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Canadian Class Actions Monitor

Global Class Actions Gain Traction – Ontario Assumes Jurisdiction over Absent Foreign Claimants

Posted in Class Actions
Charlotte-Anne MalischewskiJoseph Ur

Can individuals who live outside of Canada, who contracted outside of Canada, and who suffered losses outside of Canada, be part of a proposed class without personally consenting to Canadian jurisdiction?

Following the Ontario Court of Appeal’s recent decision in Airia Brands Inc. v. Air Canada, 2017 ONCA 792, the answer is yes.

Background

In short, the Airia Brands case is about a global price-fixing conspiracy claim. The plaintiffs alleged that the defendants, several well-known international airlines, conspired in Canada and throughout the world to fix prices of Airfreight Shipping Services. Leading into certification, the claim involved a putative class made up of members from more than 30 different countries across the world, including so-called absent foreign claimants (“AFCs”).

At first instance, (Airia Brands Inc. v. Air Canada, 2015 ONSC 5332), Leitch J. determined that Ontario did not have jurisdiction over AFCs.

Leitch J. emphasized the difficulty of ensuring that double recovery would not occur.  She expressed a concern that allowing the AFCs to be a part of the class would be counter to international legal norms and comity, if the court’s judgment was not recognized in a foreign country. So, Leitch J. refused to assert jurisdiction over the AFCs in circumstances where the court could not reasonably expect that its judgment would be recognized in foreign countries.  In so doing, she chose not to apply the “real and substantial connection” test for jurisdiction, as established in the Supreme Court of Canada’s Club Resorts Ltd. v. Van Breda, 2012 SCC 17.

The New Test for Jurisdiction over Absent Foreign Claimants

On October 17, 2017, the Court of Appeal reversed Leitch J.’s decision and set out a new jurisdiction test.

The Court found that Leitch J. erred by ignoring the prevailing tests established in Canadian law. Writing for the court, Pepall J.A. set out the framework in which jurisdiction over AFCs can be established as follows:

  1. There is a real and substantial connection between the subject matter of the action and Ontario, and jurisdiction exists over the representative plaintiff and the defendants;
  2. There are common issues between the claims of the representative plaintiff and AFCs; and
  3. The procedural safeguards of adequacy of representation, adequacy of notice, and the right to opt out … are provided, thereby serving to enhance the real and substantial connection between AFCs and Ontario.[1]

This new test returns to the Supreme Court’s test from Van Breda and adopts the Manitoba Court of Appeal’s new factor from Meeking v. Cash Store Inc., 2013 MBCA 81.

Pepall J.A. explained that Van Breda must be the starting point of a jurisdiction analysis, and that the “real and substantial connection” test is the correct test in Canada. Pepall J.A. agreed that fairness, efficiency, and comity inform the test, but wrote that they are not stand alone connecting factors themselves.[2]

“[J]urisdiction is not a function of foreign recognition and enforcement standing alone,” and “issues of foreign recognition and enforcement are not preclusive of all other factors.” [3]

This test also includes the new presumptive connecting factor as identified by the Manitoba Court of Appeal in Meeking v. Cash Store Inc., 2013 MBCA 81: jurisdiction can be assumed if there are ‘common issues’ shared between the claim of the representative plaintiff and that of non-resident plaintiffs.[4]

Evidentiary Implications

The requirement that the AFCs have issues in common with representative plaintiffs before jurisdiction over those AFCs can be assumed is new to Ontario. In bringing a factor usually associated with certification into the jurisdiction assessment, this decision begs interesting strategic and practical questions for the jurisdiction motion.

In both Meeking and the Court of Appeal’s decision in Airia Brands, the question of jurisdiction was answered after the certification motion, meaning the issue as to whether there were in fact common issues had already been adjudicated. What happens when that is not the case?

The Supreme Court made clear in Van Breda that any new presumptive connecting factors are rebuttable: If defendants can “establish facts which demonstrate that the presumptive connecting factor does not point to any real relationship between the subject matter of the litigation and the forum or points only to a weak relationship between them” then the new factor cannot establish jurisdiction.[5] The Court in Meeking agreed that the new ‘common issues’ presumptive connecting factor could also be rebutted “if there is sufficient evidence.”[6]

By importing the common issues analysis into the question of jurisdiction, and by relying on the certification motion’s decisions as to common issues, the Court of Appeal’s new test could signal a greater evidentiary burden at the jurisdiction stage.  Yet, what that evidence would entail is unclear. Will the evidentiary burden from the certification context simply be imposed at the jurisdiction stage? If litigants at the jurisdiction motion have to show ‘some basis in fact’ or a ‘workable methodology’ that demonstrates commonality and class-wide impact of common issues, the jurisdiction motion is likely to become even more complex.

Given the prevalence of pre-certification jurisdiction motions in international class actions, it seems likely that evidence-heavy common issues analysis will now come at an earlier stage.

Impact to Future Class Actions

For litigants, the Court of Appeal’s decision is a mixed bag.

Domestically, there is the potential that addressing the common issues analysis at an earlier stage would allow litigants to narrow the list of common issues prior to certification. However, addressing common issues earlier puts a burden on the parties to gather a great deal of evidence, expert and otherwise, to attempt to combat the common issues much earlier than before. This could change the timeline for certification as well as what – and how much – needs to be prepared in advance of certification motions.

Looking beyond our borders, this decision could mean that claims will now be more streamlined. If claims are made by AFCs who come from a country that will recognize Ontario judgments, litigants can rest assured that, regardless of the ruling, the Ontario judgment will be binding. If, however, a claim is made by an AFC and their local courts refuse to recognize the Ontario judgment, this will likely open litigants up to additional liability and could allow for the potential of double recovery.

[1] para 107.

[2] para 56.

[3] para 106.

[4] para 97.

[5] Van Breda at para 95.

[6] para 118.