Shah v. LG Chem, Ltd., 2015 ONSC 3257

COURT FILE NO.: CV-13-483540-00CP

DATE: 20150521

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

KHURRAM SHAH and ALPINA HOLDINGS INC.

Plaintiffs

– and –

LG CHEM, LTD., LG CHEM AMERICA, INC., PANASONIC CORPORATION, PANASONIC CORPORATION OF NORTH AMERICA, PANASONIC CANADA INC., SANYO ELECTRIC CO., LTD., SANYO NORTH AMERICA CORPORATION, SANYO ENERGY (U.S.A.) CORPORATION, SONY CORPORATION, SONY ENERGY DEVICES CORPORATION, SONY ELECTRONICS, INC., SONY OF CANADA LTD., SAMSUNG SDI CO., LTD., SAMSUNG SDI AMERICA, INC., SAMSUNG ELECTRONICS CANADA INC., HITACHI, LTD., HITACHI MAXELL, LTD., MAXELL CORPORATION OF AMERICA, MAXELL CANADA, GS YUASA CORPORATION, NEC CORPORATION, NEC TOKIN CORPORATION, TOSHIBA CORPORATION, TOSHIBA AMERICA ELECTRONIC COMPONENTS, INC., and TOSHIBA OF CANADA LIMITED

Defendants

David Sterns and Jean-Marc Leclerc for the Plaintiffs

Sandra A. Forbes and Kristin Jeffery for the Defendants LG Chem, Ltd. and LG Chem America, Inc.

Robert E. Kwinter and Litsa Kriaris for the Defendants Samsung SDI Co., Ltd. and Samsung SDI America, Inc.

Eliot N. Kolers and Mark Walli for the Defendant GS Yuasa Corporation

Gannon Beaulne for the Defendants Panasonic Corporation, Panasonic Corporation of North America, Panasonic Canada Inc., Sanyo Electric Co., Ltd., Sanyo North America Corporation and Sanyo Energy (U.S.A.) Corporation

Kelly Friedman for the Defendants Hitachi Maxell, Ltd. and Maxell Corporation of America

Vera Toppings for the Defendants Toshiba Corporation, Toshiba America Electronic Components, Inc. and Toshiba of Canada Limited

HEARD: May 19, 2015

PERELL, J.

REASONS FOR DECISION

A. INTRODUCTION

1There are two refusals motions before the court. One motion is brought by a group of Defendants. The other motion is brought by the Plaintiffs. The motions are preliminary to a certification motion scheduled for the week of June 1, 2015 in this proposed class action under the Class Proceedings Act, 1992, S.O. 1992, c. 6.

2All the Defendants except NEC Corporation, NEC Tokin Corporation, and Samsung Electronics Canada Inc. bring a refusals motion. The moving Defendants seek answers for questions refused by: (a) Zain Ul Islam Sayed, the principal of the Plaintiff Alpina Holdings Inc.; (b) Dr. Keith Reutter, the Plaintiffs’ economics and damages-assessment expert; and (c) Jatinderpal Tony Singh Sandhu, an employee of Best Buy, which is a member of the proposed class for the class action.

3The Plaintiffs bring a refusals motion. They seek answers for questions refused by: (a) Dong Hyung Lee, who is an employee of the Defendant LG Chem, Ltd.; and (b) William Moll who is an employee of the Defendant, GS Yuasa Corporation.

B. THE PARTIES AND THE PRICE-FIXING CLAIM

4In this proposed class action, the Plaintiffs are Khurram Shah and Alpina Holdings Inc. The Plaintiffs assert a claim on behalf of persons in Canada who purchased lithium ion batteries for consumer products, such as notebook computers, cellular phones, smartphones, tablet computers, e-book readers, MP3 players, personal digital assistants, handheld global positioning systems, and handheld video gaming systems. They allege that the Defendants conspired to fix the prices of rechargeable lithium ion batteries manufactured and sold between January 1, 2000 and December 31, 2011.

5The Plaintiffs seek to certify a national class including both direct and indirect purchasers of lithium ion battery cells and products containing those cells.

6The Plaintiffs allege that a price-fixing conspiracy raised the prices of all lithium ion battery cells, and that these price increases were absorbed - in part - and passed on - in part - at every level of the multiple level distribution chains—through the battery packers, electronics product manufacturers, distributors, and retailers of a wide variety of products—to consumers, so that each member of the proposed class of direct and indirect purchasers was impacted.

7The Plaintiffs claim damages for breaches of ss. 36, 45 (conspiracy) and s. 46 (foreign directives) of the Competition Act, R.S.C. 1985, c. C-34, as well as damages for restitution based on unjust enrichment.

8The current proposed class definition (amended after receipt of the Defendants’ Responding Certification Record) is:

All persons in Canada who, between January 1, 2000 and December 31, 2011, purchased a Lithium Battery* and/or any of the following products containing a Lithium Battery: (i) notebook computer**; (ii) cell phones including smartphones***; (iii) tablet computers; (iv) e-book readers; (v) MP3 players; (vi) personal digital assistants; (vii) handheld GPS; (viii) handheld video players; and/or (ix) lithium ion battery packs (collectively “Lithium Battery Products”). Excluded from the class are the Defendants and the Defendants’ present and former parents, predecessors subsidiaries and affiliates, and any person who timely and validly opts out of the proceeding.

*a Lithium Battery is a rechargeable battery cell which uses lithium-ion technology.

**for greater certainty, a notebook computer includes a laptop computer

***excluding cell phones acquired as part of a cellular phone service contract.

9The Plaintiff Mr. Shah is a consumer that purchased a mobile phone. The Plaintiff Alpina Holdings Inc. is a mobile phone retailer. The principal of Alpina Holdings is Zain Ul Islam Sayed, who is Mr. Shah’s father. Alpina Holdings operated two “Mobilicity” retail locations in Ontario in 2010. Alpina Holdings purchased cell phones for resale from Ingram Micro, a distributor in Canada.

10The Defendants are: LG Chem, Ltd., LG Chem America, Inc., Panasonic Corporation, Panasonic Corporation of North America, Panasonic Canada Inc., Sanyo Electric Co., Ltd., Sanyo North America Corporation, Sanyo Energy (U.S.A.) Corporation, Sony Corporation, Sony Energy Devices Corporation, Sony Electronics, Inc., Sony of Canada Ltd., Samsung SDI Co., Ltd., Samsung SDI America, Inc., Samsung Electronics Canada Inc., Hitachi, Ltd., Hitachi Maxell, Ltd., Maxell Corporation of America, Maxell Canada, GS Yuasa Corporation, NEC Corporation, NEC Tokin Corporation, Toshiba Corporation, Toshiba America Electronic Components, Inc., and Toshiba of Canada Limited.

C. THE SUBJECT MATTER OF THE ALLEGED PRICE-FIXING CONSPIRACY

11For the purposes of deciding the refusals motion and ultimately the pending certification motion, it is necessary to understand the nature of the subject matter of the alleged conspiracy; i.e. lithium ion battery cells.

12Battery cells are a part of what is commonly called a “battery” or a “battery pack”. A battery cell cannot power electronic equipment until it is “packed”—that is, connected to other cells, encased in a shell, and outfitted with a computer chip, circuitry, cabling, or other materials to deliver power.

13Lithium ion battery cells come in three different types—cylindrical, prismatic, and pouch. The different types have different characteristics, engineering, design, production, and uses.

14The Defendants submit that battery cells and battery packs are, with limited exceptions, customized to the specifications of individual customers for the specific type and model of product into which the battery is to be inserted.

D. THE DEPONENTS

15The Plaintiffs’ Certification Motion Record included: (a) an affidavit from Mr. Sayed, affirmed February 18, 2014; and (b) an affidavit of Dr. Reutter, attaching his initial report, sworn February 13, 2014.

16The Record also included an affidavit from Mr. Shah and an affidavit from a law clerk that included, among other things, copies of court documents from a related price-fixing class proceeding in the U.S.

17The Plaintiffs’ Reply materials included: (a) a reply report from Dr. Reutter, and; (b) an affidavit from Jatinderpal Tony Singh Sandhu, who is an employee of Best Buy.

18Dr. Reutter, Mr. Sayed, and Mr. Sandhu were cross-examined.

19The Moving Defendants’ Responding Motion Record included affidavits from: (a) Dong Hyung Lee, who is employed by the Defendant LG Chem, Ltd.; and (b) William Moll, who is employed by a wholly-owned subsidiary of the Defendant, GS Yuasa Corporation.

20Mr. Lee and Mr. Moll were cross-examined by written interrogatories.

E. REFUSALS MOTIONS IN CLASS PROCEEDINGS

21I have described the law associated with refusals motions in class proceedings in a series of decisions including: Axiom Plastics Inc. v. E.O. Dupont Canada, 2011 ONSC 4510; 2038724 Ontario Ltd. v. Quizno’s Canada Restaurant Corp., 2012 ONSC 6549; CIBC v. Deloitte & Touche, 2013 ONSC 917; and Fehr v. Sun Life Assurance Company of Canada, 2015 ONSC 2908. See also Ontario v. Rothmans Inc., 2011 ONSC 2504, leave to appeal to Div. Ct. refused, 2011 ONSC 3685 (Div. Ct.).

22I shall not repeat the discussion about refusals motions here, because all of the refusals can be addressed by determining whether the answers to the refused questions are relevant to the issues on the certification motion, which motion it needs to be emphasized is not a determination of the merits of the proposed class action.

F. THE REFUSALS

1. Mr. Sayed

23Mr. Sayed refused to answer two lines of questioning during his cross-examination and the Defendants move for answers to the refused questions.

24With respect to the first line of questions, the Defendants submitted that the refused questions were relevant to the fifth of the five criteria for certification; i.e. the representative plaintiff criterion.

25It is a requirement of the Class Proceedings Act, 1992, s. 5(1)(e) that the representative plaintiff must: (1) fairly and adequately represent the interests of the class; (2) produce an appropriate litigation plan; and (3) not have, on the common issues, an interest in conflict with the interests of the other class members: Western Canadian Shopping Centres v. Dutton, 2001 SCC 46 at para. 41.

26Adequate representation from the representative plaintiff is based on the notion that he or she has a sufficient common interest with the class members as well as the motivation and ability to pursue the action for their mutual benefit. The court must be satisfied that the proposed representative plaintiff is a genuine plaintiff who will vigorously and capably prosecute the interests of the class: Western Canadian Shopping Centres v. Dutton, supra; Sullivan v. Golden Intercapital (GIC) Investments Corp., 2014 ABQB 212 at paras. 54-55. Courts seek to ensure that the proposed representative plaintiff will bring informed and independent judgment to bear on his or her role: Singer v. Schering-Plough Canada Inc., 2010 ONSC 42 at para. 211.

27Adequacy of representation depends upon such factors as: (a) the representative plaintiff’s motivation to prosecute the claim; (b) the plaintiff’s ability to bear the costs of the litigation; and (c) the competence of their counsel to prosecute the claim. The motivation of the representative plaintiff is determined by examining all of the circumstances; no one factor is determinative; Western Canadian Shopping Centres v. Dutton, supra. However, because the plaintiff will have the advice of competent counsel, one should not expect too much or be too demanding in evaluating whether a person can properly serve as a representative plaintiff, and the court will be sceptical of the defendant's arguments based on the personality of the candidate: Frey v. BCE Inc., 2007 SKQB 328 at para. 7; Coulson v. Citigroup Global Markets Canada Inc., 2010 ONSC 1596 at para. 158, aff’d 2012 ONCA 108.

28It appears that during Mr. Sayed’s cross-examination, the Defendants sought to question him about the tripartite relationship among Class Counsel, Mr. Sayed, and Mr. Shah (Mr. Sayed’s son) to determine whether either or both of Mr. Shah and Mr. Sayed would be able to be genuine plaintiffs and not just “figureheads” for Class Counsel, who not untypically have the greater financial interest in the class action given the entrepreneurial model endorsed by the Class Proceedings Act, 1992.

29The Defendants submitted that the familial relationship between the two proposed representative Plaintiffs raised the prospect that Mr. Shah may be subject to the influence of his father and lack independence and this was particularly problematic because the two Plaintiffs were at different points in the product distribution chains and so have divergent interests. Therefore, during their cross-examination of Mr. Sayed, the Defendants sought to probe his influence over his son, including how Mr. Shah became involved in this case and with Sotos LLP, the Plaintiffs’ lawyer of record.

30Mr. Sayed refused to answer these questions. In my opinion, he was right in refusing to answer.

31Mr. Sayed and Mr. Shah are competent adults and represented by competent and experienced lawyers in what has become a specialized litigation bar. Mr. Sayed and Mr. Shah are representatives of the class members they would represent, and even if Mr. Sayed and Mr. Shah were recruited as representative plaintiffs, that does not diminish the respect they deserve as plaintiffs and the respect that should be accorded the confidentiality of the solicitor-and-client relationship.

32All class actions are representative actions in which the plaintiffs must be represented by lawyers, and as the legal profession’s and the court’s experience with class actions has grown, the critical ingredients or factors for the determination of the representative plaintiff criteria has come to focus on the competence of counsel and on the qualifications of the plaintiff as reflected in the litigation plan, which in a sense is a synthesis of the other certification criteria.

33Put somewhat differently, the representative plaintiff criteria will or should fail if any of the other criteria are not satisfied, and the representative plaintiff criteria will or should be satisfied if all of the other certification criteria are satisfied. Litigation plans are a work in progress and can be revised as necessary assuming that the preferable procedure and other certification criterion have been satisfied. Where the first four criteria for certification will be satisfied, it will be a very-very rare case that a representative plaintiff who satisfies the criteria of class membership (i.e. is representative of the class) and who does not have a conflict with class members will not satisfy the fifth criterion for certification.

34In my opinion, it is no longer relevant, if it was ever relevant, to inquire how the relationship between class counsel and the representative plaintiff came about and the court should not be expected to probe very deeply into such psychological factors as the resolve or the enthusiasm of the plaintiff, which will likely vary given the exigencies of the many kinds of class actions. The better way to examine the qualifications of both Class Counsel and the Representative Plaintiff is to look at the product of their collaboration; i.e. the litigation plan prepared for the certification motion.

35I conclude that Mr. Sayed need not answer the first line of questioning.

36With respect to the second line of questions, Mr. Sayed refused to produce documents concerning the retail business of Alpina Holdings Inc. In this regard, he was asked to produce the business plan for his Mobilicity store and to produce all of the orders that Alpina Holdings made for class products from Mobilicity (for the Mississauga store for April-August 2010; for the Markham store for May-August 2010).

37The Plaintiffs refused to answer these questions on the grounds of irrelevance and disproportionality.

38I agree. I see no relevance of this line of questioning to the issues to be decided on the certification motion.

2. Dr. Reutter

39Dr. Reutter refused to answer a line of questioning during his cross-examination and the Defendants move for answers to the refused questions.

40The background to this refusals contest between the parties is that a significant issue on the certification motion will be whether as a common issue the Plaintiffs have a credible methodology grounded in the facts of the case that can prove harm to all class members from the alleged conspiratorial conduct. In his initial report, Dr. Reutter opined that all members of the proposed class would have been impacted by the alleged conspiracy, and that he can estimate with common evidence the average overcharge paid by the Class Members. In support of his opinion, Dr. Reutter relied on a number of market characteristics, including the commodity-like nature of lithium ion batteries, the price-driven basis of competition, and the Defendants’ market power.

41After Dr. Reutter delivered his report, Aylwin Shu, who is a former Best Buy Canada employee with over 20 years of experience in the wireless retail industry, deposed for the Defendants that the wireless retail market is driven by the sale of service contracts to consumers, not by the sale of mobile phones, which typically are sold at no cost, provided that the consumer completes the service contract.

42Mr. Shu’s evidence was proffered to support the Defendants’ argument that the inclusion of purchasers of mobile phones as Class Members would necessitate individual inquiries to determine whether an overcharge on battery cells was passed through into the price of the service contract of each class member and thus the impact of the alleged price-fixing could not be established as a common issue.

43In light of Mr. Shu’s evidence, in their Reply materials, the Plaintiffs amended their proposed class definition to exclude purchasers of “cell phones acquired as part of a cellular phone service contract.” And Dr. Reutter delivered a reply expert’s report that noted this change in class definition. However, he maintained that his methodology could still be used to estimate pass-through to contract phone purchasers.

44On his cross-examination about his two reports, Dr. Reutter refused to answer the following questions:

Q6: To advise whether the inclusion of the Contract Phones would complicate the pass-through analysis because service contract prices are unrelated to mobile phone costs.

Q7: To advise whether, in Dr. Reutter's view, to even try to demonstrate that an overcharge on cells was passed through into the price of a service contract would require specific inquiries.

Q8: To advise whether having the contract phones in the Class definition would complicate the pass-through analysis.

Q9: To advise whether the inclusion of the contract phones complicates the pass-through analysis for a number of reasons, including: one, because consumers may not actually pay for their phone headsets when they're purchased with a service contract; two, consumers may only pay the actual cost of the service contract; three, the price of the service contract may be set by the carrier based on factors which are unrelated to the cost of the headset, so that individual inquiries would be required.

45In my opinion, these questions were improperly refused. The questions are relevant to testing Dr. Reutter’s methodology, which is an issue for the certification motion.

46The Plaintiffs attempted to justify Dr. Reutter’s refusal on the grounds that with the change in the class definition to exclude cell phones acquired as part of a cellular phone service contract, questions about the significance of having included them initially became irrelevant. I disagree. Indeed, it is arguable, that, if anything, questioning about his treatment of this sector of the lithium ion battery market became more relevant.

3. Mr. Lee and Mr. Moll

47Mr. Lee deposed that there are two types of lithium ion batteries that are customized on a project-by-project basis for end users. He said that LG Chem does not use a fixed formula for determining prices and most of its sales contracts are individually negotiated and are affected by a wide variety of different factors.

48Mr. Moll testified that GS Yuasa Corporation does not manufacture or sell lithium ion batteries for use in consumer products and its sales are typically to manufacturers of satellites, aircraft and industrial goods. He said that GS Yuasa Corporation’s products are custom-made and are not made in standard sizes.

49In their written interrogatories, the Plaintiffs asked Mr. Lee of LG Chem and Mr. Moll of GS Yuasa to produce copies of documents referred to in the U.S. class action complaint that describe joint meetings between LG Chem and GS Yuasa and their competitors regarding prices, or to explain whether representatives of GS Yuasa attended meetings with other competitors, as alleged in the complaint.

50The Plaintiffs submit that the questions are relevant to arguments regarding the differentiation and customization of lithium ion batteries and the individual negotiation of lithium ion battery prices. The Plaintiffs submit that the arguments about differentiation, customization and individualized negotiations, in turn, are relevant to whether impact can be determined on a class-wide basis.

51The Defendants submit that questions about the U.S. class action are of doubtful admissibility as hearsay, but more to the present problem, the Defendants submit that questions about the U.S. class action are not relevant to the certification criteria. The Defendants submit that the Plaintiffs are prematurely conducting an examination for discovery about the merits of their conspiracy claim.

52I agree with the Defendants. To be relevant, evidence must increase or decrease the probability of the truth of the facts in issue: R. v. Morris, 1983 CanLII 28 (SCC), [1983] 2 S.C.R. 190; Cloutier v. The Queen, 1979 CanLII 25 (SCC), [1979] 2 S.C.R. 709. I am not persuaded that evidence about documents in the U.S. class action complaint that describe joint meetings between LG Chem and GS Yuasa and their competitors regarding prices, or to explain whether representatives of GS Yuasa attended meetings with other competitors is relevant to anything other than the merits of the proposed class proceeding and the answers to the questions will not assist the court in determining whether the criteria for certification are satisfied.

53Mr. Lee and Mr. Moll were correct in refusing to answer the questions.

G. CONCLUSION

54Orders to go in accordance with the above Reasons for Decision.

55The parties have agreed that the certification motion and related motions will proceed on a no costs basis.

Perell, J.

Released: May 21, 2015

COURT FILE NO.: CV-13-483540-00CP

DATE: 20150521

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

KHURRAM SHAH and ALPINA HOLDINGS INC.

Plaintiffs

– and –

LG CHEM, LTD., LG CHEM AMERICA, INC., PANASONIC CORPORATION, PANASONIC CORPORATION OF NORTH AMERICA, PANASONIC CANADA INC., SANYO ELECTRIC CO., LTD., SANYO NORTH AMERICA CORPORATION, SANYO ENERGY (U.S.A.) CORPORATION, SONY CORPORATION, SONY ENERGY DEVICES CORPORATION, SONY ELECTRONICS, INC., SONY OF CANADA LTD., SAMSUNG SDI CO., LTD., SAMSUNG SDI AMERICA, INC., SAMSUNG ELECTRONICS CANADA INC., HITACHI, LTD., HITACHI MAXELL, LTD., MAXELL CORPORATION OF AMERICA, MAXWELL CANADA, GS YUASA CORPORATION, NEC CORPORATION, NEC TOKIN CORPORATION, TOSHIBA CORPORATION, TOSHIBA AMERICA ELECTRONIC COMPONENTS, INC., and TOSHIBA OF CANADA LIMITED

Defendants