This is the first of a two-part post on the Court of Appeal’s decision in Airia Brands Inc. v Air Canada. This week’s post will canvass the background to the action and summarize the framework provided by by the Court of Appeal for establishing jurisdiction over absent foreign claimants. Next week’s post will go into greater detail on the Court of Appeal’s analysis of the real and substantial connection test for jurisdiction over class proceedings, and explain the difference between the “real and substantial connection” and “forum non conveniens” tests.

In a decision released Monday, October 17, 2017, the Ontario Court of Appeal set out the test for determining jurisdiction over absent foreign claimants in a class action. In Airia Brands Inc. v Air Canada, the plaintiffs allege that the defendant airlines participated in a conspiracy to increase the price of air freight shipping services between 2000 and 2006, and sought an order certifying a class action with a class that included absent foreign claimants. The Court of Appeal overturned the motion judge’s decision that Ontario did not have jurisdiction over the absent foreign claimants, and set out the test for determining jurisdiction in such cases.

The Alleged Conspiracy: The representative plaintiffs allege that the defendant airlines conspired to limit or unduly lessen the supply of air freight shipping services, or to enhance unreasonably the price of associated fuel and security charges. Although the action had originally involved claims against other respondents, those claims have been settled leaving only three defendants remaining: Air Canada, AC Cargo Limited Partnership, and British Airways PLC.

The conspiracy has been the subject of guilty pleas and judicial findings of guilt around the world, including Canada. A parallel class proceeding was commenced in the United States over a decade ago, and was certified in 2015. The certified class in the U.S. proceedings is a global class, including both domestic and foreign purchasers of air freight services. In certifying the class action, the U.S. court specifically considered whether foreign plaintiffs had standing to bring claims under the applicable U.S. law, holding that they did; however the court declined to exercise jurisdiction over the claims brought under European law on the grounds of forum non conveniens (inconvenient forum) and international comity.

The class that the representative plaintiffs in the Canadian action sought to certify was subject to two exceptions: (1) persons who commenced litigation outside of Canada prior to the conclusion of the trial of common issues; and (2) persons and shipments that fell within the scope of the proposed class actions that had been commenced in the United States and Australia.

The Jurisdictional Dilemma in Class Proceedings: Cases involving class actions raise unique jurisdictional challenges. Unlike traditional litigation, which consists of an identifiable plaintiff actively selecting jurisdiction and thereby consenting to the jurisdiction, class actions involve at least one representative plaintiff and, frequently, unidentified members of a larger class. Indeed, the purpose of class actions is, in part, to confer a benefit on absent class members. It is therefore difficult to reconcile class actions that include unidentified claimants with traditional approaches to jurisdiction, as a real and substantial connection on an individualized basis may be elusive.

Two very different approaches have emerged to address this jurisdictional dilemma. The “expansive” approach focuses on the commonalty of interest between the claims of resident and non-resident class members, but has been criticized as being artificial and for conflating the test for certification (which requires common issues) with the test for jurisdiction. The “restrictive” approach, on the other hand, requires a real and substantial connection between the non-resident class members and the adjudicating forum, beyond common interests with the resident class members. The difficulty with this approach is that it is “almost impossible” for a court to assert jurisdiction over a non-resident class member due to a lack of actual connection between such a class member and the adjudicating forum.

Another view, reflected in American case law and the Court of Appeal’s 2005 decision in Currie v McDonald’s Restaurants of Canada Ltd., allows jurisdiction over a plaintiff class that includes non-resident persons with no connection to the forum state provided they have been given adequate notice plus an opportunity to be heard, an opportunity to opt out of the action, and adequate representation by the representative plaintiff. This approach has been criticized, however, for being based on due process rather than the legal doctrine of extraterritoriality.

The Test for Jurisdiction over Absent Foreign Claimants in Class Proceedings: The Court of Appeal’s framework for establishing jurisdiction over absent foreign claimants in class proceedings addresses the above-described dilemma. It ensures the protection of the values of order and fairness, while also serving the objectives that lie at the heart of class actions.

In Airia Brands Inc. v Air Canada, the Court of Appeal held that jurisdiction may be established over absent foreign claimants where:

1. There is a real and substantial connection between the subject matter of the action and Ontario, and jurisdiction exists over the representative plaintiff and the defendants;

2. There are common issues between the claims of the representative plaintiff and the absent foreign claimants; and

3. The procedural safeguards (described in Currie) of adequacy of representation, adequacy of notice, and the right to opt out are provided, thereby serving to enhance the real and substantial framework between the absent foreign claimants and Ontario.