The Ontario Court of Appeal recently released a decision in Airia Brands Inc. v. Air Canada (“Airia Brands”), clarifying the applicable test for determining jurisdiction over absent foreign claimants (“AFCs”) in a class proceeding. The decision provides important guidance on when non-residents will be included in a class. Since jurisdiction and certification were bifurcated in Airia Brands, the decision raises additional issues concerning certification of a global class in circumstances where certification and jurisdiction are considered simultaneously.
Background
The plaintiffs in Airia Brands commenced a class action against Air Canada, AC Cargo Limited Partnership, and British Airways PLC (collectively, the “Respondents”), alleging that the Respondents conspired to fix prices for air freight shipping services for shipments to and from Canada. The plaintiffs sought to certify a class of direct and indirect purchasers of air freight shipping services which included AFCs who were located outside of Canada and entered into contracts for shipping services outside of Canada.
The Respondents brought a motion to challenge the Court’s jurisdiction over the AFCs, and sought to stay the proposed class action as it related to the AFCs. The Respondents also questioned the constitutional applicability to the AFCs of both: (a) the real and substantial connection test; and (b) sections 27(3), 28(1) and 29(3) of the Class Proceedings Act, 1992, SO 1992, c 6 (“CPA”), which codify the opt-out regime for Ontario class actions (“Jurisdiction Motion”).
Decision of the Motion Judge
The Jurisdiction Motion and the plaintiffs’ certification motion were bifurcated, with the Jurisdiction Motion being heard first.
The motion judge granted the Respondents’ Jurisdiction Motion, concluding that the Court did not have jurisdiction simpliciter over the AFCs because they were not present in Ontario and did not consent to the jurisdiction of the Ontario Court.
The motion judge did not apply the real and substantial connection test articulated by the Supreme Court of Canada in Van Breda v. Village Resorts Ltd., 2012 SCC 17 (“Van Breda”), but based her decision on the principles of fairness, order and comity. The motion judge held in the alternative that the proposed class action should be stayed as it related to AFCs on the basis of forum non conveniens.
The plaintiffs appealed the motion judge’s decision on jurisdiction. The Attorney General for Ontario also intervened on the issue of whether the real and substantial connection test could apply to the AFCs.
In a separate decision, the motion judge certified the action as a class proceeding, but excluded AFCs from the class definition. The defendants sought leave to appeal the certification decision, but their leave application was dismissed.
Court of Appeal paves the way forward on jurisdiction
The appellate panel of Justices Gillese, MacFarland and Pepall allowed the plaintiffs’ appeal and held that the motion judge erred by failing to apply the real and substantial connection test in considering the Court’s jurisdiction over the AFCs. The Court of Appeal confirmed that the Van Breda test is a constitutional imperative which establishes the outer boundaries within which conflicts rules can be applied. The Court concluded that principles such as fairness, efficiency and comity are subsumed by the real and substantial connection test, and are not stand alone connecting factors.
The Court of Appeal held that it was not open to the motion judge to reject jurisdiction based on the absence of traditional grounds (i.e.: presence or consent). Where these grounds are not available, the inquiry into jurisdiction simpliciter in respect of foreign class members begins with the Van Breda test.
The Court of Appeal concluded that jurisdiction can be established over the AFCs where:
1. there is a real and substantial connection between the subject matter of the action and Ontario, and jurisdiction exists over the representative plaintiffs and the defendants;
2. there are common issues between the claims of the representative plaintiffs and the AFCs; and
3. the procedural safeguards of adequacy of representation, adequacy of notice, and the right to opt out are provided, thereby serving to enhance the connection between the AFCs and Ontario.
In formulating this test, the Court considered two different approaches to jurisdiction. The expansive approach, which has been applied in American jurisprudence, focuses on the commonality of interest between the representative plaintiff and the non-resident class members. The more restrictive approach requires the existence of a substantive connection beyond common interests.
The Court of Appeal favoured the expansive approach, but sought to balance the objectives of class actions, on the one hand, with the values of order and fairness, on the other.
Since the motion judge had not applied the real and substantial connection test to the facts, the Court of Appeal engaged in this analysis. The Court found that the first criterion was satisfied because the Respondents carried on business in Ontario, and the representative plaintiffs resided in Ontario and purchased shipping services in Ontario. Second, the Court found that common issues existed between the representative plaintiffs and the AFCs based on the certification decision. The third factor was satisfied as a result of the extensive notice campaigns following each round of settlements with defendants previously involved in the class action.
Having determined that a real and substantial connection existed, the Court of Appeal overturned the motion judge’s ruling on forum non conveniens. The Court of Appeal went on to hold that the Respondents had not met their burden of identifying a more appropriate forum than Ontario.
Takeaways
Airia Brands provides a clear framework for determining jurisdiction for non-resident class members, which integrates existing jurisdictional principles with the policy goals of class proceedings.
For plaintiffs’ counsel, the decision means that the class definition can include international claimants, which, in turn, increases potential damages. However, the procedural threshold set out in Airia Brands is quite high. The notice program in Airia Brands cost $5 million, and included effecting notice in 140 countries. Certifying an international class may, therefore, create a significant expense for what may be only marginal claims.
Including AFCs in a class also complicates the preferable procedure analysis at certification. In Airia Brands, the AFCs were located in 30 different countries. Certifying an international class may involve consideration of alternative procedures in foreign jurisdictions, and the extent to which those alternatives address access to justice issues. Since certification and jurisdiction were bifurcated in Airia Brands, it will be interesting to see how courts apply the jurisdiction test in conjunction with the certification criteria under ss. 5(1) of the CPA.
About the author
Alexandra Teodorescu, Blaney McMurtry