Canadian class action defence lawyers may have reacted with a hint of envy towards their American counterparts when the United States Supreme Court released the decision in Wal-Mart Stores, Inc. v. Dukes et al on June 20, 2011.
The decision overturned the granting of certification by the lower courts in the context of a claim under the Civil Rights Act of 1964. Current and former employees of Wal-Mart had sought certification on behalf of 1.5 million female employees because of alleged discrimination against women.
One of the key issues in the case was whether the petitioner satisfied Rule 23 (a)(2) of the United States Federal Rules of Civil Procedure, namely that there were questions of fact or law common to the class.
Significantly, the plaintiffs did not allege that Wal-Mart had an express corporate policy against the advancement of women. Rather they claimed that local managers’ discretion over pay and promotion was exercised disproportionately in favour of men, the theory being that a strong and uniform “corporate culture” permitted bias to infect the discretionary decision-making of each Wal-Mart manager at the local store or regional level.
The point of interest to Canadian companies and practitioners is the comparative degree of vigour exercised by the United States Supreme Court in analyzing the claim for certification.
The majority cautioned that the requirement for a common question of fact or law is easy to misread since any competently crafted class complaint or statement of claim, literally read, necessarily raises common “questions.” The key to determining whether a question of fact or law is truly common to the class, the Court explained, is whether the same proof will be used to answer that question as to each class member such that prosecution of the plaintiffs’ claims “will produce a common answer to the crucial question.”
Rule 23 does not set forth a mere pleading standard. Instead, a party seeking certification must affirmatively prove each element of the Rule. Further, the Court emphasized that a trial court must subject the proof offered in support of class certification to a “rigorous analysis,” including weighing disputed expert testimony, even if that analysis overlaps with the merits of the plaintiffs’ underlying claims. The Court then held that the plaintiffs failed to prove under Rule 23(a)(2) that there were, in fact, common questions of law or fact.
By contrast, counsel from the United States or defendant corporations from the United States are often surprised when they are involved in class action certification hearings in Canada. The class action legislation of Provinces in Canada requires the court to find that there are common issues of law or fact and to find the issue is a substantial ingredient of each class member’s claim. However, this is where the analyses of the courts diverge.
The evidential burden on an applicant for class certification in Canadian proceedings is lower than the standard espoused in the Wal-Mart decision. This is particularly true in Québec where the rights of defendants to adduce evidence to counter certification are more restricted than in the rest of Canada. The Supreme Court of Canada has described the burden on an applicant as showing, “some basis in fact to support the certification order.” The standard has been interpreted as a lower threshold than that applied in the Wal-Mart decision.
The difference can result in asymmetrical management of cross-border disputes in the United States and Canada. The number of potential claimants and the financial exposure in the United States will dwarf Canadian exposures, but in several areas of substantive law, there is a greater chance of class certification in Canada.
This raises strategic and other issues on the choice of venue for litigation and the defence of the claim, including issues such as the jury culture in the United States, the more common practice of judge alone trials in Canada, choice of law, as well as considerations of issue estoppel and enforcement of settlements and judgments in the companion jurisdiction.
These are complex decisions, but if there is going to be some convergence of legal principles, Canadian class action defence lawyers would welcome movement towards the United States’ burden of proof on class action petitioners.