Is the presence of a product recall sufficient to support a class action proceeding? Two recent appellate decisions involving automotive recalls illustrate that recalls cannot be blindly relied on as some basis in fact in support of class action certification.
Spring v. Goodyear Canada Inc., 2021 ABCA 182 (Goodyear) and Maginnis v. FCA Canada Inc., 2021 ONSC 3897 (Maginnis) demonstrate that the legal theory of a class claim must be consistent with the scope and nature of the recall. Additionally, the presence of a recall in itself and without other evidence did not provide some basis in fact for the certification requirements in these cases.
Some Basis in Fact
Twenty years ago, the Supreme Court of Canada established, in Hollick v. Toronto (City), 2001 SCC 68, that class representatives “must show some basis in fact for each of the certification requirements.” This evidentiary standard exists somewhere below the standard of a balance of probabilities and operates in relation to the procedural requirements of certification.
A low evidentiary burden is consistent with the generous legislative goals set out in class action statutes. Yet the evidentiary burden on plaintiffs must rise above symbolic scrutiny in order to allow certification applications to serve as a meaningful screening device. See Pro-Sys Consultants Ltd. v Pro-Sys Corporation, 2013 SCC 57 (Pro-Sys).
The merits of the underlying action are not determined at certification, but, as Goodyear and Maginnis demonstrate, they play an important role. The theory of the class claim must be consistent with the certification evidence and some basis in fact for class-wide loss must be presented.
The Goodyear Decision
In Goodyear, the plaintiff received a recall notice for six tire types manufactured during a 13-week time period. When he went to get a replacement, the Goodyear dealership informed the plaintiff that his tires were manufactured prior to the period covered by the recall notice. The plaintiff later experienced a tire failure and launched a class action on behalf of others who bought Goodyear tires and suffered a systematic manufacturing defect. However, the plaintiff framed the claim beyond the recall notice and included 51 types of Goodyear tires manufactured over a broader period of time.
The motion judge certified the action at the certification hearing. Goodyear appealed this decision on a number of grounds, including whether there was sufficient evidence of a common defect.
The plaintiff neither identified or presented any direct evidence of the nature of any alleged defect associated with the 51 tire types. Instead, he argued that Goodyear’s recall notice in itself constituted sufficient evidence of an admission and a resulting common issue. The Court of Appeal noted that this approach was problematic, not because it might be inadequate in terms of the merits of the claim but because it did not sufficiently address whether there was a common defect across the 51 tires.
The Court concluded it did not need to answer whether a recall notice constituted an admission of defect because there first needed to be some basis in fact presented about the source and nature of the alleged common defect for all 51 tires.
Without such evidence the Court could not conclude that anything that might be common within the recall notice could also answer any common question respecting the other types of tires. “Unless there is some indication of a common defect, there is no way to prove a common impact on all class members” (para 27).
The Court stressed the need to formulate a clear class-wide theory supported by some evidence for a common class-wide defect. The narrow recall notice could not be relied on in this respect when measured against the claim the plaintiff actually brought.
The Maginnis Decision
In Maginnis, the plaintiffs alleged that the motor vehicles they purchased contained “emissions defeat devices” in the EcoDiesel engines which manipulated emission readings.
In 2017, United States regulatory bodies issued notices of violation to Fiat Chrysler Automobile (FCA) for installing emissions defeat devices in some EcoDiesel vehicles. The matter was settled and FCA’s U.S. parent corporation issued a recall that called for the installation of corrective software into the devices. FCA also implemented a similar recall in Canada.
The plaintiffs argued they paid a premium for a clean diesel engine when they actually received a dirty diesel engine. Additionally, they argued the software repair negatively affected fuel performance. However, the certification judge found there was no evidence in the record of any arguable loss or an actual fuel performance issue. The class action was not preferable, given FCA provided repairs at no cost as part of the recall program.
On appeal, the plaintiffs alleged that the motions judge erred in requiring the plaintiffs to prove loss at the certification stage.
However, the Divisional Court disagreed that the motions judge had improperly assessed the merits of the case and required proof of actual loss. The motions judge did not require a quantification of loss or a determination of loss on the merits.
Rather, there was no evidence on the record that any class member could have suffered compensable damage. There was no evidence indicating that any purchaser had paid a premium for a vehicle with an EcoDiesel or that there was any difference in value between what they paid for and what they received, once the manufacturer completed the recall repairs.
Further, the expert evidence the plaintiffs presented did not indicate that any class member had suffered fuel performance issues. Instead, the expert suggested that there was a way to test for a decrease in fuel performance but no tests had been conducted. The Courts did not consider this to be the necessary some basis in fact.
Key takeaways from the Goodyear and Maginnis cases include:
- The evidentiary standard underlying “some basis in fact” requires some evidence that each certification requirement is met; theory and argument alone will not suffice. Further, evidence relied upon at certification must be consistent with the theory of the class claim.
- Evidence of a process that theoretically could determine whether damages were incurred does not constitute “some evidence” at the certification stage that compensable damages were suffered by the proposed class.
MLT Aikins has the right combination of legal and industry experience to help you navigate class actions. Our legal team has significant experience in helping organization prepare for and respond to class actions. Contact a member of our class action team for assistance.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice of opinion. Readers should consult a legal professional for specific advice in any particular situation.