Canadian Class Action Defence Blog

No conspiracy without ‘some evidence’; concludes Superior Court of Québec when dismissing proposed class action

Jul 13, 2021 4 MIN READ
Authors
Quentin Montpetit

Associate, Disputes, Montréal

Jessica Harding

Partner, Disputes, Montréal

Courthouse building.

On June 28, 2021, in the case of Hazan v. Micron Technology Inc.  the Québec Superior Court dismissed an application for authorization to institute a class action alleging a conspiracy to restrict the production and fix the prices of dynamic random-access memory (DRAM), a flash memory component installed in many electronic devices such as cellphones, tablets, televisions, and computers.

In a well-reasoned decision, the Court concluded that the criteria for the authorization of the class action were not met due to vague, imprecise, and general allegations, and the absence of “some evidence” establishing, even summarily, the existence of such conspiracy. Thus, the Court dismissed the application on the basis that it did not present an arguable case and failed to meet the appearance of right test.

Context

According to the plaintiff, defendants, who allegedly control 96% of the DRAM market, would have conspired between 2016 and 2018 to limit the DRAM production, thereby unduly increasing the prices. The conspiracy would have stopped following an inquiry of a Chinese commission triggered by a sudden rise in DRAM prices. The plaintiff sought to represent a group of customers regarding their alleged damage due to having overpaid for DRAM. or for devices containing such component.

The claim advanced by the plaintiffs was based on the following legal grounds: damages under the civil liability regime (Civil Code of Québec); damages under the Competition Act; damages for misrepresentation under Québec’s Consumer Protection Act (the CPA); and punitive damages under the CPA.

Reasons and conclusion

At the outset, the Court revisited the legal principles applicable to an application for authorization to bring a class action. In particular, the Court noted that the authorization stage of a class action is a filtering process aimed at establishing whether the application presents an arguable case, adding that the criteria provided at article 575 C.C.P. must be interpreted in a flexible, liberal, and generous fashion, and that the plaintiff’s burden is one of demonstration and not of proof.

That being said, the Court further added that. when alleging facts of conspiracy, class action applicants must substantiate their allegations by presenting “some evidence”[1]  of a conspiracy to establish an arguable case. As outlined by the Court, such evidence might be found in press releases, self-declarations, criminal or penal indictments, plea bargains, public inquiries, or any other similar evidence.

In the case at hand, the Court determined that the authorization application did not provide sufficient factual elements to establish a case for conspiracy against the defendants. The Court’s conclusions may be summarized as follows:

  • Vague allegations pertaining to a price-fixing conspiracy and the mere fact that the DRAM industry is an oligopoly, which is not in itself anticompetitive, are not sufficient for the class action to be authorized in this case.
  • References to U.S. proceedings alleging the same conspiracy are not appropriate evidence since those proceedings are drafted by lawyers and simply constitute opinions or legal argumentation.
  • The plaintiff’s application alleged some declarations that would have been made by the defendants, but did not file any evidence of those declarations. The sole reference to such declarations without any evidence is insufficient to establish an arguable case.
  • The inquiry conducted by the Chinese authorities did not reveal any evidence of conspiracy, did not result in a report, nor provided any conclusion, decision or sanction against the defendants.

Therefore, the Court ruled that the plaintiff did not establish any fault, proof of a conspiracy, or any agreement between the defendants to restrict DRAM production or otherwise fix its price, whether under the Civil Code of Québec, the Competition Act or the CPA.

Having concluded that the second criterion of article 575 C.C.P. was not met due to the absence of an appearance of right, the Court also found that the plaintiff did not have the required interest to properly represent the class members[2]. The Court therefore dismissed the application for authorization of a class action against the defendants.

Comment

This decision will certainly be welcomed by those who are often accused of vague, broad, and unsubstantiated claims of conspiracy and price fixing. The Court’s decision in the Hazan case is a reminder that, although the threshold for the authorization of a class action is relatively low, this procedure is not rubberstamping, and Courts will act upon their gatekeeper role to ensure that only arguable and defensible cases be heard on their merits.


[1] See par. 41, 55 and 60.

[2] The first and third criterion of article 575 C.C.P. were not contested by the defendants. but were nevertheless analyzed by the Court, which concluded that they were met in this case.