Reproduced with permission from the Canadian Class Action Review (2006), Vol. 3, No. 1, published by Irwin Law, pp. 216-244.
4) Common Issues
This part of the test requires that the claims of the proposed class members raise common issues. An issue is considered "common" where its resolution is necessary to the resolution of each class member’s claim. It is not necessary that common issues predominate over individual issues. The court must examine the significance of the common issues in relation to the individual issues in deciding whether this part of the test is satisfied.50
Courts have stated that the commonality question should be approached purposively. The underlying question is whether allowing the action to proceed will avoid duplication of fact-finding and legal analysis.51 The resolution of the proposed common issues must move the litigation forward to a sufficient degree so as to justify the certification of the action as a class proceeding.52
In both Price and Chadha, the commonality requirement proved insurmountable. In each case, the plaintiffs were unable to demonstrate that proof of loss, an essential component of liability under section 36 of the Competition Act, was a common issue capable of being established on a class-wide basis.
In Chadha, the motions judge determined that there were three common issues. Disregarding the concerns raised in Illinois Brick about indirect purchaser actions, the motions judge found that the common issues were (1) whether the defendants had entered into a price-fixing agreement; (2) whether the defendants were liable to the members of the class for conspiracy; and (3) if so, the appropriate measure of damages. The motions judge concluded that liability, including loss, could be proved on a class-wide basis, relying in part on section 24 of the Ontario Class Proceedings Act, 1992,53 which he determined could be used to assess and distribute damages on an aggregate basis without the need for individual damages hearings.54 In support of their position on the commonality of establishing loss, the plaintiffs had filed the evidence of an expert who deposed that the alleged conspiracy had a "measurable price impact" on the end-users of the building products containing iron oxide pigment. The motions judge accepted this as sufficient evidence to establish that loss could be proved on a class-wide basis.
The Court of Appeal for Ontario rejected the analysis of the motions judge on the issue of proof of loss. The court determined that the plaintiffs had failed to put forward sufficient evidence to demonstrate how loss could be proven on a class-wide basis. Noting that the plaintiffs’ expert’s model was based on the assumption of a full pass-through of the price increase to homeowners, the court stated that this was "the very issue that the court must be satisfied is provable by some method on a class-wide basis before the common issue can be certified as such."55
In analyzing the complexities inherent in proof of loss for indirect purchasers, the Court of Appeal undertook a detailed examination of the decision of the United States Court of Appeals for the Third Circuit in In re Linerboard Antitrust Litigation,56 a case involving an alleged conspiracy in the corrugated cardboard market. Justice Feldman, writing for the court in Chadha, noted that the plaintiffs in Linerboard adduced substantial expert evidence (including models, studies, company records, industry data, and articles) to support their argument that all purchasers of Linerboard products would have paid a higher price. This evidence established that the fact of loss was common to all class members, so that only the quantum of loss would vary. The court contrasted this evidence with that introduced by the plaintiffs in Chadha, which failed to substantiate the pass-through analysis. Rather, the plaintiffs’ expert assumed the pass-through and did not suggest a methodology for proving it. This did not, in the court’s view, provide a sufficient basis for concluding that proof of loss could be presented as a common issue.
The Court of Appeal also rejected the argument that section 24 of the Class Proceedings Act, 1992 set out a method for proof of class-wide loss. It held that this provision could be resorted to only once liability has been established, providing a method of assessing the quantum of damages on a global basis but not of establishing the fact of damage. The court ultimately held that the evidence presented by the plaintiffs did not satisfy the commonality requirement, and on this basis the proceeding could not be certified.
Similarly, in Price the motions judge confirmed that each member of the proposed class had to prove actual loss or damage. He did not view this requirement as necessarily barring certification. Relying on the decision of the Court of Appeal in Anderson v. Wilson,57 he observed that it should not be assumed "that there cannot be a certification or a common issue if the claimant’s evidence is individually necessary."58 However, the motions judge stated that the common issues must be analyzed in the context of the claims as a whole to determine whether the claim is properly prosecuted as a class action — in other words, whether a class action is the preferable procedure for the resolution of the matter. He determined that the evidentiary burden that the individual plaintiffs faced in establishing loss presented a major stumbling block to meeting the preferable procedure requirement. He stated:
In relation to judicial economy, I find that the common issue relating to the breach of the competition statutes or the commission of the torts pleaded is relatively minor in relation to the individual issues that must be proved. When the court considers the numerous variables in relation to the price paid by the end purchasers and the determination of whether the electronic product is a "Named Product" distributed by a PCI authorized dealer, it is readily apparent that the resolution of the one common issue (the breach of a statute or commission of a tort) does not significantly advance the litigation.59
Although the presence of individual issues will not be fatal to certification, where the individual issues could overwhelm the action completely and necessitate individual trials for virtually each class member, a class action may be completely unmanageable.60 As the Divisional Court stated in Chadha, where the trial of the individual issues would make the class proceeding a "monster of complexity," certification should be denied.61
A recent decision of the Court of Appeal for Ontario decided after Chadha may make it easier for courts to certify claims involving an abundance of individual issues. In Cloud v. Canada (A.G.),62 the court treated the common issues requirement as calling for a qualitative, not a quantitative, assessment. It determined that this criterion should be a "low bar" and that the certification analysis should not be driven by the mere number of individual adjudications that remain after the common trial. Justice Goudge emphasized this point, stating:
An issue can constitute a substantial ingredient of the claims and satisfy s. 5(1)(c) even if it makes up a very limited aspect of the liability question and even though many individual issues remain to be decided on resolution. In such a case the task posed by s. 5(1)(c) is to test whether there are aspects of the case that meet the commonality requirement rather than elucidate the various individual issues which may remain common after trial.63
It remains unclear whether and how Cloud will affect the analysis of the commonality requirement in class actions brought in the antitrust context. Given the basis on which the courts in Chadha and Price decided not to certify those actions, the implications of this "lower bar" could be significant.
5) Preferable Procedure
The preferable procedure analysis is generally the heart of the certification motion. It requires consideration of the three goals of the class action procedure: judicial economy, access to justice, and behaviour modification.64 Canadian courts have established a two-part test on the preferable procedure issue: (1) whether a class proceeding offers a fair, efficient, and manageable way of determining the common issues presented by the claims of the proposed class members; and (2) whether the determination of these common issues will advance the proceeding in accordance with the policy objectives underlying the legislation.65
The plaintiff bears the burden of satisfying the court that the elements of the certification test have been met.66 However, it is still in the best interests of defendants to lead evidence as to whether the ultimate resolution of the issues raised by each member’s claim would be better accomplished through other procedures, such as joinder, test cases, or simply allowing each claim to proceed individually.
Where there is a multiplicity of common issues, defendants can argue that individual trials are the preferable procedure.67 Where the harm alleged varies widely among class members and there is a sizeable class, a strong argument may also be made that the proceeding will inevitably disintegrate into individual trials for the resolution of the myriad individual issues.68
In both Chadha and Price, the court determined that the common issues advanced by the plaintiffs would be completely subsumed by individual issues. As in Illinois Brick, these issues would make a class proceeding completely unmanageable. In both cases, the court determined that the need to prove actual loss precluded treating liability as a common issue. In Chadha, this meant that each class member had to prove the pass-through of the higher iron oxide price along a lengthy distribution chain. Further, the court noted that "a massive record-tracing exercise" would be required just to establish the inclusion of iron oxide in any particular structure.69 The "multitude of variables" affecting the final purchase price of a building created additional problems. Under the circumstances, the obstacles to an effective class proceeding overrode its potential benefits. In Price, the court also determined that the plaintiffs would have to succeed on numerous issues to establish liability, including whether they had purchased a particular product, whether the product was bought during the requisite time frame, whether it was purchased from an authorized dealer in Canada, what the price was at the time of purchase, and what the price should have been. Further evidence would also have had to be led on the many factors that influence the price at which dealers sell electronic products in particular transactions. The preferable procedure requirement could therefore not be met.
Although the courts in both Chadha and Price determined that the individual issues so overwhelmed the common issues that a class proceeding was not the preferable procedure, the door has not been closed to antitrust class actions involving proof of loss issues. As the Court of Appeal remarked in Chadha, "[i]n this jurisdiction it remains to be determined whether in a particular case a sufficient evidentiary record can be brought before a certifying court to satisfy that liability can be proved as a common issue. Whether it can be done is a question left open for future cases."70
Courts faced with proposed antitrust class proceedings will also now likely be influenced by the Court of Appeal’s decision in Cloud. In that case, the defendants objected to certification on the basis that the vast majority of the issues required individual resolution. The court acknowledged that the proceeding involved many individual issues relating to harm, causation, and limitation periods. However, the court also noted that the common issues relating to the nature of the legal duties owed and whether those duties were breached were of primary importance to the action as framed. This was sufficient to meet the preferable procedure requirement. Justice Goudge stated:
The resolution of these common issues therefore takes the action framed in negligence, fiduciary duty and aboriginal rights up to the point where only harm, causation and individual defences such as limitations remain for determination. This moves the action a long way.
The common issues are fundamental to the action. They cannot be described as negligible in relation to the consequential individual issues nor to the claim as a whole. To resolve the debate about the existence of the legal duties on which the claim is founded and whether these duties were breached is to significantly advance the action.71
This decision suggests that the preferable procedure requirement will be met if the common issues advance the action in a "non-negligible" manner.72 This threshold appears on its face to be much lower than that set out in Chadha. Adopting this threshold in an antitrust case would likely make certification easier than if Chadha alone governed the issue.
6) The Representative Plaintiff
The representative plaintiff advances the proceeding on behalf of the entire class. The Ontario Class Proceedings Act, 1992 requires that, in order to discharge this role, the representative plaintiff must adequately represent the interests of the class, produce a workable litigation plan for advancing the proceeding, and not have any conflicts of interest with other class members.
To date, challenges by defendants to the adequacy of the proposed class representative have not been as vigorous as those in the United States.73 In Canada the focus of attack generally has been on the adequacy of the litigation plan,74 on any conflicts that can be identified between the representative plaintiff and class members, and on the ability of the representative plaintiff to fund the action. For example, in Price the plaintiff provided a sparse litigation plan, lacking in detail, which the court saw as an "unworkable" method of advancing the litigation. In complex litigation, the plaintiff cannot present the court with a bare-bones plan and assert that the court has the authority to fix or refine it at a later date.75
The representative plaintiff criterion may have added importance in competition class actions where the proposed class includes both direct and indirect purchasers. In such a case, the court may determine that there is a conflict between the interests of the members of the class. While the indirect purchasers have an interest in asserting that higher prices were passed through the distribution chain, the direct purchasers’ interest lies in persuading the court that they absorbed the price increase and should be entitled to recover the entire loss. This conflict may be sufficient to deny certification of a combined purchaser class in a future case. Although sub-classes have been proposed as a means of resolving this problem, they are likely not a viable solution when the interests of the different sub-classes are directly opposed, at least where certification is contested.
D. Certification for Settlement Purposes
Although contested antitrust certification motions are rare in Canada, a number of conspiracy-related class actions recently have been certified for settlement purposes.76 Under class proceedings legislation, a class must be certified before settlement in order for the settlement to bind all of the members of the class.77 The courts’ approach to certification for settlement purposes has been much more relaxed than in cases where certification is contested. Certification has been granted in these cases even where a proposed class proceeding might not survive a contested motion. As one court has noted, "an issue that would lack commonality in contested proceedings may be a common issue when certification is requested in a settlement context."78
The reason for the courts’ general approach to certification for settlement purposes appears to be their view that, for policy reasons, settlements of class proceedings should be encouraged.79 What motivates defendants to settle class proceedings where they might successfully resist certification (on the basis, for example, of class composition, preferable procedure or commonality) is less clear. Presumably, a desire to put an end to embarrassing and costly proceedings is one motivating factor. Another may be that the settlement is part of an effort to resolve litigation on a global basis. Many settlements negotiated in Canada follow similar settlements negotiated in the United States or elsewhere.
In the majority of settled antitrust class actions, courts have not engaged in any extensive analysis as to whether the requirements for certification have been met.80 For example, in certifying for settlement purposes a class action involving an alleged conspiracy to fix the prices of monosodium glutamate and nucleotides in Canada, Justice Cullity stated that the settlement context affects the question of whether the requirements for certification are satisfied,81 indicating that
[i]f certification had been contested in this case, the plaintiffs may well have encountered difficulty in persuading the court that the requirement in section 5(1)(d) was satisfied and, in particular, that a manageable procedure could be established for proving loss on an individual basis if this were found not to be amenable to a trial of common issues ... The proposed settlement does, however, provide for a procedure that would avoid such problems and, if it is found to be fair to — and in the interests of — class members, I do not see why it should be ignored for the purposes of certification ... The goals of access to justice and behavioral modification will be advanced and, unlike the finding in Chadha, judicial economy will not be undermined.82
Similarly, another court approving the certification of an antitrust class action for settlement purposes observed that where a proposed settlement represents a reasonable compromise to complex, expensive, risky, and potentially protracted litigation and the settlement benefits are substantial, certification will be granted in order to facilitate settlement.83
In Ford, a recent decision certifying a settlement of several class actions involving competition in the market for vitamins, Justice Cumming of the Ontario Superior Court of Justice engaged in a more comprehensive analysis of the certification criteria.84 However, even these proceedings may not have survived contested certification motions in the form in which they were certified for settlement purposes. The plaintiffs in these cases alleged a complex, global, multi-party price-fixing and market-sharing conspiracy relating to the sale of vitamins in Canada. They sought damages on behalf of all purchasers of vitamins: direct, intermediate, or consumer.
The plaintiffs proposed that the court deal with these claims in two stages. At stage one, the plaintiffs sought to have the alleged conspirators found liable for the aggregate overcharge on all sales of vitamins in Canada. At stage two, the overcharge would be distributed to or for the benefit of all classes of purchasers along the distribution chain.85 Although the plaintiffs asserted that this approach would avoid the fragmented approach to price-fixing claims adopted by courts in the United States, it does not appear that this approach would resolve the requirement that all claimants must prove that they suffered actual loss or damage as a result of the alleged anti-competitive conduct.
In reviewing the proposed settlement, the court acknowledged that the plaintiffs faced serious risk if certification had been contested, stating
[t]he novel nature of the actions and the theory pursued by Class Counsel created the risk that the actions, or some of them, would not be certified, and the risk that if certified, the Court would not assess damages in the aggregate. Quite probably, the Defendants would have argued that the decision of the Ontario Court of Appeal in Chadha v. Bayer Inc. ... ought as precedent to preclude certification of the actions at hand.86
However, for settlement purposes the court certified a class composed of direct purchasers, intermediate purchasers, and consumers. It stated that "the plaintiffs do not have on the common issue any interest in conflict with the interests of other class members. In conspiracy claims, every buyer and seller in the class has a common interest in proving the existence of the conspiracy and in maximizing the aggregate amount of class-wide damages."87
This statement seems to disregard the need for plaintiffs to prove actual loss in order to sustain a claim under section 36. The plaintiffs’ interests would inevitably come into direct conflict as each group sought to prove that some or all of the loss was suffered at its stage of the distribution chain. The court acknowledged that there were substantial difficulties associated with the determination of the actual damages suffered by indirect purchasers and that the complexity and administration costs associated with any distribution to these plaintiffs would be prohibitive,88 but avoided engaging fully in the loss analysis. Instead, the court accepted the recommendation that the benefits available to intermediate purchasers and consumers be paid on a cy pres basis to carefully selected consumer and industry organizations.89
This solution to the indirect purchaser dilemma was also adopted in Bona Foods Ltd. v. Ajinomoto U.S.A., Inc., where the Superior Court certified a class that included both direct and indirect purchasers.90 The terms of the court-approved settlement called for an 85 percent/15 percent distribution of compensation as between direct purchasers on the one hand and intermediaries and end-users on the other. This breakdown was consistent with expert evidence as to the likely incidence of damage resulting from the alleged price-fixing conspiracy. The amounts allocated to direct purchasers were to be distributed from the fund on a pro rata basis on receipt of proof of purchase during the relevant period. The amounts intended to benefit intermediaries and consumers were to be distributed to trade organizations and community foundations across Canada.91 This plan of distribution focused on both compensation and the disgorgement of ill-gotten gains. Although accepted by the court in the settlement context, it is unlikely, given Chadha, that this kind of scheme, and a class containing members whose interests might well be in conflict, would be approved on a contested certification motion.
Although several antitrust cases have reached the certification stage in Canada, most were merely for the purposes of settlement. Despite the failure of the plaintiffs in both Chadha and Price to meet the criteria for certification, the two cases are among the few to provide insight into the approach of Canadian courts to antitrust class actions and guidance as to how they will be handled in the future.
Canadian courts have not yet clearly articulated an approach to certification in antitrust class actions to guide potential plaintiffs and defendants. Recent decisions of the Ontario Court of Appeal and the Supreme Court of Canada have raised further questions for antitrust class actions. The Court of Appeal appears to have made certification easier where individual issues predominate over common issues,92 a development of potential benefit to plaintiffs faced with the need to prove myriad individual issues in order to establish loss. The Supreme Court of Canada appears to have created further difficulties for defendants wishing to assert the passing-on defence.93 Courts have yet to determine definitively whether the bar to certification in antitrust cases has been lowered and whether the passing on defence remains available. It also remains to be seen whether a class action brought by indirect purchasers can survive a contested certification motion. As Justice Feldman observed in Chadha in the context of an indirect purchaser class action, these are questions left open for future cases.94
50. Linda M. Plumpton & Amanda M. Kemshaw, "Evidence and the Certification Motion: A Defendant’s Perspective" in Key Developments in the Law of Evidence: An Essential Update for Trial Lawyers (Nova Scotia: Canadian Bar Association, 2004) at 13.
51. Western Canadian Shopping Centres Inc. v. Dutton,  2 S.C.R. 534.
52. Moyes v. Fortune Financial Corp. (2002), 61 O.R. (3d) 770 (S.C.J.) at 779, aff’d (2003), 67 O.R. (3d) 795 (Div. Ct.).
53. Section 24(1) sets out the circumstances in which the court may determine the aggregate or a part of a defendant’s liability to class members and give judgment accordingly. Section 24(2) states that the court may order that all or part of such an award be applied so that some or all individual class members share in the award on an average or proportional basis.
54. Chadha (S.C.J.), above note 2 at 37.
55. Chadha (C.A.), above note 2 at para. 30.
56. 305 F.3d 145 (3rd Cir. 2002) [Linerboard].
57. (1999), 44 O.R. (3d) 673 (C.A.).
58. Price, above note 4 at para. 40.
59. Ibid. at para. 44.
60. Mouhteros v. DeVry Canada Inc. (1998), 41 O.R. (3d) 63 (Gen. Div.) at 73 [Mouhteros]. This case involved a claim against a school for misrepresentations about the marketability of its students after graduation. The class definition was viewed as being over-inclusive because it included students who had found work after graduation. See also Price, above note 4.
61. Chadha (Div. Ct.), above note 2 at 547.
62. Cloud, above note 46.
63. Ibid. at para. 53.
64. Hollick, above note 10 at 177.
65. Ford v. F. Hoffmann-La Roche Ltd. (2005), 74 O.R. (3d) 758 (S.C.J.) at para. 41 [Ford].
66. Gariepy v. Shell Oil Co. (2002), 23 C.P.C. (5th) 360 (Ont. S.C.J.) at para. 72.
67. Mouhteros, above note 60 at 73.
68. Pearson, above note 43 at para. 119.
69. Chadha, above note 2 at para. 57.
70. Ibid. at para. 68.
71. Cloud, above note 46 at paras. 82– 83.
72. Ibid. at para. 83.
73. See Berger v. Compaq Computer Corporation, 257 F.3d 475 (5th Cir. 2001).
74. See Price, above note 4 at para. 59.
75. Ibid. at para. 61.
76. See, for example, Bona Foods, above note 11; Mura, above note 11; Alfresh Beverages Canada Corp. v. Hoechst AG, above note 11; Alfresh Beverages Canada Corp. v. Archer Daniels Midland Co., above note 11; Ford, above note 65.
77. See Ontario’s Class Proceedings Act, 1992, above note 37, s. 29(2) & (3); British Columbia’s Class Proceedings Act, above note 1, s. 35; Saskatchewan’s The Class Actions Act, above note 1, s. 38; Newfoundland and Labrador’s Class Actions Act, s. 35; Manitoba’s The Class Proceedings Act, above note 1, s. 35; and Alberta’s Class Proceedings Act, above note 1, s. 35.
78. Bona Foods, above note 11 at para. 11.
79. Ontario New Home Warranty Program v. Chevron Chemicals Co. (1999), 46 O.R. (3d) 130 (S.C.J.) at para. 70; Bona Foods, ibid. at para. 10.
80. See, for example, Alfresh Beverages Canada Corp. v. Archer Daniels Midland Co., above note 11; Mura, above note 11; Alfresh Beverages Canada Corp. v. Hoechst AG, above note 11.
81. Bona Foods, above note 11 at para. 20.
82. Ibid. at para. 27.
83. Alfresh Beverages Canada Corp. v. Hoechst AG, above note 11 at para. 19.
84. Ford, above note 65. This settlement was the largest amount ever recovered in a class action relating to price-fixing in Canada, with an approximate recovery value of $100 million.
85. Ibid. at para 12.
86. Ibid. at para. 120.
87. Ibid. at para. 44. The court reached this conclusion by referencing In re NASDAQ Market-Makers Antitrust Litigation, 169 F.R.D. 493 (S.D.N.Y. 1996) at 513.
88. Ford, above note 65 at para. 80.
89. Ibid. at para. 49.
90. Bona Foods, above note 11.
91. Ibid. at paras. 32–35. See also Alfresh Beverages Canada Corp. v. Hoechst AG, above note 11 at paras. 13–14.
92. Cloud, above note 46.
93. Law Society of Upper Canada v. Ernst & Young, above note 26. See also Ford, above note 65.
94. Chadha (C.A.), above note 2 at para. 65.
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