Recalls can be preferable to class action proceedings

In Coles v. FCA Canada Inc., 2022 ONSC 5575, the Court recently denied certification of a proposed product liability class action on the basis that the defendant’s established recall program was preferable to a class action. Coles joins a growing list of Ontario cases where courts have denied certification of product liability class actions where defendants establish recall programs that mitigate or eliminate the danger that is the basis of the proposed class action before the certification motion. 

Background

Coles concerned a proposed class action brought against car manufacturer Chrysler Canada Inc., now FCA Canada Inc., for allegedly negligently installing airbags in its vehicles that contained the risk of exploding when deployed in a motor vehicle collision. Coles was one of six national class actions commenced against 12 groups of car manufacturers and the designer and manufacturer of the airbags, Takata Corporation and TK Holdings (collectively Takata). Although Takata was named in all six class actions, it declared bankruptcy prior to any of the certification motions and was released from all the class actions. At issue before the Court was whether Coles could be certified as a class action. Perell J. held that the proposed class action could not be certified because it failed to meet the preferable procedure criterion even though it met the other four certification requirements.

Recalls can be a preferable procedure to a class action

The “preferability” analysis is generally approached from two overlapping perspectives. The first considers whether a class action, in general, is an appropriate method of advancing the claims of class members. The second considers whether a class action, in the particular context, is better than other methods such as joinder, test case, consolidation, and other means of resolving a dispute (which was raised in a recent case that we discuss in an earlier blog).

 To satisfy the preferability criterion, the proposed representative plaintiff must establish some basis in fact that the proposed class action: (a) is a fair, efficient, and manageable method of advancing the claim; (b) is preferable to any other reasonably available means of resolving the dispute; and (c) facilitates the three principal goals of class action (i.e., judicial economy, behaviour modification, and access to justice).

In Coles, Perell J. ultimately held that the proposed class action failed to meet the preferable procedure criterion because Chrysler’s existing recall campaign was preferable to the proposed class action as it was in line with what class members could achieve if the class action was allowed to proceed and had been in place for many years before the certification hearing.

In so ruling, Perell J. made a number of observations. First, he pointed to the delay in advancing the proposed class action. He held that the proposed class action had “dawdled” and made “no meaningful progress for its intended purpose of getting dangerous airbags replaced before a class member dies or is dismembered”.

Second, recognizing that the proposed class action was limited to pure economic loss for dangerous goods, Perell J. pointed to the Supreme Court of Canada's decisions in Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19, and 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2020 SCC 35, to explain that, although recovery for pure economic loss is permitted in Canada, the scope of recovery is “limited to mitigating or averting the danger”. If a product defect poses no imminent threat, there is no compensation. And in cases where it is feasible for the plaintiff to simply discard the defective product, the plaintiff’s basis for recovery falls away with the danger to the plaintiff’s economic rights. Applying these principles to the case before the Court, Perell J. held that given that Chrysler provided class members with a free of charge replacement of defective airbags, it was unlikely that class members would be able to achieve more if the class action was allowed to proceed.

Recalls can be a superior procedure to a class action under the amended Class Proceedings Act, 1992

Although Perell J. noted that the Coles action was brought before the recent amendments to the Class Proceedings Act, 1992 (which we report on in a blog from 2019), such that the new preferability standard which introduces “superiority” and “predominance” qualifications did not apply to the case before him, he commented that if the new amendments did apply, the preferable procedure criteria would not have been satisfied in this case. Perell J. noted that superiority and predominance qualifications are “prescient” of the circumstances of this case where the proposed class action is not superior to Chrysler’s established recall program. Perell J.’s brief remarks on the issue suggest that a recall program can be a superior “remedial scheme or program outside of a proceeding” under the new preferability standard.

Takeaways

Ultimately, Coles stands for the proposition that in a product liability class action where pure economic losses are alleged (under either the old or new Class Proceedings Act, 1992 provisions), a recall program may be preferable to a class action if it mitigates or removes the danger posed by the product. This is consistent with other recent rulings which suggest that remediation efforts by defendants may well serve to displace a proposed class action on the basis of preferability.