions are permitted in the human rights tribunals of Canada, BC, Manitoba, North West Territories, Nunavut, Quebec, and Saskatchewan: Canadian Human Rights Act, R.S.C. 1985, c. H-6, s. 40; Human Rights Code, R.S.B.C. 1996, c. 210, s. 21(4)(b); The Human Rights Code, C.C.S.M., c. H175, s. 22(1), and see definition of “person” under s. 1; Human Rights Act, S.N.W.T. 2002, c. 18, s. 29(1); Human Rights Act, S.Nu 2003, c. 12, s. 21, 22(1)(b); Charter of human rights and freedoms, C.Q.L.R., c. C-12, s. 74; The Saskatchewan Human Rights Code, S.S. 1979, c. S-24.1, s. 27(1)(b).

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