Another Competition Law Class Action Milestone In Canada

Last month, the British Columbia Court of Appeal, in Pro-Sys Consultants Ltd. v Infineon Technologies AG, granted an appeal and certified a class of combined direct and indirect purchasers of “DRAMs” (semiconductor memory chips also known as “dynamic random access memory”) in class proceedings against DRAM manufacturers.  This appellate court decision is the second significant antitrust class certification decision coming from Canadian courts in recent months.  Click here for a related post.

The class proceedings at issue were brought by the purchaser of a laptop computer containing DRAMs who alleged that the manufacturers controlled the vast majority of the market for DRAM in British Columbia, they engaged in an international cartel to fix prices of DRAM during the class period, and that, as a result, it paid more for the computer than it would have but for the illegal price-fixing.  The action was brought on behalf of all persons in British Columbia who, during the class period, purchased DRAM or products containing DRAM either directly from the manufacturers or indirectly from intermediate purchasers.  The manufacturers had pleaded guilty in the United States of America to criminal charges arising out of an international conspiracy to fix prices of DRAM during the period April 1, 1999 to June 30, 2002 (the “class period”).  They had paid agreed-upon fines totaling $731 million (USD) and a number of their executive officers paid fines and served prison terms for their related criminal conduct.

In the first instance, the British Columbia Supreme Court chambers judge dismissed the certification application.  The chambers judge concluded that the plaintiff had not demonstrated that it could prove on common evidence that the price-fixed overcharge was passed through the distributing and marketing chains and absorbed by the individual members of the class.  It rejected the plaintiff’s submission that the individual loss did not need to be proven for each class member to establish liability and that loss element of liability could be established on the basis of aggregate loss – by using the aggregation provisions of the BC Class Proceedings Act (“CPA”) to determine aggregate damages as the difference between the prices actually obtained by respondents for DRAM and the prices they would have obtained but for the conspiracy.  Because it rejected plaintiff’s argument, the chambers judge had found that liability was not a common issue in the case and class proceedings were not the “preferable procedure” for the fair and efficient resolution of the remaining common issues.  Thus, the certification application was denied.

On appeal, the British Columbia Court of Appeal reversed that decision and found that it may be possible for plaintiff to prove that the manufacturers benefitted from their wrongful conduct, and thus prove liability on a class-wide basis as a common issue.  The Court of Appeal found that guilty pleas to the conspiracy charges in the United States and manufacturers’ agreements to pay fines calculated as a function of the gross pecuniary gain they derived from the crime amounted to “admissions that they engaged in the wrongful conduct alleged by the appellant and that they obtained an unlawful benefit from that conduct.”  Plaintiff proposed to establish causation on a class-wide basis by proving on common statistical evidence that the manufacturers obtained a benefit attributable to the class from their conduct and by establishing, though reliance on expert economic evidence, the prices that the manufacturers would have received for DRAM absent the unlawful conspiracy from which it would deduct what the manufacturers actually received from members of the class.  The Court of Appeal found that this approach had been approved by British Columbia courts.  After reviewing the circumstances under which the CPA authorizes the use of statistical evidence to assess an aggregate monetary award, the Court of Appeal reviewed the affidavit evidence and expert cross-examination transcripts submitted by the parties.  The Court of Appeal found that the chambers judge subjected plaintiff’s expert evidence to “rigorous scrutiny” which did not take into consideration that, at the certification stage, plaintiff was only required to show a “credible and plausible methodology.”  The Court of Appeals concluded that the assessment of the total gain to the manufacturers from their illegal conduct could be tried as a common issue.

The Court of Appeal also concluded that class proceedings would be the preferable procedure and would serve judicial economy since all issues (except the allocation and distribution of monetary awards) could be decided on common evidence.  Further, even though the manufacturers had already been fined for their conduct in the United States and had settled with direct purchasers in class actions in the United States, according to the B.C. Court of Appeal behavior modification could still be considered an important goal in the case in Canada.