Written by Ranjan K. Agarwal, Gannon G. Beaulne and Ethan Z. Schiff
On July 5, 2017, the Ontario Superior Court of Justice released a 129-page decision in the Rana Plaza class action (Das v George Weston Limited, 2017 ONSC 4129), a proposed class action brought in Ontario on behalf of Bangladeshis injured in the collapse of the Rana Plaza building in Dhaka in 2013 and their families. 2520 were injured and 1130 died in the collapse.
The plaintiffs sued Canadian retailer Loblaw Inc. and three affiliates (including Joe Fresh Apparel Canada Inc.), which had indirectly sourced clothing through factories in Rana Plaza, and French testing, inspection, and certification company Bureau Veritas SA and two affiliates, which had been engaged to perform two limited social audits of a factory in Rana Plaza. Bennett Jones LLP were lawyers for the Bureau Veritas defendants. The plaintiffs alleged that the adoption by Loblaws of a corporate social responsibility (CSR) policy created a duty to protect workers manufacturing products in factories down the supply chain from structural safety issues. The plaintiffs sought $2 billion in damages.
Justice Paul Perell’s decision followed a nine-day hearing of a motion by the plaintiffs to certify the proceeding as a class action and cross-motions by the defendants to strike out the action. Justice Perell dismissed the certification motion and the action outright. He found the alleged duties of care do not exist under Bangladesh law, which he concluded governed the action under Ontario’s choice of law rules, or even under Ontario law.
The decision will be of interest to companies sourcing from offshore manufacturers or that have otherwise incorporated (or are considering incorporating) CSR policies and procedures into their businesses but are concerned about potential liability.
No Duty of Care Grounded in CSR
In considering the plaintiffs’ claim in negligence against Loblaws, Justice Perell held that Loblaws had no control over the impugned Rana Plaza factory as a sub-supplier to a Loblaws subsidiary. He accepted the defendants’ expert witness testimony that reliance is a necessary element to negligence claims based on an assumption of responsibility under applicable law and found that the plaintiffs had failed to properly support reliance. Justice Perell further found that the foreseeability element was not met, nor were the class members proximate to Loblaws, given the tenuousness of their relationship.
To support its negligence claim against Bureau Veritas, the plaintiffs argued that Bureau Veritas was obligated to inspect for structural integrity in Rana Plaza. But Justice Perell found that Bureau Veritas had a limited remit which did not include structural integrity. The scope of any duty of care Bureau Veritas owed to the plaintiffs under Bangladesh (including English) and Ontario law was circumscribed by its agreement with Loblaws.
The plaintiffs argued that Bureau Veritas could be liable even absent an obligation to inspect for structural integrity. They argued Bureau Veritas was essentially in the position of a government inspector, pointing to case law in that context. But Justice Perell agreed with Bureau Veritas’s submissions distinguishing that case from the situation of a privately engaged auditor asked to perform a limited social audit. While citizens may reasonably expect government officials to inspect buildings due to public law duties, no such expectation could be imposed on a private social auditor in the case’s circumstances.
Justice Perell further accepted Bureau Veritas’s argument that holding a party liable in nonfeasance depends on the plaintiff establishing reasonable reliance. On the pleadings, Justice Perell held that no basis existed to establish that members of the proposed class could have reasonably expected Bureau Veritas to audit the structural integrity of the Rana Plaza given its limited contractual mandate.
Justice Perell held for the defendants on virtually every issue. The decision is a valuable modern exploration of the boundaries of the neighbour and proximity concepts in a globalized economy in which companies may adopt CSR policies aimed at improving labour standards in offshore factories. It confirms that such policies may not be enough, by themselves, to bridge the proximity gap between Western brands and workers in factories down the supply chain.
Justice Perell, however, did not address the potential effect that broader CSR policies could have on the analysis. In this case, if Loblaws’s CSR policy had included reference to the structural integrity of its suppliers’ factories, Justice Perell may have held that the proximity element was satisfied.
The case also offers practical lessons for class action litigants. Even before or at the certification stage, a judge may take a hard look at the statement of claim to check whether enough material facts have been pleaded and whether elements of asserted causes of action have been artificially characterized to survive preliminary scrutiny.
Litigants are also well-advised to consider, early in the class action, whether any foreign country has a meaningful connection to the matter and, if so, whether that country has any advantageous laws that can be proved through expert evidence.