Uh Oh, Canada: High Court OKs Indirect Purchaser Antitrust Class Actions
With the U.S. Supreme Court successively raising the bar for class action certification, Canada's high court has taken the opposite tack. On Thursday, in one of the most hotly anticipated class action decisions in years, the Supreme Court of Canada lowered the bar a little more, finding that individual Canadian consumers and other "indirect" purchasers can press class claims against companies accused of price-fixing under Canada's Competition Act.
"The floodgates are now open," said Christopher Naudie, an antitrust and class action partner at Osler, Hoskin & Harcourt. After Thursday's ruling, Naudie said, dozens of antitrust class actions currently wending their way through provincial courts "will now be going forward in an expedited way."
The court released a trio of decisions Thursday morning, all concerning allegations that companies fixed prices on products and passed the overcharge along the supply chain to millions of Canadian consumers. In two British Columbia cases, plaintiffs challenged decertification of indirect purchaser classes. In the third, defendants challenged a Quebec appeals court's affirmation of certification of the class.
In Infineon Technologies v. Option consommateurs, a case involving allegations that several chip makers fixed prices on Dynamic Random Access Memory, or DRAM, the high court was not swayed by defense arguments that opening the door to indirect purchaser claims would unfairly expose defendants to paying twice for overcharges—once to the manufacturer "front line" purchasers and once again to downstream purchasers and consumers.
"The risk of double recovery for a single loss should be assessed in light of the facts and circumstances specific to each case, as opposed to being dealt with in the abstract by means of a blanket application of inflexible rules," the court wrote in Infineon. The court also found that the Quebec court did have jurisdiction—despite the fact that both the defendants and the alleged anticompetitive conduct were outside Canada—because Canadians were overcharged.
The justices also rejected defense arguments that class treatment wasn't justifiable because of the difficulty in determining how much each downstream customer had been overcharged. The thorny issue of proving individual losses for each class member, the court found, "is one that would be more appropriately undertaken at trial," not prior to certification.
Citing its decision in Infineon, the court also reinstated class claims in a second case, Pro-Sys Consultants v. Microsoft. The indirect purchasers in that case, which relates to allegations that the computer giant overcharged for operating systems and software, were consumers who got Microsoft products from resellers.
Microsoft's lawyers at McCarthy Tetrault asked the court to apply more rigorous scrutiny of evidentiary and methodological issues at the certification phase, noting that the U.S. Supreme Court had done so in Wal-Mart v. Dukes. But writing for the court, Justice Marshall Rothstein indicated that though the court should play a gatekeeper role in certification decisions, plaintiffs should not have to show actual harm at the certification stage.
"The U.S. courts have said there should be a 'robust' and 'rigorous' assessment of the plaintiff's evidence at certification," said Osler's Naudie. "Canada's courts are saying that plaintiffs don't have to meet that threshold in Canada, and these sorts of evidentiary issues are better addressed at trial."
Infineon's lawyers also argued that Canada's high court should cleave to the U.S. Supreme Court's 1977 decision in Illinois Brick Co. v. Illinois. In that case, the justices in Washington held that indirect purchasers of overpriced goods couldn't sue, because it would open the door to "multiple recovery."
Though Illinois Brick remains good law at the federal level in the United States, "its subsequent repeal at the state level in many jurisdictions and the report to Congress recommending its reversal demonstrate that its rationale is under question," the Canadian justices wrote Thursday. In the United States, nearly every major antitrust class action includes indirect as well as direct purchaser claims.
The Supreme Court of Canada "embraced the dissent in Illinois Brick," said Charles Wright, an antitrust class action lawyer at Siskinds, a powerhouse plaintiffs class action firm based in London, Ontario. "[Thursday's ruling] allows individual purchasers to share in any recovery. It keeps the standard for class certification relatively low and much lower than in the U.S."
Siskinds lawyers expect to ramp up again on many cases that were put on hold pending the Supreme Court decision, including matters involving products as diverse as LCD screens, hydrogen peroxide, polyether polyols, auto parts and air cargo. Like other Canadian plaintiffs firms, Siskinds has often brought cases in the wake of U.S. enforcement actions, frequently in tandem with U.S. class actions. Liabilities in the cases can be quite large; in May, for instance, a federal judge in Kansas ordered Dow Chemical Company to pay $1.2 billion to indirect purchasers in a U.S. price-fixing class action involving sales of the chemical urethane.
Siskinds is leading the charge in the parallel case against Dow in Ontario. The firm recently inked settlements worth millions of dollars with Dow's codefendants, Bayer AG, Lyondell Chemical Company, BASF Corporation and Huntsman International LLC.
Thursday's rulings didn't all favor the Canadian plaintiffs. The indirect purchaser class in the third case, Sun-Rype v. Archer Daniels Midland, was not revived. In that case, the court found that the indirect class couldn't be certified because plaintiffs hadn't showed how they would determine class membership. The product at the heart of Sun-Rype's price-fixing allegations, high-fructose corn syrup, is often used interchangeably with liquid sugar in foods, and consumers generally don't know which one is in the foods they buy. That limitation should put a brake on certification in antitrust class actions involving component parts, said Osler's Naudie.
The indirect purchaser plaintiffs in Infineon were represented by Montreal's Belleau Lapointe. Vancouver plaintiffs lawyers J.J. Camp, Q.C., and Reidar Mogerman at Camp Fiorante Matthews Mogerman led on for the Sun-Rype and Pro-Sys appeals.
Infineon tapped Yves Martineau of Stikeman Elliott for the appeal. Codefendants Samsung looked to Blake, Cassels & Graydon, and Micron Technology Inc. had McMillan.
In the Sun-Rype appeal, ADM looked to Vancouver's Nash & Company, while another high-fructose corn syrup maker, Cargill Incorporated, tapped Vancouver's Hunter Litigation Chambers. Corn Products International Inc., Bestfoods Inc. and Unilever PLC had Vancouver's Nathanson, Schachter & Thompson.
In its amicus supporting the defendants in Sun-Rype, the Canadian Chamber of Commerce was represented by Davies Ward Phillips & Vineberg.