B.C. Court of Appeal Decision a Setback for Class Action Defendants
August 28, 2017
On August 18, 2017, the British Columbia Court of Appeal (Court of Appeal) released a significant decision relating to certification matters for class actions that could have wide-ranging effects on competition class actions commenced in B.C. and elsewhere.
Godfrey v. Sony Corporation (Godfrey) involved an appeal from a B.C. Supreme Court decision allowing certification of a class action on behalf of both direct and indirect purchasers of optical disc drives (ODD).
The Court of Appeal addressed four important issues:
1. Limitations Defence
The Court of Appeal reached two important conclusions regarding the scope of the limitation period under the Competition Act. It adopted the reasoning of the Ontario Court of Appeal in Fanshawe College of Applied Arts and Technology v. AU Optronics Corporation (Fanshawe), finding that it is not plain and obvious that the discoverability principle, which holds that a limitation period does not begin to run until the basis of the claim is reasonably discoverable, does not apply to Competition Act claims. For a discussion of Fanshawe and the discoverability principle, see our August 2016 Blakes Bulletin: Court of Appeal Rules Competition Act is not a Complete Code, Discoverability Principle Applies. The Court of Appeal also found that it is not plain and obvious that the fraudulent concealment rule, which has the effect of suspending the limitations clock, does not apply to Competition Act claims.
The Court of Appeal confirmed that limitation periods can, but usually should not, be considered at the certification stage.
2. Competition Act Violations Can Form the Basis of a Tort Claim
The Court of Appeal followed the Ontario Court of Appeal’s decision in Fanshawe, deciding that it is not plain and obvious that the Competition Act is a complete code and that violations of the Act’s criminal provisions can be pleaded as the “unlawful means” for a tort claim.
3. No Requirement to Show Harm to All Class Members at Certification
Commonality of harm is one of the five requirements for certification under the Class Proceedings Act. The Court of Appeal took a broad interpretation of the Supreme Court of Canada’s decision in the class action trilogy holding that the commonality requirement is satisfied where the plaintiffs present a plausible method for demonstrating that an overcharge reached the indirect purchaser level of the distribution channel, not each individual within that level. Under this approach, a proposed class can include members that ultimately have not suffered damage as a result of the alleged conduct.
4. Umbrella Purchaser Claims Permitted to Proceed
The Court of Appeal disagreed with the decision from the Ontario Superior Court of Justice (Divisional Court) in Shah v. LG Chem, Ltd., in which the Divisional Court struck down the plaintiff’s “umbrella purchaser” claims (for a discussion of Shah, see our May 2017 Blakes Bulletin: Significant Developments in Recent Competition Litigation). It concluded that any concern over indeterminate liability was unwarranted because of several reasons, including that:
- The class period is temporally limited
- The class definition is constrained
- The claims relate to a specific product
- The umbrella purchasers likely represent a small proportion of customers
- The defendants may have sought to increase prices on a market-wide basis.
Godfrey confirms the low threshold for certification of competition class actions in B.C. and is likely to influence the approach taken by courts in other provinces. The decision does, however, stand in contrast to other decisions taken by courts in Ontario, including in relation to umbrella purchaser claims. These issues could be further addressed by the Supreme Court of Canada if leave is sought and obtained from the court.
If you have any questions regarding these developments, please do not hesitate to contact your usual Blakes contact or any member of the Blakes Competition & Antitrust group.
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