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February 25, 2020 Articles

Seven Canadian Class Action Appellate Decisions of 2019 That You Should Know

It was another busy year for the Supreme Court of Canada and Ontario’s apex court.

By Michael A. Eizenga, Ranjan K. Agarwal, Katrina E. Crocker, and Celeste Poltak

The Supreme Court of Canada and Ontario’s apex court delivered significant class action decisions in 2019. Though these decisions largely deal with the procedural aspects of class actions, they illustrate how substantive rights can be dealt with before or at the same time as certification motions. In this article, we discuss several of 2019’s most important decisions, which should be interesting to class action lawyers in the United States and Canada given the expanding number of cross-border class actions in Canada.

Substantive Developments at the Pre-Certification and Certification Stages

Hughes v. Liquor Control Board of Ontario, 2019 ONCA 305

On April 17, 2019, the Ontario Court of Appeal upheld the summary dismissal of a proposed class action by the Ontario Superior Court of Justice in Hughes v. Liquor Control Board of Ontario, 2019 ONCA 305. The plaintiffs, an individual beer consumer and the licensed restaurant he operated, alleged that the Liquor Control Board of Ontario and the Beer Store conspired in violation of section 45(1) of the Competition Act to allocate the beer market between them, among other claims (paras. 2–4).

The defendants brought summary judgment motions to dismiss the action before certification. In agreeing with the defendants and dismissing the plaintiffs’ appeal, the Court of Appeal confirmed key aspects of the regulated conduct defense.

First, the regulated conduct defense insulates a defendant from liability if (a) the legislation governing the regulated defendant is constitutionally valid and directs or authorizes the defendant to engage in the impugned conduct and (b) the law providing for criminal liability provides leeway for the regulated activity to operate without being criminalized (paras. 16, 25). Either an express grant of authority or a grant of authority by necessary implication is acceptable.

Second, the defense’s purpose is to avoid criminalizing conduct that a province considers to be in the public interest. For added certainty, the Ontario legislature enacted retroactive legislation in 2015 that specifically authorized and directed the parties to enter into the agreement at issue. That same provincial public interest should be recognized whether expressed in legislation in force at the time of the impugned acts or in retroactive legislation (paras. 35–36, 38).

Third, bringing unmeritorious class actions comes with great risk. Besides dismissing the appeal, the Court of Appeal denied leave to appeal the summary judgment costs award because it agreed that a reasonable litigant would expect defendants to devote significant resources when responding to a $2 billion claim of criminal conspiracy (para. 57).

Das v. George Weston Ltd., 2018 ONCA 1053

On December 21, 2018, the Ontario Court of Appeal in Das v. George Weston Ltd., 2018 ONCA 1053, upheld the dismissal of the claim brought as a proposed class action on behalf of thousands of individuals injured in the collapse of the Rana Plaza building.

The action was brought against several Loblaws entities and Bureau Veritas, a consulting company retained by Loblaws to inspect its offshore suppliers’ factories by way of “social audits.” The plaintiffs alleged that the adoption by Loblaws of a corporate social responsibility policy created a duty to protect factory workers down the supply chain (and other individuals in Rana Plaza) (para. 20).

The Court of Appeal upheld the decision to decline to certify the action as a class proceeding and to dismiss the plaintiffs’ action altogether under Rule 21 of the Ontario Rules of Civil Procedure (paras. 62, 176). It agreed that Bangladeshi law applied to the plaintiffs’ claim because the injuries occurred in Bangladesh, the claim was limitations-barred because it was started after the one-year limitation period of Bangladesh (for all class members other than those who were minors), and it was plain and obvious the defendants owed no duty of care to the plaintiffs (paras. 32–37, 42, 50). The “social audits” did not undertake to inspect building construction and structural integrity, and the court affirmed the well-established proposition that parties may enter into “limited audit” arrangements.

This case demonstrates how crucial a finding on the applicable law can be at an early stage in cross-border class proceedings. The case also reminds parties to be mindful when entering contracts to carefully limit the scope of their contractual engagements to avoid broad liability exposure.

Finally, although the plaintiffs were unsuccessful on their substantive appeal, the Law Foundation of Ontario, which funded the plaintiffs’ action, succeeded in reducing the $2.3 million cost award. The Court of Appeal found that while the respondents’ success entitled them to costs, there should have been a reduction (of 30 percent) in those costs to reflect the public interest component of the claim (para. 225).

Pioneer Corp. v. Godfrey, 2019 SCC 42

In an 8–1 ruling released on September 20, 2019, the Supreme Court of Canada affirmed the certification judge’s decision to certify the action as a class proceeding in Pioneer Corp. v. Godfrey, 2019 SCC 42.

Godfrey alleged that the 42 defendants who manufactured optical disc drives (ODDs) and ODD products conspired to raise, maintain, fix, or stabilize the price of those products. The proposed class consisted of three categories: (1) direct purchasers, (2) indirect purchasers, and (3) people who purchased the product made and sold by non-defendant companies (umbrella purchasers) (para. 5).

Godfrey alleged five causes of action, including a breach of section 45 of the Competition Act (para. 125). With certain exceptions, the certification judge conditionally certified the action as a class proceeding and included umbrella purchasers within the class.

By the time this matter reached the Supreme Court, there were five issues to address regarding competition/antitrust class actions:

  • the discoverability rule applies to the two-year limitation period in section 36(4)(a)(i) of the Competition Act (paras. 44–50);
  • the application of fraudulent concealment is not conditioned on a special relationship between the parties and may operate to extend the limitation period (paras. 53–54);
  • “umbrella purchasers” have a cause of action against the conspirators under section 36(1)(a) (para. 57);
  • section 36(1)(a) does not bar common-law or equitable claims from being brought alongside their claims under the Competition Act (para. 81); and
  • at certification, it is unnecessary for a plaintiff’s economic methodology to establish that every class member suffered a loss for loss to be certified as a common question (para. 102).

Except for the Supreme Court’s comments about methodology at trial, its decision accorded with results from the lower courts and made the civil cause of action in the Competition Act largely coextensive with the parallel common-law cause of action of unlawful means conspiracy. The decision also removed barriers to umbrella purchasers bringing their claims forward, without resolving whether the defendants were in fact liable, by noting the theory underlying such claims: Sometimes a group of companies conspiring to raise the price of a product between them could affect the market price for those products across the board, justifying a cause of action against the conspirators under the Competition Act (paras. 58–60).

The specific question about economic methodology before the Supreme Court in Godfrey arose following the Court’s 2013 decision in another competition class action case: Pro‑Sys Consultants Ltd. v. Microsoft Corp., 2013 SCC 57. In Pro-Sys, the Supreme Court held that demonstrating “some basis in fact” to certify that antitrust injury is a common issue requires a “credible or plausible” economic methodology that offers a “realistic prospect” of establishing loss on a class‑wide basis (para. 118). Pro-Sys left unresolved what was meant by “class-wide basis.”

The Supreme Court settled this issue in Godfrey by adopting the plaintiff’s interpretation of class-wide. For certification, the economic methodology need only show that the conduct injured some unidentified class members, rather than all class members or an identifiable subset (Godfrey at para. 102). However, the Court also made it clear that the burden on parties at a common issues trial will be significant (para. 117). A plaintiff’s methodology must identify the injured class members before a court will order the defendants to pay aggregate damages (paras. 117–19). The Competition Act cause of action requires proof of injury as a prerequisite for recovery.

Appeal Rights of Nonparty Class Members and the Ability of the Settlement Approval Judge to Vary Its Terms

Bancroft-Snell v. Visa Canada, 2019 ONCA 822

In Bancroft-Snell v. Visa Canada, 2019 ONCA 822, two class members appealed an order of the certification judge, who approved a partial settlement of the class action. Neither appellant was the representative plaintiff. A motion was brought to quash the appeal because these class members lacked standing.

The Ontario Court of Appeal found that the class members did not have standing because (a) Dabbs v. Sun Life Assurance Co. (1998), 41 OR (3d) 97 (CA), in which the Ontario Court of Appeal held that class members’ rights of appeal were confined to those in the Class Proceedings Act of 1992 continued to be good law and had not been superseded by later decisions (paras. 9–17); (b) there was nothing to support the argument that the settlement approval order could be understood as a “judgment on common issues” or a “determination of aggregate damages” (paras. 18–20); and (c) allowing class members to appeal settlement orders would create uncertainty, compromise the authority of the representative plaintiff and class counsel, and delay settlement (paras. 21–23).

The implication of this decision is that objectors should state their best case at the settlement approval hearing and the appellate courts will defer to the certification judge’s decision approving the settlement.

Welsh v. Ontario, 2019 ONCA 41

The class members in Welsh v. Ontario, 2019 ONCA 41, were 4,500 former students of three provincial schools for the deaf. At the motion to approve the settlement of the class action, the Ontario Superior Court of Justice approved the fee request but with a condition. Class counsel would have to donate a substantial portion of the fees to a charity for the deaf because he found the results achieved by the settlement to be “disappointing” (para. 5).

The Ontario Court of Appeal reversed this decision because unilaterally altering the terms of the settlement without the parties’ consent was an error of law, especially considering that the lower court had not allowed the parties to make further submissions on this issue (para. 11).

After being remitted, the motion was heard de novo in July 2019, and the Superior Court approved the fee in its totality.

The Application of Arbitration Clauses in Business-to-Business Relationships

TELUS Communications Inc. v. Wellman, 2019 SCC 19

In a 5–4 split in TELUS Communications Inc. v. Wellman, 2019 SCC 19, the Supreme Court of Canada clarified that consumers and businesses are not one and the same when it comes to claims under service contracts. Business customers cannot do an end run around the Arbitration Act of 1991 by simply joining their claims with those of consumers in a class action (para. 98).

The representative plaintiff, Wellman, filed a proposed class action in Ontario against TELUS, alleging that TELUS was improperly overcharging customers by rounding up calls to the next minute. The proposed class included both consumers and business customers; the service contracts between TELUS and each of its customers contained a standard form arbitration clause requiring all contractual disputes to be resolved through binding arbitration (paras. 2–3).

TELUS conceded that the Consumer Protection Act of 2002 (CPA of 2002) invalidated arbitration clauses in the consumer contracts, but TELUS sought a partial stay as against the business customers as non-consumers under the CPA of 2002 (paras. 4, 7). The motion judge dismissed TELUS’s motion for a stay and certified the action, and the Ontario Court of Appeal dismissed TELUS’s appeal.

The Supreme Court disagreed with the lower courts. The majority held that Ontario courts do not have the discretion under section 7(5) of the Arbitration Act of 1991 to decline to stay a proceeding where there is an otherwise valid arbitration clause, even in contracts of adhesion or where it might otherwise be considered practical to do so (paras. 69–76). This is in keeping with the Supreme Court’s previous decisions involving arbitration agreements in the context of class actions (see Dell Comput. Corp. v. Union des consommateurs, 2007 SCC 34; Seidel v. TELUS Commc’ns Inc., 2011 SCC 15.)

The decision to exempt certain parties from the enforcement of arbitration agreements ultimately lies with the legislature. Policy concerns “cannot be permitted to distort the actual words of the statute . . . so as to make the provision say something that it does not” (TELUS at para. 79). Here, the legislature made a careful policy choice to exempt consumers—and only consumers—from the ordinary enforcement of arbitration agreements under the CPA of 2002 (para. 80). For that reason, without legislative language to the contrary, arbitration clauses will probably (but not always) be enforced.

Heller v. Uber, 2019 ONCA 1

In Heller v. Uber Technologies Inc., 2019 ONCA 1, the plaintiff, David Heller, was an UberEats driver. His agreement with Uber contained an arbitration clause that required all complaints between the parties to proceed through mediation-arbitration (para. 11). Heller, however, brought a class action on behalf of Uber drivers alleging that Uber violated the Employment Standards Act of 2000 and that the arbitration clause was void and unenforceable (para. 4). The motion judge stayed the proceedings because the arbitration clause in the agreements between Uber and Heller precluded the action (paras. 16–17).

On appeal, the Ontario Court of Appeal held that the mandatory stay requirement under the Arbitration Act of 1991 did not apply. The court found that the arbitration clause effectively contracted out of the Employment Standards Act of 2000 by precluding an employee from making a complaint to the Ministry of Labour (paras. 36, 41–46). The court also found that the clause was invalid due to unconscionability because it represented a substantially improvident or unfair bargain. Heller received no legal or other advice before entering into the agreement, there was an inequality of bargaining power between Heller and Uber, and Uber knowingly and intentionally chose the arbitration clause to favor itself and take advantage of its drivers (paras. 52, 68–69). The Court of Appeal allowed the appeal, set aside the order to stay the proceedings, and ordered Uber to pay Heller costs of $20,000 (paras. 74–75).

The Supreme Court of Canada granted leave to appeal (see Uber Techs. Inc. v. Heller, [2019] SCCA No. 58), and the appeal was heard on November 6, 2019, but the Supreme Court’s judgment has been reserved.

Michael A. Eizenga, Ranjan K. Agarwal, and Katrina E. Crocker are with Bennett Jones LLP in its Toronto, Ontario, office. Celeste Poltak is with Koskie Minsky LLP in Toronto, Ontario.

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