What is next for antitrust class action suits after DRAM?
Unlike the US courts, which are recognized for certifying a multitude of class actions and awarding prodigious punitive damages, Canadian courts see a negligible number of class actions being brought forward. Class actions in Canada rarely proceed to a contested certification motion. They often reach the certification checkpoint and are denied certification on the basis of failing to meet the requirements under the Competition Act, RSC, 1985, c C-34, on a class-wide basis. Nonetheless, there have been several competition class actions in Canada in recent years. Recently, the courts in Ontario have certified two class actions, 2038724 Ontario Ltd v Quizno’s Canada Restaurant Corp et al,  96 OR (3d) 252 (ON SCDC), and Axiom Plastics Inc v EI DuPont Canada Co,  90 OR (3d) 782 (ON SCDC).
On November 12, 2009, the British Columbia Court of Appeal (“BCCA”) released its decision in Pro-Sys Consultants Ltd v Infineon Technologies AG, 2009 BCCA 503 [DRAM]. The BCCA overturned the lower court ruling and instead certified the class action against five technology manufacturers accused of fixing prices on computer memory chips. DRAM is one of the first significant appellate decisions dealing with competition law. It departs from earlier cases, most notably the Ontario Court of Appeal (“ONCA”) decision in Chadha v Bayer Inc,  63 OR (3d) 22 (ONCA) [Chadha], where certification was denied in similar circumstances. This conflict between the Ontario and British Columbia courts at the appellate level has set the stage for a foreseeable review by the Supreme Court of Canada.
The respondents (Infineon, Hynix Semiconducter Inc., Samsung Electronics Co. Ltd., Micron Technology Inc. and Elpida Memory Inc.) manufactured semi-conductor memory chips known as Dynamic Random Access Memory used in almost all electronic products including computer mainframes and servers, laptops, automobiles, and cell phones. The respondent companies account for more than 76% of the worldwide production of Dynamic Random Access Memory.
Three of the respondents have settled in the US for $160 million (USD). All the respondents, except Micron, have pleaded guilty in the US to criminal charges of an international conspiracy to fix Dynamic Random Access Memory prices and have paid fines of more than $731 million (USD). There have been no pleas in Canada.
On May 8th, 2009, the British Columbia Supreme Court (“BCSC”) denied certification for a class action suit because the plaintiff failed to “put forward any issues of liability on a class-wide basis.” Given this failure on the part of the plaintiff, the court concluded that the case lacked “the semblance of a manageable and workable process.” Furthermore, the courts found that the appellant was not a suitable representative for the class because he had “irreconcilable differences” with other class members. Predictably, the plaintiffs appealed this decision and the case was reviewed by the BCCA on November 12, 2009.
Current Test for Certification In Canada
To get certification for a class action, the plaintiff needs to demonstrate (a) a viable cause of action, (b) a identifiable class of two or more people who are willing be represented by representative plaintiff, (c) meaningful common issues, (d) preferable procedures and (e) an adequate representative plaintiff, as per section 5(1) of the Ontario Class Proceedings Act, 1992, SO 1992, c 6. The test for certification has to be applied in a flexible and purposive manner.
The courts in Canada have rejected certification for most cases based on the fact that plaintiffs have failed to advance adequate expert evidence to prove that there was a workable methodology for confirming the issues of loss and liability on a class-wide basis. The harm and damages have been deemed to be viable common issues as per the test. Proof of loss or harm is a required element of liability for both the tort of conspiracy and section 36 of the Competition Act. Furthermore, without a workable methodology, the courts would have to find the liability of hundreds of class members. The complexity of the proceedings would not make the class action procedure the most preferable approach for certification.
Chadha, an ONCA decision, denied certification of indirect purchasers for an alleged price-fixing conspiracy for the distribution of iron oxide. Chadha was the first Canadian case to deal with class certification of indirect purchasers. The court held that the plaintiff did not provide sufficient evidence that the loss could be ascertained on a class-wide basis, following a similar line of reasoning described above.
On the other hand, a recent Ontario Superior Court (“ONSC”) decision, Irving Paper Limited v Atofina Chemicals,  89 OR (3d) 578 (ONSC) [Irving Paper], came to an opposite conclusion, granting certification to a class of direct and indirect purchasers relating to a price-fixing conspiracy for distribution of hydrogen peroxide. This was one of the first decisions in Canada where certification was granted in such a situation. The courts were moving away from the decision in Chadha where plaintiffs can show liability by demonstrating that the defendants were acting unlawfully, without proving loss on a class-wide basis. After this decision, the defendants facing competition class action suits pinned their hopes on DRAM, proliferating the significance of the DRAM decision in determining the direction of Canadian antitrust class proceedings.
Test revised in DRAM
In overturning the BCSC decision, the BCCA in DRAM has endorsed the ONSC decision in Irving Paper. The BCCA concluded that the lower court set the bar for the appellant too high. It held that the British Columbia Class Proceedings Act, RSBC 1996, c 50 should be construed “generously” in order to achieve its objectives of behavior modification, improved access to justice, and minimized multiplicity of court cases. They noted that “[t]he certification hearing does not involve an assessment of the merits of the claim; rather it focuses on the form of the action in order to determine whether the action can appropriately go forward as a class proceeding.” The onus is on the plaintiff to show some basis in fact. This evidentiary burden is not onerous.
The courts held that in this case, it “may be possible for the appellants to prove that the respondents benefited from their wrongful conduct, and thus prove liability, without resorting to statistical evidence.” Furthermore, expert evidence at the certification stage “should not be subjected to exacting scrutiny required at trial,” thus lowering the standards currently in place. A detailed scrutiny of the evidence was considered unfair at this stage because the appellant had not had discovery and sufficient time to gather evidence.
The BCCA concluded that the appellants had to show “only a credible or plausible methodology” when considering expert evidence, contrary to the stricter prevailing standards. The courts essentially lowered the threshold for establishing loss and liability on a class-wide basis at the certification stage, in direct and indirect purchaser cases.
With regard to the common issues branch of the certification test, the court found that the common evidence – based on the guilty pleas and plea agreements in the US criminal proceedings – were sufficient to prove defendants class-wide liability. The class proceedings procedure was the preferable approach because of the flexible and powerful nature of the British Columbia Class Proceedings Act, which provided judges with the “tools to deal with such complexities.” Finally, the court found the lower court’s conclusion that the appellant was not a suitable representative plaintiff was a minor issue.
But what is the next step?
The major question we must consider is whether Irving Paper and DRAM are forging a path towards a lower threshold for certification, or, conversely, whether DRAM is a passing trend and the ONCA decision in Chadha will prevail in forthcoming similar cases. If the DRAM decision is upheld and applied in other cases, then the certification and expert evidence standards may be more liberal, and may be followed by an influx of class action suits brought about by indirect purchasers of cartelized products.
Notwithstanding subsequent decisions, DRAM is significant as it is the first time an appellate court has granted certification to an antitrust class action on a contested basis. The decision is a marked departure from the current standards set out in Chadha, lowering the threshold and employing a less onerous standard. However, the court in DRAM did not consider the conflicts between direct and indirect purchasers. Considering the conflicted views and the differing standards of the Ontario and British Columbia courts, it is anticipated that the decision might be appealed and reviewed by the Supreme Court of Canada.
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