Back to basics on commonality: Whether one step or two, BC Court of Appeal confirms the burden remains the same

The “two-step test” for commonality at class action certification—that plaintiffs must demonstrate some basis in fact that the proposed common issues exist and that they are common to the entire class—continues to serve as a focus of debate. Much ink has been spilled about this issue¹.

Perhaps until now. In Noramco LLC v. British Columbia² and McKinsey & Company, Inc. United States v. British Columbia³, the British Columbia Court of Appeal recently confirmed that whether courts describe the inquiry as one-or two-step is a distraction that is ultimately immaterial. The approach to commonality in British Columbia remains a functional one that requires plaintiffs to establish a minimum evidentiary foundation supporting the existence of some basis in fact of a common issue.

What you need to know

• The BC Court of Appeal confirmed that the “two-step test” debate does not change the legal standard for commonality. Attempts to formalize the analysis into rigid evidentiary stages risk obscuring the statutory test, and overcomplicating what should be a pragmatic inquiry of whether the proposed common issues can be usefully resolved on a common basis that moves the litigation towards resolution.
• The governing question remains whether there is some basis in fact that the proposed common issues exist and can be resolved on a class-wide basis. The analysis is focused on avoiding duplication of litigation, not proof of underlying liability.
• Certification is a functional screening exercise, not a merits determination. The BC Court of Appeal emphasized that certification is concerned with whether claims can be advanced collectively, rather than whether they will ultimately succeed at trial.

Background

Canadian courts have long recognized that certification of a class proceeding is intended to be a procedural screening exercise rather than a determination of the merits of the action. Against that backdrop, debate has arisen over whether the commonality inquiry is best described as a “one-step” or “two-step” analysis.

Under the so-called one-step approach, the plaintiff must establish some basis in fact that the proposed issues are common to the class.

Under the two-step approach, the plaintiff must establish some basis in fact both that the proposed issues exist and that they are common across the class.

The British Columbia Court of Appeal recently considered this issue in two opioid-related class actions: Noramco and McKinsey. Both proceedings were brought by the Province of British Columbia under healthcare cost recovery legislation and sought to recover alleged opioid-related healthcare expenditures on behalf of governments across Canada. In Noramco, the claims were advanced against manufacturers, distributors, and related entities alleged to have contributed to the opioid crisis. In McKinsey, the Province alleged that a consulting firm played a role in increasing opioid sales and distribution through advice provided to opioid industry participants.

In both cases, the application judges concluded that the claims raised a series of factual and legal questions that could be addressed on a common basis and granted certification⁴. The defendants appealed these orders, asserting that the judges erred in finding commonality without requiring a sufficient evidentiary foundation for the proposed common issues. They argued that the Province could not rely on the pleadings alone and that the court was required to determine whether there was some basis in fact for the existence of each proposed common issue against each defendant, in addition to whether the issue was common across the class.

The Court of Appeal decisions

In Noramco, the Court of Appeal firmly rejected efforts to recast the commonality inquiry as a rigid, two-step test. The Court emphasized that certification is a procedural screening exercise concerned with whether the action can proceed efficiently as a class proceeding. The question is whether there is some basis in fact that the proposed common issues can be resolved across the class in a way that avoids duplication of fact-finding or legal analysis, and meaningfully advances the litigation.

The Court also squarely addressed the debate about whether the commonality inquiry should be approached as a “one-step” or “two-step” analysis. It concluded that this distinction is largely semantic and has “no utility”, describing the debate as a distraction from the real task facing certification judges. What matters is the practical application of the "some basis in fact" standard in light of the nature of the claim, and whether there is sufficient evidence that the proposed issues are capable of common resolution.

The same themes were echoed in McKinsey, where the Court again rejected attempts to formalize the analysis into discrete evidentiary stages. Endorsing Noramco, the Court reiterated that certification is not concerned with the likelihood of success on the merits, but rather, with whether the action can properly proceed as a class proceeding and whether permitting it to do so will avoid duplication. The Court declined to adopt the two-step approach proposed by McKinsey, a form of which was endorsed by the Federal Court of Appeal in Jensen v. Samsung Electronics Co. Ltd.⁵ as requiring 1) some minimal evidence supporting the existence of a claim and 2) some evidence that the common issue is such that its resolution is necessary to the resolution of each class member’s claim. Instead, the Court in McKinsey reaffirmed that characterizing the “some basis in fact” standard as involving one or two steps does not assist in the overall analysis. Commonality in British Columbia is established when there is “a minimum evidentiary foundation supporting the existence of a common issue,” meaning sufficient evidence that the issue exists to the extent that it is relevant to the assessment of commonality.

Summary

Taken together, the decisions in Noramco and in McKinsey reinforce a consistent, substance-driven approach to commonality that does not concern itself with form, but rather focuses on functionality. Whether described as a one- or two-step inquiry, the burden on the plaintiff is the same: to establish a minimum evidentiary foundation that supports the existence of a common issue. The Court of Appeal’s message is that the focus should remain on the practical application of the “some basis in fact” standard, rather than on the terminology used to describe the inquiry.