Introduction
In Kett v. Mitsubishi Materials Corporation[1], the Supreme Court of British Columbia found that some class actions can indeed be too large and too fragmented to proceed under s. 5 of the Class Proceedings Act.[2]
In this case, Branch J. denied certification of a proposed class action against several Japanese automotive part suppliers, declaring that the proposed proceeding would be too unwieldly to certify and that it risked devolving into “a hydra… with more and more heads emerging as the court fought to finish off the last”[3].
The decision also raised additional legal issues, including “whether a parts supplier can be held liable to end users for wrongdoing towards a manufacturer of a consumer product” under the Business Practices and Consumer Protection Act, S.B.C. 2004, c. 2 [BPCPA].[4]
Background
The defendants, Mitsubishi Materials Corporation (“Mitsubishi”) and several of its subsidiaries, produce a wide variety of vehicle components, such as metal plates, wires, connectors and other such components which are used by other suppliers in the automotive supply to chain to produce finished parts for installation in vehicles manufactured by Japanese automakers, including Toyota, Honda, Subaru, Mazda and Mitsubishi itself. The defendants’ components are accordingly found in millions of vehicles around the world.
In 2018, it was revealed that the defendants had manipulated their quality control data and, in some cases, even forged test results, which resulted in components which were non-conforming or outside the required specifications to be delivered to their customers. The defendants were charged with offenses in Japan under the Japanese Unfair Competition Prevention Act and were subsequently fined.
A class action was brought in British Columbia on behalf of all Canadians who had purchased automobiles from automobile manufacturers who had used components which could be traced back to the defendants. The class action sought compensation under the BPCPA, unjust enrichment, and the unlawful means tort.
Test for Certification
The test for class certification is set out s. 4 of the CPA, which includes three of the decisive factors considered by the Court in Kett: whether the pleadings disclose a cause of action; whether there are common issues raised in the class’ claims; and whether the class proceeding would be the preferable procedure for determining such common issues.
Disclose a Cause of Action
In considering whether the pleadings disclosed a cause of action, the Court focused on the claims set out under the BCCPA and, in particular, the difference in character between a “good” and its “components”.
Ultimately, the Court found that the defendants had not provided the plaintiffs with goods (the vehicles), but rather provided goods (vehicle components) to others who, in turn, supplied the goods (vehicles) to the plaintiffs. The Court further interpreted the BPCPA in a manner that limited consumers from claiming against individual components in a complex supply chain that lead to the good ultimately purchased. Accordingly, the Court held a large majority of claims under the BPCPA were bound to fail and ought to be struck.
Common Issues
In order to receive certification under the CPA, there must be common issues of fact or law common to all class members, such that the resolution of those issues is necessary to the resolution of each class member’s claim. The point is to avoid duplication of fact finding or legal analysis.
In this case, the Court found that the proposed common issue of whether the defendants fraudulently altered quality control documentation was too large and fragmented to be capable of being unified in a single class action.
The Court held that because there was neither an allegation nor evidence of conspiracy or systemic wrongdoing, the only way to properly analyze the effects of the wrongdoing would be to analyze the components on a shipment-by-shipment basis. This would require analysis of tens or hundreds of thousands of different shipments of hundreds of different components individually, as there was no unifying defect.
Accordingly, the inability to generalize or extrapolate the analysis conducted on one batch of shipments to another batch was fatal to there being a common issue.
Preferability
The Court then considered whether a class action was the preferable procedure for resolving the claim, which is an additional requirement for certification under the CPA.
The overarching considerations in this respect are whether a class proceeding would be a fair, efficient and manageable method for advancing the claim and whether a class proceeding is preferable to any other reasonably available means of resolving the class members’ claims. In British Columbia, section 4(2) the CPA[5] provides relevant criteria the court must consider in assessing whether a class proceeding is the preferable procedure.
In Kett, the Court raised several issues with whether a class action was the preferable procedure for resolving the class’ claims, as follows.
First, the fact that the claim necessitates a shipment-by-shipment analysis meant that a common analysis for all class members was impossible. The Court commented that the proposed class essentially sought to tie together a multitude of individual class actions, and that the CPA is not designed to “stitch together a case with so many dangling threads”[6].
Second, the Court held that the class action would be entirely unmanageable due to the sheer scope of the parts covered by the proposed class and the complexity required in tracing non-conforming parts to individual vehicles. The Court commented that this case threatened to be “a monster of complexity and cost.”[7]
Finally, the proposed proceeding did not enhance the purposes of class actions, being: (1) access to justice; (2) judicial economy; and (3) behavior modification.
Taken together, it was evident to the Court that a class proceeding was not the preferable procedure.
Take Away
To be certified, a class action must be manageable and not so fragmented that it lacks the required commonality to tie the claims together. While class actions have generally increased in complexity in recent years, the Supreme Court of British Columbia has made it clear that there is a limit to what can be advanced as a class proceeding in the Court.
For more information on class actions or your consumer protection questions, please contact Patrick Sullivan, Jordanna Cytrynbaum or Raj Mittal.
See the decision here: https://www.bccourts.ca/jdb-txt/sc/20/18/2020BCSC1879.htm
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[1] Kett v. Mitsubishi Materials Corporation, 2020 BCSC 1897 [Kett].
[2] Class Proceedings Act, RSBC 1996, c 50 [CPA]
[3] Kett at para 193.
[4] Kett at para 2.
[5] Class Proceedings Act, RSBC 1996, c 50.
[6] Kett at para 183.
[7] Kett at para 193.