The Supreme Court of Canada recently denied leave to appeal to defendants in the Canadian air cargo litigation on the question of whether absent foreign claimants (“AFCs”) could be included in a putative litigation class. Leaving the judgment of the Ontario Court of Appeals (“ONCA”) as the final word on the matter, it declares that foreign plaintiffs who are not present in Canada and do not affirmatively subject themselves to the jurisdiction of Canadian courts nevertheless can be members of an opt-out litigation class.

The Canadian Air Cargo Class Action

The Canadian air cargo action was brought on behalf of claimants who purchased air freight shipping services either directly from a defendant or indirectly through a freight forwarder, for shipments to or from Canada. It was one of dozens of international competition cases related to allegations that a group of airlines conspired to fix air freight prices. Claimants to the Canadian action had settled with all but three defendants; Canadian prosecutors also obtained guilty pleas. Through the initial settlements, approximately 310,000 individuals were notified by mail of their ability to file a claim or opt-out of the settlements. Publication notice also was widely circulated. The settlements pertained to a global class which included AFCs, and the remaining defendants in the litigation did not object to the notice program.

Defendants filed a motion challenging Canadian jurisdiction over the AFCs. For the purpose of the motion, AFCs were defined as those purchasers who resided outside of Canada, entered contracts for shipping air freight services outside of Canada, suffered any alleged losses outside of Canada, and who had not expressly consented to the jurisdiction of the Canadian court. The motion judge held that the Canadian “substantial connection” test, which governs jurisdiction over foreign parties, should not apply to the AFCs, and instead considered whether including the class members would be appropriate given the principles of fairness, order, and comity.

The ONCA Decision

In overturning the motion judge, the ONCA applied the substantial connection test, holding that courts should consider three factors when deciding whether to assume jurisdiction over AFCs:

  1. whether there is a real and substantial connection between the subject matter of the action and Ontario, and whether jurisdiction exist over the representative plaintiffs and the defendants;
  2. whether there are common issues between the claims of the representative plaintiffs and the AFC; and
  3. whether the procedural safeguards of adequacy of representation, adequacy of notice, and the right to opt out are provided, thereby serving to enhance the real and substantial connection between the AFCs and Ontario.

The ONCA noted that the “framework provides the necessary safeguards to establish that jurisdiction properly exists, and ensures the protection of the values of order and fairness. Quite apart from that consequence, a positive result of this framework is that the objectives at the heart of class actions are served.”

In applying the test to foreign purchasers of air freight shipping services for shipments to or from Canada, the ONCA held: “The respondents’ business in Ontario includes the sale of services that are the subject matter of the alleged conspiracy. As mentioned, part of the conduct in furtherance of the alleged conspiracy took place in Ontario, and there are shared common issues between the representative plaintiffs and the AFCs.”

The Canadian “Substantial Connection” Test and Foreign Defendants

The substantial connection test also governs whether a Canadian court can assume jurisdiction over a foreign defendant. The test asks:

  1. whether the court has presumptive jurisdiction due to a traditional mechanism of subject matter jurisdiction (e.g. carries on business in the forum or committed a tort in the forum);
  2. whether the presumptive jurisdiction is rebutted by showing there is no real relationship or only a weak relationship to the subject matter of the litigation and the forum; and
  3. whether the court should decline to exercise jurisdiction because the doctrine of forum non conveniens dictates that a more suitable forum exists.

In addition, the plaintiff must show “good arguable cause” for the court to exercise jurisdiction over the foreign defendant. This is a low bar, but requires “something more than allegations of a conspiracy and reliance on a class action in another jurisdiction.” Thus, in antitrust matters, the prohibition on anticompetitive practices is not limited to conduct that occurred in Canada.

In most Canadian provinces courts can certify an opt-out litigation class which meets relatively modest requirements. Canadian courts, including the Canadian Supreme Court, have taken a permissive view of motions for class certification, making it difficult for defendants to defeat such motions. Where individualized issues may predominate in one aspect of the litigation, such as damages, Canadian courts often will bifurcate the litigation and certify the class for liability purposes only. This contrasts markedly with the U.S. system, where defendants are increasingly demanding that class plaintiffs provide a reliable economic mechanism which effectively measures damages at the class certification stage.

Conclusions

The Airia decision marks Canada as one of few jurisdictions where global class actions may be possible, and the ease of certifying a class could make Canada a very desirable place for possible plaintiffs to litigate. Provided they meet the terms of the substantial connection test, claimants whose claims have an ostensible tie to Canada have the ability to remedy their claims as a part of a class, with the inherent benefits of collective litigation. This is particularly helpful for foreign claimants with small claims that would be too costly to bring as independent actions. For foreign claimants whose home jurisdictions don’t allow collective actions, this may open an opportunity to litigate where no opportunity may have existed before. While calls for collective redress are growing internationally, opt-out class action litigation is still limited to only a handful of jurisdictions. For claims that can be brought in either the U.S. or Canada, potential claimants might be wise to consider the option of participating in a Canadian litigation class.

That said, the Airia decision is not an open invitation to bring any claims in Canada, as both claimants and defendants must meet the requirements of the substantial connection test; essentially, the litigation must be tied to Canada in some way. In Airia, the ONCA found this was easily established because the air freight purchases at issue were for shipments to and from Canada. A more nuanced connection may be insufficient to meet the requirements of the test. For example, in the air cargo litigation, the Airia decision would not likely allow foreign claimants to be part of class with regard to their shipments which occurred wholly outside Canada. Claimants may also need to defeat a motion seeking to quash jurisdiction on the basis of forum non conveniens. Another hurdle is that the cost of notifying absent class members globally can easily exceed the potential damages. This was demonstrated by the $5 million notice program in Airia. These limitations may provide reasonable limits on foreign claims without ties to Canada that might overwhelm the Canadian court system.

From an access to justice perspective, commentators have lauded the Airia decision, likely with good reason. International claimants with ties to Canada now may have an additional venue to seek redress for harms they previously might not have been able to pursue.