Competition Class Actions in Canada: The Basics

Transcription

1 Competition Class Actions in Canada: The Basics

2 Private actions for damages are a key component of the enforcement of Canada s Competition Act (the Act). 1 Class actions, in turn, are an increasingly common vehicle used by plaintiffs to seek damages from parties convicted of violating, or alleged to have violated, the criminal cartel or bid-rigging provisions of the Act. Below we provide a short overview of competition-related class action law in Canada, highlighting the essential points that every business should know when facing such claims. A. What competition law claims can be brought by class action? Private actions for damages may be brought in respect of any alleged violation of the criminal provisions of the Act, such as price-fixing and bid-rigging (whether or not the government proceeds with its own case). 2 A plaintiff must bring a claim within two years from the date the conduct occurred or criminal proceedings were finally disposed of. 3 Significantly, the period is not subject to the doctrine of discoverability. 4 The clock starts ticking as of the date of the impugned conduct or of the disposition of criminal proceedings, regardless of the plaintiff s ability to know of an offence. In the case of conduct that constitutes a continuing practice, the clock starts ticking as of the last ongoing act that in itself is an offence. 5 Continued lessening of competition (or damages to the plaintiff) due to acts that are no longer occurring would not be sufficient to extend the limitation period. 6 Having said that, there is no statute of limitation restricting when the government can lay charges or prosecute so the limitation period can be extended significantly by those events. However, if there is a criminal conviction, the plaintiffs can benefit from a rebuttable presumption allowing a record of criminal proceedings to be entered as evidence of a defendant s anticompetitive conduct in civil proceedings. In practice, private (class) actions are increasingly commenced upon news of a criminal investigation to address the uncertainty associated with the applicable limitation period and, more importantly, to improve the plaintiffs counsels chances of winning a carriage motion for appointment as class representatives. 7 Class actions can be successfully brought by proving a criminal violation and resultant damages on the civil balance of probabilities standard (otherwise referred to as the preponderance of evidence standard), notwithstanding the fact that criminal conviction would require proof beyond a reasonable doubt. 8 B. What types of damages can be claimed in a class action? Canadian law provides only for recovery of compensatory (as compared to treble and punitive) damages, along with prejudgment interest, partial or substantial indemnity costs (i.e., a portion of legal fees for the successful litigant) and the costs of an investigation in connection with the competition law claim. 9 Although, the cause of action expires two years after the last criminal conduct (except in the case of a late government prosecution), that does not necessarily mean that damages are limited to losses incurred in the two-year period. Plaintiffs assert that all losses are in theory recoverable, even losses attributable to criminal conduct beyond the limitation period. Additionally, plaintiffs frequently bring related commonlaw tort claims such as restitutionary disgorgement, conspiracy and intentional interference with economic interests that often have a longer limitation period and may offer punitive damages or disgorgement of all revenues from wrongful conduct (a potentially greater liability than even treble damages). 1 Competition Act, R.S.C. 1985, c Ibid., s. 36(1). 3 Ibid., s. 36(4). 4 Garford Pty Ltd. v. Dywidag, 2010 FC Ibid. at paras See also Eli Lilly and Co. v. Apotex Inc., 2009 FC 991 at para. 736 [Eli Lilly], aff d 2010 FCA 240, leave to appeal to S.C.C. ref d, [2010] S.C.C.A. No. 434: in the Court s view, ongoing conduct can only be qualified as ongoing for the purposes of subs. 36(4) so long as it continues to constitute an offence under Part VI of the Competition Act. 6 See also Eli Lilly, ibid. at para. 743: Effects may be examined for the purposes of determining whether or not this agreement was likely to unduly lessen competition, but it does not extend the period during which such conduct occurred. Garford, at para Competition Act, s. 36(2). 8 F.H.P. v. McDougall, 2008 S.C.C. 53 at para Competition Act, s. 36(1). Wong v. Sony of Canada, [2001] O.J. No (S.C.J.) at paras Competition Class Actions in Canada: The Basics \ 1

3 Consistent with U.S. federal law, the latest appellate jurisprudence from the British Columbia Court of Appeal holds that indirect purchasers 10 cannot bring any claims for pass-through of overcharges from direct purchasers, although this decision is not binding in other provinces (such as Ontario and Quebec, which have indicated indirect purchaser claims are available) and the general scope of this rule is not clear. A further complication arises from the uncertainty around whether co-defendants have a right of contribution and indemnity against each other, if found liable to the plaintiffs. As the Supreme Court of Canada has held that a common law right of contribution between tort feasors may exist, except for intentional torts or malicious motivation, 11 the Ontario and British Columbia courts have noted that this issue has not yet been settled in Canada in the explicit context of price-fixing claims. 12 C. What are the elements required for certification of a class action? A competition law class or representative action can be brought in any provincial or federal court in Canada. The criteria for certification in Ontario are typical of most provinces (except for Quebec). 13 In Quebec, the requirements for authorization of a proposed class action are defined in Article 1003 of the Code of Civil Procedure of Québec. The plaintiff must establish that 14 : 1) The claim discloses a viable cause of action: The court presumes the allegations in the pleadings are true for the purposes of a certification motion and the defendant must show that it is plain and obvious the claim has no chance of success (particularly difficult if the claim is based on a Competition Bureau investigation or conviction 15 ). The plaintiff need only show a credible or plausible methodology for class-wide determinations; courts will not resolve evidentiary disputes. 16 2) There is an identifiable class of two or more people who are willing to be represented by a representative plaintiff: The proposed class must be well defined and clear, and there must be a rational relationship between the class and the common issues. It is not necessary that every class member be named or be known from the outset of the class proceeding. 17 3) The claims of the class members raise common issues: Common issues are (a) common but not necessarily identical issues of fact, or (b) common but not necessarily identical issues of law arising therefrom. 18 Resolution of the common issues need not resolve the class members claims or determine issues of liability with respect to all class members. The common issues must merely move the litigation forward by being both (a) necessary to the resolution of each class member s claim, and (b) a substantial ingredient of each of the class members claims. 19 4) A class action would be the preferable procedure for resolution of the action: The class action must be more suitable than any available alternatives, such as a test case or consolidation of individual actions, 20 for determining the entire action, not only the common issues. 21 Preferability is assessed in the context of the three objectives of class proceedings: judicial economy, access to justice and behaviour modification. 22 The court must also be satisfied that a class proceeding would be fair, efficient and manageable Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977); Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2011 BCCA 186; Sun-Rype Products Ltd. v. Archer Daniels Midland Company, 2011 BCCA Blackwater v. Plint, 2005 SCC 58, [2005] 3 SCR 3 at para Crosslink Technology, Inc. v. BASF Canada November 30, 2007, London, 5030CP (Ont. S.C.J.) at para. 47 (unreported); Osmun v. Cadbury Adams Canada Inc., 2010 ONSC 2643 at paras. 48, 60-65, aff d 2010 ONCA 841, leave to appeal to S.C.C. ref d, 2011 CanLII 40927; Main v. Cadbury Schweppes plc, 2010 BCSC 816 at para. 19, aff d 2011 BCCA 21, leave to appeal to S.C.C. ref d, 2011 CanLII The threshold for certification in Quebec is lower but still more than a mere formality, requiring more than speculative, general allegations of misconduct. Option Consommateurs v. Novopharm Ltd., [2006] Q.C.C.S Class Proceedings Act, 1992, S.O. 1992, c. 6, s Hollick v. (City), [2001] 3 S.C.R. 158 at para. 25 [Hollick]. 16 Pro-Sys Consultants Ltd. v. Infineon Technologies AG, 2009 BCCA 503 at paras. 65, Hollick at para. 20; Western Canadian Shopping Centres Inc. v. Dutton, [2001] 2 S.C.R. 534 at para. 38 [Dutton]. 18 Class Proceedings Act, s Hollick at para. 18; Dutton at paras Hollick at paras. 28 and Ibid. at para. 30. Unlike in the U.S., the common issues need not predominate over the individual issues for a class proceeding to be the preferable procedure. 22 Ibid. at para Ibid. at para. 28; Rumley v. British Columbia, [2001] 3 S.C.R. 184 at para / Competition Class Actions in Canada: The Basics

4 5) There is an appropriate representative plaintiff: The representative plaintiff must (a) fairly and adequately represent the interests of the class; (b) have a plan for the proceeding that sets out a workable method of advancing the action on behalf of the class and notifying the class of the proceeding and (c) not have an interest in conflict with the interests of other class members on the common issues. 24 D. How broad a class (national, international) can the court certify? Anticompetitive conduct can have effects in more than one province or territory. As a result, antitrust class actions can be, and often are, instituted in several provinces contemporaneously (usually Ontario, Quebec and B.C., which have the largest populations and longest history of class actions). Plaintiffs counsel often attempt to coordinate their actions across Canada. Typically, they will commence provincial class actions in Quebec and British Columbia and an opt-out class for the rest of Canada by way of an action in Ontario. There is precedent for the certification of multi-jurisdictional or national classes in Canada: Canadian courts have held that a real and substantial connection to a jurisdiction will exist so long as the residents and non-residents in a national class share the same common issue. 25 E. What are the rules of discovery, and is cross-border discovery available? In general, precertification discovery is quite limited in Canada. If the class action is certified, oral examination for discovery and production of documents on the common issues follows. 26 Recently, the Ontario courts have been bifurcating the common issues trial, with quantification of damages and entitlement to punitive damages being deferred. 27 Typically (other than in Quebec), 28 discovery rules require the parties to produce all relevant documents that are in their possession, power or control of the defendants (including affiliates) without the need for any specific interrogatory or request from opposing counsel. 29 Oral discoveries in Canada are more limited than depositions in the U.S., often being restricted to one corporate representative of each party, rather than every person with knowledge of the matters in issue. 30 Discovery of a non-party requires leave of the court. 31 In most provinces, there is an implied or deemed undertaking that documents and information produced by a party through the discovery process will not be used for any purpose other than the conduct of that litigation. 32 Given the limits on discovery in Canada, particularly precertification, Canadian plaintiffs are increasingly seeking access to evidence given in discovery in related U.S. cases. Canadian plaintiffs have often been granted access to documentary production (or told to ask U.S. courts first for access 33 ) but not allowed to actively conduct depositions. 34 F. How closely can Canadian and foreign plaintiffs co-ordinate in related proceedings? Many of the antitrust class actions instituted in Canada are copycat cases based on similar proceedings commenced in the U.S. Because many class actions have facts that are common to the U.S. and Canada, plaintiffs law firms have been forging formal and informal relationships across the border. In practice, the majority of cases first arise in the U.S., followed by proceedings in Canada. U.S. counsel often assist their Canadian counterparts in various aspects of a case, and Canadian courts have approved counsel fees that include the fees of U.S. counsel Class Proceedings Act, s. 5(1)(e). 25 See, e.g., Carom v. Bre-X Minerals Ltd. (1999), 43 O.R. (3d) 441 (Gen. Div.); Wilson v. Servier Canada Inc. (2002), 59 O.R. (3d) 656 (Sup. Ct.) and Wilson v. Servier Canada Inc. (2000), 50 O.R. (3d) 219 (Sup. Ct.), leave to appeal to Div. Ct. ref d, 52 O.R. (3d) 20, leave to appeal to S.C.C. ref d, [2001] S.C.C.A. No. 88; Harrington v. Dow Corning Corp. (1997), 29 B.C.L.R. (3d) 88 (S.C.), aff d [2000] 11 W.W.R. 201 (C.A.), leave to appeal to S.C.C. ref d, [2001] S.C.C.A. No. 21 (but note that British Columbia only takes jurisdiction over non-resident class members who opt in and thus attorn to jurisdiction in British Columbia). 26 Axiom Plastics Inc. v. E.I. DuPont Canada Co., 2011 ONSC 4510 at paras See, e.g., Robinson v. Medtronic, Inc., [2009] O.J. No (S.C.J.), aff d 2010 ONSC 3777 (Div. Ct.); Peter v. Medtronic, Inc., [2009] O.J. No (S.C.J.), aff d 2010 ONSC 3777 (Div. Ct.); Markson v. MBNA Canada (21 October 2009) (Ont. S.C.J.) (unreported). 28 In Quebec, the parties are only required to produce those documents that they intend to rely upon or that are specifically requested by opposing counsel during oral discovery. 29 See, e.g., Ontario Rules of Civil Procedure, R.R.O. 1990, Reg. 194, R See, e.g., ibid., r See, e.g., ibid., r See, e.g., ibid., r There are certain exceptions; for instance, under r (6) of the Ontario Rules of Civil Procedure, the deemed undertaking does not preclude use of evidence from one proceeding for the purpose of impeaching a witness in a different case. Where there are multiple class actions in Canada, the parties may agree that discovery of the defendants be conducted simultaneously for purposes of all of the certified proceedings. 33 See Bryar Law Corporation v. Samsung Electronics Co. Ltd., 2010 BCSC 1661; Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2007 BCSC Coleman v. Bayer Inc., [2004] O.J. No (S.C.J.). 35 See, e.g., Vitapharm Canada Ltd. v. Hoffman-Laroche Ltd., [2005] O.J. No (S.C.J.), Sharma v. Timminco, [2009] O.J. No (S.C.J.). Competition Class Actions in Canada: The Basics \ 3

5 Sources say: The depth of their expertise in competition law is unparalleled in the Canadian market Blakes is top of the crop. Chambers Global: The World s Leading Lawyers for Business 2012 About the Blakes Competition, Antitrust & Foreign Investment Group The Blakes Competition, Antitrust & Foreign Investment Group is repeatedly acknowledged as the leading practice in Canada. Blakes is frequently retained by major domestic and international companies and by international and domestic law firms to provide best in class strategic counsel and representation in merger reviews, cartel investigations, abuse of dominance cases, distribution practices, advertising matters, and other competition issues. Blakes is also a leading firm with respect to securing merger approvals for non-canadian purchasers under Canada s foreign investment laws, which are typically required in all transactions where a non-canadian purchases a Canadian business. Competition Litigation Blakes competition litigators play a key role in Canada s largest and most experienced competition law practice. Blakes is frequently at the forefront of high-profile competition litigation matters, including contentious mergers, advertising, abuse of dominance, reviewable trade practices and other civil matters before the Canadian Competition Tribunal, the Federal Court of Appeal and the Supreme Court of Canada. Our lawyers also appear before the superior courts and the Supreme Court of Canada on criminal matters and class actions. Much of the Firm s work in this area involves strategic advice to best position matters for success in the event of litigation as well as preventing problems before they lead to litigation through prudent advice concerning the structuring of business transactions and the conduct of business affairs. Blakes lawyers have acted as litigation counsel in: Class Action Defence We have represented defendants in leading antitrust class actions, including recent decisions by the B.C. Court of Appeal in DRAM and the Superior Court of Ontario in the hydrogen peroxide class actions. Other significant class action cases on which Blakes lawyers act include air cargo, credit cards, rubber chemicals, chocolate, LCDs and the vitamin case, the first major class action of its kind. Contentious Mergers Blakes is at the forefront of merger litigation. There are six merger cases that form the primary body of merger jurisprudence in Canada. Blakes has represented the parties in all five of the cases in which the parties were successful (Southam, CP Ships, Hillsdown, Superior Propane and Labatt). In Labatt, Blakes lawyers successfully defended an application for an injunction to block the closing of a merger before the Competition Tribunal and the Federal Court of Appeal and successfully moved to set aside production orders issued by the Federal Court. Blakes lawyers have acted as litigation counsel in some of the most vigorously contested consent order cases where there was concerted opposition by intervenors such as Chapters/Indigo, Interac and Imperial Oil. Most recently, Blakes has acted as counsel to United Continental Holdings Inc. in relation to the Competition Bureau s challenge of the existing and proposed alliance agreements between United Continental Airlines and Air Canada under the civil merger and competitor collaboration provisions of the Competition Act, currently before the Competition Tribunal. Blakes acted on behalf of a complainant in connection with the recent CCS Corporation/Complete Environmental Inc. merger challenge before the Competition Tribunal. Criminal Investigations (including cartels) We have extensive experience defending corporations in investigations and court proceedings under the criminal law provisions of the Competition Act, including some of the most high-profile cases in Canadian history, such as the PANS case before the Supreme Court of Canada. Abuse of Dominance We have represented clients in connection with abuse of dominance investigations or inquiries conducted by the Competition Bureau, including Air Canada/CanJet, Tele-Direct and Nutrasweet. Blakes lawyers acted as lead counsel in Canada Pipe, the only abuse of dominance case to go to the Federal Court of Appeal and the Supreme Court of Canada. 4 / Competition Class Actions in Canada: The Basics

6 ... the firm s competition department is both the largest and the busiest in Canada, by all accounts handling more mergers, cartel investigations and class actions than any other firm in the country. Law Business Research s The GCR 100 (10th Edition) Other Civil Matters We have represented clients on other matters under the Competition Act, including refusal-to-deal cases such as Fred Deeley and Wyeth. Blakes lawyers represented clients in various advertising matters and acted as counsel in some of the leading misleading advertising cases in Canada, including Bell Aliant v. Rogers, Church & Dwight v. Sifto and UPS v. Purolator. We have provided advice on the negotiation of numerous consent agreements such as Bell, Forzani, Sears and GoodLife, as well as emerging cases with respect to the manner in which the Competition Act applies to intellectual property rights: Apotex v. Eli Lilly and Company. Rankings and Recognition The 2011 Lexpert Guide to the Leading US/Canada Cross-border Litigation Lawyers in Canada ranks Calvin S. Goldman, Q.C., and Brian A. Facey as leading lawyers. Benchmark Canada: The Definitive Guide to Canada s Leading Litigation Firms and Attorneys 2012 Edition: Brian A. Facey and Randall Hofley are recognized for competition litigation and Robert E. Kwinter is recognized for competition litigation and class actions. Chambers Global: The World s Leading Lawyers for Business 2012 ranks Blakes in Band 1, its top tier for competition/antitrust (including litigation and foreign investment review). Group Co-chair Calvin S. Goldman, Q.C., received the only star individual ranking for a Canadian competition lawyer in Canada. Eight Blakes lawyers are also ranked in this category. Global Competition Review s The GCR 100 (12th Edition) and Global Competition Review s Canada Country Survey ranks the Blakes Competition Group in the Elite category, the review s highest designation. PLC Which Lawyer? 2012 recognizes Blakes as having one of the leading competition practices in Canada, with five endorsed lawyers. Law Business Research s The International Who s Who of Competition Lawyers 2012 ranks the Blakes Competition Group as a leader, with six competition lawyers individually ranked including group Co-chairs Calvin S. Goldman, Q.C., and Brian A. Facey, as well as partners Jason Gudofsky, Randall Hofley, Robert E. Kwinter and Julie Soloway. Global Competition Review s 2012 Edition of 40 Under 40 recognizes partners Navin Joneja and Deborah Salzberger as leading competition lawyers. Law Business Research s Who s Who Legal: Canada 2011 recognizes six Blakes competition lawyers. The Canadian Legal Lexpert Directory 2011 ranks the Blakes Competition Group in its top category, Most Frequently Recommended, and recognizes Calvin S. Goldman, Q.C., Brian A. Facey, Randall Hofley and Robert E. Kwinter as leading lawyers. The 2012 Lexpert/American Lawyer Guide to the Leading 500 Lawyers in Canada ranks Calvin S. Goldman, Q.C., and Brian A. Facey as leading lawyers in the area of competition law. The 2011 Lexpert Guide to the Leading US/Canada Cross-border Corporate Lawyers in Canada ranks Calvin S. Goldman, Q.C., and Brian A. Facey as leading lawyers in the area of competition law. The Best Lawyers in Canada 2012 ranks five Blakes competition lawyers as leaders. Legal Media Group s Guide to the World s Leading Competition and Antitrust Lawyers/Economists 2012 ranks Calvin S. Goldman, Q.C., Brian A. Facey, Robert E. Kwinter, Randall Hofley, Jason Gudofsky and Julie Soloway as leading lawyers. Legal Media Group s Guide to Leading Practitioners: China 2011 ranks Calvin S. Goldman, Q.C., and Brian A. Facey as leading lawyers in the area of competition law. Competition Class Actions in Canada: The Basics \ 5

7 For more information on the Blakes Competition Litigation Group, please contact your usual Blakes contact or any of our partners below: Catherine Beagan Flood Direct: Randall Hofley /Ottawa Direct: / Deborah Salzberger Direct: Brian A. Facey Co-chair Direct: Navin Joneja Direct: Paul B. Schabas Direct: Réal Forest Montréal Direct: Robert E. Kwinter Direct: Julie Soloway Direct: Jeff W. Galway Direct: Claude Marseille Montréal Direct: James Sullivan Vancouver Direct: Ryder L. Gilliland Direct: Mark A. Morrison Calgary Direct: Robert Torralbo Montréal Direct: Calvin S. Goldman, Q.C. Co-chair Direct: David T. Neave Vancouver Direct: Micah Wood Direct: Jason Gudofsky Direct: Francis Rouleau Montréal Direct: Seumas M. Woods Direct: / Competition Class Actions in Canada: The Basics

8 MONTRÉAL OTTAWA TORONTO CALGARY VANCOUVER NEW YORK CHICAGO LONDON BAHRAIN AL-KHOBAR* BEIJING SHANGHAI* 2012 Blake, Cassels & Graydon LLP blakes.com *Associated Office