It has been the best of times for Canadian class action
plaintiffs: an unprecedented level of attention from Canada's
top court has affirmed Canada's relatively low evidentiary
threshold at certification. These decisions also confirm that, with
respect to the role of evidence at certification, Canada and the
United States are on divergent paths.
Canada's Relatively Low Evidentiary Threshold
In three consumer class action certification appeals known as
the Indirect Purchaser Trilogy, discussed
here, the Supreme Court of Canada affirmed that the evidentiary
threshold to be met on a certification motion is the relatively low
"some basis in fact". In coming to this conclusion, the
Court considered and rejected the American approach, as set out in
Wal-Mart v. Dukes and In Re Hydrogen Peroxide Antitrust
Litigation, which subjects proposed class actions to
rigorous analysis and permits factual determinations to be made at
the certification stage on a preponderance of the evidence.
More recently, in AIC Limited v. Fischer, discussed
here, the Supreme Court clarified the "some basis in
fact" standard. The Court reviewed the case law and remarked
that the requirement to establish "some basis in fact"
should not lead a more detailed assessment of contested facts going
to the merits of the case. Therefore, at the certification stage,
the evidentiary record need not be exhaustive and courts
"cannot engage in any detailed weighing of the evidence but
should confine itself to whether there is some basis in the
evidence to support the certification requirements."
Deepening Divide Between Canada And The U.S.
While Canada's top court continues to circumscribe the role
of evidence at the certification stage, the U.S. Supreme Court is
moving in the opposite direction. In Halliburton Co. v. Erica
P. John Fund, Inc., discussed here, the U.S. Supreme Court confirmed that
plaintiffs in securities class actions could continue to rely on
the "fraud-on-the-market" presumption. The presumption,
which is activated when plaintiffs adduce indirect evidence of
price impact, in effect eliminates the need for plaintiffs to
demonstrate individualized reliance on an alleged
misrepresentation. In turn, defendants are given an opportunity to
rebut the presumption with evidence demonstrating that the alleged
misrepresentation did not actually affect the stock price. Both the
establishment and rebuttal of the "fraud-on-the-market"
presumption occurs at the certification stage. In this way,
antithetical to the Canadian approach, the U.S. Supreme Court in
Halliburton has, in the context of securities class
actions, embraced and expanded detailed evidentiary contests on the
merits at certification.
Certification Still A Meaningful Screening Device In
However, defendants in Canada should not expect that the
relatively low "some basis in fact" standard will lead to
the proliferation of class actions north of the border. Canadian
courts have consistently maintained that certification remains a
meaningful screening device.
The Supreme Court underscored this point by only authorizing the
certification of two of the three actions in the Indirect Purchaser
Trilogy (Pro-Sys Consultants Ltd. v. Microsoft Corporation
and Infineon Technologies AG v. Option consommateurs). In
the third action, Sun-Rype Products Ltd. v Archer Daniels
Midland Company, the Court denied certification, having found
that there was no basis in fact to support the existence of a class
that could self-identify. In Sun-Rype, the putative class
consisted of consumers who purchased products containing
high-fructose corn syrup. However, the plaintiffs did not offer any
evidence that such consumers could distinguish such products from
those using liquid sugar, as high-fructose corn syrup and liquid
sugar were used interchangeably in products. As a result,
certification was refused.
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