Written by Ranjan Agarwal, Emily Kettel and Pavan Virdee
The Québec Court of Appeal recently released a decision in Micron Technology Inc. c Hazan, 2020 QCCA 1104, that could have important implications for defendants seeking to have proposed class proceedings in Québec courts stayed in favour of proceedings in other Canadian jurisdictions.
History of the Case: Overlapping Class Actions in Québec and Federal Court
In 2018, class actions were commenced in Quebec, British Columbia, Ontario and the Federal Court to certify (or authorize) a class action against seven defendants who were manufacturers and sellers of dynamic random-access memory (DRAM). In each of the proceedings, the proposed representative plaintiff made claims under the federal Competition Act that he and other class members had paid artificially inflated prices for DRAM, and products containing DRAM, because of a price-fixing conspiracy among the defendants.
On April 30, 2018, an application for authorization of a class action against the defendants (the Québec equivalent of a motion for certification) was filed in the Québec Superior Court. On May 2, 2018, a statement of claim was filed in Federal Court against the same defendants, which included a motion for certification. The next day, a second application was filed in Québec, which was suspended under Québec's “first to file” rule. This rule requires that the first applicant to file an application for authorization in the Québec Superior Court is allowed to seek the authorization to proceed with the class action, and later applications are stayed.
In November 2018, a Joint Application for a Stay of the Class Action was filed in Québec seeking a stay of the Québec action, alleging lis pendens—an exception under the Québec Civil Code to have a pending suit stayed if a proceeding is already the subject of pending proceedings in a foreign jurisdiction, involving the same cause of action between the parties—between the Québec proceeding and the Federal Court proceeding.
In February 2019, the Québec Superior Court dismissed the stay application, finding that the “first to file” rule applies with equal force to applications in Québec Superior Court and in Federal Court, not just concurrent applications for authorization of class actions in Superior Court. The court also found that, although there was a risk of contradictory decisions arising from parallel proceedings, the appellants failed to show how staying the Québec proceedings would serve the best interests of the class members.
Summary of the Québec Court of Appeal's Decision
The Québec Court of Appeal revisited the “first to file” rule to determine whether it applies in the scenario where plaintiffs start applications for authorization, or certification, in both the Québec Superior Court and the Federal Court. The existing jurisprudence in Québec holds that the rule applies when multiple plaintiffs start overlapping proceedings in the Québec Superior Court but it does not apply when one proceeding is in the Québec Superior Court and another is “pending before a foreign authority”.
The Court of Appeal held that because the “first to file” rule was adopted as a matter of judicial policy for intra-Québec class action matters, the court could not justify extending it to situations involving the Federal Court or another province. In that case, the Québec Superior Court can only decide whether to suspend its proceedings.
The Court of Appeal acknowledged that, owing to the risk of conflicting judgments, undue costs to the parties, and the potential for waste of scarce judicial resources, it generally will not be in the interests of justice or of the parties to have two class actions proceed on the merits in parallel in front of different courts. When considering a suspension, the appeal court suggested that a court should assess and weigh general considerations, such as whether the proposed class actions raise similar issues, and any difference in scope of the proceedings.
In reaching a decision, both the motion judge and the Court of Appeal expressed dissatisfaction with the defendants’ conduct. The defendants had failed to advise the motion judge that they had also asked the Federal Court to suspend its proceeding pending the Supreme Court of Canada’s decision in Godfrey, a leading competition law class action. The lower court found this was sufficient, on its own, to dismiss the stay application. The appeal court agreed that it was inappropriate of the defendants to seek a stay of the proceedings in the Québec court to proceed in Federal Court without disclosing to the judge that they also had sought a suspension of the Federal Court proceeding.
That said, the Québec Court of Appeal found that the defendants’ conduct was insufficient to dismiss the stay application, affirming the lower court judge's conclusion: “In itself, the behaviour of the defendants in court must not have an impact on the interests of the class members.” Rather, the Court of Appeal emphasized the holistic approach for assessing the interests of the class members. The possible suspension of the Federal Court proceeding was just one relevant factor to consider.
Ultimately, the Québec Court of Appeal found that the lower court judge correctly dismissed the stay application under the principle of lis pendens because the Québec proceeding was filed before the Federal Court proceeding. It held that it would be premature to suspend the Québec proceeding before authorization of the class action, and that it may be appropriate to reassess the issue if both the Federal Court and the Québec Superior Court certify or authorize the class actions.
Interestingly, the Québec Court of Appeal acknowledged that the question whether a proceeding should be suspended usually occurs before either class action is authorized or certified. That said, it also said that in this case the court lacked key information to make a decision (for example, there is no judgment which defines the class, issues or remedies, and there is no certainty about whether the other proposed class action will be authorized or certified).
This is an important decision on overlapping, multi-jurisdictional class actions, as defendants may have to fight certification/authorization for the same, or similar, claims, more than once, potentially raising costs. The recent amendments to Ontario's Class Proceedings Act, 2002 that came into force on October 1, 2020, include provisions for the management of multi-jurisdictional class actions. This decision is also an important reminder for parties to disclose any plans they may have when considering a stay in multiple jurisdictions.