Corporate Governance

From the Pages of The Pomerantz Monitor: Further Evidence of Global Warming: Cracks in Canadian Class Action

By Carolyn Moskowitz

As Adam Kurtz reports in the current issue of The Pomerantz Monitor, Canadian courts have recently become far more receptive to shareholder class actions. Now this trend is extending to Canadian antitrust actions. Two Canadian courts ? an Ontario trial court and a British Columbia appellate court ? recently certified class actions in cases alleging price fixing conspiracies, in violation of antitrust law (called competition law in Canada). Generally, in price fixing cases, the defendant manufacturers (i.e., competitors) are alleged to have agreed amongst themselves on price and/or supply of a product that results in a higher price than would have otherwise been paid in a competitive market. Prior to these two decisions, Canadian courts set a high bar for class certification and were very reluctant to certify class actions. Canadian courts required substantial expert evidence to prove that there was, in fact, a workable methodology to establish both loss and liability on a class-wide basis. Plaintiffs? expert testimony was rigorously scrutinized and defendants? expert opinion ? that harm could not be shown on a class-wide basis ? was commonly adopted. As a result, very few class actions were certified or even brought in Canada, especially compared to the U.S., where courts are known for certifying a wide variety of class actions. 

However, in September 2009, the Ontario Superior Court ? in Irving Paper Limited v. Atofina Chemicals ? granted certification of a class action alleging a pricing fixing conspiracy by producers of hydrogen peroxide. Although common in the U. S., this was one of the first times that a Canadian court had certified a class of direct and indirect purchasers in an alleged price-fixing conspiracy case. 

Shortly thereafter, in November 2009, the British Columbia Court of Appeal (?BCCA?) ? in Pro-Sys Consultants Ltd. v. Infineon Technologies AG (?DRAM?) ? overturned a lower court ruling and certified a class action alleging a pricing fixing conspiracy by manufacturers of computer chips, known as Dynamic Random Access Memory, that are in computers and other electronic devices. DRAM is significant because it is the first important appellate decision that deals with class action competition law. 

Together, DRAM and Irving Paper have ? for now ? lowered the bar for plaintiffs to establish loss and liability on a class-wide basis. In general, in DRAM, the BCCA held that ?[t]he provisions of the CPA [Class Proceedings Act] should be considered generously in order to achieve its objectives: judicial economy ?; access to justice ?; and behavior modification ?.? Toward this end, the BCCA further recognized that ?[t]he certification hearing does not involve an assessment of the merits of the claim; rather it focuses on the form of the action in order to determine whether the action can appropriately go forward as a class proceeding.  * * * [I]n conformity with the liberal purpose approach to certification, the evidentiary burden in not an onerous one.?    

More specifically, in DRAM, the Court recognized that plaintiff, at this early stage of the litigation, ?was required to show only a credible or plausible methodology? to establish loss and liability on a class-wide basis and not the higher standard that the existence of harm must, in fact, be determined. In Irving Paper, the trial court held that plaintiffs need only show that such a plausible methodology "may" exist: ?Accordingly, where expert opinion evidence is adduced at the certification stage, ? it should not be subjected to the exacting scrutiny required at trial.?   

Full post as published by PomTalk on March 10, 2010 (boomark / email).