Canada: Another Refreshing Decision: Certification Denied In B.C. Vitaminwater® Class Action

INTRODUCTION

Earlier this month, the British Columbia Supreme Court released its judgment in Clark v. Energy Brands Inc. and refused to certify a proposed class proceeding regarding alleged breaches of British Columbia's Business Practices and Consumer Protection Act (BPCPA) in relation to the labelling and marketing of vitaminwater® beverages. This follows a previous decision in June by the Quebec Superior Court refusing to authorize a class action in relation to substantially the same allegations regarding vitaminwater® and Quebec's Consumer Protection Act. (For more information, please see our June 2014 Blakes Bulletin: A Refreshing Decision: Quebec Court Refuses to Authorize vitaminwater® Class Action.) These two decisions are the first contested certification decisions in Canada regarding the labelling of a food or beverage.

FACTUAL CONTEXT

In Clark, the plaintiff sought to certify a class proceeding on behalf of residents of British Columbia who purchased any of nine varieties of vitaminwater® and to advance claims that the labelling and marketing of vitaminwater® had the capability, tendency, or effect of causing a consumer to conclude that vitaminwater® is a healthy beverage with a minimal amount of sugar. In particular, the plaintiff's allegations related most fundamentally to the content of vitaminwater® labels, including the name vitaminwater®, the description of vitaminwater® as a "nutrient enhanced water beverage", flavour names, the lack of the number of grams of sugar, list of medicinal and non-medicinal ingredients, and the "recommended dose" and "recommended purpose" — elements of the labelling that the defendants contended were required by the Natural Health Products Regulations. (vitaminwater® was regulated as a natural health product, rather than a food, until December 2012.) The defendants noted, among other things, that "cane sugar" was listed as the second ingredient and the number of calories were included on every vitaminwater® label. Additionally, food and beverage decisions are matters of personal choice.

The plaintiff sought damages equal to an alleged price premium for vitaminwater® pursuant to section 171 of the BPCPA and a restoration of amounts paid by class members for the purchase of vitaminwater® pursuant to section 172 of the BPCPA. Initially the plaintiff contended that losses for the class as a whole could be determined by the use of market research studies to measure the impact on the overall consumption of vitaminwater® if the amount of sugar in it was disclosed to consumers.

After the Supreme Court of Canada's decision in Pro-Sys Consultants Ltd. v. Microsoft Corporation, the plaintiff conceded that survey or statistical evidence could not be used to establish causation or the fact of loss for the purposes of damages under the BPCPA. Instead, the plaintiff argued at a supplementary certification hearing that damages for an alleged price premium could be determined for the class as a whole, or in the alternative, that the court should authorize a class proceeding to seek declaratory relief. The defendants argued that there was no basis on which the proposed common issues can be determined without an assessment of individual class members' circumstances. The plaintiff had not established any means to establish causation or reliance on the representations at issue on a class-wide basis or any plausible methodology to determine damages on common evidence.

REASONS FOR DECISION

The decision of Justice Verhoeven of the B.C. Supreme Court focused primarily on whether the allegations of the plaintiff raised one or more common issues as required by section 4(1)(c) of B.C.'s Class Proceedings Act (CPA). In a departure from the usual practice of considering the requirements for certification in order, Justice Verhoeven noted that in the context of the issues in this case, and the centrality of whether class-wide assessment of damages is possible, the first question that should be addressed is whether the claim for damages pursuant to section 171 of the BPCPA was a common issue that should be certified. The plaintiff claimed that the allegedly deceptive labelling and marketing of vitaminwater® has inflated the price charged by the defendants and paid by consumers. The plaintiff submitted that the court should certify the proposed common issues regarding damages, despite not advancing an expert report or any evidence to support the allegation of a price premium.

Justice Verhoeven found that the plaintiff had not presented "some basis in fact" to support his price premium claim for vitaminwater® and it was not a certifiable common issue. He found that the plaintiff's theory of damages was vague; there was no clear, plausible theory of loss or damage. He also focused on the plaintiff's failure to adduce any evidence in support of his theory of damages. There was no evidence from the plaintiff or any other class member as to the price paid for vitaminwater® or to support a price premium theory. There was no evidence at all regarding the retail price of vitaminwater®. There was no evidence to show that there is a realistic prospect of establishing loss on a class-wide basis.

The plaintiff argued that although he had not adduced evidence as to the alleged price premium, information regarding the defendants' pricing was not publicly available and evidence to support the price premium theory might be obtained on discovery. However, Justice Verhoeven held that "where the theory of damage and the pleadings to support it are both vague, and the plaintiff has adduced no evidence whatsoever to support the claims, it would not be appropriate to certify the action for damages under s. 171 of the BPCPA on the basis that some evidence might be revealed on discovery that would in some manner support the claim."

Justice Verhoeven also considered the plaintiff's alternative claim that the court should certify issues of compliance with the BPCPA and declaratory relief. He noted that the central common issue — whether the defendants had marketed and labelled vitaminwater® in a manner that had the capacity, tendency, or effect of misleading consumers — would not serve any practical purpose in terms of moving the litigation forward. The consumer evidence provided by the plaintiff supports the defendants' contention and evidence that purchasing decisions are inherently individualistic. The circumstances of each and every consumer transaction are endlessly variable, and issues of reliance and causation would still need to be determined on an individual basis to establish subsequent individual claims for monetary relief.

Finally, Justice Verhoeven went on to find that the plaintiff had not established an identifiable class as required by section 4(1)(b) of the CPA and, in the circumstances, a class proceeding was not the preferable procedure for the resolution of the common issues as required by section 4(1)(d) of the CPA. In addition to the lack of common issues, the management of individual claims involving individualistic questions of reliance, loss and quantum of damages would be exceedingly difficult if not impossible. Consumers could not be expected to provide accurate or detailed records concerning vitaminwater® purchases and fairness to the defendants would be impossible. The practical problems presented by individual assessments of the claims in a class proceeding would be overwhelming. Justice Verhoeven noted the plaintiff's argument that a class action was the only economically feasible proceeding, but held that it cannot justify certification of an unworkable class proceeding; a class action must still be fair, efficient and manageable.

PROPOSED QUEBEC CLASS PROCEEDING

Notably, Justice Verhoeven considered the Quebec court's decision in Wilkinson v. Coca-Cola Ltd. in detail, but concluded that while the decision is of interest, it was distinguishable from the case before him due to the differences in the applicable legislation — both regarding consumer protection and class proceedings — and the resulting significant differences in the issues for the court to determine. In particular, Justice Verhoeven noted the defendants' arguments that the regulatory scheme for natural health products specifically precluded listing the quantity of non-medicinal ingredients, such as sugar, on the label of the product could potentially go to the merits of the claim. However, he had previously held that the defendants' arguments concerning the effects of a federal regulatory scheme should be addressed after the certification application. In contrast, the court in Wilkinson recognized that the defendants/respondents' labelling practices were consistent with the applicable federal regulations and that they had therefore not committed any breach of the Quebec Consumer Protection Act.

CONCLUSION

Clark is another example of the B.C. court refusing to certify a proposed class proceeding regarding a breach of the provincial consumer protection legislation — a notable trend given the prediction by some class action counsel that certification would simply become a speed bump after the Supreme Court of Canada's decisions in October 2013.

Further, in Clark and the Quebec proposed class proceeding (Wilkinson), the B.C. and Quebec courts have refused to certify (or authorize, in Quebec) a class action with respect to the labelling and marketing of vitaminwater® for markedly different reasons. In opposing proposed class actions regarding labelling or marketing consumer products, it is important that defendants and their counsel understand the provisions of provincial consumer protection statutes and the requirements of provincial class proceedings acts in order to ensure that the opposition to certification is appropriately tailored to provincial legislation.

Blakes acts for the defendants Energy Brands Inc. and Coca-Cola Ltd.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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