Class Actions (Fed) - Certification. Jensen v. Samsung Electronics Co. Ltd.
In Jensen v. Samsung Electronics Co. Ltd. (Fed CA, 2023) the Federal Court of Appeal considered whether a 'reasonable cause of action' was pled, here for class action certification purposes:
A. Did the Motion Judge err in finding that the statement of claim does not plead a reasonable cause of action?. Jensen v. Samsung Electronics Co. Ltd.
 The crux of the appellants’ argument on appeal is that the Motion Judge improperly considered the merits of the case and stepped beyond his more limited role in a certification motion. Stressing that no evidence may be considered and that the pleadings must be read as a whole, the appellants submit that the Motion Judge erred in applying too high a standard in his analysis. More particularly, the appellants claim that the Motion Judge imposed an inflated standard of particularity, failed to read the pleadings as a whole, failed to presume the pleaded facts were true, and failed to consider the evidence.
 The appellants argue that their pleadings met each and every one of the requirements to plead a conspiracy established by the jurisprudence: a description of the parties and their relationship; the agreement between the defendants to conspire; the purpose or objects of the conspiracy; the overt acts alleged to have been done by each of the alleged conspirators in furtherance of the conspiracy; and finally, the injury and damage occasioned as a result. In their view, the Motion Judge’s finding that the statement of claim is "“too sparse in detail”" and does not contain a sufficient description of an unlawful agreement is premised on too high a standard of particularity: Reasons at para. 117. The appellants submit that their pleadings were sufficiently detailed to allow the respondents to identify the agreement in question. When stating that the appellants should have provided material facts to support who was in attendance, what was discussed and whether there was any meeting of the minds at the alleged meetings at trade association events, the Motion Judge applied a virtually impossible standard, claim the appellants. Not only would these details be unavailable to the appellants, but they would emerge during the discovery stage because the alleged conspiracy is secret in nature.
 The appellants further submit that instead of assessing the pleadings "“as a whole”", the Motion Judge considered individual allegations and dismissed them gradually. The appellants argue that in approaching the pleadings in a piecemeal way, the Motion Judge failed to consider allegations which he had previously dismissed when assessing a new part of the pleadings leading to incorrect conclusions, including that the appellants pleaded no more than conscious parallelism.
 The appellants argue that Justice Gascon limited the presumption of truth by mischaracterizing material facts and refusing to presume the appellants’ allegations as true. First, he misapplied the requirement of particularity, by applying it to individual paragraphs rather than to the pleadings as a whole, and so ignored individual facts that he believed were not sufficiently particular. Next, the appellants argue that Justice Gascon misapplied the test for the reasonable cause of action analysis. In their view, he dismissed the allegation that "“the defendants met and communicated with each other among their senior executives, directly and indirectly, in person, over the phone, and at meetings of the industry’s various trade organizations”" as vague, brief and conclusory because he applied the requirement for authorization of a class action in Québec (as elaborated by the Supreme Court in L’Oratoire Saint-Joseph du Mont-Royal v. J.J., 2019 SCC 35,  2 S.C.R. 831 and Infineon, instead of those applying in the Federal Court: Appellant’s Memorandum of Fact and Law at para. 62; Reasons at para. 130. Finally, the appellants take issue with the Motion Judge when he claimed that material facts "“cannot be simply constituted of bald assertions of conclusions”" or "“bare allegations”": Reasons, at paras. 77 and 82. In their view, bare allegations of fact are precisely the desired content of pleadings given that Rule 174 prohibits the inclusion of evidence in the pleadings; as a result, material facts can only be rejected as conclusory when the plaintiff pleads only a legal conclusion without pleading the material facts.
 Finally, the appellants argue that the Motion Judge considered evidence when determining if the pleadings disclose a reasonable cause of action despite clear guidance from this Court which prohibits doing so. The appellants argue that the Motion Judge overstepped his role by evaluating the incorporated documents in detail to determine if the appellants’ interpretation of them was correct. Moreover, the Motion Judge required an evidentiary basis for the material facts that is prohibited in a motion for certification.
 In my view, none of these arguments can succeed and the Motion Judge did not err in finding that the appellants failed to plead a cause of action for conspiracy. In so concluding, Justice Gascon identified the applicable legal principles, and he made no overriding or palpable error in applying them. I also wholeheartedly agree with his general approach with respect to certification motions, which is best captured by the following paragraph of his Reasons:
 I do not dispute that the class actions are a specific procedural vehicle for litigants and that a certification motion is not the place to focus on the substance and merits of a contemplated class action. However, the certification stage nonetheless remains an important gate-keeping mechanism which must operate as a “meaningful screening device” and which shall not be treated as a “mere formality” (Desjardins at para 74; Oratoire at para 62; Pro-Sys at para 103). Contrary to what the Plaintiffs appeared to suggest, for a court to conduct a rigorous review of a plaintiff’s certification motion and to scrutinize with care the allegations, the material facts and the evidence put forward by a plaintiff on a certification motion does not amount to delving into the merits of the case. As the [Supreme Court of Canada] frequently stated, it is rather part of the courts’ expected role and duty to do more than a rubber-stamping and symbolic review of proposed class actions at the certification stage, and to be satisfied that the certification requirements are effectively met. In their memorandum, the appellants claim that the Motion Judge, despite stating the legal test accurately, nevertheless did launch a full-blown merits analysis. In the very first paragraph of their memorandum, they write that the Motion Judge approached the truth of the conspiracy allegation as "“the determinative issue”", relying for that proposition on his finding that "“[t]he formation and existence of the section 45 conspiracy”" was "“the central issue in dispute between the parties”": Reasons at paras. 5-6. In my view, this is an unfair and distorted reading of the Motion Judge’s Reasons. When read in its totality, it is clear that paragraph 5 of the Reasons is focused on the common issues and stressed the unusual character of the appellants’ claim, as is made clear from a reading of the paragraph in its entirety:
The formation and existence of the section 45 conspiracy alleged by the Plaintiffs are the central issue in dispute between the parties, as this core allegation drives the Plaintiffs’ pleadings and provides the backdrop for their proposed common issues. I pause to observe that this is highly unusual in competition law class actions brought under sections 36 and 45 of the Act. In the vast majority of those cases, whether the claims raise common issues concerning an alleged conspiracy is typically not in dispute. The main battleground is instead with respect to the proposed common issues relating to the consequences of the alleged wrongful acts, namely whether there is some basis in fact in the record that the alleged loss or harm can be established on a class-wide basis. More often than not, it revolves around whether there is a credible and plausible methodology to establish loss or harm on a class-wide basis. Not surprisingly, the parties have indeed spent a fair amount of their written and oral submissions on this point. Contrary to the appellants’ submissions, the Motion Judge undisputedly applied the correct "“plain and obvious”" legal test, the very same test that they advocated at paragraph 58 of their factum. Relying on the jurisprudence of the Supreme Court (Atlantic Lottery at para. 87; R. v. Imperial Tobacco at para. 23) and of this Court (Condon), the Motion Judge stated the criterion as follows:
(emphasis in the original)
In order to reject a certification motion on the cause of action requirement, the Court must be convinced, while assuming that the pleaded facts are true, that it is plain and obvious that a claim does not exist or has no reasonable chance of success. For this criterion, no evidence may be considered and the analysis is limited to the pleadings… In applying this test, the Motion Judge was appropriately guided by Rules 174 and 181, pursuant to which a pleading is to contain a concise statement of the material facts (but not the evidence) on which a party relies, and the particulars of every allegation it contains. Reviewing the jurisprudence on the plain and obvious test, especially with respect to the requirements of sufficient particulars, the presumption that allegations of fact are true, and the contents of the pleadings, the Motion Judge then stated the following well-established principles:
Reasons at para. 70
a)A plaintiff must plead material facts in sufficient detail to support the claim and the relief sought. In order for allegations in pleadings to be considered as material facts, they must be supported by sufficient particularization when required and must not be bare conclusory assertions or bald legal statements based on assumptions or speculations: Reasons at paras. 75 and 79;
b)The facts alleged in the pleading are presumed to be true. However, this presumption does not extend to matters which are manifestly incapable of being proven, to matters inconsistent with common sense, vague generalization, opinion, conjecture, bare allegations, bald conclusory legal statements, or speculation that is unsupported by material facts: Reasons at paras. 81-82;
c)Documents referred to in the pleadings, whether it is through direct quotes, summaries or paraphrases of the documents, are incorporated by reference and will be considered part of the pleading if they are central enough to the claim to form an essential element or integral part of the claim itself or its factual matrix: Reasons at paras. 85, 87;
d)If the documents referred to in the pleadings do not actually say what the plaintiff alleges they say, or if the plaintiff has ascribed a meaning to those paraphrases and quotes that is not consistent, on a plain reading, with the documents from which they originate, the court cannot consider these allegations as material facts. The certification judge’s task is not to look at these documents in detail to determine whether or not the plaintiff has correctly interpreted them, but can determine whether the references made by the plaintiff accurately reflect what has been expressly stated in the documents: Reasons at paras. 86-87.
In Jensen v. Samsung Electronics Co. Ltd. (Fed CA, 2023) the Federal Court of Appeal considered the standard of review that applies to the determination of whether a 'reasonable cause of action' exists, here for class action certification pleadings purposes:
 The appellants and the respondents joined issue over the standard of review with respect to the first question. The appellants argued that the assessment of the reasonable cause of action requirement is a pure question of law reviewable on the correctness standard, whereas the respondents are of the view that in this case, the issue lies not so much on the requirements of the asserted cause of action (a question of law), but on whether the pleaded facts satisfy these requirements (a question of mixed fact and law).. Canada (Attorney General) v. Nasogaluak
 Having carefully reviewed the case law submitted by both parties in their reply and sur-reply memoranda, I come to the conclusion that the applicable standard of review in the particular circumstances of this case is the palpable and overriding standard.
 The appellants rely on the decision of the Supreme Court of Canada in Godfrey, as well as on this Court’s decision in John Doe and numerous provincial appellate courts decisions, for the proposition that "“whether a pleading discloses a reasonable cause of action is a question of law, reviewable on the standard of correctness”" (Appellants’ Reply Memorandum at para. 6). In my view, this is an inaccurate and distorted reading of the case law.
 In most cases, determining whether a pleading discloses a cause of action involves essentially the identification of the proposed cause of action and whether it is cognizable in Canadian law. This was precisely the case in Godfrey, where the issue was whether "“umbrella purchasers”" (i.e., purchasers of products manufactured and supplied by someone other than the defendants, but who allege that the defendants’ price-fixing conduct raised the market price of the product) have a cause of action under paragraph 36(1)(a) of the Act. As the majority stated at paragraph 61 of its reasons, this was a question of statutory interpretation. It was clear that if the answer to that question was positive, the facts pleaded made out the claim; in that context, whether umbrella purchasers had a cause of action was undeniably a question of law reviewable on a standard of correctness (Godfrey at para. 57).
 The same was true in all the other cases referred to by the appellants in their reply memorandum (footnotes 5 to 10), and in the John Doe decision of this Court upon which the appellants rely extensively. At issue in that case was whether the statement of claim disclosed a reasonable cause of action for breach of contract, negligence, breach of confidence, intrusion upon seclusion, publicity given to private life and breach of the right to privacy under sections 7 and 8 of the Canadian Charter of Rights and Freedoms. These issues were first and foremost of a legal nature, and it is in this context that must be read the comments of the Court relied upon by the appellants. In that context, the Court stated that the assessment of the reasonable cause of action criterion differs from the last four certification criteria because it "“involves essentially legal reasoning, that is, whether the applicable legal criteria to make out a certain claim have been met”": John Doe at para. 30. Other cases of this Court are to the same effect: see King v. Canada (Attorney General), 2010 FCA 122,  F.C.J. No 634 (QL) at para. 5; Jost at paras. 21, 47-48; Bauer v. Canada, 2018 FCA 62, 289 A.C.W.S. (3d) 880 at para. 7.
 In some instances, however, the question to be resolved is not so much whether the alleged cause of action is indeed a valid cause of action, but rather whether the pleaded facts, assuming they are true, satisfy the requirements of the asserted cause of action. Even if facts are to be taken as pleaded and need not be proven with evidence, they must still be considered and capable of supporting the cause of action. As this Court stated in John Doe (at para. 23), "“[w]hile the facts alleged are assumed to be true, they must still be pleaded in support of each cause of action. Bald assertions of conclusions are not allegations of material fact and cannot support a cause of action”". That second part of the analysis is not a legal question, but a question of mixed fact and law reviewable on the palpable and overriding error standard.
 In the case at bar, there is no dispute as to the first part of the test: a breach of sections 45 or 46 of the Act clearly triggers the section 36 cause of action. What is at stake is whether the facts, as pleaded in the statement of claim, support the cause of action. It is very clear from the jurisprudence that this second part of the analysis does not raise a pure question of law. Nowhere did the Supreme Court state, in Godfrey or elsewhere, that the overall determination of whether a pleading discloses a reasonable cause of action is a pure question of law. That question must be broken down into two parts: (1) whether the alleged cause of action exists in law, and (2) whether the pleaded facts can ground the cause of action. That second part of the question is clearly not a pure question of law.
 It is true that in John Doe, this Court did not spell out explicitly these two parts of the test. As explained above, the inquiry about the reasonable cause of action requirement in that case revolved for the most part around the existence at law of the alleged causes of action. That did not prevent the Court, however, from dismissing some of the causes of action on the ground that they were not supported by the pleaded facts. At paragraph 45, for example, the Court stated that there was "“a total lack of any material facts”" to support the pleading of an alleged breach of contract, and that it was "“in and of itself a sufficient basis to dismiss that cause of action”". Similarly, the Court found that the alleged tort in publicity given to private life and of intrusion upon seclusion should have been rejected because they were not supported by any material facts: John Doe at paras. 53, 56 and 58.
 Most recently, the Ontario Court of Appeal drew the same distinction between the legal and factual components of the reasonable cause of action requirement in PMC York Properties Inc. v. Siudak, 2022 ONCA 635, 2022 A.C.W.S. 3647. At paragraph 29, the Court wrote:
As framed by the plaintiffs’ arguments, the motion judge’s assessment of the defamation claim was not a pure legal analysis. It required the application of the legal standard of the modern, flexible approach to defamation pleadings to an assumed set of facts, a question of mixed fact and law. At their core, the plaintiffs’ submissions did not require the motion judge to determine whether Mr. Siudak’s pleadings disclosed a known and tenable cause of action but, rather, whether the known cause of action was pleaded with sufficient particulars to satisfy the modern, flexible approach to defamation pleadings. The motion judge’s analysis therefore attracted a deferential standard. In light of the above, I agree with the respondents that the decision of the Motion Judge to dismiss the appellants’ certification motion on the basis that the statement of claim does not disclose a reasonable cause of action is reviewable on the deferential standard of palpable and overriding error, as it rests on the Motion Judge’s finding that the pleaded facts do not satisfy the requirements of the asserted cause of action, as opposed to the existence of that cause of action in Canadian law.
 On the second question, the parties are in agreement that the applicable standards of review are those set out in Housen. As a result, the identification by the Motion Judge of the test to determine whether there is a basis in fact for the proposed common issues is a question of law to be reviewed on the correctness standard. The application of that test to assess whether the claims’ proposed class members do raise common issues is a mixed question of fact and law, to be reviewed on the standard of palpable and overriding error: see John Doe at paras. 29-31; Horseman v. Canada, 2016 FCA 238, 271 A.C.W.S. (3d) 707 at para. 4; Condon v. Canada, 2015 FCA 159,  F.C.J. No 803 (QL) at para. 7 [Condon].
In Canada (Attorney General) v. Nasogaluak (Fed CA, 2023) the Federal Court of Appeal cites class action certification rules from the Federal Court Rules:
 Rule 334.16(1) of the Federal Courts Rules, S.O.R./98-106, sets out five conditions that must be met for a proceeding in the Federal Court to be certified as a class proceeding:. Canada (Attorney General) v. Jost
(1) the pleadings disclose a reasonable cause of action; When all five conditions are met, rule 334.16(1) requires that certification be granted: the motion judge "“shall, by order, certify the proceeding as a class proceeding […].”" The motion judge here determined that the first four conditions were met and that the fifth could be addressed through a conditional order. She granted conditional certification accordingly.
(2) there is an identifiable class of two or more persons;
(3) the claims of the class members raise common questions of law or fact, whether or not those common questions predominate over questions affecting only individual members;
(4) a class proceeding is the preferable procedure for the just and efficient resolution of the common questions of law or fact; and
(5) there is an adequate representative plaintiff or applicant.
 The first certification condition, that the pleadings disclose a reasonable cause of action, is assessed on the same standard that applies on a motion to strike out a pleading. Thus, the question is whether it is plain and obvious, assuming the facts pleaded to be true (unless they are manifestly incapable of being proven), that the pleaded claims have no reasonable prospect of success: Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19 at para. 14; Canada v. Greenwood, 2021 FCA 186 at para. 91, leave to appeal to S.C.C. refused, 39885 (March 17, 2022). A claim that has no reasonable prospect of success will not satisfy the first condition.
 No evidence is admissible on this issue. However, the pleading must be read generously, and as it might reasonably be amended to accommodate inadequacies attributable to drafting. Moreover, recognizing that the law is not static, the motion judge must err on the side of permitting a novel but arguable claim to proceed to trial: R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42 at paras. 19-25. This Court has described as "“onerous”" the burden resting on a defendant seeking to defeat a certification motion on the basis that no reasonable cause of action is pleaded: Greenwood at para. 144.
 To satisfy each of the remaining four conditions, a plaintiff seeking certification must adduce evidence that provides "“some basis in fact”" for concluding that the condition is met: Greenwood at para. 94, citing Hollick v. Toronto (City), 2001 SCC 68, and Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57, among other authorities. This is a threshold lower than the ordinary civil standard of balance of probabilities. But the motion for certification remains "“a meaningful screening device,”" and "“[t]here must be sufficient facts to satisfy the [motion] judge that the conditions for certification have been met to a degree that should allow the matter to proceed on a class basis without foundering at the merits stage”": Pro-Sys at paras. 101-104.
 Whether a pleading discloses a cause of action is a question of law. The standard of appellate review of the motion judge’s decision on the first certification condition is, therefore, correctness: Pioneer Corp. v. Godfrey, 2019 SCC 42 at para. 57; Canada (Attorney General) v. Jost, 2020 FCA 212 at para. 21. On this standard, this Court owes no deference to the court below and is free to substitute the opinion of the motion judge with its own: Housen v. Nikolaisen, 2002 SCC 33 at para. 8.
In Canada (Attorney General) v. Jost (Fed CA, 2020) the Federal Court of Appeal considered a class action certification under the Federal Court Rules:
V. The Federal Courts Rules Governing Class Actions
 Certification motions are governed by Rule 334.16(1) of the Federal Courts Rules, which states that a judge shall certify a proceeding as a class proceeding if the following five requirements are met:
(1) the pleadings disclose a reasonable cause of action; It should be noted that the criteria set out in the Federal Courts Rules are substantially similar to the class action certification criteria applied in Ontario and British Columbia, with the result that the jurisprudence emanating from those jurisdictions is instructive: Buffalo v. Samson Cree Nation, 2010 FCA 165, 405 N.R. 232 at para. 8.
(2) there is an identifiable class of two or more persons;
(3) the claims of the class members raise common questions of law or fact (whether or not those common questions predominate over questions affecting only individual members);
(4) a class proceeding is the preferable procedure for the just and efficient resolution of the common questions of law or fact; and
(5) there is a representative plaintiff or applicant who would fairly and adequately represent the interests of the class, among other requirements.
VI. General Principles Governing Class Proceedings
 Before addressing the Attorney General’s arguments as to why the pleadings in this case do not disclose a reasonable cause of action, it is helpful to start with a review of the general principles governing class actions.
 As the Supreme Court has observed, class actions allow for improved access to justice for those who might otherwise be unable to seek vindication of their rights through the traditional litigation process. Class actions also enhance judicial economy, allowing a single action to decide large numbers of claims involving similar issues. Finally, class actions encourage behaviour modification on the part of those who cause harm: Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46,  2 S.C.R. 534, at paras. 27-29; Hollick v. Toronto (City), 2001 SCC 68,  3 S.C.R. 158, at para. 27; and Rumley v. British Columbia, 2001 SCC 69,  3 S.C.R. 184.
 The Supreme Court has also held that an overly restrictive approach to the application of class action certification legislation must be avoided, so that the benefits of class actions can be fully realized: Western Canadian Shopping Centres, above at para. 46; Hollick, above at para. 15.
 As this Court observed in John Doe, the focus at the certification stage is on the form of the action. The question at this point is not whether the claim is likely to succeed, but whether the suit is appropriately prosecuted as a class action: above at paras. 23 and 24.
 The onus is on the plaintiff in a certification motion to establish an evidentiary basis for certification: Hollick, above at para. 25; John Doe, above at para. 24. That is, the plaintiff must show some basis in fact for each of the certification requirements, apart from the requirement that the pleadings disclose a reasonable cause of action. Each of the asserted causes of action will be addressed in turn.