In Hazan v. Micron Technology Inc., 2023 QCCA 132, the Québec Court of Appeal confirmed that mere allegations are insufficient to authorize a class action based on an alleged price-fixing conspiracy.
Some evidence of the alleged conspiracy is required in order to establish an “arguable case” under the Québec test for authorization,[1] even when the allegations are accepted at face value. The Court of Appeal’s decision confirms that requiring such evidence is not a foray into the merits at the authorization stage, but instead part of the Court’s preliminary screening function.
The appellant (applicant) had sought authorization in order to institute a national class action against three manufacturers of dynamic random-access memory chips (DRAM), claiming damages arising from an alleged price-fixing conspiracy between the respondents (defendants) to restrict the production of DRAM between June 1, 2016, and February 1, 2018. The Court of Appeal noted that the appellant had no personal knowledge of the facts and, instead, asserted in his pleadings that the conspiracy was effected “through statements to investors and the industry” and “public statements,” without submitting those statements into evidence.[2]
Article 575 (2) of the Code of Civil Procedure requires that the underlying facts alleged in support of an application for authorization justify the conclusions sought. On appeal, the Appellant argued that the authorization hearing judge, Justice Bisson, had erred in looking for conclusive proof of the alleged conspiracy, rather than performing a prima facie screening of the facts.
The Court of Appeal confirmed the authorization hearing judge’s finding that the Court must ignore elements of the application that are opinion, legal argument, untested inferences or assumptions, or that are flatly contradicted by reliable documentary evidence. In its conclusion, the Court of Appeal confirmed that the following allegations required some objective evidence to support authorization:
- That the defendants colluded to restrain competition or participated in a conspiracy to restrain competition;
- That the conspiracy artificially inflated the prices of a good; and
- That direct and indirect purchasers overpaid for the property as a result of the conspiracy.[3]
The Court of Appeal upheld the decision of Justice Bisson. The key issue before Justice Bisson was whether the plaintiff had satisfied the “arguable case” element of the test for authorization of a class action under article 575 (2), which requires the Court to conclude that, “the facts alleged appear to justify the conclusions sought.”[4] Justice Bisson concluded that the allegations of conspiracy to restrict DRAM output were too general and imprecise and the evidence of investigations, without any charges, were merely evidence of suspicion by antitrust authorities and could not support an arguable case for the alleged conspiracy.[5]
This decision by the Québec Court of Appeal is consistent with the Infineon decision, in which the Supreme Court of Canada held that, “mere assertions are insufficient without some form of factual underpinning,” therefore requiring that general and imprecise allegations be “accompanied by some evidence to form an arguable case.”[6]
This decision follows a similar dismissal by the Federal Court on a motion to certify a similar proposed class proceeding against DRAM manufacturers on the basis that the pleadings of conspiracy were “not anchored in material facts, … speculative and boil down to bald assertions.”[7] The Federal Court also held that the proposed common issues related to the conspiracy could not be certified because there was no basis in fact to support the existence of the alleged conspiracy. Justice Gascon found that the conspiracy allegations conflicted with the public record and were, at best, evidence of “conscious parallelism,” which is not illegal in Canada and falls well short of a conspiracy.[8]
While the common law provinces do not require (and in fact preclude) the filing of evidence for the Court to assess the causes of action under the test for certification, recent decisions, including the recent Federal Court decision concerning DRAM, have applied a two-step test to assess commonality, in which evidence of the conspiracy has been relevant. In addition to assessing whether there is some basis in fact for the commonality of proposed common issues for the alleged conspiracy, common law courts have recently required evidence of “some basis in fact” in order to establish that the alleged conspiracy actually exists.[9]
The Hazan decision signals that the Québec courts will be as reluctant as the courts in common law provinces to permit competition class actions to proceed where there is no evidentiary support for allegations of a cartel conspiracy.
For more information on this topic, please contact the authors Adam S. Goodman, Margaret Weltrowska, Abbie Buckman and Camila Maldi.
[1] In Quebec, “authorization” is the preliminary screening mechanism, equivalent to the test for certification in common law jurisdictions.
[2] Hazan v. Micron Technology Inc., 2023 QCCA 132 at para. 10.
[3] Ibid., paras. 9–14.
[4] Code of Civil Procedure, c. C-25.01, art. 575 (2).
[5] Hazan c. Micron Technology Inc., 2021 QCCS 2710 at para. 60.
[6] Infineon Technologies AG v. Option consommateurs, 2013 SCC 59, para 134.
[7] Jensen v. Samsung Electronics Co. Ltd., 2021 FC 1185 at para. 7.
[8] Ibid., at paras. 145–148.
[9] See Kuiper v. Cook (Canada) Inc., 2020 ONSC 128 at paras. 26 and 44; Hoy v. Expedia Group Inc., 2022 ONSC 6650 at para. 259.
