Court File and Parties
COURT FILE NO.: 47025CP
DATE: 2015/10/30
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Irving Paper Ltd., Irving Pulp & Paper, Ltd. 3969410 Canada Inc. c.o.b. as Park Avenue Hair Salon, Distributech Inc. and Stacey Leavitt
AND:
Atofina Chemicals Inc., Arkema Inc., Arkema Canada Inc., Arkema S.A., FMC Corporation, FMC of Canada, Ltd., Solvay Chemicals Inc., Solvay S.A., Degussa Corporation, Degussa A.G., Degussa Canada Inc., EKA Chemicals, Inc., EKA Chemicals Canada Inc., AKZO Nobel Chemicals International B.V., Kemira OYJ, and Kemira Chemicals Canada Inc.
BEFORE: Justice H. A. Rady
COUNSEL: D. Jones, J. Facchin and A. Dekay, for the plaintiffs P. Martin, for the defendants, FMC Corporation and FMC of Canada Ltd. L. Brasil, Independent Counsel
HEARD: October 20, 2015
ENDORSEMENT
Introduction
[1] This is an alleged price fixing case that was certified five years ago. The plaintiffs move for an order amending the class definition to shorten the class period to between November 1, 1998 to December 31, 2003 and to exclude persons who purchased products containing hydrogen peroxide or products using hydrogen peroxide (primarily indirect purchasers).
[2] The new class definition is as follows:
All persons in Canada (excluding the defendants and their subsidiaries, affiliates and predecessors) who purchased hydrogen peroxide directly from a manufacturer of hydrogen peroxide or through a distributor of hydrogen peroxide in Canada, between November 1, 1998 and December 31, 2003.
[3] The defendants remaining in the action do not oppose the relief sought. However, they submit that:
- the effect of such an order is to either dismiss the indirect purchasers’ claims or to discontinue them, thereby entitling the defendants to costs;
- the action cannot proceed until class counsel identify a representative of those members of the class who purchased hydrogen peroxide through a distributor.
The Claim
[4] This action was commenced by statement of claim issued in May 2005. The statement of claim alleges that the defendants conspired to and fixed, maintained and/or raised prices of hydrogen peroxide. The litigation is being prosecuted on a national basis in Ontario.
[5] On January 14, 2010, an order certifying the class action as a class proceeding on behalf of a national class was granted. Leave to appeal that decision was denied on June 8, 2010. The certified class definition specified a class period from January 1, 1994 to January 5, 2005. It included both direct and indirect purchasers of hydrogen peroxide as class members.
[6] Distributech Inc. was named as one of the representative plaintiffs in the certification order. During the class period, Distributech purchased paper products that contained or were produced using hydrogen peroxide. Irving Paper Ltd. was named as another representative plaintiff. It was a direct purchaser.
[7] Documentary discovery has been underway for quite some time but is not yet complete. As part of the process, the FMC defendants, the only defendants remaining in the action, produced in excess of 33,000 documents. There were production motions that were stayed pending the decision of the Supreme Court of Canada in the price fixing trilogy.[^1] Those decisions were ultimately released on October 31, 2013 but the outstanding discovery motions remain in abeyance until this motion has been adjudicated. Oral discoveries have not yet been scheduled.
[8] The plaintiffs were able to achieve settlements with all but the FMC defendants. Under the settlements, the settled defendants were required to produce relevant documents, participate in an evidentiary proffer and make employees available for interviews with class counsel. To date, more than 285,000 documents have been produced by the settled defendants. In addition, evidentiary proffers from all settled defendants have been received by the plaintiffs. Class counsel has conducted interviews with or have reviewed U.S. deposition transcripts of all living key players from the settled defendants.
The Settlements
[9] The settled defendants cumulatively paid $20,590,000. Except for the Arkema settlement funds of $100,000, the settlement funds were distributed in accordance with administration of the settlement agreements and order of the court dated July 5, 2010. A distinction was drawn for the purposes of compensating class members between two time periods. Class members were compensated at a higher rate for purchases made prior to December 31, 2001 and at a lower rate for those purchases made thereafter. The administration of the settlement agreements did not directly compensate purchasers of products containing or produced using hydrogen peroxide. Six percent of the settlement monies was allocated to those class members and was paid out cy-prѐs. The cy-prѐs distribution was approved because of the difficulty in accurately identifying the amount of overcharge borne by indirect purchasers, as well as the difficulty associated with paying compensation directly to them. The only recipients of direct compensation were direct purchasers, distributors and persons who purchased hydrogen peroxide from a distributor. There were no objections to the administration of the settlement agreements.
The Amendments
[10] As I have said, the proposed amended class definition shortens the class period. I am advised that the time period better reflects the period of time in which class members are believed to have been affected by the alleged conspiracy, based on productions made to date.
[11] And as already noted, the class as currently certified includes both purchasers of hydrogen peroxide as well as the purchasers of products containing or produced using hydrogen peroxide, the direct and indirect purchasers respectively. The essence of the plaintiffs’ position is that the law has evolved with the trilogy, and in particular, the decision in Sun-Rype. The law is now said to be clear that a representative plaintiff must show some basis in fact that two or more persons will be able to determine if they are in fact class members. The plaintiffs say that this is simply not possible for indirect purchasers of hydrogen peroxide, because other products are available with the same qualities as hydrogen peroxide - chlorine based products for example. Consumers would not necessarily know which compound was used in the product they purchased.
[12] The plaintiffs initially brought this motion on June 12, 2014. I raised with counsel a concern with respect to the impact of such an order on the rights of indirect purchasers. I expressed concern that indirect purchasers may not be aware of the proposed amendment and the court wished to ensure that they be given voice. Accordingly, at the hearing, the court requested that class counsel prepare a notice of the pending hearing of the plaintiff’s request to amend the definition of the class. I directed that counsel be appointed to provide independent legal advice to the representative plaintiff, Distributech; to any class members who had questions or wished to object to the amendment; and to represent such persons at the hearing of the motion to amend the class definition.
[13] In April 2015, with the input of class counsel and counsel for the FMC defendants, the court approved the form of pre-hearing notice and appointed Luciana Brasil as independent counsel. The pre-hearing notice was disseminated and the deadline for objections was September 15, 2015. The court received correspondence from Ms. Brasil prior to the hearing of this motion, reporting on her work as independent counsel. She also appeared at the hearing of the motion.
[14] The relevant sections of the pre-hearing notice provided as follows:
If you purchased Hydrogen Peroxide or Products containing or produced using Hydrogen Peroxide in Canada between 1994 and 2005, your legal rights could be affected.
The proposed amendment narrows the class in two ways.
First, it excludes from the Class those persons who purchased products containing or produced using hydrogen peroxide. Only those persons who purchased hydrogen peroxide directly from a manufacturer of hydrogen peroxide or who purchased hydrogen peroxide from a chemical distributor of hydrogen peroxide during the new class period will remain in the Class.
Limitation Period
If the Ontario court approves the amendment to the class definition, the limitation period will begin to run again starting on October 20, 2015 for:
• persons who purchased products containing or produced with hydrogen peroxide from January 1, 1994 – January 5, 2005; and
• persons who purchased hydrogen peroxide from January 1, 1994 – October 31, 1998 and from January 1, 2004 – January 5, 2005.
Persons affected by the proposed amendment who wish to pursue a claim should contact Luciana Brasil of Branch MacMaster LLP for independent legal advice as discussed below … [emphasis in original]
[15] Class counsel advised that they have been contacted by several class members who sought to provide updated contact details in order to make future claims. Ms. Brasil advised that she provided independent legal advice to Distributech and it does not object to the proposed amendments. She has spoken as well to a number of businesses and individuals. As of October 7, 2015, none of those class members expressed the desire to object to the amendment but equally had not confirmed that they would not object. However, no one appeared at the hearing.
[16] Class counsel, with input from Ms. Brasil, has proposed a form of notice to be sent to class members if the motion is granted. It will be disseminated in the same way as the pre-hearing notice. The relevant sections of the notice reads:
If you purchased Hydrogen Peroxide or Hydrogen Peroxide Products in Canada between 1994 and 2005, your legal rights could be affected.
Limitation Period
The limitation period that governs the time in which purchasers of products containing or produced using hydrogen peroxide could commence claims of the nature alleged in this case was suspended by the commencement of the class proceeding. The limitation period for purchasers of products containing or produced using hydrogen peroxide to commence an individual claim will begin to run again as of publication of this notice. Persons affected by this notice and who wish to pursue a claim on an individual basis should seek legal advice …
The Sun-Rype Decision
[17] In the Sun-Rype case, the Supreme Court refused to certify a class proceeding that alleged price fixing of high fructose corn syrup. HFCS is a food product sweetener used in soft drinks and baked goods.
[18] The court held that Sun-Rype failed to adduce evidence establishing a basis in fact that at least two class members would be able to identify that they purchased a product containing HFCS. Indirect purchasers would not necessarily know if an item was made with HFCS because other sweeteners, including liquid sugar, could be used interchangeably. Manufacturers were not required to identify which sweetener was used in a given product or batch.
[19] The plaintiffs submit that prior to the Supreme Court settling the issue, it had not been clear that such a class would not be certified. Indeed, the motions judge had certified the class. The majority of the British Columbia Court of Appeal raised the question whether the class was identifiable but did not decide the issue.
[20] Furthermore, they say that the law respecting the availability of a “passing on” defence remained unsettled until the trilogy and as a result, it was not uncommon to include both direct and indirect purchasers in the class.
[21] I pause here to note that the FMC defendants take issue with the foregoing submissions. They say that the decisions in the trilogy do not provide any justification for the change in perspective. They counter that the availability of the passing on defence was in doubt before the trilogy. They rely on these arguments not to oppose the relief sought but to buttress their argument that they are entitled to costs because the claims of indirect purchasers were doomed to failure from the outset. They say the inclusion of indirect purchasers unnecessarily consumed a great deal of time during the certification process.
The Statutory Framework
[22] The relevant sections of the Class Proceedings Act are set out below:
8.(1) An order certifying a proceeding as a class proceeding shall,
(a) describe the class;
(b) state the names of the representative parties;
(c) state the nature of the claims or defences asserted on behalf of the class;
(d) state the relief sought by or from the class;
(e) set out the common issues for the class; and
(f) specify the manner in which class members may opt out of the class proceeding and a date after which class members may not opt out.
(2) Where a class includes a subclass whose members have claims or defences that raise common issues not shared by all the class members, so that, in the opinion of the court, the protection of the interests of the subclass members requires that they be separately represented, subsection (1) applies with necessary modifications in respect of the subclass.
(3) The court, on the motion of a party or class member, may amend an order certifying a proceeding as a class proceeding.
10.(1) On the motion of a party or class member, where it appears to the court that the conditions mentioned in subsections 5(1) and (2) are not satisfied with respect to a class proceeding, the court may amend the certification order, may decertify the proceeding or may make any other order it considers appropriate.
- The court, on the motion of a party or class member, may make any order it considers appropriate respecting the conduct of a class proceeding to ensure its fair and expeditious determination and, for the purpose, may impose such terms on the parties as it considers appropriate.
28.(1) Subject to subsection (2), any limitation period applicable to a cause of action asserted in a class proceeding is suspended in favour of a class member on the commencement of the class proceeding and resumes running against the class member when,
(a) the member opts out of the class proceeding;
(b) an amendment that has the effect of excluding the member from the class is made to the certification order;
(c) a decertification order is made under section 10;
(d) the class proceeding is dismissed without an adjudication on the merits;
(e) the class proceeding is abandoned or discontinued with the approval of the court; or
(f) the class proceeding is settled with the approval of the court, unless the settlement provides otherwise.
29.(1) A proceeding commenced under this Act and a proceeding certified as a class proceeding under this Act may be discontinued or abandoned only with the approval of the court, on such terms as the court considers appropriate.
Settlement without court approval not binding
(2) A settlement of a class proceeding is not binding unless approved by the court.
Effect of settlement
(3) A settlement of a class proceeding that is approved by the court binds all class members.
Analysis and Disposition
[23] It is axiomatic that class proceedings are flexible in nature and experience has shown that certification orders can be adjusted and modified as the case proceeds. Certification orders are interlocutory rather than final in nature.
[24] The court’s ability to amend the class definition after certification is well established. Such amendments were made in Silver v. Imax Corp., 2013 ONSC 1667 (S.C.J.); Sauer v. Canada (Attorney General), 2010 ONSC 4399 (S.C.J.); and LeFrancois v. Guidant Corp., [2009] O.J. No 780 (S.C.J.) among others.
[25] The analysis undertaken by Van Rensberg J. (as she then was) in the Silver case is helpful. She noted as follows:
Section 8(3) of the CPA provides general authority for the court to amend an order certifying a proceeding as a class proceeding. Where circumstances relevant to certification have changed, section 10, which is more specific, is engaged …
Under s. 10(1), in the order to grant the relief sought, the court must find that at the time the motion is brought, one or more of the conditions under subsections 5(1) and (2) are no longer satisfied. The section specifically contemplates an amendment to a certification order based on changed circumstances: LeFrancois v. Guidant Corp … As Cullity J. noted in Pearson v. Inco Ltd., [2009] O.J. No. 780 (Ont. S.C.J.), at paras. 22 to 26, a motion for decertification or to amend a certification order, is not an appeal from the certification order, and the moving party has the burden of showing that the earlier decision would not have been made in light of new evidence, including evidence of facts that have subsequently occurred.
[26] She also observed that the amendment motion is not available to relitigate a decision earlier made at certification.
[27] I am satisfied that the class definition should be amended as the plaintiff requests for several reasons. First, I agree that the trilogy conclusively established that the passing on defence is not available. Therefore, the rationale (or a part of it) for including indirect purchasers is eliminated. Second, the emphasis in Sun-Rype on the requirement for self-identification caused counsel to re-evaluate their case, notwithstanding the supportive opinion of their expert. Clearly, there was some doubt about how to interpret the self-identification element when one remembers that the action was certified at first instance. An appeal was allowed on other grounds. I note as well, the dissenting opinion in the Supreme Court.
[28] The FMC’s defendants’ arguments relating to the merits of including indirect purchasers in the class appear to be essentially a relitigation of an issue decided on certification.
[29] I am not persuaded that the effect of the amendment to the class definition is tantamount to either a dismissal with prejudice or a discontinuance of the claim against the FMC defendants, thereby presumptively entitling them to costs. I have reached this conclusion for several reasons.
[30] First, as already noted, the CPA expressly permits the amendment of the certification order. Second, s. 28(1) of the CPA contemplates this very situation. The effect of the amendment falls squarely within s. 28(1)(b).
[31] There has been no adjudication of the claims of the indirect purchasers on their merits and therefore a dismissal order with prejudice is not appropriate.
[32] Moreover, neither a dismissal nor a discontinuance order is in the interests of justice because it would fly in the face of the notice given to class members. No reference to such an order being requested or contemplated was made. In my view, it would be manifestly unjust to make such an order in the circumstances.
[33] Finally, it bears noting that the plaintiffs were entirely successful on the certification motion. It would seem counter intuitive and an inappropriate exercise of discretion that the unsuccessful defendant would now be awarded costs, including those of certification.
[34] With respect to the appointment of a representative plaintiff for those indirect purchaser class members that remain in the class, the defendants have no standing to make the request. Their concerns about discovery rights are addressed by s. 15(2) of the CPA. It provides that the defendants can move for discovery of a class member following their examination of Irving Paper. I have already dealt with the possibility of a conflict of interest in my certification order and I do not propose to revisit it. Nor am I persuaded that a representative plaintiff is necessary for each of the direct and indirect purchasers. While I recognize that is frequently the practice, I am aware of cases where there has not been a representative plaintiff for each group. The Pro-Sys and Sun-Rype cases are but two examples.
[35] The motion is therefore granted. I wish to record my appreciation to Ms. Basil for the work she undertook at the request of the court.
“ Justice H. A. Rady”
___________________
Justice H. A. Rady
Date: October 30, 2015
[^1]: Sun-Rype Products Ltd. v. Archer Daniels Midland Company 2013 SCC 58; Pro-Sys Consultants Ltd. v. Microsoft Corp. 2013 SCC 57; and Option Consommateurs v. Infineon Technologies AG, 2013 SCC 59.