COURT FILE NO.: 50305CP
DATE: 2014/03/07
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Crosslink Technology Inc. (Plaintiff)
- and –
BASF Canada, BASF Corporation, BASF A.G. Bayer Inc., Bayer A.G., Bayer Material Science LLC, Bayer Corporation, Dow Chemical Company, Dow Chemical Canada Inc., Huntsman International LLC, Lyondell Chemical Company, Rhodia, Rhodia Inc., and Rhodia Canada Inc. (Defendants)
BEFORE: Justice H. A. Rady
COUNSEL: Charles M. Wright, Andrea L. DeKay & Linda J. Visser, for the plaintiffs
F. Paul Morrison, Dana M. Peebles & Gillian Kerr, for the Dow Chemical Company and Dow Chemical Canada Inc. defendants
HEARD: December 17 & 18, 2012
ENDORSEMENT
Introduction
[1] The plaintiff seeks an order certifying this proceeding as a class action against Dow Chemical Company and Dow Chemical Canada Inc. The action was earlier resolved with the other defendants and settlement approvals granted.
[2] The action relates to an alleged price-fixing conspiracy in the market for polyether polyol products, which are the chemical products used in the manufacture of polyurethanes. The plaintiffs submit that certification is more straightforward in this case than in other price-fixing conspiracy cases that have been certified in the past. This is because the proposed class is limited to purchasers of the price-fixed product and does not include downstream purchasers of products containing the price-fixed product.
[3] The defendants resist certification. They assert that the plaintiff’s expert evidence is inadmissible and in any event, the methodology used is fatally flawed. They submit that there is no viable cause of action; no identifiable class; no representative plaintiff; insufficient common issues; and a class action is not the preferable procedure.
[4] At the conclusion of argument, I advised counsel that I was reserving my decision to await the decision of the Supreme Court of Canada in Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57, 2013 S.C.C. 57 and two other cases.[^1] One of the issues before that court was the “pass through” defence and because I considered it might be relevant to the outcome in this case, I decided to withhold my reasons until after the decisions were released. The appeals were argued on October 17, 2012 and decisions were released in November 2013.
The Facts
The Products
[5] Polyether polyol products are chemical products used in the manufacture of polyurethanes. Polyurethanes are used in three forms:
flexible polyurethane foam used in cushioning applications such as furniture and automotive seating, carpeting underlay, bedding, packaging and textile laminates;
rigid polyurethane foam used mainly in installation material in construction and refrigeration applications as well as in packaging and industrial and transportation installation applications; and
non-foam polyurethane which has a variety of uses, including surface coatings, elastomers, adhesives, sealants, automobile fascia and shoe soles.
[6] Polyether polyol products can be broken down into four product types. They include:
Polyether polyols,
Toluene diisocyanate (TDI)
Monomeric or polymeric diphenylmethane dissocyanate (MDI)
Polyether polyol systems
[7] During the relevant time, polyether polyols were used in Canada primarily for flexible foam and rigid foam applications. The largest end use markets for the flexible foam applications were for transportation and furniture.
[8] TDI was mainly used in the production of flexible polyurethane foams for furniture, bedding and the transportation industry. The largest end use for MDI was rigid foam applications used for insulation, transportation and appliances. Other uses included flexible foam and semi-rigid foam applications, including adhesives, wood binders for oriented strand board, surface coatings and elastomers.
[9] The plaintiff is an Ontario corporation that purchased products during the class period, although apparently none from the Dow defendants, and it also manufactured and sold system products to its own customers. The proposed class is comprised of purchasers of products in Canada during the proposed class period of 1999 to 2004.
[10] The proposed class is said to include a number of companies that purchased significant quantities of products in order to manufacture polyurethane foam (the so-called “foamers”). Two of those foamers have pleaded guilty in Canada to a price-fixing conspiracy in the polyurethane industry. A number of other foamers are under investigation in Canada and the United States regarding their alleged participation in the conspiracy.
Procedural History
[11] The plaintiff alleges that the defendants unlawfully conspired to and did fix, increase and/or maintain prices in the market for polyether polyol products in North America. The plaintiff pleads that they are liable for tortious conspiracy pursuant to ss. 36 and 45 of the Competition Act.
[12] Class proceedings have also been commenced in the United States in which similar allegations are made. The proceedings were consolidated through the multi-district litigation panel and the consolidated action was heard in the District of Kansas.
[13] The American proceedings were brought on behalf of direct purchasers and the action was certified as a class proceeding. The certified class consisted of direct purchasers of polyether polyol products in the United States from January 1, 1999 to December 31, 2004. Polyether polyol products were defined as already outlined above. The defendants’ request to appeal the certification order was denied. The U.S. litigation has been resolved against all defendants other than the Dow Chemical Company and I am advised that a trial of the common issues as against Dow Chemical Company was scheduled to begin in January 2013. I have not been made aware of the outcome of that litigation.
[14] The defendants take particular issue with the plaintiff’s failure to plead material facts in their statement of claim to support a claim for conspiracy. They submit, as well, that the certification record contains no evidence of any material facts of a conspiracy among the defendants. In particular, they point out that the plaintiff has settled the case with the other defendants and a term of the settlement included their cooperation in supplying evidence supporting the conspiracy claim. Those defendants agreed to produce transactional data for the sales of polyether polyols, price announcements and documents reflecting communications between the defendants regarding the prices at which the product would be sold. The defendants point out that none of that evidence has been produced by the plaintiff in support of its motion for certification, which they say fatally undermines the request for certification. Whether it is necessary to lead such evidence will be the subject of further comment below.
Expert Evidence
[15] The plaintiff has retained Dr. John Beyer of Nathan Associates, Inc. to provide an opinion. Dr. Beyer has provided opinions in a number of anti-trust cases, including the Canadian hydrogen peroxide case and the U.S. polyether polyol litigation.
[16] The Dow defendants retained Dr. Roger Ware to provide a responding opinion.
[17] The defendants challenge the admissibility of Dr. Beyer’s evidence on the basis that he is not a properly qualified expert, he demonstrates bias and he opines upon matters beyond his expertise. They say that his evidence has been rejected in U.S. courts. A variety of other criticisms of Dr. Beyer’s report is given, including that his methodology is inherently flawed.
[18] The plaintiff offers criticism of Dr. Ware’s reports, including that he is unfamiliar with Canadian case law regarding certification of price-fixing cases, he engages in an analysis of the merits, questions the adequacy of the proposed plaintiff and raises the potential for conflict. A considerable portion of the parties’ facta is devoted to either the criticism of the expert opposite or a defence of their own expert. Both experts were cross-examined at length.
The Statutory Framework
[19] The Class Proceedings Act, 1992 provides as follows:
- (1) The court shall certify a class proceeding on a motion under section 2, 3, or 4 if,
(a) the pleadings or the notice of application discloses a cause of action;
(b) there is an identifiable class of two or more persons that would be represented by the representative plaintiff or defendant;
(c) the claims or defences of the class members raise common issues;
(d) a class proceeding would be the preferable procedure for the resolution of the common issues; and
(e) there is a representative plaintiff or defendant who,
(i) would fairly and adequately represent the interests of the class,
(ii) has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and
(iii) does not have, on the common issues of the class, an interest in conflict with the interests of their class members.
(5) An order certifying a class proceeding is not a determination of the merits of the proceeding.
The court shall not refuse to certify a proceeding as a class proceeding solely on any of the following grounds:
The relief claimed includes a claim for damages that would require individual assessment after determination of the common issues.
The relief claimed relates to separate contracts involving different class members.
Different remedies are sought for different class members.
The number of class members or the identity of each class member is not known.
The class includes a subclass whose members have claims or defences that raise common issues not shared by all class members. [Emphasis added.]
The Law
[20] The case law respecting certification is well developed. Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158 instructs that a certification hearing is not to involve a consideration of the merits of an action but rather whether the form of action is amenable to prosecution as a class. Notwithstanding this straightforward direction, it seems to me that the line between the purely procedural analysis and a merits assessment often becomes blurred. It certainly has in this case.
[21] The latest word on certification is the Supreme Court of Canada’s decision in the Pro-Sys Consultants Ltd., supra, case and the two others argued at the same time, as well as its decision in AIC Limited v. Fischer, 2013 SCC 6. I propose, therefore, to consider those cases in some detail.
Pro-Sys Consultants Ltd. v. Microsoft Corporation
[22] Pro-Sys appealed from the British Columbia Court of Appeal’s decision to set aside a certification order and to dismiss an action on the basis that the class members had no cause of action.
[23] The plaintiffs, Pro-Sys Consultants Ltd. and Neil Godfrey (collectively Pro-Sys), brought a proposed class action against Microsoft Corporation and Microsoft Canada Co./Microsoft Canada CIE (collectively Microsoft) alleging that beginning in 1988, Microsoft engaged in unlawful conduct by overcharging for certain operating systems and application software. Pro-Sys alleged causes of action under s. 36 of the Competition Act, R.S.C. 1985, c. C 34; in tort for conspiracy and intentional interference with economic interests; in restitution for unjust enrichment and constructive trust; and finally for waiver of tort. Pro-Sys sought certification of the action as a class proceeding under the Class Proceeding Act, R.S.B.C. 1996, c. 50 (CPA). The proposed class was made up of ultimate consumers who acquired Microsoft’s products from re-sellers, who themselves purchased the products either directly from Microsoft or from other re-sellers higher up the chain of distribution. Pro-Sys claimed that as a direct consequence of Microsoft’s unlawful conduct, it and all of the class members paid and continue to pay higher prices for Microsoft operating systems and applications software than they would have paid absent the unlawful conduct.
[24] The British Columbia Supreme Court certified the action, concluding that the certification requirements in s. 4(1) of the CPA had been made out: there was an identifiable class; common issues were raised among class members; a class action was the preferable procedure; and Pro-Sys could adequately represent the class. Microsoft appealed. A majority of British Columbia Court of Appeal allowed the appeal, set aside the certification order and dismissed the action. It determined that indirect purchasers had no cause of action according to Canadian law. The dissenting judgment concluded that indirect purchaser actions were permitted. Pro-Sys appealed successfully to the Supreme Court of Canada.
[25] The court considered the following issues:
Are indirect purchaser actions available as a matter of law in Canada?
Was a cause(s) of action made out as is necessary under s. 4(1)(a) of the CPA?
Were the remaining certification requirements satisfied under s. 4(1) of the CPA?
[26] The court concluded that the answer to all three questions was yes. It held that indirect purchasers do, as a matter of Canadian law, have a cause of action against a party who has effectuated an overcharge at the top of the distribution chain that has allegedly injured indirect purchasers, as a result of the overcharge being “passed on” to them through the chain of distribution. Microsoft had argued that permitting indirect purchasers to bring an action against the alleged overcharger to recover a loss that had been passed on would be inconsistent with the court’s prior rejection of passing-on as a defence in Kingstreet Investment Ltd. v. New Brunswick (Department of Finance), 2007 SCC 1, [2007] 1 S.C.R. 3, since it is at odds with restitution law. Microsoft argued that the offensive use of passing-on by indirect purchasers to recover overcharges passed on to them should be similarly rejected. The Court disagreed for the following several reasons:
The risk of double or multiple recovery where actions by direct and indirect purchasers are pending at the same time or where parallel suits are pending in other jurisdictions can be managed by the courts;
Indirect purchaser actions should not be barred solely because of the likely complexity associated with proof of damages. Indirect purchasers willingly assume the burden of establishing that they have suffered loss, and whether they have met their burden of proof is a factual question to be decided on a case-by-case basis;
Allowing the offensive use of passing-on will not frustrate the deterrence objectives of Canadian competition laws. Indirect purchaser actions may be the only means by which overcharges are compensated and deterrence is promoted;
Allowing indirect purchaser actions is consistent with restitution law because it compensates the parties who have actually suffered harm rather than limiting claims to direct purchasers who may have in fact passed on the overcharge.
[27] Accordingly, the court concluded that indirect purchasers should not be foreclosed from claiming losses passed on to them.
[28] It also determined that a cause of action was made out. Sections 4(1)(a) of the CPA requires that a cause of action be made out in the pleadings. The same test as for a motion to dismiss applies. A plaintiff satisfies this requirement unless it is plain and obvious that the claim cannot succeed.
[29] Here, it could not be said that the pleadings did not disclose a cause of action under s. 36 of the Competition Act. Microsoft had argued that it had not been included in the statement of claim and was now barred by the pertinent limitation period. The court rejected this argument as purely technical and improper at that stage of the proceedings. Microsoft had also argued that the Competition Tribunal had jurisdiction over the enforcement of the competition law. This, too, was rejected because s. 36 expressly confers jurisdiction on the court to entertain the claims of any person who suffered loss by virtue of a breach of Part VI of the Competition Act.
[30] Second, with respect to the tort of conspiracy, the court considered that it was not plain and obvious that the claim would not succeed and refused to strike it. Microsoft had argued that the predominant purpose conspiracy was not made out because (a) the statement of claim failed to identify one true predominant purpose but instead listed overlapping purposes, which it said should fail at that stage of the proceedings; and (b) the predominant purpose conspiracy claim should be struck because it applied to an alleged conspiracy between a parent corporation and its subsidiary. Microsoft contended that the plaintiff could not establish unlawful means. The court disagreed and concluded that it was not plain and obvious that the claim would not succeed.
[31] Third, it was not plain and obvious that a claim for unjust enrichment could not succeed. It was not plain and obvious that a claim for unjust enrichment is made out only where the relationship between the plaintiffs and the defendant is direct. It is for the trial judge to address whether the contracts between Microsoft and the direct purchasers and the contracts between the direct purchasers and the indirect purchasers, which might constitute a “juristic reason’ for the enrichment as argued by Microsoft, are illegal and void.
[32] However, the pleadings based on constructive trust were struck. In order to make out a constructive trust, the plaintiff must demonstrate a causal connection between its contribution and the acquisition of specific property (see Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269). But in this case, Pro-Sys made a purely monetary claim. It was plain and obvious that the claim could not succeed.
[33] Finally, it was not plain and obvious that a waiver of tort cause of action would not succeed. The court observed that law is unsettled but it was neither the time nor the place to resolve that law on this particular appeal.
[34] The court also concluded that the remaining certification requirements were satisfied. The class representative must show some basis in fact for each of the certification requirements set out in the provincial class action legislation, other than the requirement that the pleadings disclose a cause of action. The standard does not require proof on a balance of probabilities. It does not involve an assessment of the merits of the claim nor is it intended to be a pronouncement on the viability or strength of the action. Rather, it focuses on the form of the action to determine whether it can appropriately go forward as a class proceeding. Further, each case must be decided on its own facts. There must be a sufficient factual basis to satisfy the motions judge that the conditions for certification have been met so that the claim can proceed on a class basis without foundering at the merits stage.
[35] The applications judge’s finding that the claim raised common issues is entitled to deference. In order to establish commonality, evidence that the acts alleged actually occurred is not required. Rather, the factual evidence required at this stage goes only to establish whether the questions are common to all the class members.
[36] The use of expert evidence is required in order to establish whether loss can be established on a class-wide basis. The proposed methodology must be sufficiently credible or plausible to establish some basis in fact for the commonality requirement. In other words, it must offer a realistic prospect of establishing loss on a class-wide basis so that if the overcharge is eventually established at the trial of the common issues, there is a means by which to demonstrate that it is common to the class. The methodology cannot be purely theoretical or hypothetical, but must be grounded in the facts of the particular case in question, and there must be some evidence of the availability of the data to which the methodology is to be applied. Resolving conflicts between the experts is an issue for the trial judge and not one that should be engaged in at certification.
[37] Deference is owed to the motions judge’s decision to certify as a common issue whether damages can be determined on an aggregate basis and if so, in what amount. Whether damages can be assessed in the aggregate can be certified as a common issue. However, this issue should only be determined at the common issues trial after a finding of liability has been made. The ultimate decision whether the aggregate damages provisions of the CPA should be available is one that should be left to the common issues trial judge. The failure to propose or certify aggregate damages or another remedy as a common issue does not preclude a trial judge from invoking the provisions if he or she considers it appropriate.
[38] Finally, the applications judge’s finding that the class action is the preferable procedure should be shown deference. In this case, there are common issues related to the existence of the causes of action and to loss to the class members. The loss-related issues can be said to be common because a methodology exists with a realistic prospect of establishing loss on a class-wide basis. If the common issues were resolved, they would be determinative of Microsoft’s liability and whether passing-on of the overcharge to the indirect purchasers had occurred. Because such determinations are essential in order for the class members to recover, a resolution of the common issues would significantly advance the action.
Sun-Rype Products Ltd. v. Archer Daniels Midland Company
[39] Sun-Rype brought a proposed class action on behalf of direct and indirect purchasers of high fructose corn syrup (HFCS). Archer and the others were leading North American producers of HFCS, a food-product sweetener used in soft drinks and baked goods. Sun-Rype alleged that Archer engaged in illegal price-fixing of HFCS, therefore harming manufacturers, wholesalers, retailers, and consumers. As in Pro-Sys, the action was certified in the lower courts under s. 4 of the British Columbia CPA. On the certification motion, the court determined that Sun-Rype’s pleadings disclosed causes of action for the direct purchasers in constructive trust, and for the indirect purchasers, as in Pro-Sys, under s. 36 of the Competition Act as well as in tort and in restitution. Archer appealed the certification decision.
[40] The British Columbia Court of Appeal found the indirect purchasers did not have a cause of action and it dismissed the direct purchasers’ claim. The Supreme Court of Canada referred to Pro-Sys in support of the conclusion that indirect purchasers have a right to bring an action. The issue was whether complications resulting from a class that included both direct and indirect purchasers were a sufficient basis to dismiss the action. The direct purchasers’ claim in constructive trust was also at issue on the cross-appeal. Rothstein J. wrote for the majority and Karakatsanis J. wrote dissenting reasons.
[41] The court reasoned that double or multiple recovery would not result where direct and indirect purchasers were included in the same class and expert evidence at the trial of common issues determined the aggregate amount of overcharge. The court has the power to fashion damage awards and settlements if double recovery is established.
[42] However, the court held that the requirements of the CPA for certification were not met. The pleadings did disclose causes of action and common issues just as in Pro-Sys. The court confirmed that the test in Club Resorts Ltd. v. Van Breda, 2012 SCC 17, [2012] 1 S.C.R. 572 must be applied to establish whether there is a “real and substantial connection” sufficient to ground jurisdiction where the price fixing conspiracy began outside Canada.
[43] Nevertheless, this case could not meet the certification requirements because there was no identifiable class of indirect purchasers. There was insufficient evidence to demonstrate some basis in fact that two or more persons would be able to determine if they were, in fact, class members. A class proceeding’s purpose is to provide a more efficient means of recovery for plaintiffs who suffered harm but for whom it was impractical or unaffordable to commence an individual claim. That purpose is subverted when a class proceeding moves forward without identifying two or more persons who would be able to demonstrate loss suffered because of the alleged overcharges.
[44] Sun-Rype failed to adduce evidence establishing a basis in fact that at least two class members would be able to prove that they bought a product with HFCS during the class period. Despite the harm indirect purchasers may have suffered because of alleged price-fixing, they were not able to self-identify and prove individual harm. The appeal was dismissed on this basis.
[45] Finally, the court ruled the direct purchasers’ cause of action in constructive trust failed. Neither the “proprietary nexus” requirement nor the requirement that a constructive trust be imposed only when a monetary remedy was inadequate, were met. No cause of action was made out. Accordingly, Archer’s cross-appeal was allowed.
Infineon Technologies AG v. Option consommateurs
[46] Infineon Technologies case originated in Quebec. Infineon Technologies AG and the other appellant companies (collectively Infineon) were manufacturers of dynamic random-access memory chips (DRAM), a microchip commonly used in a wide range of electronic devices. Infineon sold DRAM chips through a number of distribution channels to original equipment manufacturers, such as Dell computers, for example. Manufacturers inserted the chips into various electronic products that are in turn sold to intermediaries in the distribution chain or directly to final consumers.
[47] Infineon conceded its participation in an international price-fixing conspiracy in the multi-billion dollar DRAM chip market during 1999 and 2002. They faced repercussions in both Europe and the United States. Option alleged that the price-fixing artificially inflated the price of DRAM chips sold in Quebec during this time. It claimed that, as a result of price inflation, those who acquired DRAM chips directly from Infineon (the direct purchasers), and those who acquired DRAM chips or products containing DRAM chips either from a direct purchaser or from another indirect purchaser at a different level in the distribution chain (the indirect purchasers), overpaid and therefore suffered damages.
[48] Option applied to the Quebec Superior Court for authorization to institute a class action against Infineon to recover damages on behalf of the members of the affected class. The proposed class was comprised of both direct and indirect purchasers who suffered losses by absorbing, in whole or in part, the inflated portion of the price of DRAM chips sold in Quebec. Its claim was based upon allegations that Infineon failed to discharge statutory obligations under the Competition Act and that their conduct amounted to a fault giving rise to civil liability under the Civil Code. At the authorization stage, the motion judge held that the Quebec Superior Court did not have territorial jurisdiction to hear the class action because no damage had been suffered in Quebec. He also found that Option had not shown that its action met all the conditions set out in Arts. 1003 and 1048 of the Code of Civil Procedure (CPP) necessary for authorizing a class action. The Court of Appeal overturned the Superior Court’s judgment and authorized the class action. Infineon appealed. The court’s ruling on whether the case met the threshold requirement for certification under the CPP is noteworthy.
[49] It held that a court must satisfy itself that Option had succeeded in meeting the criteria set out in Art. 1003 of the CPP, bearing in mind that the threshold provided for in that article is a low one, often interpreted broadly in Quebec. Like in other provinces, the authorization process does not amount to a trial on merits. Although the claim may in fact ultimately fail, the action should be allowed to proceed if the applicant has an arguable case in light of the facts and the applicable law. In this case, the motion for authorization alleged sufficient facts to demonstrate the elements required under Art. 1003.
[50] Option met the requirement that there be sufficient common questions for the purpose of Art. 1003(a). There were no differences between the members of the proposed group at the authorization stage that adversely affected the unity of the group. All of the members, regardless of their individual circumstances, had a common interest both in proving the existence of a price-fixing conspiracy and in maximizing the amount of the overcharge that resulted. Any disparity between the direct purchasers’ relationship with Infineon and those of the indirect purchasers did not alter the fact that they had a collective interest in the questions of fault and liability. Any conflicts of interest could be addressed at trial.
[51] With respect to the requirement of Art. 1003(b), that “the facts alleged seem to justify the conclusions sought”, Option made out an arguable case in support of its claim of Infineon’s extracontractual liability. In short, the allegations set out in the motion for authorization were sufficient to support an inference of fault, given the relatively low standard to be met at this stage under the Quebec legislation. Although the allegations and supporting documentation did not explicitly establish the commission of wrongful behaviour in Quebec, they did point to the international nature of conspiracy to fix the price of DRAM chips and to damage being occasioned outside of the United States. The court reasoned that anti-competitive practices in the United States must surely have an impact on multinational corporations and on markets in Quebec.
[52] Option also demonstrated that members of the proposed class suffered an injury as a result of Infineon’s anti-competitive conduct. Like Sun-Rype, the passing on of price increases can ground a class action where the members of the class include direct purchasers. The policy considerations that militate against the defence of passing-on at common law should favour compensation for a loss that has been passed on to a plaintiff. Here, there was no risk of double recovery since the direct and indirect purchasers would be combined in a single group that would make a single collective claim for a loss. It is not necessary at the authorization stage to prove that each member of the group suffered a loss. The evidentiary standard for demonstrating passing on is no different than the one for demonstrating an aggregate loss. The applicant must establish an arguable case that losses were passed on. Given this low threshold, the applicant is neither expected nor required to adduce expert testimony and advance a sophisticated methodology. If ultimately Option is unable to demonstrate how the loss was passed on to the indirect purchasers and how it is to be calculated, the action would fail at trial.
[53] To establish causation, the damage must be shown to be a direct consequence of the injurious act, but the plaintiff need not be the immediate victim of that act in order to recover. At the authorization stage, the applicant need only to present an arguable case that the loss was a result of the allege misconduct. In this case, although the indirect purchasers may be indirect victims, the injury they allegedly suffered was a direct result of Infineons’ anti-competitive conduct.
[54] Finally, respecting the requirement of adequate representation, it would be contrary to the spirit of the legislation to deny authorization for the proposed group of purchasers of DRAM chips on the basis of a potential conflict of interest between members of the group. The proposed class acted in good faith and its members clearly shared a common interest in establishing the aggregate loss and in maximizing the amount of this loss. Where a legal person applies to represent a class, Art. 1048 directs that its mission be connected not with the interests of all members of the class, but merely with those of the one of the members. Since the individual plaintiff was a member of Option and of the proposed class, Art. 1048 did not prohibit Option from representing the interests of the members in this case.
AIC Limited v. Fischer
[55] A group of mutual fund managers were the subject of an investigation conducted by the Ontario Securities Commission (OSC) into “market timing” that was alleged to have caused long-term investors to suffer losses in the value of their investments. The fund managers ultimately entered into agreements with the OSC that paid investors millions of dollars in settlement. The settlement agreements anticipated and did not preclude the possibility of civil proceedings against the fund managers. Following the settlement agreements, the investors who received payments, as the proposed class, moved to certify a class action against the fund managers, alleging among other things that the fund managers had breached their fiduciary duty to the investors and had been negligent by failing to take steps to curb market timing activities. Three of the five originally named fund manager defendants settled; AIC Limited and CI Mutual Funds Inc. did not.
[56] Perell J. denied certification concluding that although there were common issues, a class action was not the preferable procedure because of the existence of the OSC proceedings and settlement agreements, and having regard to the purposes of class proceedings: judicial economy, behaviour modification, and access to justice. The plaintiff investors appealed.
[57] The Divisional Court reversed the motion judge and granted certification concluding that the motion judge erred in his preferability analysis because he failed to apply the proper low evidentiary burden at the certification stage; he improperly found that the already completed OSC proceeding was a preferable proceeding going forward; and he considered criteria for approval of a settlement at the certification stage. The court held that a class proceeding was preferable because it was the only viable method for investors to obtain full or substantially full recovery. The defendants appealed.
[58] The Court of Appeal upheld the Divisional Court’s result and dismissed the appeal, but adopted a different approach to the preferability analysis. It was incorrect to consider whether the OSC settlements provided investors with all or substantially all of the monetary relief sought. At the certification stage, the amount recoverable in the proposed class action remains unknown. Rather, the focus should be on comparing the class members’ procedural rights in class proceedings to those in the alternative proceedings. The OSC proceedings did not provide sufficient procedural access to justice to the investors, particularly because the OSC pursued a regulatory objective (rather than a remedial function) and the investors did not have the opportunity to participate in the OSC proceedings. Again, the defendants appealed.
[59] The primary issue before the Supreme Court of Canada was whether the proposed class action was the preferable procedure from the perspective of providing access to justice in light of the settlements in the OSC proceedings. Or in more general terms, how does one determine if a proposed class action is preferable to a non-judicial, alternative dispute resolution?
[60] Cromwell J., writing for a unanimous court, dismissed the appeal with costs. In doing so, the court found that the preferable procedure requirement had been satisfied, and therefore found that the case should be certified, but it set out a different analytical approach to those adopted by the Divisional Court and the Court of Appeal.
[61] The court affirmed that the preferability requirement is broad enough to take into account all reasonably available means of resolving the class member’s claims, including non-court redress.
[62] The court repeated the oft cited criteria respecting the preferability analysis, namely judicial economy, behaviour modification and access to justice. The court directed that the preferability analysis must consider both substantive and procedural aspects. A class action will serve the goal of access to justice if a) there are access to justice concerns that a class action could address; and (b) these concerns remain even when alternative avenues of redress are considered.
[63] To gauge whether both of these elements are present in a particular case, the following questions should “inform the overall comparative analysis”:
What are the barriers to access to justice? They may relate to either or both of the procedural and substantive aspects of access to justice. Barriers are not limited to economic ones.
What is the potential of a class proceeding to address the barriers? Again, this must take account of both the procedural and substantive dimensions of access to justice. Class actions may allow class members to overcome economic barriers by distributing litigation costs, and to overcome psychological and social barriers through the representative plaintiff who provides guidance and takes charge of the action on their behalf. It provides access to the courts for class members, and thus is a procedural tool, but is one aimed at substantive results.
What are the alternatives to a class proceeding? The motions court must identify all reasonably available alternatives, both court and non-court, to the proposed class proceedings. This assessment must be done on a global basis.
To what extent can the alternatives address the barriers? The question is whether the alternative proceeding has the potential to provide effective redress for the substance of the plaintiffs’ claims and to do so in a manner that affords suitable procedural rights. This must be asked with the evidentiary framework for certification in mind.
How do the proceedings compare? “At the end of the day, the motions court must determine whether, on the record before it, the class action has been shown to be the preferable procedure to address the specific procedural and substantive access to justice concerns in a case.” This is accomplished by a cost-benefit analysis.
[64] Finally, the court reiterated that the court is not to engage in a detailed assessment of the merits or the likely outcome of the class action or any alternatives. The evidentiary burden for the preferability requirement is low – some basis in fact.
[65] The court concluded that the OSC proceeding was not preferable for several reasons, including that investor compensation was not the OSC’s primary focus and provided no meaningful means for investor participation.
Summary
[66] Here is my appreciation of the principles that emerge from Hollick, the cases summarized above and other relevant authorities.
For certification to be successful, the plaintiff must show some basis in fact for each of the certification requirements, and that the pleading discloses a cause of action;
The some basis in fact standard does not require evidence on a balance of probabilities and does not require that the court resolve conflicting facts and evidence at the certification stage but rather reflects the fact that at the certification stage, the court is ill-equipped to resolve conflicts in the evidence or to engage in a finely calibrated assessment of evidentiary weight. The certification stage does not involve an assessment of the merits of the claim and is not intended to be a pronouncement on the viability or strength of the action;
The evidentiary threshold for certification is not onerous and courts must not impose undue technical requirements on plaintiffs;
When the Supreme Court established in Hollick “some basis in fact” as the evidentiary threshold, it was signalling a lesser standard of proof than that required for the determination of the merits of the claim. This is consistent with the fact that at the certification stage the court is dealing with procedural rather than substantive issues: See also Ring v. Canada (Attorney General), 2010 NLCA 20, [2010] N.J. No, 107 (C.A.), rev’g [2007] N.J. No. 273 (T.D.) at para. 14, leave to appeal to S.C.C. ref’d [2010] S.C.C.A. No. 187;
The “some basis in fact” standard does not require that the court resolve conflicting facts and evidence at the certification stage and should not lead to assessment of the contested facts going to the merits of the case;
Where expert evidence is produced on a motion for certification, the nature and amount of investigation and testing required to provide a basis for a preliminary opinion will not be as extensive as would be required for an opinion to be given at trial, and it follows that some lesser level of scrutiny is applied to the opinions offered, if they are otherwise admissible;
On a certification motion, a plaintiff need only show a “credible or plausible methodology” for proving class-wide issues. The threshold is a low one and conflicting expert evidence is not to be given the level of scrutiny to which it would be subject at a trial; and
In a claim for damages for tortious economic loss, it is not necessary to show a methodology that can demonstrate harm to all class members. It is sufficient if harm can be shown to some of the class members.
[67] With that background, I turn then to each of the elements of the certification test. One of the arguments most vigorously advanced by the defendants is the failure to plead necessary facts to found the conspiracy. They also contend that there is no evidentiary record to establish on a sufficient basis the remaining preconditions for certification.
- Do the pleadings disclose a cause of action?
[68] The defendants submit that the pleadings are wholly deficient because they fail to plead necessary allegations of fact. They point out that there are strict rules respecting a pleading of conspiracy and agency.
[69] Rule 25.06(1) provides that “every pleading shall contain a concise statement of the material facts on which that party relies for the claim or defence, but not the evidence by which those facts are to be proved”.
[70] Rule 25.06(8) provides that “when fraud, misrepresentation, breach of trust, malice or intent is alleged, the pleading shall contain full particulars, but knowledge may be alleged as a fact without pleading the circumstances from which it is to be inferred”.
[71] When considering its adequacy, a pleading must be read generously and with a forgiving eye for drafting deficiencies.
[72] It has been held that “a pleading of a cause of action may not be based on speculation, it is not proper to plead breach of duty, conspiracy, malice, intention to injure etc. baldly and without pleading material facts to support the allegation...” Pennyfeather v. Timminco Ltd. (2011), 2011 ONSC 4257, 107 O.R. (3d) 201 (S.C.J.).
[73] The leading authority on the constituent elements of a claim for a conspiracy is Canada Cement Lafarge Ltd. v. B.C. Lightweight Aggregate Ltd., 1983 CanLII 23 (SCC), [1983] S.C.J. No. 33. The pleadings must allege that two or more persons combined to use lawful or unlawful means for the predominant purpose of causing injury to the plaintiff or where the conduct of two or more people is unlawful and is directed at the plaintiff, the defendants ought to know that harm to the plaintiff was likely and did result.
[74] In Normart Management Ltd. v. West Hill Redevelopment Co. (1998), 1998 CanLII 2447 (ON CA), 37 O.R. (3d) 97 (C.A.) the Court of Appeal set out the requirements for a proper plea of conspiracy, namely a description of the parties and their relationship; the agreement between the defendants to conspire; the purpose or objects of the conspiracy; the overt acts alleged to have been done by each of the alleged conspirators in furtherance of the conspiracy; and finally, the injury and damage occasioned as a result.
[75] What then does the plaintiff allege against the Dow defendants? The statement of claim sets out the following allegations:
Polyether polyol systems are formulated packages of chemicals that include either MDI or TDI and polyols as well as other chemicals and additives. Polyether polyol systems are used for spray applying rigid foam installation and for use in appliances and refrigerated trucks. Some specialized polyether polyol systems are used in foam moulding, reaction injection moulding and floatation applications.
Some polyether polyol systems are manufactured by system houses. System houses supply systems to polyurethane processors in small local markets. In other cases, the polyurethane processes purchase bulk quantities of MDI or TDI and polyether and blend polyether polyol systems in-house.
It is alleged that the defendants produced or were capable of producing polyether polyol products within each of these four categories during the relevant period.
The acts alleged in this complaint to have been done by each defendant were authorized, ordered and done by its officers, directors, agents, employees, or representatives while engaged in the management, direction, control or transaction of its business affairs.
Various persons and/or firms, not named as defendants herein, may have participated as co-conspirators in the violation alleged herein and may have performed acts and made statements in furtherance thereof.
The defendants were involved in an unlawful conspiracy as detailed herein.
At various times from at least January 1, 1999 to December 31, 2004, senior executives and employees of each of the defendants engaged in telephone conversations and meetings with each other.
As a result of these conversations and meetings, the defendants entered into a conspiracy in which they unlawfully agreed to the price at which each defendant would sell Polyether Polyol Products to its customers and to the volume that each company would supply to its customers.
In furtherance of the conspiracy, during the relevant time, the following acts were done by the defendants, and their senior executives, employees and agents:
a) Representatives of the defendants met secretly to discuss prices and volumes of sales of Polyether Polyol Products;
b) The defendants implemented coordinated price increases;
c) They agreed to, and did, allocate the volumes of sales, customers, and markets for Polyether Polyol Products among themselves;
d) They agreed to refrain from bidding or to submit intentionally high, complementary and non-competitive bids for particular Polyether Polyol Products supply contracts;
e) They exchanged information regarding the prices and volumes of sales of Polyether Polyol Products for the purpose of monitoring and enforcing adherence to the agreed-upon prices, volumes of sales and markets;
f) They instructed members of the conspiracy not to divulge the existence of the conspiracy;
g) They took active steps to conceal the unlawful conspiracy from their customers, the authorities, and the public; and
h) They disciplined any corporation that failed to comply with the conspiracy.
- The defendants were motivated to conspire and their predominant purpose and intention was:
a) To harm the plaintiff and members of the public by requiring them to pay artificially high prices for Polyether Polyol Products and/or products containing or derived from Polyether Polyol Products and
b) To lawfully increase their profits on the sale of Polyether Polyol Products.
The acts particularized in paragraphs 31 to 33 were unlawful acts directed towards purchasers or Polyether Polyol Products or products containing Polyether Polyol Products, including the plaintiff, which unlawful acts the defendants knew in the circumstances would likely cause injury to those purchasers and plaintiffs and the defendants are liable for the tort of civil conspiracy.
Alternatively, the acts particularized in paragraphs 31 to 33 were unlawful acts undertaken by the defendants with the intent to injure purchasers of Polyether Polyol Products or purchasers of products containing Polyether Polyol Products, including the plaintiff, and the defendants are liable for the tort of intentional interference with economic interests.
The acts particularized in paragraphs 31 to 33 were also in breach of Part VI of the Competition Act and render the defendants liable to pay damages pursuant to s. 36 of the Competition Act.
[76] I tend to agree with the defendants that the pleading is somewhat sparse in detail but, in my view, sufficient facts are alleged to ground the cause of action in conspiracy. Similarly, the allegations respecting agency are adequate at this stage of the proceeding. It must be remembered that a certification hearing occurs before a statement of defence has been (usually) delivered and before documentary discovery. I recognize that in this case, the plaintiff has had a form of documentary discovery by reason of the cooperation obligations of the settling defendants. I would have thought, however, that the production provided by the settling defendants would be the evidence by which the plaintiffs intend to prove its claim. The pleading of evidence is improper.
[77] In this case, there is a description of the parties and their relationship; the agreement by the defendants to conspire; the purpose of the conspiracy; the overt acts done to further the conspiracy; and the injury caused as a consequence.
[78] Furthermore, Hollick (supra) is quite clear that the evidence filed on a certification motion is to be confined to the certification criteria. The Ontario Court of Appeal affirmed this direction in McCracken v. Canadian National Railway, [2010] O.J. No. 2884 (C.A.). The court made this observation:
…the “some basis in fact” test does not apply to the first criterion in s. 5(1)(a) that the pleadings disclose a cause of action. This criterion does not require the plaintiff to lead evidence showing a basis in fact for the allegations in the pleadings: see Hollick, at para. 25. The pleadings must contain sufficient factual allegations to establish the necessary elements of the cause of action asserted. However, unless the allegation of fact are patently ridiculous or incapable of proof, the facts must be accepted as pleaded for the purpose of determining if the plaintiff has stated a viable cause of action.
[79] What the defendants here seem to invite is a preliminary merits assessment, which was squarely rejected in Hollick (supra) and in decisions such as Lambert v. Guidant Corp., 2009 CanLII 23379 (ON SC), [2009] O.J. No. 1910 (S.C.J.); aff’d [2009] O.J. No. 4464 (Div.Ct.) in which Cullity J. wrote:
It was repeatedly submitted by defendants’ counsel that decisions certifying proceedings must have an “air of reality”. To the extent that this means that the statutory requirements must be read and applied in the light of the purposes and objectives of the legislation, it is truism. To the extent, however, that references to an air of reality are intended to introduce a preliminary merits test – disguised or otherwise – they are inconsistent with the analysis in Hollick and the significance that McLachlin C.J. attributed to the rejection of the views of the Ontario Law Reform Commission. In its report released in 1982, the Commission was firmly of the opinion that a plaintiff seeking certification should have the burden of establishing that the claims advanced have “substantive adequacy” and apparent validity. In the unanimous opinion of the member of the commission, this would be required in order to eliminate the potential use of the class action procedure to blackmail defendants into agreeing to settle unmeritorious claims. The possibility that such claims could be excluded by a requirement that the pleading disclosed a cause of action was categorically rejected.
[80] The plaintiff also claims pursuant to ss. 36 and 45 of the Competition Act. The provision in force at the time of the defendants’ alleged conduct made it an offence to conspire, combine, agree or arrange with another to prevent, limit or lessen the manufacture or production of a product or to enhance unreasonably the price thereof or to otherwise restrain or injure competition unduly. For the reasons already articulated, this claim is adequately pleaded.
[81] The defendants also allege that the claim under the Competition Act is barred on its face because the plaintiff has failed to plead that a conspiratorial agreement occurred within the two years prior to the issuance of the claim. I cannot agree.
[82] Section 36(4) of the Competition Act provides as follows:
(4) No action may be brought under subsection (1),
(a) in the case of an action based on conduct that is contrary to any provision of Part VI, after two years from
(i) a day on which the conduct was engaged in, or
(ii) the day on which any criminal proceedings relating thereto were finally disposed of,
whichever is the later; and
(b) in the case of an action based on the failure of any person to comply with an order of the Tribunal or another court, after two years from
(i) a day on which the order of the Tribunal or court was contravened, or
(ii) the day on which any criminal proceedings relating thereto were finally disposed of,
whichever is the later.
[83] At paragraphs 31 and 32, the plaintiff alleges that at various times from January 1, 1999 to December 31, 2004 senior executives and employees of the defendants engaged in telephone conversations and meetings with one another, as a result of which an unlawful price fixing agreement was made. The statement of claim was issued on May 5, 2006, thereby capturing conduct occurring within the two year period prior.
[84] It must be remembered that affirmative defences must be pleaded (Rule 25.07(4)) and therefore a limitation period must be pleaded: S. (W.E.) v. P. (M.M.) (2000), O.R. (3d) 70 (C.A.); leave to appeal refused 149 O.A.C. 397 (S.C.C.). As already noted, no statement of defence has yet been delivered.
[85] There may also well be an issue respecting discoverability that makes a determination of the limitation at this stage premature. See Chadha v. Bayer Inc., 1998 CanLII 14791 (ON SC), [1998] O.J. No. 6419 (S.C.J.); reversed on other grounds (2003), 2003 CanLII 35843 (ON CA), 63 O.R. (3d) 22 (C.A.); Eli Lilly and Co. v. Apotex Inc., 2005 FCA 361. One of the proposed common issues is whether the defendants took steps to conceal the conspiracy.
[86] Finally, I question whether it is even appropriate to deal with a limitation argument at certification, particularly in the absence of a cross motion under Rule 20 or 21. Moreover, is the certification judge able to determine that the limitation period applicable to the proposed plaintiff should also apply to the entire class. These are questions raised but unanswered in Lipson v. Cassels, Brock & Blackwell, 2013 ONCA 165.
[87] The pleading also raises a claim for interference with economic relations. It appears to me that this claim will not be advanced. The plaintiff did not address it in its factum nor in oral argument and it is not on the plaintiff’s list of proposed common issues. As a result, I do not consider it necessary to deal with the defendants’ contention regarding the adequacy of the pleading.
[88] Finally, the defendants contend that some of the allegations should be struck as irrelevant and scandalous. In particular, they take aim at the pleading respecting criminal investigations in the United States involving BASF, Lyondell and Beyer.
[89] The allegations are as follows:
In the Interim Report issued on March 31, 2006, BASF confirmed that in February, 2006 it was served with a subpoena from the U.S. Department of Justice in relation to the manufacture and sale of polyether polyols, MDI and TDI.
In its 2005 Annual Report, Lyondell confirmed that on February 16, 2006 it was served with a subpoena from the U.S. Department of Justice in relation to the manufacture and sale of polyether polyols, MDI and TDI.
In its 2005 Annual Report, Bayer confirmed that it had been served with a subpoena from the U.S. Department of Justice seeking information relating to the manufacture and sale of polyether polyols and other precursors for urethane end-use products. Additionally, Bayer disclosed that it had reached an agreement in principle to settle all class action cases relating to claims from direct purchasers of polyether polyols, MDI or TDI (and related systems).
[90] Rule 25.11 provides that a court may strike a pleading that may prejudice or delay a fair trial or is scandalous. The rule has been interpreted to include the power to strike irrelevant allegations.
[91] In this case, the above allegations were relevant and permissible when BASF, Lyondell and Bayer were target defendants. They have all settled with the plaintiff and therefore, the allegations are no longer relevant because they do not relate to Dow. They should therefore be struck.
- Is there an identifiable class?
[92] The definition of the class is as follows:
All persons in Canada (excluding defendants and their respective parents, employees, subsidiaries, affiliates, officers and directors) who purchased Polyether Polyol Products between January 1, 1999 and December 31, 2004.
** Polyether Polyol Products means polyether polyols, together with polyether polyol systems, monomeric or polymeric diphenylmethane diisocyanate (“MDI”) and toluene Diisocyanate (“TDI”).
[93] The defendants say that there is no other identifiable class member; no identifiable class period; the class does not share a common cause of action; and certain purchasers cannot be class members.
[94] The class definition must identify persons who have a potential claim; define the parameters of the lawsuit in order to identify those persons who are bound by the result; and describe who is entitled to notice: Axiom Plastics Inc. v. E.I. DuPont Canada Co., 2007 CanLII 36817 (ON SC), [2007] O.J. No. 3327 (S.C.J.) aff’d 2008 CanLII 23490 (ON SCDC), [2008] O.J. No. 1973 (Div. Ct.). The class definition should not be overly broad but on the other hand, it must not be defined so narrowly that it arbitrarily excludes persons with claims similar to those asserted by the class. See Hollick (supra).
[95] In this case, the class is defined to include those who purchased polyether polyol products in Canada during the class period either directly from the manufacturer or through a distributor. As already noted, the proposed class does not include downstream purchasers of products containing the allegedly price fixed product. The class cannot be said to be either overly broad or unduly restrictive.
[96] The defendants contend that at “a bare minimum”, a plaintiff must lead evidence that there is at least one other person with a common complaint who wants it to be determined through a class proceeding. The difficulty with that submission is that it ignores that there was a market for polyether polyol products in Canada, implying at the very least that others besides the plaintiff purchased the product. Further, it seems reasonable to assume that there are others who would wish to pursue a claim given that others have participated in the earlier settlements. Certainly, plaintiff’s counsel has not returned to court to advise that the settlement funds paid by the settling defendants have not been claimed. Indeed as part of the Bayer settlement, Bayer was required to provide a list of its direct purchaser customers. Ninety eight customers were identified. Only two putative class members opted out of the action, which must surely indicate a wish to participate by the others. I pause here to note as well that the CPA does not impose a requirement that there be evidence of two or more persons wishing to participate in a class action.
[97] The defendants also submit that the class period is wholly arbitrary and no evidence has been filed with the court to demonstrate the propriety of the class period. I do not agree. The proposed class period coincides with the time during which the conspiracy is said to have occurred. As a result, it cannot be said that the period is arbitrary in the sense that it bears no relation to the pleading. In any event, I would expect that some further refinement of the class period may become necessary following the discovery process. It also bears observing that conspiracies are conducted in secrecy and it may be difficult at this stage of the proceeding to precisely define its beginning and end dates.
[98] The defendants complain that the class is over inclusive because it “sweeps up every person who bought any product from any manufacturer (even unknown, non-defendants) between 1999-2004, inclusive”. I cannot agree. A virtually identical argument was raised in Irving Paper Ltd. v. Atofina Chemicals Inc. 2009 CanLII 92127 (ON SC), [2009] O.J. No. 4021 (S.C.J.); leave to appeal dismissed, [2010] O.J. No. 2472. In that case, the defendants submitted that the proposed class definition was overly broad including as it might virtually all individuals and businesses in Canada. They argued that the plaintiffs led no evidence to show that all proposed class members suffered damage. In particular, they contended that because there was no evidence that a portion of the “supra competitive” price was inflicted on every level of every distribution channel, such a broad definition was inappropriate.
[99] In dismissing the argument, I noted that “it is no response to the plaintiffs’ proposed class definition that because it is so large, it is unsuitable. If that were so, defendants engaged in “bad behaviour” affecting large numbers of the population could do so with relative impunity, knowing that the class proceedings were not available and individuals affected would be most unlikely to bring an individual action. This seems a result to be avoided, consistent with Justice Winkler’s remarks in Cassano, supra. Furthermore, as I read Markson, supra, it is not necessary to show that every member of the class suffered damage because Justice Rosenberg said that “the only serious issue is how many members of the class actually suffered an economic loss”. This suggests to me that some class members may have suffered no loss”.
[100] That observation seems equally applicable here.
[101] Finally, the defendants urge that certain purchasers cannot be class members – the systems purchasers and the foamers. With respect to the former, they are those who combined polyols and MDI/TDI to build systems to sell to their own customers. The defendants rely on evidence from representatives of the plaintiff to show that pricing was inherently individual and that any price increases were passed on. In my view, the Pro-Sys decision disposes of any argument respecting passing on.
[102] The defendants say that purchasers cannot have a common issue as to pricing because of the individuality of pricing. However, as the authorities make clear, that is not dispositive. There is no requirement that all class members must have been harmed in the same way.
[103] With respect to the foamers, certain of them have pleaded guilty to or are under criminal investigation for a price-fixing conspiracy in the polyurethane foam industry. The defendants say that the point of their conspiracy was to pass on price increases. As already noted, the Pro-Sys decision answers that contention. Whether these putative class members are disqualified from receiving compensation by reason of their own criminal conduct is a determination to be made at another time.
- Are there common issues?
[104] The plaintiff has identified the following as common issues. It bears repeating that “common” does not mean “identical”.
a) Did the defendants, or any of them, engage in conduct that amounts to civil conspiracy?
(i) Did the defendants unlawfully conspire with each other to limit or lessen, unduly, the production of Polyether Polyol Products, or to enhance unreasonably the price of Polyether Polyol Products?
(ii) Was the defendants’ unlawful conduct directed towards the plaintiff and other class members?
(iii) Did the defendants know, or ought to have known, in the circumstances that injury to the plaintiff and other class members would likely result?
b) Did the defendants, or any of them, engage in conduct contrary to section 45 of the Competition Act?
c) Did the plaintiff and other class members suffer loss or damage as a result of any of the conduct referred to in issues (a) and (b)?
d) Over what period of time did the conspiracy take place?
e) Over what period of time did the conspiracy affect the price of Polyether Polyol Products?
f) Did the defendants take affirmative and/or fraudulent steps to conceal the conspiracy?
g) Can damages be measured on an aggregate, class-wide basis and if so, what are the aggregate damages?
h) Was the conduct of the defendants, or any of them, such that they ought to pay global exemplary or punitive damages to the plaintiff and other class members?
i) Should the full costs of investigation in connection with this matter, including the cost of the proceeding or part thereof, be fixed or assessed on a global basis pursuant to section 36 of the Competition Act and if so, in what amount?
[105] In Fulawka v. Bank of Nova Scotia (2012), 21 C.P.C. (7th) 1 (Ont.C.A.), the court adopted the following principles concerning the common issues requirement as summarized by Strathy J. (as he then was) in Singer v. Schering-Plough Canada Inc.
The underlying foundation of a common issue is whether its resolution will avoid duplication of fact-finding or legal analysis: Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46, [2001] S.C.R. 534 at para. 39.
An issue can be a common issue even if it makes up a very limited aspect of the liability question and even though many individual issues remain to be decided after its resolution: Cloud, at para. 53.
There must be a rational relationship between the class identified by the plaintiff and the proposed common issues: Cloud, at para. 48.
The proposed common issue must be a substantial ingredient of each class member’s claim and its resolution must be necessary to the resolution of that claim: Hollick, at para. 18.
A common issue need not dispose of the litigation. It is sufficient if it is an issue of fact or law common to all claims and its resolution will advance the litigation for (or against) the class: Harrington v. Dow Corning Corp., 1996 CanLII 3118 (BC SC), [1996] B.C.J. No. 734, 48 C.P.C. (3d) 28 (S.C.), aff’d 2000 BCCA 605, [2000] B.C.J. No. 2237, leave to appeal to S.C.C. ref’d [2001] S.C.C.A. No. 21.
With regard to the common issues, “success for one member must mean success for all. All members of the class must benefit from the successful prosecution of the action, although not necessarily to the same extent.” That is, the answer to a question raised by a common issue for the plaintiff must be capable of extrapolation, in the same manner, to each member of the class: Dutton, at para. 40, Ernewein v. General Motors of Canada Ltd., 2005 BCCA 540, 46 B.C.L.R. (4th) 234, at para. 32; Merck Frosst Canada Ltd. v. Wuttunee, 2009 SKCA 43, [2009] S.J. No. 179 (C.A.), at paras. 145-146 and 160.
A common issue cannot be dependent upon individual findings of fact that have to be made with respect to each individual claimant: Williams v. Mutual Life Assurance Co. of Canada (2000), 2000 CanLII 22704 (ON SC), 51 O.R. (3d) 54, at para. 39 aff’d (2001), 2001 CanLII 62770 (ON SCDC), 17 C.P.C. (5th) 103 (Div. Ct.), aff’d 2003 CanLII 48334 (ON CA), [2003] O.J. No. 1160 and 1161 (C.A.); Fehringer v. Sun Media Corp. (2002), 27 C.P.C. (5th) 155 (S.C.J.), aff’d (2003), 39 C.P.C. (5th) 151 (Div. Ct.).
Where questions relating to causation or damages are proposed as common issues, the plaintiff must demonstrate (with supporting evidence) that there is a workable methodology for determining such issues on a class-wide basis: Chadha v. Bayer Inc., 2003 CanLII 35843 (C.A.), a para. 52, leave to appeal dismissed [2003] S.C.C.A. No. 106, and Pro-Sys Consultants Ltd. v. Infineon Technologies AG, 2008 BCSC 575, at para. 139.
Common issues should not be framed in overly broad terms: “It would not serve the ends of either fairness or efficiency to certify an action on the basis of issues that are common only when stated in the most general terms. Inevitably such an action would ultimately break down into individual proceedings. That the suit had initially been certified as a class action could only make the proceeding less fair and less efficient”: Rumley v. British Columbia, 2001 SCC 69, [2001] 3 S.C.R. 184, at para. 29.
[106] The defendants submit that the expert evidence setting out the proposed methodology is inadmissible and in any event it is fatally flawed. They also assert that the failure to file evidence in support of its pleading inevitably means it cannot fulfill the s. 5(1)(c) test.
[107] Dealing first with the expert evidence, I am not persuaded that it should be ruled inadmissible at this stage of the proceedings. The defendants’ submission that Dr. Beyer demonstrates bias because he has assumed that a conspiracy existed lacks merit. It is axiomatic that experts are frequently called upon to express an opinion on the basis of assumptions they are asked to make. I do not see this case as materially different as any other case involving expert evidence.
[108] Apparently Dr. Beyer’s testimony has attracted judicial criticism in several cases in the United States. Four were cited to me. Two were class proceedings. Two were not.
[109] I am far from certain that another court’s criticism of an expert in another proceeding involving different parties, different allegations and different facts should disqualify an expert’s evidence, rendering it inadmissible particularly at this stage of the proceeding. I was provided no authority for such a conclusion. Furthermore, to the extent that it is relevant, Dr. Beyer’s opinion has been accepted in other cases, including the U.S. polyether direct purchaser class action. This also disposes of the defendants’ next contention that Dr. Beyer lacks expertise in the urethane industry.
[110] Turning then to the proposed methodology. I begin by reiterating that the court is ill equipped at this stage of the proceeding to engage in a finely calibrated assessment of evidentiary weight, to borrow from Hague v. Liberty Mutual Insurance Co., 2004 CanLII 95289 (ON SC), [2004] O.J. No. 3057 (S.C.J.). The Pro-Sys decision underscores that it is not necessary for the motion judge to resolve conflicts between the experts. Indeed, it would be exceedingly difficult to do so unless the inadequacy of the expert’s opinion were patently obvious. This is very complex evidence, which requires a considerable degree of sophistication in order to understand it. Part of an expert’s role is to assist the court in understanding the underlying science, engineering, medicine – or as in this case, the statistical and economic foundation for the opinion. At this stage of the proceeding, it bears repeating that the motions judge does not have that assistance and is therefore ill-equipped to resolve conflicts, particularly on the basis of a paper record and without the benefit of the interaction that occurs during viva voce testimony. I think it would be incorrect to reject either expert’s opinion and the case should be permitted to go forward because a plausible methodology is before court. The Concise Oxford English Dictionary defines plausible as “apparently reasonable or probable, without being necessarily so”. Put another way, the expert evidence raises a triable issue.
[111] The defendants’ contention that the plaintiff’s failure to file evidence in support of its pleading has already been discussed above.
- Is a class action the preferable procedure?
[112] The Fischer decision sets out the analysis to be followed and in my view, when it is, it is clear that a class action is the preferable if not the only procedure.
[113] There is a powerful economic barrier to justice in a case such as this. An individual plaintiff could not afford to pursue a claim. Indeed, in another price fixing conspiracy case[^2] that I am managing, I had occasion to approve a precertification settlement. The disbursements in that case were in the range of $350,000 – well beyond the financial abilities of the average litigant. Clearly, a class proceeding addresses that barrier by distributing litigation costs. The only alternative, it seems to me, would be an individual action, which as already noted is not a realistic or viable option.
- Is there a proper representative plaintiff?
[114] The answer is that the proposed plaintiff is a proper representative. The defendants submit that it is not because it does not share a common interest with other purchasers. I disagree. There is a commonality of interest in the resolution of such matters as whether a price fixing conspiracy existed, and if so during what time. The fact that the representative plaintiff may have a different purchase experience is not fatal to its ability to represent the class.
[115] The defendants also say the plaintiff has a conflict. To the extent that there might be, it can be addressed later in the proceedings. The same argument was raised and rejected in Irving Paper.
[116] The proposed litigation plan as amended is adequate at this point in the proceedings.
[117] The motion for certification is granted.
[118] If the parties cannot agree, I will receive brief written submissions within 30 days.
“Justice H. A. Rady”
Justice H. A. Rady
Date: March 7, 2014
[^1]: Sun-Rype Products Ltd. et al v. Archer Daniels Midland Company et al 2013 SCC 58 ; and Infineon Technologies AG v. Option consommateurs, 2013 SCC 59.
[^2]: Westminster Mutual Insurance Company v. TYC Brother Industrial Co. Ltd. et al. See also Seed v. Ontario, 2012 ONSC 2681.