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Supreme Court rulings make it easier for consumers to launch class actions: Lawyer


November 8, 2013   by Canadian Underwriter


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Three recent decisions by the Supreme Court of Canada will “facilitate consumers” in bringing class action lawsuits against manufacturers alleged to have been involved in conspiracies to raise prices of products, even when those products are not directly purchased by those consumers, according to one Canadian lawyer.

“Often, direct purchasers, who have business relationships with the alleged conspirators and/or have passed on all the price increases to consumers, will have little or no incentive to sue the alleged conspirators,” wrote Brian Radnoff, a partner with law firm Lerners LLP, in a recent opinion column on the website Advocate Daily.

Radnoff’s article referred to three decisions published Oct. 31 by the Supreme Court of Canada. One involved allegations of conspiracy to fix prices of computer memory chips, another alleged several manufacturers conspired to fix prices of corn syrup used in baked goods and soda pop, while the third lawsuit was filed against Microsoft Corp. over software pre-installed in computers.  The Supreme Court of Canada decisions were on the matter of class action certification, not on the merits of the allegations.

“The Supreme Court of Canada has decided that indirect purchasers can sue manufacturers in these situations, despite the fact they did not purchase the product that was subject to the conspiracy directly from one of the alleged conspirators,” Radnoff wrote. “This is a very important issue for class actions and competition law in Canada. These decisions will facilitate consumers bringing class actions in these situations.”

In one ruling, the highest court in the land allowed an appeal from Pro-Sys Consultants Ltd. and Neil Godfrey, who had brought a class-action lawsuit against Microsoft Corp., alleging that beginning in 1988, Microsoft “engaged in unlawful conduct by overcharging” for its Intel-compatible personal computer operating systems and applications software.

Pro-Sys sought class-action certification for “all persons resident in British Columbia who, on or after Jan.1, 1994, indirectly acquired a license” for either operating system or application software from Microsoft, including those who bought new computers pre-installed with Microsoft software.

A B.C. judge had certified the action against Microsoft in March 2010 but in April 2011 the Court of Appeal for British Columbia set that certification order aside, ruling that “indirect purchaser actions were not available as a matter of law in Canada and therefore that the class members had no cause of action” under the province’s Class Proceedings Act.

Pro-Sys successfully appealed that decision to the Supreme Court of Canada.

“Indirect purchasers have a cause of action against the party who has effectuated the overcharge at the top of the distribution chain that has allegedly injured the indirect purchasers as a result of the overcharge being ‘passed on’ to them through the chain of distribution,” wrote the Supreme Court of Canada in ruling against Microsoft. “The argument that indirect purchasers should have no cause of action because passing on has been rejected as a defence in Canada should fail.”

In another Oct. 31 decision, the Supreme Court of Canada ruled against computer component maker Infineon Technologies AG and its North American subsidiary. Infineon, which makes dynamic random access memory (DRAM) components, unsuccessfully appealed a November 2011 ruling by the Quebec Court of Appeal in favour of consumer advocacy group Option Consommateurs, which had sought authorization to institute a class action lawsuit against several companies, including Infineon.

Option Consommateurs alleged that Infineon and its co-defendants had artificially inflated the prices of devices containing DRAM — such as computers, printers, hard drives, cellular phones, digital cameras and MP3 players — sold in Quebec from April 1999 to July 2002. 

Claudette Cloutier, a Montreal resident who claimed to have paid “an artificially inflated price” for a Dell computer, sought status as the designated representative in class action proceedings brought against Infineon and other manufacturers. Option consommateurs had sought authorization to bring the class action lawsuit.

In 2008, Mr. Justice Richard Mongeau had declared that the Quebec Superior Court did not have proper territorial jurisdiction to hear the class action but that decision was set aside by the Quebec Court of Appeal.

The damage to Cloutier “was allegedly suffered as a result of the contract” between her and Dell, and that contract “is not in fact the source of the cause of action in this case,” wrote the Supreme Court of Canada Oct. 31, 2013. However, the court wrote: “…it is a juridical fact that establishes where the alleged economic damage occurred: the conclusion of the contract is the event that fixes the ‘situs’ of the material damage suffered in Quebec.”

A third decision issued Oct. 31 by the Supreme Court of Canada was in the case of Sun-Rype Products Ltd. versus Archer Daniels Midland Co. and several manufacturers alleged to have engaged in a conspiracy to fix the price of high fructose corn syrup. In that decision, the Supreme Court of Canada ruled against Sun-Rype, finding that Sun-Rype had “not introduced evidence to establish some basis in fact that at least two class members could prove they purchased a product actually containing HFCS during the class period and were therefore identifiable members of the class.”

Prior to the decisions in Sun-Rype vs Archer Daniels Midland, Infineon vs Option Consommateurs and Pro-Sys vs Microsoft, “the law in Canada was uncertain whether these so called ‘indirect purchasers’ could bring an action for the damage they suffer,” Radnoff wrote in his article posted to Advocate Daily.


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