Page 48 - CCCA Magazine Spring 2014

{ LEGAL UPDATE } THE IMPACT OF THE INDIRECT PURCHASER TRILOGY By Sarah Corman and Shaun Finn Consumer class actions have been on the rise in Canada in If defendants are open to such actions but recent years, and that trend will likely continue in the wake are prohibited from asserting the passing- on defence, there is a risk of recovery of of the Supreme Court of Canada’s long-awaited decisions in the same overcharge multiple times. In Pro-Sys, the Supreme Court accept- the indirect purchaser trilogy. ed that this is a real concern and stated that courts will have to manage the risk The trilogy “Passing on” may be used offensively when it presents. A judge “may deny the On October 31, 2013, the Supreme Court but not defensively claim or modify the damage award in ac- released decisions on three appeals from The Court rejected the defence of “pass- cordance with an award sought or granted consumer class action certifcation deci- ing on,” invoked by defendants who seek in the other jurisdiction in order to pre- sions: Pro-Sys Consultants Ltd. v. Microsoft to reduce their liability by claiming that vent overlapping recovery.” Corporation, 2013 SCC 57 (“Pro-Sys”), the direct purchaser passed on the over- Sun-Rype Products Limited v. Archer charge thereby suffering no loss. The Standard of proof at certifcation Daniels Midland Company, 2013 SCC 58 Court also sanctioned the offensive use of The Supreme Court confrmed that nei- (“Sun-Rype”) and Infneon Technologies “passing on” by indirect purchasers who ther in common-law Canada nor in civil- AG v. Option consommateurs, 2013 SCC claim the overcharges were passed on to law Quebec will the Court assess the merits 59 (“Infneon”). Pro-Sys and Sun-Rype them, thereby rejecting the holding of the of a proposed class action at certifcation. are British Columbia cases, while Infne- U.S. Supreme Court in Illinois Brick Co. v. In common-law provinces, the class on is a Quebec case decided according to Illinois, 431 U.S. 720 (1977) that a corol- representative must simply show “some the distinct civil, statutory and procedural lary to the disallowance of the “passing basis in fact” for each of the certifca- laws of that province. on” defence is a prohibition against indi- tion requirements and need not adduce The central issue in these appeals is rect purchaser actions so as to avoid the any evidence that the acts alleged actu- whether indirect purchasers may assert risk of multiple recovery. ally occurred. They will, however, gener- actions based on alleged anti-competitive The Supreme Court of Canada held ally require expert evidence to establish conduct and, if so, whether classes con- that indirect purchaser actions are consis- loss on a class-wide basis. This evidence taining a mix of both direct and indi- tent with the objectives of restitution law must provide a workable methodology, rect purchasers are permissible. Indirect since these purchasers may have actually grounded in facts and available data, ca- purchasers are those who have pur- borne the overcharge. pable of proving that overcharges have chased the product not directly from It follows that there will be cases certi- been passed on to the indirect purchasers the alleged overchargers, but from an fed in Canada which are rejected in the U.S. and had a “common impact” on them. intermediary at some point in the chain This may lead to more attempts to include In Quebec, the petitioner must establish of distribution. U.S. plaintiffs in Canadian class actions. an “arguable case” in light of the facts and The trilogy sets out the framework for the applicable law. This means demonstrat- indirect purchaser actions in Canada. Di- Multiple recovery to be avoided ing that the elements required to establish rect and indirect purchasers may bring A concern for defendants potentially fac- liability are present and that each member actions, together or separately, against al- ing both direct and indirect purchaser ac- has sustained an injury. Expert evidence is leged overchargers. tions is the prospect of multiple recovery. not required and palpable allegations of fact 48 CCCA MAGAZINE | SPRING 2014 PRINTEMPS