Canada: Bar Orders In Price Fixing Class Action Settlements: The Uncertainty Continues

Introduction

The Supreme Court of Canada recently dismissed an application for leave to appeal from decisions of the Ontario Court of Appeal¹ and the British Columbia Court of Appeal,² which had upheld the approval of a partial settlement reached with two out of five chocolate manufacturers against whom class actions were proposed in Ontario and British Columbia. The proposed class actions alleged a conspiracy to raise, maintain, fix and/or stabilize the price of chocolate products sold in Canada.³ The settlement agreement contained a bar order that the non-settling defendants, who sought leave to appeal, viewed as depriving them of their substantive rights to seek contribution and indemnity from the settling defendants.

Both the Ontario Court of Appeal and the British Columbia Court of Appeal determined that the bar order did not interfere with the non-settling defendants' substantive rights. The decisions emphasized that there continues to be uncertainty as to whether joint tortfeasors have a right of contribution and indemnity where they are found liable as co-conspirators under the Competition Act or as intentional tortfeasors at common law (particularly where their conduct is alleged to be a criminal conspiracy).

Class action settlement agreements require court approval

In Canada, the courts must approve class action settlements to ensure that they are reasonable and in the best interest of the class. The courts cannot modify the terms of a proposed settlement but can only approve or reject it. The bar order at issue in Ontario and British Columbia provides that if the courts ultimately determine that there is a right of contribution and indemnity between co-conspirators, the plaintiffs will be entitled to claim from the non-settling defendants only those damages arising from the latter's conduct.

Decisions of the courts of appeal

Both the Ontario and the British Columbia courts concluded that Canadian courts have not yet considered whether there is a right of contribution and indemnity between co-conspirators in cases involving claims of price-fixing and violations of the Competition Act. In its analysis, the British Columbia Court of Appeal noted that the terms of the proposed bar order would not cause any prejudice to the non-settling defendants. Indeed, the bar order provides that if a right of contribution and indemnity between the co-conspirators is ultimately established, the plaintiffs are required to limit their claims against the non-settling defendants to those damages that arise from and are attributable to the latter's conduct and/or sales. On the other hand, if no such right of contribution and indemnity in the context of price-fixing claims and violations of the Competition Act exists, the bar order will have no effect on the non settling defendants. The plaintiffs should not have to give up their right to claim their full damages against the non settling defendants until the latter's right of contribution and indemnity has been established.

Although bar orders have become a mainstay in the settlement of complex multi-party litigation, including price-fixing cases, the Supreme Court of Canada's refusal to grant the non-settling defendants' application leaves unanswered the question of whether a non-settling defendant has a right to seek contribution and indemnity from a settling defendant for Competition Act and intentional tort claims⁴. Consequently, until this precise issue has been considered by the courts, non-settling defendants must be mindful that their liability may include damages attributable to a settling defendant's conduct unless the bar order provides otherwise.

Footnotes

1 [2010] O.J. No. 5304, 2010 ONCA 841

2 2011 CarswellBC 423, 2011 BCCA 21, [2011] B.C.W.L.D. 2576, [2011] B.C.W.L.D. 2575

3 A settlement approval order relating to a similar class action was also rendered by the Quebec Superior Court on September 7, 2010 but no appeal was filed by the non-settling defendants. The terms of the bar order contained in the Quebec settlement agreement were different than those at issue in the Ontario and British Columbia settlements.

4 Recent case law in Quebec involving conspiracy accusations indicates that bar orders may not always be needed given the solidarity provisions contained in the Civil Code of Québec which have been interpreted as precluding plaintiffs from claiming damages that are attributable to the settling defendants' conduct from the non-settling defendants.

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