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Proving an Ability to Quantify Damages by Common Proof: What Standard Applies at Certification?

Fasken
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Class Action Bulletin

Background

The Supreme Court of Canada may soon decide the standard of proof to apply to an expert's ability to quantify damages by way of common proof at certification. The Court recently heard appeals of two B.C. cases, Sun-Rype Products Ltd v Archer Daniels Midland Co[1] and Pro-Sys Consultants Limited v Microsoft,[2] along with the Quebec case of Samsung Electronics Co, Ltd v Option Consommateurs,[3] all dealing with price-fixing allegations. In the lower B.C. courts, plaintiffs adduced expert evidence to establish that damages are capable of being calculated on a class-wide basis. The issue was not before the Quebec courts.[4] Such evidence can be essential to certification in the common law provinces as it may satisfy the common issue requirement of the various class proceedings acts.

The issue before the court is whether a unique (i.e. lower) standard of proof applies to such expert evidence at the certification stage. Courts in multiple provinces[5] have developed a lower standard based on the statements in Hollick v Metropolitan Toronto (Municipality)[6] that a plaintiff does not face an onerous evidentiary burden at a certification hearing, needing only to show "some basis in fact" for each of the certification requirements.[7] In the context of quantifying damages by way of common proof, this has been interpreted as requiring the plaintiff "show only a credible or plausible methodology"[8] by which to determine such damages. The application of this lower standard is a major issue for defendants attempting to refute the validity of methodologies adopted by plaintiffs' experts at certification hearings.

Cases before the Supreme Court of Canada

The appeal of the two B.C. cases has put this issue squarely before the Supreme Court. In Sun-Rype, the defendants led expert evidence to rebut the analysis undertaken by the plaintiffs' expert. At the certification hearing, Justice Rice found that such rebuttal was insufficient, and that the standard of proof requires only "a "credible and plausible methodology" for showing class-wide harm and pass-through".[9] Unless the expert's methodology is patently unsound, the commonality requirement is satisfied for the purposes of certification.[10] Justice Rice also specifically dealt with the issue of when such proof of a credible and plausible methodology would depend on a finding of fact on a merits question. In such a situation, the certification judge is to apply the same standard applied to facts alleged in the pleadings for the purposes of establishing a cause of action: unless patently ridiculous or incapable of proof, such facts are assumed to be true.[11]

Without dedicating extensive analysis to the issue, the B.C. Court of Appeal agreed, reiterating that the burden of proof is only one of a credible or plausible methodology. Despite the defendants' attempt to attack a foundational fact of the expert's methodology (the market definition adopted by the expert), the court agreed with Justice Rice that the analysis of such a foundational fact crosses the line into a merits analysis.[12]

Similarly, in Pro-Sys, the defendants attacked the plaintiffs' expert's evidence, largely due to the fact that she relied on U.S. data for the pass-through analysis and did not consider specifics of the Canadian market. At the certification hearing, Justice Myers undertook an issue-by-issue review of the defendants' numerous arguments, finding that the plaintiffs' expert had met the standard of an existing credible or plausible methodology.[13] The Court of Appeal was deferential to the finding of Justice Myers in his application of this lower standard.[14]

Both cases were appealed to the Supreme Court of Canada, with the standard of proof issue likely to receive consideration by the top court.

Lessons from South of the Border?

A similar debate has recently worked its way through the U.S. courts, with the U.S. Supreme Court ultimately setting a much higher standard of proof than the recent Canadian cases. In Wal-Mart Stores Inc v Dukes,[15] the court reviewed expert evidence that sought to establish a general pattern or practice of discrimination as a common issue. The U.S. Supreme Court upheld the detailed analysis of the 9th circuit in stating that trial courts are to only be satisfied that there are in fact common questions after a "rigorous analysis" of the evidence, including any proffered expert evidence.[16] The fact that this may require an analysis of the underlying facts that overlaps with the merits of the plaintiffs' underlying claim is insufficient to alleviate the plaintiffs' need to prove the existence of questions of law or fact common to the class.[17]

Standard Applied to the Qualification of an Expert

It is important to note that the lower standard at certification for the assessment of opinion evidence does not apply to the qualifications of an expert, only to the standard applied to the expert's evidence once properly qualified. In the recent case of Williams v Canon Canada Inc.,[18] the Ontario Divisional Court rejected the plaintiffs' attempt to relax the standard for qualification of an expert at certification. The Court was clear that for issues of qualification, the standard test from R v Mohan[19] is to be applied.[20] The expert must be "shown to have acquired special or peculiar knowledge through study or experience in respect of the matter on which he or she undertakes to testify".[21] Having failed to meet the Mohan standard in Canon Canada, the plaintiffs' expert's evidence was wholly rejected.[22]

Looking Forward

The Supreme Court of Canada heard the appeals in Sun-Rype and Pro-Sys October 17, 2012 and reserved judgment. The main focus of the decisions will likely be the standing of indirect purchasers to bring actions for price-fixing allegations. However, a decision which clarifies the burden that expert evidence must meet at the certification stage could also have wide-reaching implications outside of the competition context. Should the Supreme Court agree that the standard merely requires "some basis in fact" for the expert's evidence or a "credible and plausible methodology" for quantifying damages by common proof, it will continue to be difficult for defendants to rebut such expert evidence at certification.


[1] 2010 BCSC 922 [Sun-Rype].

[2] 2010 BCSC 285 [Pro-Sys].

[3] 2011 QCCA 2116.

[4] The Quebec Court of Appeal stated that "the presentation of expert evidence is not the norm at the authorization stage in Quebec under the Code of Civil Procedure and, where rules applicable elsewhere might require a sophisticated methodology of proof of loss to be advanced before certification of a class action, the absence of such a methodology is not fatal here.", ibid at para 100.

[5] Though the issue is before the Supreme Court of Canada on the appeal of the two B.C. cases, Ontario courts have similarly applied a lower standard to expert evidence at certification. See, for example, 2038724 Ontario Ltd v Quizno's Canada Restaurant Corp (2009), 96 O.R. (3d) 252 at paras 101-102 (Div Ct) (plaintiffs meet the test of "providing some basis in fact… to the extent that they present a proposed methodology by a qualified person whose assumptions stand up to the lay reader").

[6] [2001] 3 SCR 158.

[7] Ibid at paras 21-25.

[8] Pro-Sys Consultants Ltd v Infineon Technologies AG, 2009 BCCA 503 at para 68.

[9] Supra note 1 at para 163 [Emphasis in original].

[10] Ibid at para 167.

[11] Ibid at para 164.

[12] 2011 BCCA 187 at paras 52-53.

[13] Supra note 2 at paras 133-164.

[14] 2011 BCCA 186 at para 70.

[15] 131 S Ct 2541 (2011).

[16] Ibid,  p 10.

[17] Ibid.

[18] 2012 ONSC 3692 (Div Ct) [Canon Canada].

[19] [1994] 2 SCR 9.

[20] Supra note 18 at para 11.

[21] Supra note 19, p 25.

[22] Supra note 18 at para 19.

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