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Common Sense Meets Class Actions: If No Loss, Then Nothing to Certify

Fasken
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Product Liability & Class Actions Bulletin

Certification of a proposed class action will be denied when a plaintiff fails to present evidence that he or she has incurred any compensable loss. That was the conclusion of an Ontario Superior Court judge in the recently released decision in Maginnis and Magnaye v. FCA Canada et al, 2020 ONSC 5462 (“Maginnis”). Significantly, in denying the plaintiffs’ certification motion, the judge confirmed that “some evidence of compensable loss is a fundamental prerequisite for the certification of a class proceeding”, absent which certification will be denied on numerous grounds, including the element of “preferable procedure”. A team of Fasken litigators acted as legal counsel for FCA on this certification motion.

The Proceeding and Outcome

Maginnis was the most recent in a series of proposed class actions filed against automotive manufacturers relating to diesel fuel emissions systems. The plaintiffs sought to certify a class proceeding based on an allegation that class members purchased certain FCA vehicles that were not as environmentally friendly as had been represented. FCA emphatically denied these allegations in their entirety.

Concurrent with the class action litigation was an investigation by the Environmental Protection Agency (“EPA”) and California Air Resources Board (“CARB”) in the U.S. Without admitting any of the allegations, FCA reached agreement with EPA and CARB on some modifications to the programming of the emissions software in the affected vehicles, thus eliminating any basis for concern. FCA then recalled the affected vehicles and reprogrammed the emissions software accordingly. The recall repair ensured that the affected vehicles were fully compliant with all relevant emission requirements and had no adverse impact on fuel economy or vehicle performance.

At the certification motion, FCA asserted that the plaintiffs had failed to adduce any evidence of harm or loss, and that without any such evidence, the action was not suitable for certification as a class action.

In response, the plaintiffs submitted that they had sustained a compensable loss because they allegedly had paid a “premium price” for “clean diesel”. They also submitted that, following the recall, the affected vehicles’ fuel economy and performance deteriorated. Although the judge acknowledged that those could be possible bases for plausible claims of compensable harm, if they existed, there was no evidence that any such alleged losses did exist. In particular, there was no evidence that the representative plaintiffs (or any proposed class members) paid a “premium price” for the EcoDiesel feature of the diesel engine, or sustained any reduction in fuel economy or engine performance after the recall. Further, even if there had been evidence that the plaintiffs paid a “premium price” for “clean diesel”, they now unquestionably were in possession (or could be placed in possession) of emissions-compliant vehicles, by virtue of the recall repair.

The plaintiffs also submitted that the alleged additional pollution of the atmosphere during the period of time between the date of vehicle purchase and the date of the recall procedure constituted a “loss” to the plaintiffs. However, the judge rejected that notion.

Salient Take-Aways

The judge’s basis for denying certification in Maginnis is important for at least the following reasons:

  • The decision confirms that evidence of compensable loss is a prerequisite for the certification of a class proceeding. Unsubstantiated theories of harm will not suffice, even at the certification stage.
  • Where there is no basis in fact for compensable loss suffered by the representative plaintiff or the proposed class, several elements of the certification test will not be met, including the requirement to have an identifiable class (s. 5(1)(b)), the requirement to have an adequate representative plaintiff (s. 5(1)(e)) and the requirement to establish that a class action is a  preferable procedure (5(1)(d)). In Maginnis, the judge concluded that while the plaintiffs failed to satisfy all three certification elements, it was best to focus on “preferability” because it “cuts to the core of why we have class actions in the first place.”
  • The judge’s focus on preferability is perhaps the most significant take-away from Maginnis, as this requirement has traditionally not been an onerous test for plaintiffs to meet at the certification stage. The preferable procedure element is to be assessed from the perspective of the three objectives of class actions: access to justice, judicial economy and behaviour modification. In weighing the preferable procedure element against those three objectives in Maginnis, the judge accepted FCA’s submissions that denying certification would present no access to justice concerns because any alleged defects in the emissions system were repaired through the recall, and any allegedly problematic behaviour had already been modified by FCA’s work with the regulators and the conduct of the recall. Importantly, the certification judge found that certifying the class action would “not advance any viable lawsuit and would only result in a waste of judicial resources.”

Any readers who would like further information about this decision, or other matters respecting class actions, should feel free to contact the members of the Fasken team who represented FCA—Peter Pliszka, Zohaib Maladwala, Antonio (Tony) Di Domenico and Caroline Youdan—or any other member of Fasken’s national Class Actions Group.

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