Jensen v. Samsung Electronics Co. Ltd.

Jensen v. Samsung Electronics Co. Ltd.
Court (s) Database
Federal Court of Appeal Decisions
Date
2023-06-08
Neutral citation
2023 FCA 89
File numbers
A-314-21
Notes
A correction was made on April 18, 2024
Decision Content
Date: 20230608
Docket: A-314-21
Citation: 2023 FCA 89
CORAM:
BOIVIN J.A.
DE MONTIGNY J.A.
WOODS J.A.
BETWEEN:
CHELSEA JENSEN and LAURENT ABESDRIS
Appellants
and
SAMSUNG ELECTRONICS CO. LTD., SAMSUNG SEMICONDUCTOR INC., SAMSUNG ELECTRONICS CANADA, INC., SK HYNIX INC., SK HYNIX AMERICA, INC., MICRON TECHNOLOGY, INC., and MICRON SEMICONDUCTOR PRODUCTS, INC.
Respondents
Heard at Toronto, Ontario, on November 2, 2022.
Judgment delivered at Ottawa, Ontario, on April 28, 2023.
REASONS FOR JUDGMENT BY:
DE MONTIGNY J.A.
CONCURRED IN BY:
BOIVIN J.A. WOODS J.A.
Date: 20230608
Docket: A-314-21
Citation: 2023 FCA 89
CORAM:
BOIVIN J.A.
DE MONTIGNY J.A.
WOODS J.A.
BETWEEN:
CHELSEA JENSEN and LAURENT ABESDRIS
Appellants
and
SAMSUNG ELECTRONICS CO. LTD., SAMSUNG SEMICONDUCTOR INC., SAMSUNG ELECTRONICS CANADA, INC., SK HYNIX INC., SK HYNIX AMERICA, INC., MICRON TECHNOLOGY, INC., and MICRON SEMICONDUCTOR PRODUCTS, INC.
Respondents
AMENDED REASONS FOR JUDGMENT
DE MONTIGNY J.A.
[1] The appellants seek to overturn a decision rendered by Justice Gascon (the Motion Judge) of the Federal Court (Jensen v. Samsung Electronics Co. Ltd., 2021 FC 1185 (Reasons)) denying the certification of a class action. At its core, this appeal raises the issue of a judge’s role in a certification motion hearing and to what extent a judge may consider the evidentiary basis for the claim when certifying a class action.
[2] For the reasons that follow, I would dismiss the appeal.
I. Background [3] The appellants, Ms. Jensen and Mr. Abesdris, are indirect end-consumers of Dynamic Random Access Memory chips (DRAM). DRAM is a kind of semiconductor memory chip that is used in most computer products, including cell phones and laptops that allows information to be electronically stored and retrieved. The appellants allege that the respondents breached sections 45 and 46 of the Competition Act, R.S.C., 1985, c. C-34 (the 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 from June 1, 2016 to February 1, 2018. The appellants seek compensation in the amount of $1,000,000,000 on behalf of all persons or entities in Canada who purchased DRAM or products containing DRAM that were manufactured or sold by the respondents.
[4] The respondents are all manufacturers of DRAM chips and are estimated to manufacture between 96% and 98% of the world’s DRAM. The respondents are Samsung Electronics Co. Ltd., Samsung Semiconductor Inc. and Samsung Electronics Canada Inc., SK Hynix Inc. and SK Hynix America, Inc. and Micron Technology, Inc. and Micron Semiconductor Products, Inc.
[5] In February 2019, the appellants brought a motion to certify the action as a class proceeding and it was argued in October 2020. In the judgment under appeal issued on November 5, 2021, Justice Gascon dismissed the motion. In fulsome and thorough reasons, he found that the pleadings disclosed no reasonable cause of action and that there was no basis in fact for the existence of the common issues.
[6] There is no dispute between the parties that Rule 334.1 of the Federal Courts Rules, S.O.R./98-106 governs class proceedings in the Federal Courts. Rule 334.16 provides that a class action shall be certified if the following conditions are met: (a) the pleadings disclose a reasonable cause of action; (b) there is an identifiable class of two or more persons; (c) the claims raise common questions of law or fact; (d) a class proceeding is the preferable procedure for just and efficient resolution of those common questions; and (e) there is a representative plaintiff who would fairly and adequately represent the interests of the class.
[7] In their amended statement of claim, the appellants allege that the respondents breached sections 45 and 46 of the Act, thereby opening the door to a statutory right of private action to recover damages suffered as a result of that criminal conduct pursuant to section 36 of the Act. In a nutshell, section 45 makes it a criminal offence for competitors to conspire, agree or arrange to fix prices, allocate markets or restrict output. As for section 46, it provides that it is a criminal offence for a corporation carrying on business in Canada to implement a directive or other communication from a controlling person outside Canada for the purpose of giving effect to a conspiracy entered into outside of Canada that, if entered into in Canada, would have been in contravention of section 45. The full text of these provisions is reproduced in the Annex to these reasons.
[8] The appellants identified six common issues on which basis the proceedings should be certified. These issues are:
i)Did the Defendants, or any of them, breach section 45 of the Act?
ii)Did the Defendants, or any of them, breach section 46 of the Act?
iii)Did the Class members suffer loss or damage as a result of the Defendants’ conduct contrary to any provision of Part VI of the Act?
iv)Are the Class members entitled to recovery of their loss or damage pursuant to section 36 of the Act and, if so, in what amount or amounts?
v)Are the Defendants, or any of them, liable to pay pre-judgment interest and post-judgment interest pursuant to sections 36 and 37 of the Federal Courts Act, R.S.C. 1985, c. F-7 and, if so, in what amount?
vi)Should the full costs of investigation in connection with this matter, including the cost of the proceeding or part thereof, be fixed or assessed on an aggregate basis pursuant to section 36 of the Act and, if so, in what amount?
[9] The appellants supported their motion for certification with several affidavits including one from each of the proposed representative plaintiffs and one from class counsel, to which 54 exhibits were attached including articles about an investigation by the Chinese antitrust regulator, public statements made by the respondents and documents from the trade associations in the DRAM industry. The appellants also introduced into evidence the expert report and the reply expert report of Dr. Hal Singer, an economist. As for the respondents, they submitted as exhibits to an affidavit financial documents and transcripts of various earnings calls and investor calls involving them, and the expert evidence of Dr. Israel, an economist, in response to Dr. Singer’s report.
[10] At the certification hearing, the respondents argued that the appellants failed to meet their burden because the respondents’ conduct does not constitute a criminal violation of the Act and does not amount to an actionable conspiracy under section 45 or an unlawful foreign directive under section 46. Accordingly, the respondents argued that the amended statement of claim did not disclose a reasonable cause of action, and that the issues identified by the appellants are not common issues because the appellants failed to provide a basis in fact for the existence of the respondents’ liability or harm issues.
II. The Impugned Decision [11] In his opening remarks, the Motion Judge noted that similar class actions to the case at bar were dismissed both in the United States (In re Dynamic Random Access Memory (DRAM) Indirect Purchase Litigation, Order Granting in Part and Denying in Part Defendants’ Motions to Dismiss, U.S. District Court, Northern District of California, November 24, 2020) and in Québec (Hazan c. Micron Technology Inc., 2021 QCCS 2710): Reasons at paras. 28-35. In both cases, the courts found that the plaintiffs’ allegations fell short of alleging a plausible cause of action based on conspiracy, and that the evidence was insufficient to establish, even summarily, the existence of the alleged conspiracy. Both of these cases have been upheld on appeal since the decision of the Federal Court was issued: see In re Dynamic Random Access Memory (DRAM) Indirect Purchaser Antitrust Litigation, 28 F (4th) 42 (9th Cir. 2022) and Hazan c. Micron Technology Inc., 2023 QCCA 132. Of course, Justice Gascon acknowledged that these precedents were not binding on him despite the fact that they relate to the same factual background, if only because the law relating to class actions and the standard to certify such a proceeding in these jurisdictions are not the same (and, in the case of the U.S., the legal regime governing conspiracy and antitrust practices is also different).
[12] Justice Gascon also remarked that the appellants do not allege a typical price-fixing conspiracy, but rather a conspiracy to suppress the supply of DRAM that has allegedly resulted in an increase in prices of these goods: Reasons at paras. 36-47. He could find no precedent for a class action which alleges a breach of section 45 through output suppression. The Motion Judge went on to say that it is extremely rare to find a class action where the existence of the conspiracy is in dispute and challenged at the certification stage; that distinguishes, in his view, the present case from Infineon Technologies AG v. Option consommateurs (2013 SCC 59, [2013] 3 S.C.R. 600) [Infineon], in which the conspiracy to fix the price of DRAM was admitted to.
[13] After reviewing the general principles applicable to the certification process (Reasons at paras. 54-62), which are not in dispute in this appeal, Justice Gascon focused his analysis on the three requirements that were challenged by the respondents, namely the reasonable cause of action, the existence of common issues of law or fact, and the preferable procedure for the just and efficient resolution of the common issues. Because I agree with most of Justice Gascon’s reasoning on these three questions, I will summarize his findings in some detail.
[14] With respect to the reasonable cause of action, Justice Gascon held that the appellants had not adequately pleaded the essential elements of an offence under sections 45 and 46 of the Act, namely, the existence of an unlawful agreement. In particular, the appellants failed to plead “material facts showing that the [respondents] entered into an agreement to suppress the supply of DRAM” under section 45: Reasons at para. 69. Since such an agreement is the central requirement underlying the respondents’ claim in damages, he concluded that “this radical defect is fatal to their cause of action”: Reasons at para. 69.
[15] The Motion Judge briefly reviewed the test for the cause of action criterion, which is essentially the same as that applicable on a motion to strike: is it “plain and obvious”, assuming that the facts pleaded are true, that the pleadings disclose a reasonable cause of action: see Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57, [2013] 3 S.C.R. 477 at para. 63 [Pro-Sys]; Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24, [2011] 2 S.C.R. 261 at para. 20; Canada v. John Doe, 2016 FCA 191, [2016] F.C.J. No. 695 (QL) at para. 23 [John Doe]; Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19, [2020] 2 S.C.R. 420 at para. 14 [Atlantic Lottery]; Pioneer Corp. v. Godfrey, 2019 SCC 42, [2019] 3 S.C.R. 295 at para. 27 [Godfrey]; R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45 at para. 17 [Imperial Tobacco]; Canada v. Greenwood, 2021 FCA 186, [2021] F.C.J. No. 1006 (QL) at para. 91; Canada (Attorney General) v. Jost, 2020 FCA 212, 332 A.C.W.S. (3d) 25 at para. 29 [Jost]. To fail at this stage of the test, therefore, the claim must be “bereft of any possibility of success”: Wenham v. Canada (Attorney General), 2018 FCA 199, [2018] F.C.J. No. 1088 (QL) at paras. 33, citing Canada (National Revenue) v. JP Morgan Asset Management (Canada) Inc., 2013 FCA 250, [2014] 2 F.C.R. 557 at para. 47; Lin v. Airbnb, Inc., 2019 FC 1563, 15 A.C.W.S. (3d) 642 at para. 28.
[16] For this criterion, the Motion Judge noted that the analysis is limited to the pleadings. Even if no evidence can be considered, the party seeking certification must plead facts sufficient to support a legally recognized cause of action. In that respect, he pointed to Rules 174 and 181 of the Federal Courts Rules, which establishes that parties must plead material facts and provide particulars of every allegation. Specifically, the Motion Judge noted that material facts “cannot be simply constituted of bald assertions of conclusions”: Reasons at para. 77, citing John Doe at para. 23; Mancuso v. Canada (National Health and Welfare), 2015 FCA 227, [2015] F.C.J. No. 1245 (QL) at para. 27 [Mancuso]; Merchant Law Group v. Canada Revenue Agency, 2010 FCA 184, [2010] F.C.J. No. 898 (QL) at para. 34. While the conditions for certification must be applied broadly and flexibly, “the Court cannot go so far as to presume the existence of an element that is essential to the establishment of a cause of action”: Reasons at para. 76.
[17] Summarizing the jurisprudence on that issue, the Motion Judge stressed that the normal rules of pleading apply to no lesser extent to class actions as they do for any action. As he stated at paragraph 79 of his Reasons, “…in order for allegations in pleadings to be considered as material facts, they must be supported by sufficient particularization, and must not be bare assertions or conclusory legal statements based on assumptions or speculation”: Reasons at para. 79, citing for that proposition Das v. George Weston Limited, 2017 ONSC 4129, [2017] O.J. No. 3542 (QL) at para. 17, aff’d 2018 ONCA 1053, [2018] O.J. No. 6742 (QL) at para. 74.
[18] In the same vein, he also emphasized that there are limits to the presumption that allegations of fact are true. The presumption will apply only when the facts alleged are sufficiently precise and tangible to ensure that they truly support the existence of the right claimed; in other words, allegations based on mere speculations and assumptions will not be assumed to be true: Reasons at paras. 81-82. The Motion Judge also agreed with the respondents that in the case at bar, the documents referred to in the appellants’ pleadings formed an integral part of their claim and can be considered as incorporated by reference. That being said, the Motion Judge acknowledged that, at the certification stage, his role is not to determine whether the appellants have correctly interpreted them, but only to ascertain whether, on a plain reading, the documents referred to in the pleading actually say what the appellants allege they say: Reasons at para. 86.
[19] Justice Gascon then proceeded to give an overview of the Act, and more specifically of sections 36, 45 and 46 upon which the amended statement of claim is grounded. Pursuant to section 36, the appellants must establish that the respondents’ conduct satisfies all constituent elements of section 45 or 46, the loss or damage suffered, and the causal link between the loss or damage and the criminal offence. Section 36 confers a right of private action to any person who has suffered loss or damage as a result of conduct in breach of the criminal provisions of the Act, without the need of there having been a criminal conviction or even an investigation. The elements of the prohibited criminal conduct, and the criminal intent, must still be proven.
[20] For a conspiracy to be established under section 45, it must be shown that a person: (1) conspires, agrees or arranges; (2) with a competitor of that person with respect to a product or service; (3) to do any of the three things mentioned in subsection 45(1), namely, fix prices; allocate sales, territories, customers or markets; or control output. As a result of amendments to the Act adopted in 2009, there is no need to prove actual or likely anti-competitive effects or harm to competition in a market. As for section 46, it criminalizes the implementation of foreign directives in Canada to give effect to a conspiracy entered into outside Canada that if entered into in Canada, would have been in contravention to section 45.
[21] Next, Justice Gascon reviewed the law relating to section 45, and in particular examined the requirement for an agreement to be established, as this is the main constituent element of that criminal offence. He writes that a “meeting of the minds” between two or more unaffiliated persons who are competitors is the crucial element of the offence, and he accepts that such an agreement can be inferred from circumstantial evidence. Critically, he goes on to add that “even if there is no direct evidence of an agreement, there must at least be some indirect or circumstantial evidence of some type of communications between the parties in order for an agreement to be inferred”: Reasons at para. 98. In other words, “[a] conscious but independent adoption of a uniform or parallel course of action by different parties, without such a meeting of the minds, assent, promise or coordination among them is not an agreement contemplated by the conspiracy provision”: Reasons at para. 102.
[22] Having summarized the legal framework, the Motion Judge then assessed the amended statement of claim and found that it “does not contain material facts as to how and when an agreement could have been formed and entered into between the Defendants, what if anything could have been agreed upon between the Defendants, any meeting of the minds with regard to the commission of the alleged conspiracy offence, or any overt acts undertaken by the Defendants in furtherance of an alleged conspiracy”: Reasons at para. 117.
[23] To reach that conclusion, the Motion Judge considered the general statements made by the appellants on the alleged conspiracy (statement of claim at paras. 5, 61-62, 129 and 135), the allegations of direct private communications between the respondents (statement of claim at paras. 5 and 102) and meetings between the respondents at the industry’s trade organizations (statement of claim at paras. 5, 51-52, 71 and 102-103). He found all such allegations to be “vague, brief and conclusory” (Reasons at para. 130), and consequently lacking material facts which reflect that there was any kind of agreement.
[24] Justice Gascon was equally unconvinced by the appellants’ allegations that the respondents engaged in public statements from which conspiracy can be inferred (statement of claim at paras. 6, 56-101). The Motion Judge found that such statements do not amount to an agreement under section 45, and that they were misquoted and read out of context by the appellants. Far from supporting any allegation of supply restriction or conspiracy, the documents relied on by the appellants rather show, in his view, conduct in furtherance of unilateral and independent commercial behaviour.
[25] In the end, the Motion Judge found that the appellants’ pleadings did not disclose a reasonable cause of action under section 45, and that their action was doomed to fail. That being the case, the Motion Judge similarly found that the pleadings could not disclose a reasonable cause of action for breach of section 46 since it also requires a conspiracy. Moreover, the pleadings were defective because they essentially amounted to a mere recitation of the language contained in section 46.
[26] Turning to the common issues requirement, the Motion Judge considered the six questions identified by the appellants, namely: (a) the existence and scope of the alleged conspiracy and the respondents’ liability under sections 45 and 46 (first and second issues); (b) the allegations of loss and harm flowing from the alleged wrongful acts (third and fourth issues); and (c) the follow-on interest and investigation costs (the fifth and sixth issues). Relying on the Ontario Superior Court decision in Crosslink v. BASF Canada (2014 ONSC 4529 at para. 51) [Crosslink 2], the appellants alleged that the first two issues can be determined solely with regard to the conduct of the respondents and without reference to the individual class members. Moreover, the appellants argue that deciding these questions would advance each class member’s claim and therefore meet the common issue requirement.
[27] After having briefly summarized the jurisprudence relating to the commonality requirement, which in his view requires that the certification judge “determine whether there are indeed common questions stemming from facts that are relevant to all the class members” (Reasons at para. 188), the Motion Judge addressed the appellants’ contention that the some-basis in fact standard requires only that they show some basis in fact for the commonality of the proposed common issues (a so-called “one-step approach”), rather than having to show some basis in fact that the proposed common issues (1) actually exist in fact, and (2) can be answered in common across the entire class (the “two-step approach”).
[28] The Motion Judge rejected the appellants’ contention that the requirement to lead some evidence for the existence of the common issue itself would infuse a merits analysis in the certification test. Despite some uncertainty in the law, he expressed the view that the two-step approach has been applied by the vast majority of the courts and that the decision of the Supreme Court in Pro-Sys did not change the law in that respect. He stressed, however, that the two-step approach is not a merits-based test, that a court should not resolve conflicting facts and evidence at the certification stage, and that the some-basis in fact standard sets a low evidentiary standard for the appellants. In his view, the two-step approach is the only one consistent with the underlying filtering objectives of certification:
…The certification requirements, however low they may be, were not meant to authorize class actions to proceed on the basis of the commonality of a non-existent proposed common issue. A non-existent or fictitious issue has no more basis or justification because it happens to be common to a group of plaintiffs. A cause of action with no factual underpinning does not become somehow more founded because it is common to a group of plaintiffs, nor does it gain any more value or traction just because it is shared by hundreds, thousands or millions. It would be ironic that a plaintiff’s action could be certified as a class proceeding simply because there is some basis in fact on the commonality of an issue for the class members, without any basis in fact for the issue claimed to be common.
Reasons at para. 214
[29] Applying the two-step approach, the Motion Judge first reviewed the appellants’ evidence and found that it failed to satisfy the minimal evidentiary basis required to support their common issues concerning liability. More particularly the Motion Judge found the evidence did not support a finding that the respondents were parties to a coordinated restriction of DRAM supply and made an agreement in breach of section 45 of the Act.
[30] Since section 46 is an extension of section 45, he came to the same conclusion that there is no basis in fact for that second proposed common issue. He added that there is not a scintilla of evidence on the other main constituent elements of a foreign directive in breach of section 46. On that basis, he opined that there was no need to deal with the other proposed common issues identified by the appellants; as he stated, if there is no evidence and basis in fact on conduct and liability, and for the existence of an alleged conspiracy, the proposed common issues relating to the alleged harm or loss, or to interest or investigation costs, cannot be certified. Given the absence of certifiable common issues, the Motion Judge concluded that a class action could not be the preferable procedure for the resolution of the appellants’ claims.
III. Issues [31] In my view, this appeal raises the following two questions:
Did the Motion Judge err in finding that the statement of claim does not plead a reasonable cause of action?
Did the Motion Judge err in finding that the appellants have failed to provide some basis in fact for the proposed conspiracy-related common issues?
IV. Analysis [32] There is no doubt that the usual appellate standard of review applies to decisions of a trial judge in matters of pleadings: Imperial Manufacturing Group Inc. v. Decor Grates Incorporated, 2015 FCA 100, [2015] F.C.J. No. 503 (QL) at para. 19; Mancuso v. Canada (National Health and Welfare), 2015 FCA 227, [2016] 1 F.C.R. 246 at para. 8. As a result, questions of fact and questions of mixed fact and law are reviewable on the standard of palpable and overriding error, whereas questions of law and questions of law that can be extracted from questions of fact and law will be reviewed on a standard of correctness: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 [Housen].
[33] The appellants and the respondents joined issue over the standard of review with respect to the first question. The appellants argued that the assessment of the reasonable cause of action requirement is a pure question of law reviewable on the correctness standard, whereas the respondents are of the view that in this case, the issue lies not so much on the requirements of the asserted cause of action (a question of law), but on whether the pleaded facts satisfy these requirements (a question of mixed fact and law).
[34] Having carefully reviewed the case law submitted by both parties in their reply and sur-reply memoranda, I come to the conclusion that the applicable standard of review in the particular circumstances of this case is the palpable and overriding standard.
[35] The appellants rely on the decision of the Supreme Court of Canada in Godfrey, as well as on this Court’s decision in John Doe and numerous provincial appellate courts decisions, for the proposition that “whether a pleading discloses a reasonable cause of action is a question of law, reviewable on the standard of correctness” (Appellants’ Reply Memorandum at para. 6). In my view, this is an inaccurate and distorted reading of the case law.
[36] In most cases, determining whether a pleading discloses a cause of action involves essentially the identification of the proposed cause of action and whether it is cognizable in Canadian law. This was precisely the case in Godfrey, where the issue was whether “umbrella purchasers” (i.e., purchasers of products manufactured and supplied by someone other than the defendants, but who allege that the defendants’ price-fixing conduct raised the market price of the product) have a cause of action under paragraph 36(1)(a) of the Act. As the majority stated at paragraph 61 of its reasons, this was a question of statutory interpretation. It was clear that if the answer to that question was positive, the facts pleaded made out the claim; in that context, whether umbrella purchasers had a cause of action was undeniably a question of law reviewable on a standard of correctness (Godfrey at para. 57).
[37] The same was true in all the other cases referred to by the appellants in their reply memorandum (footnotes 5 to 10), and in the John Doe decision of this Court upon which the appellants rely extensively. At issue in that case was whether the statement of claim disclosed a reasonable cause of action for breach of contract, negligence, breach of confidence, intrusion upon seclusion, publicity given to private life and breach of the right to privacy under sections 7 and 8 of the Canadian Charter of Rights and Freedoms. These issues were first and foremost of a legal nature, and it is in this context that must be read the comments of the Court relied upon by the appellants. In that context, the Court stated that the assessment of the reasonable cause of action criterion differs from the last four certification criteria because it “involves essentially legal reasoning, that is, whether the applicable legal criteria to make out a certain claim have been met”: John Doe at para. 30. Other cases of this Court are to the same effect: see King v. Canada (Attorney General), 2010 FCA 122, [2010] F.C.J. No 634 (QL) at para. 5; Jost at paras. 21, 47-48; Bauer v. Canada, 2018 FCA 62, 289 A.C.W.S. (3d) 880 at para. 7.
[38] In some instances, however, the question to be resolved is not so much whether the alleged cause of action is indeed a valid cause of action, but rather whether the pleaded facts, assuming they are true, satisfy the requirements of the asserted cause of action. Even if facts are to be taken as pleaded and need not be proven with evidence, they must still be considered and capable of supporting the cause of action. As this Court stated in John Doe (at para. 23), “[w]hile the facts alleged are assumed to be true, they must still be pleaded in support of each cause of action. Bald assertions of conclusions are not allegations of material fact and cannot support a cause of action”. That second part of the analysis is not a legal question, but a question of mixed fact and law reviewable on the palpable and overriding error standard.
[39] In the case at bar, there is no dispute as to the first part of the test: a breach of sections 45 or 46 of the Act clearly triggers the section 36 cause of action. What is at stake is whether the facts, as pleaded in the statement of claim, support the cause of action. It is very clear from the jurisprudence that this second part of the analysis does not raise a pure question of law. Nowhere did the Supreme Court state, in Godfrey or elsewhere, that the overall determination of whether a pleading discloses a reasonable cause of action is a pure question of law. That question must be broken down into two parts: (1) whether the alleged cause of action exists in law, and (2) whether the pleaded facts can ground the cause of action. That second part of the question is clearly not a pure question of law.
[40] It is true that in John Doe, this Court did not spell out explicitly these two parts of the test. As explained above, the inquiry about the reasonable cause of action requirement in that case revolved for the most part around the existence at law of the alleged causes of action. That did not prevent the Court, however, from dismissing some of the causes of action on the ground that they were not supported by the pleaded facts. At paragraph 45, for example, the Court stated that there was “a total lack of any material facts” to support the pleading of an alleged breach of contract, and that it was “in and of itself a sufficient basis to dismiss that cause of action”. Similarly, the Court found that the alleged tort in publicity given to private life and of intrusion upon seclusion should have been rejected because they were not supported by any material facts: John Doe at paras. 53, 56 and 58.
[41] Most recently, the Ontario Court of Appeal drew the same distinction between the legal and factual components of the reasonable cause of action requirement in PMC York Properties Inc. v. Siudak, 2022 ONCA 635, 2022 A.C.W.S. 3647. At paragraph 29, the Court wrote:
As framed by the plaintiffs’ arguments, the motion judge’s assessment of the defamation claim was not a pure legal analysis. It required the application of the legal standard of the modern, flexible approach to defamation pleadings to an assumed set of facts, a question of mixed fact and law. At their core, the plaintiffs’ submissions did not require the motion judge to determine whether Mr. Siudak’s pleadings disclosed a known and tenable cause of action but, rather, whether the known cause of action was pleaded with sufficient particulars to satisfy the modern, flexible approach to defamation pleadings. The motion judge’s analysis therefore attracted a deferential standard.
[42] In light of the above, I agree with the respondents that the decision of the Motion Judge to dismiss the appellants’ certification motion on the basis that the statement of claim does not disclose a reasonable cause of action is reviewable on the deferential standard of palpable and overriding error, as it rests on the Motion Judge’s finding that the pleaded facts do not satisfy the requirements of the asserted cause of action, as opposed to the existence of that cause of action in Canadian law.
[43] On the second question, the parties are in agreement that the applicable standards of review are those set out in Housen. As a result, the identification by the Motion Judge of the test to determine whether there is a basis in fact for the proposed common issues is a question of law to be reviewed on the correctness standard. The application of that test to assess whether the claims’ proposed class members do raise common issues is a mixed question of fact and law, to be reviewed on the standard of palpable and overriding error: see John Doe at paras. 29-31; Horseman v. Canada, 2016 FCA 238, 271 A.C.W.S. (3d) 707 at para. 4; Condon v. Canada, 2015 FCA 159, [2015] F.C.J. No 803 (QL) at para. 7 [Condon].
A. Did the Motion Judge err in finding that the statement of claim does not plead a reasonable cause of action? [44] The crux of the appellants’ argument on appeal is that the Motion Judge improperly considered the merits of the case and stepped beyond his more limited role in a certification motion. Stressing that no evidence may be considered and that the pleadings must be read as a whole, the appellants submit that the Motion Judge erred in applying too high a standard in his analysis. More particularly, the appellants claim that the Motion Judge imposed an inflated standard of particularity, failed to read the pleadings as a whole, failed to presume the pleaded facts were true, and failed to consider the evidence.
[45] The appellants argue that their pleadings met each and every one of the requirements to plead a conspiracy established by the jurisprudence: a description of the parties and their relationship; the agreement between the defendants to conspire; the purpose or objects of the conspiracy; the overt acts alleged to have been done by each of the alleged conspirators in furtherance of the conspiracy; and finally, the injury and damage occasioned as a result. In their view, the Motion Judge’s finding that the statement of claim is “too sparse in detail” and does not contain a sufficient description of an unlawful agreement is premised on too high a standard of particularity: Reasons at para. 117. The appellants submit that their pleadings were sufficiently detailed to allow the respondents to identify the agreement in question. When stating that the appellants should have provided material facts to support who was in attendance, what was discussed and whether there was any meeting of the minds at the alleged meetings at trade association events, the Motion Judge applied a virtually impossible standard, claim the appellants. Not only would these details be unavailable to the appellants, but they would emerge during the discovery stage because the alleged conspiracy is secret in nature.
[46] The appellants further submit that instead of assessing the pleadings “as a whole”, the Motion Judge considered individual allegations and dismissed them gradually. The appellants argue that in approaching the pleadings in a piecemeal way, the Motion Judge failed to consider allegations which he had previously dismissed when assessing a new part of the pleadings leading to incorrect conclusions, including that the appellants pleaded no more than conscious parallelism.
[47] The appellants argue that Justice Gascon limited the presumption of truth by mischaracterizing material facts and refusing to presume the appellants’ allegations as true. First, he misapplied the requirement of particularity, by applying it to individual paragraphs rather than to the pleadings as a whole, and so ignored individual facts that he believed were not sufficiently particular. Next, the appellants argue that Justice Gascon misapplied the test for the reasonable cause of action analysis. In their view, he dismissed the allegation that “the defendants met and communicated with each other among their senior executives, directly and indirectly, in person, over the phone, and at meetings of the industry’s various trade organizations” as vague, brief and conclusory because he applied the requirement for authorization of a class action in Québec (as elaborated by the Supreme Court in L’Oratoire Saint-Joseph du Mont-Royal v. J.J., 2019 SCC 35, [2019] 2 S.C.R. 831 and Infineon, instead of those applying in the Federal Court: Appellant’s Memorandum of Fact and Law at para. 62; Reasons at para. 130. Finally, the appellants take issue with the Motion Judge when he claimed that material facts “cannot be simply constituted of bald assertions of conclusions” or “bare allegations”: Reasons, at paras. 77 and 82. In their view, bare allegations of fact are precisely the desired content of pleadings given that Rule 174 prohibits the inclusion of evidence in the pleadings; as a result, material facts can only be rejected as conclusory when the plaintiff pleads only a legal conclusion without pleading the material facts.
[48] Finally, the appellants argue that the Motion Judge considered evidence when determining if the pleadings disclose a reasonable cause of action despite clear guidance from this Court which prohibits doing so. The appellants argue that the Motion Judge overstepped his role by evaluating the incorporated documents in detail to determine if the appellants’ interpretation of them was correct. Moreover, the Motion Judge required an evidentiary basis for the material facts that is prohibited in a motion for certification.
[49] In my view, none of these arguments can succeed and the Motion Judge did not err in finding that the appellants failed to plead a cause of action for conspiracy. In so concluding, Justice Gascon identified the applicable legal principles, and he made no overriding or palpable error in applying them. I also wholeheartedly agree with his general approach with respect to certification motions, which is best captured by the following paragraph of his Reasons:
[292] I do not dispute that the class actions are a specific procedural vehicle for litigants and that a certification motion is not the place to focus on the substance and merits of a contemplated class action. However, the certification stage nonetheless remains an important gate-keeping mechanism which must operate as a “meaningful screening device” and which shall not be treated as a “mere formality” (Desjardins at para 74; Oratoire at para 62; Pro-Sys at para 103). Contrary to what the Plaintiffs appeared to suggest, for a court to conduct a rigorous review of a plaintiff’s certification motion and to scrutinize with care the allegations, the material facts and the evidence put forward by a plaintiff on a certification motion does not amount to delving into the merits of the case. As the [Supreme Court of Canada] frequently stated, it is rather part of the courts’ expected role and duty to do more than a rubber-stamping and symbolic review of proposed class actions at the certification stage, and to be satisfied that the certification requirements are effectively met.
[50] In their memorandum, the appellants claim that the Motion Judge, despite stating the legal test accurately, nevertheless did launch a full-blown merits analysis. In the very first paragraph of their memorandum, they write that the Motion Judge approached the truth of the conspiracy allegation as “the determinative issue”, relying for that proposition on his finding that “[t]he formation and existence of the section 45 conspiracy” was “the central issue in dispute between the parties”: Reasons at paras. 5-6. In my view, this is an unfair and distorted reading of the Motion Judge’s Reasons. When read in its totality, it is clear that paragraph 5 of the Reasons is focused on the common issues and stressed the unusual character of the appellants’ claim,