Written by Laura Gill, Ranjan Agarwal and Keely Cameron
On May 17, 2021, the Alberta Court of Appeal released its decision in Spring v Goodyear Canada Inc., 2021 ABCA 182. This case is the latest Alberta consideration of the test for certification of a class action. At issue was whether the certification judge erred in certifying the class action against Goodyear Tires relating to an alleged manufacturing defect resulting in tire failure due to tread separation. The central issue was the scope of certification, with the Court also considering the evidentiary burden for the demonstration of commonality of issues.
In 2012, Goodyear had issued a recall notice for 6 types of tires manufactured at the Fayetteville plant during a 13-week period during the spring of 2009. The representative plaintiff had experienced a failure in one of his Goodyear tires which was manufactured three weeks before the period covered by the recall notice.
The representative plaintiff started a claim for all 51 types of Goodyear tires, not just those manufactured at the Fayetteville plant or the 13 weeks covered by the recall notice. The representative plaintiff claimed that Goodyear deliberately and intentionally selected a recall period in the recall notice that it knew was too narrow. The certification judge certified the action as a class proceeding. Goodyear appealed, arguing that the certification judge erred by: (1) concluding there was some basis in fact for the existence of a common defect; (2) imposing a reverse onus on Goodyear to disprove the common defect; and (3) failing to require evidence that the issue respecting the common defect could be answered in common for the entire class. The appeal was granted on issues 1 and 3 leading to the Court overturning of the certification. As for issue 2, the Court found that the certification judge had not reversed the burden of proof.
Requirement for "Some Basis in Fact"
The key issue on appeal was whether there was commonality among the class members; specifically whether there was "some basis in fact" for a defect. While the evidentiary threshold for certification is low, so that expert evidence is unnecessary, the Court found that a claim should not be certified in the complete absence of evidence. That is particularly so in the case of allegations of intentional misconduct. To support the claim, the only direct evidence that the representative plaintiff provided was the recall notice, which only applied to a subset of the tires covered by the claim, and produced no evidence showing the cause of the tread separation. The representative plaintiff also produced no evidence to demonstrate that tread separation was a common problem for all 51 types of Goodyear tires, or that Goodyear had acted dishonestly in setting the scope of the recall notice.
The Court noted that to show "some basis in fact," the representative plaintiff needed to provide (1) some indication as to a common cause or source of problem; (2) that the representative plaintiff acknowledged that there may be other factors; and (3) that such factors that could only be identified at trial were found to support a finding, that the representative plaintiff had failed to prove, that the answer provided by a trial would apply to the claims of all the members of the class. If a representative plaintiff cannot identify a "common" defect, courts have noted that a trial would be a search for a defect rather than consideration about whether such a defect resulted from negligence. In the result, the Court found that the representative plaintiff did not meet the test for showing "some basis in fact" for commonality among the class members, and that the allegations of intentional misconduct should not have been certified.
Disclosing a Cause of Action
In terms of disclosing a cause of action, another of the criteria set out in section 5 of the Class Proceedings Act, the Court noted that to establish the tort of negligence and the duty to warn, it is not enough to be "at risk" of damage. On this basis, the claim for restitution for unjust enrichment and disgorgement of profits also failed. "Restitution" refers to a benefit which flowed from a plaintiff to the defendant which must be returned while "disgorgement" is the defendant's wrongful gain. The Court noted that a claim for deprivation must relate to class members' personal deprivation and not deprivation to the general public. Similarly, class members cannot claim disgorgement of profits earned from selling tires to the general public. While disgorgement of profits may be available for breach of contract, it is viewed as an exceptional remedy where other remedies would be ineffective. Here, if it had been available, the Court noted that the disgorgement remedy would be limited to a class member's value of tires.
This is the latest decision establishing the Court's gatekeeper function over certification proceedings and reveals the risk of framing the scope of a claim too widely. The case also reinforces that while the evidentiary threshold on certification is low, the Court will not certify class actions in the complete absence of evidence, in particular when allegations of intentional misconduct are raised.
If you would like more information about the issues discussed here or other matters pertaining to Canadian class proceedings, please contact a member of our Class Action Litigation group.