Canada: Class Actions and Consumer Product Settlements: The Proof is in (the Receipt For) the Pudding

Consumers don't keep their receipts. This poses a unique challenge in consumer product class actions, especially when parties seek the Court's approval of a settlement that requires a receipt as proof of purchase. And if the settlement doesn't require a receipt, what proof of purchase does it ask for? By the time a settlement is reached, how likely is it that consumers will accurately remember the dates and quantities of their purchases or how much they spent?

American and Canadian courts answer these questions in different ways. As manufacturers of consumable food and beverages are increasingly the targets of class actions south of the border, the U.S. courts seek the comfort of a receipt; in Canada, the courts seem more willing to accept affidavits.

No Receipt, No Class Action: The U.S. Skinnygirl Margarita Example

In June 2014, a federal district court in New Jersey denied certification to a putative class action brought on behalf of purchasers of the popular drink mix, Skinnygirl Margarita. The plaintiffs alleged that they purchased the product on the basis of false and misleading "all natural" and health claims featured on the product's label. In denying certification, the Court held that there was no reliable way to ascertain whether an individual belonged in the class, saying:

Without any independently verifiable proof of purchase through receipts, retail records, or otherwise, the Court finds it unlikely that putative class members will accurately remember every Skinnygirl Margarita purchase they made during the class period, let alone where these purchases were made and the prices they paid each time. Given the general inaccuracies of individuals' memories, the submission of affidavits supplying such information would be very likely to invite speculation, or worse, not to mention that this process would result in an extremely burdensome task for the Court or a claims administrator attempting to verify class members' claims. [emphasis added]

The Court refused to rely on each individual purchaser's "say-so," and cast similar doubt on using statistical methods, retailer records and social media to cross-check individual affidavits to screen out fraudulent claims. Such methods, the Court reasoned, did nothing to advance the inquiry regarding whether a specific individual purchased the product in question. Class certification was accordingly denied, without prejudice to the plaintiff's ability to renew their certification motion at a later date. The Court will hear arguments in respect of a renewed motion for certification later this fall.

The Canadian Approach: Sworn Affidavits are Enough

Unlike our neighbours to the South, courts in Canada are more likely to accept affidavit evidence attesting to proof of purchase. In fact, receipts are typically not required. In one case, the Court commented that the "threshold for making claims is very low, reflecting the realities of consumer conduct, for example, in not retaining receipts or having destroyed [products] that were considered hazardous."

Instead of refusing to certify a class action because receipts aren't available, courts in Canada not only certify the action, but are increasingly approving "two-tier" payment structures, in which purchasers who did not retain receipts are entitled to claim less than purchasers who provide receipts or other objective evidence of purchase.

In May 2013, a plaintiff who had commenced a class action against Danone Inc. obtained approval of a settlement in Québec for approximately $1.7 million. The Court approved a settlement structure that provided damages to class members who did not retain receipts as follows:

  •  if claimants did not have receipts, then they signed a sworn declaration in support of their purchase, and were automatically entitled to $30; or
  • if the claimants had proof of purchase, they were entitled to the greater of $30 or the value of their purchase, up to a maximum of $100.

Key Takeaway

In many cases, class actions are the only economical way for people buying consumables such as margarita mix to pursue product liability claims. The two-tier approach in the Danone case strikes the balance in favour of access to justice by creating a two-tier settlement structure that includes claimants who do not have receipts. The stricter U.S. approach in Skinnygirl strikes the balance in favour of preventing fraudulent or mistaken claims based on our inherently flawed memories.

These differing approaches make clear that the threshold level for proof of purchase varies between jurisdictions. When parties want to settle cases brought in more than one jurisdiction, the settling parties are well advised to do their due diligence on how the different courts will react to the proof of purchase requirements in their settlements.

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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