Consumers get SCC boost

In a landmark trilogy released on Thursday, the Supreme Court of Canada has declared open season for consumers who wish to use class actions to recover overpayments for products or services that have been the subject of price-fixing conspiracies.

“Price-fixing class actions are open for business in Canada,” says J.J. Camp of Vancouver’s Camp Fiorante Matthews Mogerman, who represented the class in Pro-Sys Consultants Ltd. v. Microsoft Corp., one of the three cases decided by the Supreme Court.

“If the Court had excluded consumers, dozens of these types of cases would have been shut down, unjustly precluding consumers from recovering their losses against the wrongdoers and requiring them to disgorge their ill-gotten gains.”

More particularly, the court ruled plaintiffs’ lawyers could lump direct and indirect purchasers into the same class action.

“These decisions are, without a doubt, a big win for plaintiffs,” says Michael Osborne, a class action defence lawyer at Toronto’s Affleck Greene McMurtry LLP.

“The entire structure of class actions in Canada has tended to be based on the one big happy family approach where direct and indirect purchasers sue in the same proceedings, and the court has basically validated that approach.”

Pro-Sys was a B.C. case involving operating systems. The second case, Sun-Rype Products Ltd. v. Archer Daniels Midland Co., was also a B.C. case but involved high-fructose corn syrup. The third, Infineon Technologies AG v. Option consommateurs, originated in Quebec and dealt with memory chips.

The court unanimously certified the indirect purchaser classes in Pro-Sys and Infineon, but in a split decision, it rejected certification for both direct and indirect purchasers in Sun-Rype. The rejection of the indirect purchasers stemmed from the plaintiffs’ inability to offer any evidence showing that at least two individuals (two being the minimum number for a class) could self-identify by proving they had purchased a product that actually contained the impugned syrup, something often not included on product labels.

In all three cases, however, the court rejected the 1977 U.S. Supreme Court decision in Illinois Brick Co. v. Illinois, a case that has served to bar indirect purchaser claims in federal courts for more than three decades.

“Despite recognizing that there were complicated issues of multiple and double recovery in allowing indirect purchaser claims to proceed, the SCC clearly believed that trial judges would be able to sort these things out,” says Adam Fanaki, a class action defence lawyer with Davies Ward Phillips & Vineberg LLP’s Toronto office who appeared on behalf of the Canadian Chamber of Commerce as an intervener in Sun-Rype.

Just as significantly, the top court confirmed, as it had 10 years earlier when it first considered the question, that a relatively low evidentiary standard is necessary for certification of price-fixing class actions in common law provinces with an even lower one in Quebec.

“It’s clear that the Supreme Court does not see the certification process as a robust gatekeeping function,” says Fanaki’s colleague Mark Katz.

It was not, the top court ruled, the certifying court’s place to resolve conflicting facts or evidentiary issues. Rather, where loss issues arose, a plaintiff only had to make out a “credible” or “plausible” methodology that would allow a court to try the case on a class-wide basis.

In a price-fixing case, the methodology had to offer a “realistic prospect” — one grounded in the facts of the case and based on “some evidence” that appropriate data was available — for establishing loss on a class-wide basis to ensure that the plaintiffs could demonstrate at trial that any proven losses were common to the class.

In Quebec, however, the civil code imposed a lower standard of certification. Expert evidence was, therefore, “not the norm” at the certification stage and the plaintiffs had only to demonstrate an “arguable case that an injury was suffered.”

Canada’s acceptance of indirect purchaser classes and its lower evidentiary standard for certification raise the prospect that competition class actions that can’t be certified in the United States will come to this country and succeed here.

“It’s not clear yet how much sense that makes,” says Christopher Naudie, a defence lawyer with Osler Hoskin & Harcourt LLP’s Toronto office.

However that may be, Naudie says the trilogy isn’t bereft of “silver linings for defendants.” In particular, he points to the court’s refusal to certify the indirect class in Sun-Rype.

“The significance of this ruling can’t be underestimated because it reiterates that, whatever the standard for certification, plaintiffs must at least adduce persuasive evidence to meet the requirement that a class of two or more does in fact exist,” he says.

“So many class actions these days, like those about computer components or auto parts, involve a part of a part, where it can be hard to show that the defective product actually existed in an individual consumer’s purchase or that it was produced by a particular defendant.”

For more, see "Class action rulings a game changer for competition cases."

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