When faced with the proposed certification of a class action, a court must consider whether the claims of the prospective class members raise common issues and, if so, whether the common issues predominate over issues affecting only individual prospective class members. Where questions relating to causation or damages are proposed as common issues, the plaintiff must demonstrate, with supporting evidence, that there is a workable methodology for determining such issues on a class-wide basis.
A question that has given rise to varying judicial opinion and been the source of vigorous debate between defendants and plaintiffs is to what extent plaintiffs must demonstrate at the certification stage that there is some way to prove their theory of liability once the case is heard on its merits. In the 2013 decision of Andriuk v. Merrill Lynch Canada Inc. (“Andriuk”), the Alberta Court of Queen’s Bench recently denied certification of an investment broker self-dealing class action on the basis that, among other things, the plaintiffs had not demonstrated any indication of a methodology that could be used to prove that Merrill Lynch’s conduct caused the plaintiffs’ losses. In that certification motion, the plaintiffs alleged that when Merrill Lynch discovered that its clients collectively held too much stock in a biotech firm, it took steps to rectify the situation in a manner that preferred its own interests to those of its clients, leading to the “artificial” depression of the biotech firm’s share price.
The plaintiffs led little evidence of how they could prove that their losses were not simply the result of other market forces or that their losses were linked with each of Merrill Lynch’s impugned actions. Indeed, the Court queried whether such a complex, though necessary, calculation was even possible. Searching for assistance with this question, the Court wondered “why the plaintiffs would wait until after discoveries have been completed to determine this threshold issue”.
This decision confirms that in proposed class actions where causation is a complex determination, it is critical that plaintiffs lead their own expert evidence at the certification stage to demonstrate that a workable methodology exists that is capable of establishing liability on a class-wide basis. In Andriuk, it was not enough for the Plaintiffs to say that they intended to put forward an expert after discovery that would “tease out the impact” of Merrill’s actions from the “myriad of other factors that can affect a stock’s price”. Rather, the Plaintiffs had to show at the certification stage that the necessary calculations are at least possible. Otherwise, “it would simply not promote efficiency or judicial economy to permit certification when there is no basis in fact to show that the primary but novel form of class-wide loss asserted by the Plaintiffs could ever be established”.
Andriuk is a useful case for defence counsel’s toolbox as it confirms that plaintiffs must show that it is possible to prove loss on a class-wide basis to be able to move forward to a common issues trial. It also serves as a reminder to plaintiffs’ counsel that if a proposed class proceeding involves a complicated calculation to determine proof of loss on a class-wide basis, the plaintiff must come forward with an expert that says he or she can perform the calculation. While the court will not engage in a weighing of expert evidence at the certification stage, the court is also not prepared to “certify now and worry later” if the plaintiff comes seeking certification with a complex causation question and no expert evidence at all.