An appellate court has confirmed that where causation is proposed as a common issue in a class action, plaintiffs must demonstrate that there is a credible and plausible methodology for determining that issue on a class-wide basis.
In Andriuk v Merrill Lynch Canada Inc, the Alberta Court of Appeal upheld the motion judge’s denial of certification of a proposed class action (which we previously reported on). The appellate court’s decision in Andriuk serves as an important reminder to defendants that although Canadian plaintiffs are not held to the rigorous class certification standard in the United States, they are required at the certification stage to put forward expert evidence to demonstrate that a methodology capable of proving class-wide harm exists.
In Andriuk, the plaintiffs alleged that Merrill Lynch breached both regulatory standards and duties to its investor clients by favoring its own interests over its clients’ interests in addressing an accumulation of a speculative biotech company’s stock in client accounts at one of its branches. The plaintiffs further alleged that Merrill Lynch’s conduct in reducing the holdings caused an “artificial depression” of the stock price. The certification judge denied certification on the basis that, among other things, the plaintiffs had not led any evidence to establish a methodology that could be used to prove that Merrill Lynch’s conduct caused the plaintiffs’ alleged financial losses on a class-wide basis.
The Appeal Decision
On the appeal, the plaintiffs argued that their failure to provide evidence regarding a methodology to establish causation and damages on a class-wide basis was not fatal to their certification application. The appellate court disagreed. The appellate court determined that the certification judge’s decision on class-wide causation and the need for expert evidence regarding a methodology to prove causation on a class-wide basis accorded with the Supreme Court of Canada’s recent decision on the issue in Pro-Sys Consultants Ltd v Microsoft Corp (which we previously reported on). The appellate court agreed with the certification judge that where questions relating to causation are proposed as common issues, the plaintiff must demonstrate (with supporting evidence) that there is a workable methodology for determining those issues on a class-wide basis. Importantly, the appellate court did not limit the application of the Pro-Sys requirement to price-fixing/anti-trust cases, which is where the nature and extent of this requirement has been hotly contested.
The need for expert evidence at the certification stage depends on the nature of the case and the proposed common issues. If causation is proposed as a common issue, plaintiffs are required to lead expert evidence to establish that there is a credible and plausible methodology that offers a realistic prospect of establishing that issue on a class-wide basis. The methodology must be grounded in the facts and there must be some evidence regarding the availability of the necessary data. A plaintiff’s failure to satisfy this requirement is sufficient to deny certification. Importantly, the Alberta Court of Appeal’s decision in Andriuk confirms that this requirement extends to all cases in which causation is a proposed common issue – it is not limited to price-fixing/antitrust cases.
Mr. Mallett and Ms. Tomasich successfully represented Merrill Lynch on the certification motion and related appeal.