More Than ‘Symbolic Scrutiny’: Federal Court of Appeal Clarifies Evidentiary Burden and Denies Certification
Canadian courts are increasingly tilting against simply accepting a plaintiff‘s pleading at face value at certification, instead ensuring that plaintiffs’ allegations are a fair representation of the underlying evidence they rely on. Courts have historically walked a delicate balance to ensure they refrain from a full merits-analysis (prohibited at certification), while still ensuring claims have at least some minimal evidentiary basis to support them going forward. On April 28, 2023, the Federal Court of Appeal in Jensen v. Samsung Electronics Co. Ltd.[i] (“Jensen”) clarified this burden and put to rest the plaintiffs’ frequent refrain that courts should not engage in a merits-based review of the evidence at this procedural juncture. As the Court clarified, reviewing the evidence is not the same as engaging in a merits-based review.
The appeal stems from the underlying Federal Court decision of Justice Gascon (the “Motion Judge”), summarized here, and follows its Québec counterpart Hazan c. Micron Technology Inc. (“Hazan”). There, the Québec Court of Appeal upheld the lower court’s decision to scrutinize a class action at the authorization phase where the plaintiff’s pleadings were “mere assertions”.[ii] Read our blog post about this decision here.
The plaintiffs in Jensen commenced the proposed class action in May 2018, seeking $1,000,000,000 in damages from the defendants, three leading manufacturers of Dynamic Random Access Memory Chips (“DRAM”), a kind of semiconductor memory chip used in most computer products, including cell phones and laptops. The plaintiffs alleged that the defendants breached sections 45 and 46 of the Competition Act by conspiring through direct communications in private meetings and through public statements – or “signalling” – to each other, in order to suppress the global supply of DRAM and increase DRAM prices.
In February 2019, the plaintiffs brought a motion to certify the action as a class proceeding.
The Lower Court Decision: Federal Court of Canada
The Motion Judge dismissed the plaintiffs’ motion on the basis that their claim disclosed no reasonable cause of action for breach of sections 45 or 46 of the Act.[iii] The Motion Judge concluded that, at best, the facts pleaded would support an allegation that the defendants had engaged in “conscious parallelism”,[iv] which is not in and of itself unlawful, nor is it sufficient to establish the defendants entered into an unlawful agreement – an “essential and prominent” component of a section 45 conspiracy:[v]
[t]he Statement of Claim essentially invents a fictitious scenario of intent, communications and coordination between the Defendants that does not exist in or flow from the documents the Plaintiffs claim to paraphrase […][vi]
Given the absence of material facts to support the plaintiffs’ conspiracy claim, the Motion Judge held that the plaintiffs were similarly unable to establish the minimum evidentiary basis (i.e. “some basis in fact”) for their proposed common issues.
The Appeal: Federal Court of Appeal
The plaintiffs appealed the decision of the Motion Judge, alleging that the Motion Judge erred in finding the plaintiffs’ claim (i) did not plead a reasonable cause of action, and that they (ii) failed to provide some basis in fact for the conspiracy-related common issues.
The Court of Appeal dismissed the appeal, “wholeheartedly” agreeing with the Motion Judge’s approach to certification:
- No Rubber-Stamping: The court’s role and duty must go beyond conducting a symbolic review of a proposed class action at the certification stage. The certification process is a “meaningful screening device” for speculative claims. The analysis at this stage must be more than superficial.
- Probing the Evidence: While courts should continue to refrain from conducting a full-blown merits analysis on certification, they should not allow purely speculative pleadings to be certified. Striking this balance requires the courts to engage in some level of evidentiary investigation to ensure the allegations fairly represent the underlying evidence relied on to support their claim.
- No Change in Law: The Court of Appeal rejected the plaintiffs’ submission that their approach to evidentiary investigation was a departure from the traditional “two-step approach” set out in Hollick v. Toronto (City). In fact, they held that the test could not reasonably be applied without first deciding whether there is some basis in fact for the allegations – which requires a review of some minimal evidence.
The Court of Appeal stressed that even at the certification stage, the allegations, along with the material facts and evidence put forward by the plaintiff, need to be scrutinized. Such analysis does not uproot the entire class proceedings scheme as a result.
No More Pleadings at Face Value
The Federal Court of Appeal’s decision sets out clearly how courts should strike the proper balance between assessing minimal evidence to support a claim while avoiding a full merits analysis. Both the Court of Appeal and the Motion Judge rejected the plaintiffs’ contention that a requirement to lead some evidence to substantiate the allegations would necessitate a merits analysis at certification. While this evidentiary burden is low, it “cannot be so low as to be devoid of any meaning.”[vii] The decision also builds on the Federal Court of Appeal’s prior commentary in Mohr v. Hockey Canada[viii] on the scope of permissible evidence on these types of motions, dismissing the notion that courts are confined solely to the pleadings in determining whether they disclose a reasonable cause of action.
[i] 2023 FCA 89, aff’g 2021 FC 1185 (Jensen (FC)).
[ii] Hazan c. Micron Technology Inc., 2023 QCCA 132 at para 10.
[iii] Jensen (FC) at para 69.
[iv] Jensen (FC) at para 147.
[v] Jensen (FC) at para 69.
[vi] Jensen at para 59, citing Jensen (FC) at para 146.
[vii] Jensen at para 69.