The recent decision of the Court of Appeal for Ontario in Lilleyman v. Bumble Bee Foods LLC, 2024 ONCA 606 confirms the significance of the "some basis in fact" requirement for establishing the existence of the proposed common issues at certification, in particular, where the theory of liability advanced by the plaintiff is dubious.
The appeal was from the dismissal of the plaintiff's motion to certify a proposed class action brought on behalf of direct, indirect and umbrella purchasers of brands of canned tuna allegedly sold in Canada by the defendants or associated entities at supercompetitive prices (Lilleyman v. Bumble Bee Foods LLC, 2023 ONSC 4408). Piggybacking on the findings in anti-trust proceedings in the United States that, over a three year period, three entities that dominated the U.S. marketplace for consumer tuna unlawfully conspired to fix the price of tuna sold there, the Claim alleged that there was a similar or related conspiracy to fix prices of tuna sold in Canada over a 20 year period commencing many years prior to the U.S. conspiracy. None of the U.S. conspirators sold their brands of tuna in Canada. There had never been an investigation or criminal charges in Canada with respect to the sale of canned tuna in Canada.
Class Certification Decision
Justice Perell dismissed the motion for certification for reasons including the Claim's failure to disclose a cause of action for conspiracy and the plaintiff's failure to establish "some basis in fact" for the existence of the alleged conspiracy forming the basis for the common issues.
With respect to the cause of action criterion for certification, His Honour identified more than a dozen fundamental defects in the Claim and concluded that the plaintiff had not pleaded and would not be able to plead material facts necessary to join each defendant as a co-conspirator. In general, the Claim mistakenly assumed that a proven price-fixing conspiracy involving the sale of tuna in the United States could simply be extended to Canada, even though the markets for tuna in each country were entirely separate.
With respect to the common issues criterion, Justice Perell confirmed that the onus was on the plaintiff to establish "some basis in fact" both that a proposed common issue actually exists, and that it can be answered in common across the entire class. This standard does not require evidence on a balance of probabilities, nor that the court resolve conflicting facts and evidence at the certification stage. However, in a conspiracy case, where the manifestation of injury to a group is not obvious, it requires the plaintiff to show some basis in fact that the alleged conspiracy could or might have existed.
His Honour's conclusion that the plaintiff had failed to establish "some basis in fact" for the existence of the alleged conspiracy was based upon his analysis of the evidence of the plaintiff's expert economist, Dr. Meer, which contradicted itself. Dr. Meer's evidence "was one of the evidentiary torpedoes that sunk the class action battleship". Factual evidence provided by a defence witness who testified about the operation of the Canadian tuna market, and evidence extracted by the defendants during cross-examination of Dr. Meer, established that her factual assumptions about the Canadian marketplace for canned tuna and the firms operating in it were "totally unsound". This included the fact that most of the defendants did not sell packaged tuna in Canada or anywhere else in the world during the class period. Applying Dr. Meer's expertise to the correct factual underpinning suggested that Canadian market conditions were not conducive to the existence of a price-fixing conspiracy in Canada. As such, her opinion (which was not contradicted by expert evidence from any defence expert) could not provide "some basis in fact" for the existence of a conspiracy to control the price of tuna sold in Canada.
Decision on Appeal
The Court of Appeal found no reviewable error with respect to Justice Perell's careful analysis of the "cause of action" criterion for certification. In particular, he "correctly analysed the Claim as an attempt to extend a conspiracy between U.S. tuna producers to Canada without pleading the necessary facts to do so".
The Court also rejected the plaintiff's submission that Justice Perell had applied the wrong test with respect to the common issues criterion. In particular, her assertion that she was not required to provide evidence that the proposed common issues actually exist and that His Honour had improperly decided the ultimate merits was incorrect.: "The fact that a plaintiff on a certification motion must provide some basis in the evidence that an alleged conspiracy could or might have occurred is a minimal but necessary requirement". If there is no basis in fact to suppose that a conspiracy with attendant harm actually occurred, then "as a matter of logic and common sense", it necessarily follows that there is no basis to suppose that such a nonexistent conspiracy could have caused harm across members of the proposed class. The standard requires some basis in fact, but "not proof of fact". It does not involve weighing the merits of the claim or a resolution of conflicts in the evidence, "but merely asks is there is some minimal evidence in support of it".
The Court of Appeal confirmed that this is neither a novel requirement or a departure from existing jurisprudence of Ontario courts on this issue and referenced its decision in Palmer v. Teva Canada Limited, 2024 ONCA 220, and three recent decisions of the Divisional Court in Simpson v. Facebook, 2022 ONSC 1284, Kuiper v . Cook, 2020 ONSC 128 and Frayce v. BMO, 2024 ONSC 533 . In Frayce, for example, the certification judge was found by the Divisional Court to have correctly scrutinized the evidentiary record at certification to determine whether there was an "air of reality" to the claim that the receipt by online brokers of trailing commissions prior to the enactment of a prohibition on that form of compensation was contrary to securities law. For greater detail on the Frayce decision, see our case comment: "The Flip Side of the Trailing Commission Coin: Frayce v. BMO Investorline Inc., 2024 ONSC 533".
Takeaways
Lilleyman and recent decisions of Ontario appellate courts confirm that at certification, the onus is on the plaintiff to establish that there is "some basis in fact" for the common issues criterion for liability questions. That requires the certification judge to scrutinize the record with a view to determining whether there is some evidentiary foundation for the proposition that the defendants engaged in conduct that could give rise to a cause of action. In Lilleyman, that required the plaintiff to establish "some evidentiary foundation to conclude that the alleged conspiracy with attendant harm to Class Members could or might have occurred in Canada". In Frayce, in the absence of an express statutory prohibition, the plaintiff was required to establish some basis in fact for the proposition that during the relevant period the defendants' conduct was contrary to securities law.
That is not the same as a finding on the merits and is entirely consistent with the gatekeeping function of the court at the certification stage. While the certification judge is not to engage in a weighing of the merits of the case or to resolve competing expert opinions, the "some basis in fact" test does require the judge to consider the entirely of the plaintiff's evidence for the purpose of determining the existence of a common issue. Evidence that is internally contradictory will not satisfy the test. (See also Larsen v. ZF TRW Automotive Holdings Corp., [2023] B.C.J. No 1663).
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