While the U.S. Supreme Court and federal courts of appeals have in recent years demanded rigorous scrutiny before authorizing certification of class actions, the Supreme Court of Canada has charted a different course. In a trio of recent decisions in antitrust class actions, Canada's high court rejected key U.S. precedents on the scope and nature of class actions, forcing companies to defend against the same types of allegations under distinctly different legal regimes on each side of the border.

The three cases decided by the Canadian court, which all involved allegations of price-fixing, are:

In each case, plaintiffs had filed a class action in Canada on the heels of a similar class action filed in the United States. The Supreme Court of Canada addressed four issues that have been critical to antitrust class actions on both sides of the border, and deviated in several places from the path charted by the U.S. Supreme Court.

Indirect Purchasers May Sue Under Canada's Antitrust Law

In Pro-Sys, the Supreme Court of Canada ruled that a defendant is generally precluded from asserting a passing-on defense in an antitrust class proceeding (i.e., the Court largely adopted the U.S. Supreme Court's ruling in Hanover Shoe). But Canada's court rejected the U.S. Supreme Court's Illinois Brick rule that bars indirect-purchaser suits under federal antitrust law, and held instead that an indirect purchaser may assert a cause of action under Canada's Competition Act. In concluding that an indirect-purchaser class action may be certified in the common-law provinces in Canada—i.e., those other than Quebec—the Court echoed Justice Brennan's dissent in Illinois Brick, concluding that "the same policies of insuring the continued effectiveness of the [antitrust] action and preventing wrongdoers from retaining the spoils of their misdeeds favor allowing indirect purchasers to prove that overcharges were passed on to them."

The Pro-Sys Court acknowledged the potential risk of double recovery when parallel claims are brought by direct and indirect purchasers, either as part of the same action or in multiple jurisdictions. But the Court noted that "legislation restricts individual recovery for damages for violations to just two years," making it impractical for potential Canadian indirect plaintiffs to sit on their claims until resolution of an earlier direct purchaser suit. Where multiple suits are brought, a defendant may present evidence of the potential for overlapping recovery to the trial judge, who may modify any damage award accordingly.

In Infineon, the Supreme Court of Canada held that similar principles apply under Quebec's civil-law regime. Accordingly, indirect-purchaser class actions also may be filed in that province.

Canada Does Not Require Rigorous Analysis Of Class Certification Requirements Prior To Certifying A Class

In Pro-Sys, the Supreme Court of Canada addressed the "rigorous" approach to class certification that the U.S. Supreme Court has reiterated is necessary under Federal Rule of Civil Procedure 23—most recently in Wal-Mart Stores, Inc. v. Dukes and Comcast Corp. v. Behrend. The Canadian court rejected the U.S. approach.

To the contrary, the court held that a plaintiff seeking class certification in Canada's common-law provinces does not need to prove with evidence at the class-certification stage that the class-certification requirements are met, nor does the court need to resolve "conflicting facts and evidence at the certification stage." Rather, in Canada a would-be class representative need only adduce a "credible" or "plausible" methodology to prove the issues of loss and liability on a class-wide basis.

More specifically, in an antitrust class action, "the methodology 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 must be "grounded in the facts" and "there must be some evidence of the availability of the data."

But the Canadian court did not give a completely free pass to plaintiffs at the class-certification stage. Instead, the court suggested, certification remains "a meaningful screening device" (including the requirement that an expert's methodology offer a "realistic prospect" of establishing class-wide loss).

In Infineon, the Supreme Court of Canada held that the standard for class certification in Quebec is even lower because the evidentiary burden is "less demanding" under the Civil Code. In a total departure from U.S. precedent, a Quebecois plaintiff must present merely an "arguable case that an injury was suffered"—and need not do so by presenting expert testimony. In fact, "presentation of expert evidence is not the norm at the [class-action] authorization stage in Quebec." (Defense lawyers in Quebec tell us that class-action trials are far more common than they are here; this comparatively loose approach to class certification may explain why.)

Canadian Courts May Exercise Jurisdiction Over Companies Alleged To Be Part Of Foreign-Based Conspiracies.

Another significant aspect of the Canadian high court's decision in Infineon was the conclusion that Quebec courts could exercise jurisdiction over companies accused of entering into price-fixing arrangements outside of Canada, so long as there is some indication of injury or "economic damage" to a consumer in Quebec.
Similarly, in Sun-Rype, the Court ruled that if plaintiffs adequately allege that defendants conduct business in Canada, make sales in Canada, and conspire to fix prices on products sold in Canada, Canadian courts could adjudicate the claims regardless of where the challenged conduct had taken place. As the Court put it: "The respondents have not demonstrated that it is plain and obvious that Canadian courts have no jurisdiction over the alleged anti-competitive acts committed in this case."

Some Good News On Ascertainability In Canada?

The Supreme Court of Canada did refuse to approve certification of a class action in one of the three cases. In rejecting class treatment for the indirect-purchaser class action in Sun-Rype, the court focused on the plaintiffs' failure to establish "some basis in fact" that an identifiable class existed. In particular, the plaintiffs in Sun-Rype did not offer any evidence to show that two or more persons could prove that they purchased a product actually containing high-fructose corn syrup during the class period.

This holding parallels a recent trend in U.S. courts of taking Rule 23's ascertainability requirement seriously—with the most prominent examples being the Third Circuit's recent decisions in Hayes and Carrera—decisions we have previously discussed in some detail. That said, it does not appear that the inquiry is as stringent in Canada as it is in Hayes and Carrera; although those U.S. decisions rejected the use of self-identification alone as a means of demonstrating the existence of an identifiable class in those cases, the Canadian Sun-Rype decision may leave that door open.

Potential Implications

While the full impact of these rulings will become apparent only over time—and future litigation—some implications already are clear. As an initial matter, plaintiffs' lawyers are likely to be emboldened by these rulings. Indirect-purchaser suits are now expressly permitted in Canada. It will be easier to certify class actions in Canada than the U.S. now that the Canadian high court has expressly rejected the type of "rigorous analysis" mandated by the U.S. Supreme Court in Dukes and Comcast. And foreign defendants with no presence in Canada may be required to defend competition class actions in Quebec, and possibly other provinces, that are filed by plaintiffs alleging that they suffered losses in those jurisdictions that were caused by a price-fixing scheme entered into entirely outside Canada.

More generally, these decisions may lead Canada's class-action system to see more litigation progress further along towards trial as fights that previously took place at the class-certification stage now get pushed down the road to summary judgment or trial. When it comes to class actions—like the Winter Olympics—our neighbor to the north is one to watch.

Edited by Archis A. Parasharami and Kevin S. Ranlett

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