Court File and Parties
COURT FILE NO.: CV-17-586063-00CP DATE: 20181214 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Marcy David and Brenda Brooks, Plaintiffs – AND – Loblaw Companies Limited, George Weston Limited, Weston Foods (Canada) Inc., Weston Bakeries Limited, Canada Bread Company, Limited, Grupo Bimbo, S.A.B. De C.V., Maple Leaf Foods Inc., Empire Company Limited, Sobeys Inc., Metro Inc., Wal-Mart Canada Corp., Wal-Mart Stores, Inc. and Giant Tiger Stores Limited, Defendants
BEFORE: E.M. Morgan J.
COUNSEL: James Orr, Kyle Taylor, Annie Tayyab, and David Wingfield, for the Plaintiffs Katherine Kay and Sinziana Hennig, for the Defendant, Sobeys Inc. Robert Russell and Davit Akman, for the Defendants, Loblaw Companies Limited, George Weston Limited, and Weston Foods (Canada) Inc. Christopher Naudie and Adam Hirsh, for Maple Leaf Foods Inc. Adam Fanaki and Derek Ricci, for Giant Tiger Stores Limited Evangelia Kriaris and Joe McGrade, for Canada Bread Company Michael Brown and Danny Urquhart, for Metro Inc. Kristine Spence, for Wal-Mart Canada Inc.
HEARD: December 12, 2018
Defendants’ Motion for a Pause
[1] This motion is brought by the Defendants collectively for a pause in the proceedings pending the judgment in Toshiba Corporation v Godfrey (SCC File No. 37810), which was heard by the Supreme Court of Canada on December 11, 2018 and is under reserve. In my case management capacity I have previously fixed a hearing date of July 8, 2019 for the certification motion, with various interim deadlines for serving materials, conducting cross-examinations, etc.
[2] Ms. Kay, representing Sobeys Inc. and taking the lead on behalf of the moving Defendants, submits that there are issues in Godfrey which are highly relevant to the issues here. She states that the Supreme Court’s ruling is bound to have an impact on how the parties complete the evidentiary record, brief the legal issues, and present their arguments at the certification hearing. The Defendants are particularly concerned that the Godfrey ruling will impact on the extent and content of the expert evidence to be produced.
[3] The Plaintiffs have already served their expert reports. If the Supreme Court changes the law in a substantive way those reports will doubtless have to be amended or supplemented. The Defendants are anxious to be able to respond to the final version of the Plaintiffs’ expert reports. They do not want to encounter a situation where they are required to produce one set of reports and then later produce an amended or supplementary set.
[4] Under the schedule that I have set, the Defendants are required to serve their expert reports by January 2, 2019. If possible, they would like to be able to avoid that deadline. I am sure they have been working diligently to make the due date, which is rapidly approaching. Although Defendants’ counsel have been good sports about it, since setting the schedule they have made me understand that T.S. Eliot was incorrect; it is not April but early January that is the cruelest month.
[5] It was, of course, not my intention to turn Defendants’ counsel’s holiday season into a Waste Land. However, one of the primary tasks of a judge under the Class Proceedings Act, as under all of the Rules of Civil Procedure, is to ensure access to justice: Hollick v Toronto (City), 2001 SCC 68, [2001] 3 SCR 158, at para 27. In this regard, it is by now well understood that expeditious justice is part and parcel of access to justice: Hryniak v Mauldin, 2014 SCC 7, [2014] 1 SCR 87, at para 32. The protracted nature of much civil litigation tends to undermine the goal of access, and avoiding delays is one of the challenges that case management is aimed at rectifying.
[6] Counsel for the Plaintiffs submits that the Defendants’ request for a pause in this action, which, as indicated, has been set on a tight schedule, amounts to an effort at delay. Mr. Orr, for the Plaintiffs, states that the impact of an eventual ruling in Godfrey will likely be minimal. It is the Plaintiffs’ view that allowing one or two small issues to upset the schedule that has governed the parties in this action would be to allow the tail to wag the dog.
[7] It is the Defendants’ position that Godfrey will predictably have a major impact on the issues in this action. As they see it, a temporary pause now will likely prevent the need for a hurried adjournment later. In effect, Ms. Kay states that it is a pause that represents the most efficient way to proceed given the uncertainty in the state of important areas of the law pending the Supreme Court’s ruling.
[8] The issues argued in Godfrey that are also at play in this case are: (a) whether ‘umbrella purchasers’ (i.e. those who purchased the product at issue in the alleged price-fixing conspiracy from parties other than the alleged conspirators) have a cause of action; (b) whether section 36 of the Competition Act is a ‘complete code’, so that the assertion of tort and restitutionary claims at common law are precluded; (c) the standard to be met, and the economic methodology to be pursued in fixing that standard, by the Plaintiffs and their experts in seeking to certify harm as a common issue.
[9] I will leave aside the ‘complete code’ question, as that strikes me as a strictly legal issue that is unlikely to effect the production of evidence. The most immediate deadlines in the schedule set for certification are aimed more at compiling the evidentiary record than they are at addressing legal issues, although it is at least conceivable that the Godfrey ruling will remain under reserve for sufficient time that it will impact on all aspects of the certification motion, including the filing of factums and the oral hearing.
[10] As for the ‘umbrella purchasers’ issue, it is obvious that question will impact on the not only the argument but the evidence presented by the parties in the case. Mr. Orr concedes that this is an open issue. There have been differences in recent years between some courts in Ontario and British Columbia on whether these purchasers have a cause of action or are too remote and represent too indefinite a class. Indeed, the Plaintiffs’ expert, Dr. Jeffrey Leitzinger, states in his affidavit dated July 30, 2018 that his instructions included a question mark over the issue of umbrella purchasers:
[I was] informed by Plaintiffs’ counsel that the law on umbrella purchasers in Canada is in a state of flux and that Plaintiffs’ motion for class certification in the present matter will not seek to certify an umbrella class at this time. Consequently, issues related to the Umbrella Class members can be addressed at a later date, to the extent appropriate and instructed by counsel.
[11] It is the Plaintiffs’ position that while umbrella purchasers represent an unresolved question in terms of having a cause of action, the number of potential class members that fall into that category in the present case is small. Mr. Orr explains that to be an umbrella purchaser here, a person would have to not have bought bread from any of the Defendants (who represent the major retailers and producers in the country) or anyone in their direct distribution chain during the entire class period. It is only purchasers of bread from entirely independent producers and retailers who would qualify.
[12] The question of whether umbrella purchasers have a cause of action has been of some debate both in the carriage motion in the present case as well as in the parallel case in British Columbia. In fact, the issue of umbrella purchasers was identified in B.C. as one of the issues that may distinguish the action in that province from the present one:
While the plaintiff class in the David Action may be notionally broad enough to include all purchasers, even umbrella purchasers who may have purchased Fresh Commercial Bread once in the span of the class period, I am satisfied, based on the regional market differences identified by Mr. Bessette and Dr. Leitzinger, that the plaintiff in the Asquith Action has raised a serious question that the impacts on BC purchasers at the retail level is substantively different from the impacts on purchasers in the rest of Canada.
Asquith v George Weston Limited, 2018 BCSC 1557, at para 53.
[13] Perhaps most importantly, the prominence of this issue in Godfrey is one of the reasons that the British Columbia Supreme Court granted a pause similar to the one requested by the Defendants here (Asquith, at paras 80-81):
[80] It is common ground that the decision in Godfrey is expected to have a significant impact on the pleading of a cause of action for umbrella purchasers.
[81] In preparation for certification, expert materials will have to be prepared to address the economic impacts of the conspiracy, including the economic impact on umbrella purchasers. The pending decision of the Supreme Court of Canada is expected to significantly impact the methodology underlying the expert reports to be marshalled on a certification hearing, including whether umbrella purchaser claims can be advanced at all.
[14] The reason the question was “common ground” between counsel in B.C. but is contentious here is that the market is arguably different in each region. Everyone, including Plaintiffs’ counsel, was convinced that the umbrella purchasers would represent a significant portion of the class given the nature of the west coast market. That certainty is not shared by Plaintiffs’ counsel in Ontario.
[15] Unfortunately, I find it difficult to assess the potential class numbers at this point. There is no evidence to go on right now, and I would not want to make any decision based on conjecture. What I do know is what Dr. Leitzinger has confirmed – i.e. that the umbrella purchasers issue will have to be revisited by Plaintiffs’ counsel once the Supreme Court rules on the issue. That is the same here as in British Columbia. The B.C. court did not want the parties to have to engage in a two-stage expert report process, and neither do I. Given the legal uncertainties around this class of purchaser and the pending resolution of that uncertainty by the Supreme Court of Canada, it would seem imprudent to barge ahead without hearing the Supreme Court’s answer.
[16] Turning to the standard to be met by the Plaintiffs in identifying loss to indirect purchasers as a common issue, and the economic methodology to be deployed in meeting that standard, there is an equally contentious issue before the Supreme Court. The leading case to date in this area is Pro-Sys Consultants Ltd. v Microsoft Corporation, 2013 SCC 57, [2013] 3 SCR 477. There, the Court observed [at para 115]:
[The] role of the expert methodology [for indirect purchasers] is to establish that the overcharge was passed on to the indirect purchasers, making the issue common to the class as a whole…[and that] the critical element that the methodology must establish is the ability to prove ‘common impact’ from the alleged conspiracy.
[17] Defendants’ counsel take the position here, and apparently in defending other price-fixing claims, that in Microsoft the Court set a rather onerous standard for plaintiffs to meet. Ms. Kay points out in her factum that under Microsoft there must be a means of demonstrating that the overcharge was actually passed through to all purchasers, which means that at the certification stage there “must be some evidence of the availability of the data to which the methodology is to be applied”: Microsoft, at para 118.
[18] This onerous standard appears to have been disregarded, or at least softened, in the Godfrey case. The British Columbia Supreme Court opined that, “all that Microsoft requires is that ‘the methodology must be able to establish that the overcharges have been passed on to the indirect-purchaser level in the distribution chain”: Godfrey v Sony Corporation, 2016 BCSC 844, at para 167. The British Columbia Court of Appeal confirmed that this means that there is no need for an economic methodology that demonstrates that each class member suffered harm. In other words, the reading of Microsoft in the B.C. courts places a substantially lower onus on plaintiffs at the certification stage than that suggested by the Defendants’ strict reading of that case.
[19] Depending on whether the Supreme Court confirms the B.C. courts’ softer reading of Microsoft or the Defendants’ stricter reading of Microsoft, the burden on the Plaintiffs’ economics expert may vary greatly. If Defendants’ counsel are right, Dr. Leitzinger may have to amend or supplement his report to demonstrate that there is data available that establishes in a specific way the passing though of the price increases to every indirect purchaser. If the Court upholds the B.C. version of Microsoft, the task of the economics expert, including the Defendants’ expert in response, will be lessened and, presumably, the extent of the data to be produced in support of the expert reports will be equivalently reduced.
[20] The extent and content of expert reports is a legitimate concern to take into account in assessing whether a pause in the action is merited. Preparation of expert reports is crucial to both the prosecution and defense of an action based on an alleged price fixing conspiracy, and it is an expensive and time consuming step in the preparation of a certification record. Avoiding parties having to re-do the expert reports, or substantially supplement them down the road, is a valid goal in scheduling the path to a certification hearing.
[21] Likewise, the timing of the certification motion itself is a concern to be taken into account. No one knows today whether the Supreme Court will release its Godfrey decision before or after the scheduled July 8th certification hearing, or whether I will have released my own decision or still have it under reserve. Depending on that timing, the certification may have to be re-argued or an appeal based on the new state of the law may be sought.
[22] In Airia Brands Inc. v Air Canada, 2012 ONSC 4773, Leitch J. was faced with a similar dilemma in a case managed class action. As she observed, it is rare that we know in advance that a crucial set of questions like this will be answered within a relatively short time by the Supreme Court of Canada. She agreed with the defendants in that case that in those circumstances expeditious conduct of the litigation means pausing the action rather than moving quickly ahead [at para 15]:
…it is not fair and expeditious to commit resources to a process that will unquestionably have to be redone to some extent once the judgments of the Supreme Court of Canada are released. An adjournment will avoid inevitable duplication. If the certification motion proceeds as scheduled and the Supreme Court of Canada decisions are released while the certification decision is under reserve, the parties will be asked to make further submissions as a result of those decisions. If the certification motion proceeds as scheduled and I release a decision before the Supreme Court of Canada decisions are released, it is not hard to imagine that appeals will be commenced considering the uncertain state of the law and leave to appeal, if required, would most likely be readily attainable. Neither scenario provides an expeditious determination.
[23] A pause such as that requested by the Defendants will give guidance to counsel. In the wake of a Supreme Court ruling on the issues identified in Godfrey, the expert evidence here will only have to be done once by each side and will be tailored to the most current state of the law. A pause will also help ensure that the motion for certification will correctly include or exclude umbrella purchasers in accordance with whether or not they are determined to have a cause of action.
[24] The benefit of economizing of resources and proceedings in this way will likely outweigh any delay engendered by a pause at this stage. In my assessment, the Supreme Court of Canada’s pending judgment in Godfrey is worth the wait.
[25] The certification motion scheduled for July 8, 2019 is hereby adjourned and the action is temporarily paused. The schedule for the steps leading up to certification, including the looming January 2nd date for Defendants’ expert reports, is no longer applicable.
[26] If there are other steps to be taken in this action that do not impact on the route to certification in this direct way, they may be scheduled with my assistant as usual. A case management conference is to be convened by the parties with me as soon as practicable after release of the Supreme Court’s judgment in Godfrey.
Morgan J.