Should I stay or should I go…? The decision in Micron Technology Inc. and the suspension of multijurisdictional class actions
As multijurisdictional class actions become increasingly common, they raise difficult questions about the conduct of the same or similar actions in different courts, the use of scarce judicial resources, and the costs to the parties.
On September 2, the Quebec Court of Appeal rendered its decision in Micron Technology Inc. v. Hazan.1 The decision provides a timely reminder of the legal framework applicable to the staying of multijurisdictional class actions in Quebec.
On April 30, 2018, the plaintiff filed a proposed class action in Quebec against the defendants based on anticompetitive behaviour with respect to an electronic component in violation of the Competition Act2 and the Quebec Consumer Protection Act.3
Two days later, on May 2, 2018, another plaintiff filed a proposed class action in Federal Court against the same defendants.
On May 3, 2018, another proposed class action was filed in Quebec by a different plaintiff. This action was however suspended under the “first to file” rule.4 Another proposed class action was filed in Federal Court but was subsequently discontinued. Similar class actions have also been instituted in Ontario and British Columbia.
On November 15, 2018, the defendants sought to stay the Quebec class action in favour of the class action instituted in Federal Court, alleging a situation of lis pendens between the two actions and a risk of contradictory judgments. Alleging the prejudice they would suffer from having to defend themselves against two actions proceeding simultaneously on behalf of the same members, the guiding principle of proportionality, and the inherent jurisdiction of the Superior Court, the defendants argued that the Quebec class action should be stayed.
II. The judgment of the Superior Court
On February 11, 2019, the Superior Court, presided by Justice Donald Bisson, dismissed the defendants’ application for a suspension of the class action.5
In Justice Bisson’s view, the Superior Court and the Federal Court have concurrent jurisdiction in respect of the action, given that it is based primarily on the Competition Act. However, although both actions are directed against the same defendants and seek the same objectives, they only present a situation of “quasi-lis pendens” because the Quebec action invokes the Civil Code of Quebec and the Consumer Protection Act, whereas the Federal Court action invokes common law remedies.
Also, since the Federal Court cannot be considered a foreign authority, which would have justified the application of international lis pendens, and because the Quebec action was instituted first, the Superior Court concluded that the “first to file” rule applied and therefore, there was no basis to stay the Quebec proceedings.
Furthermore, the Superior Court expressed concerns that the defendants requested a suspension of the Quebec proceedings at the same time as they requested a suspension of the Federal Court proceedings pending a decision of the Supreme Court of Canada. In Justice Bisson’s view, the suspension of both proceedings would be contrary to the interests of the class members, thus bolstering the decision not to suspend the Quebec proceedings.
III. The judgment of the Court of Appeal
The Court of Appeal, in reasons delivered by the Honourable Stephen W. Hamilton, J.A., dismissed the defendants’ appeal and upheld the dismissal of their application for a suspension of the Quebec action, while offering interesting insights into the legal framework for staying multijurisdictional class actions.
A. The “first to file” rule for applications filed in Quebec
The “first to file” rule originated in Hotte v. Servier Canada inc.,6 a decision rendered in the context of concurrent class actions instituted in Quebec. It established the judicial policy according to which, in a situation involving multiple class actions based on the same causes and involving the same subject matter between parties acting in the same capacity, an appearance of lis pendens entails that only the first action filed must proceed, while subsequently filed actions ought to be suspended.
In Schmidt v. Johnson & Johnson inc., the Court of Appeal subsequently determined that the “first to file” rule could be applied with flexibility in exceptional circumstances, such that a second action could proceed to the detriment of the first, particularly when the first action filed is seriously deficient or was not undertaken in the best interests of the Quebec members.
B. The “first to file” rule when foreign actions are involved
In the event of an action brought before a foreign authority, the rules relating to international lis pendens have been codified in Article 3137 of the Civil Code of Quebec and provide that Quebec proceedings can only be suspended if the foreign authority was first seized of the dispute.
With respect to class actions, the rule entails that an action brought before a court outside Quebec must have been filed before the Quebec class action for a suspension application to be granted. The court considering the suspension application must also consider the application of Article 577 of the Code of Civil Procedure, which requires that the protection of the rights and interests of Quebec residents be taken into account before granting such an application.
Indeed, the Court of Appeal in FCA Canada inc. v. Garage Poirier & Poirier inc.8 recognized that the application of the rules of private international law applicable in Quebec does not permit a Quebec class action to be stayed on the basis of the principles of international lis pendens if the Quebec forum is the first having been seized with an action.
Importantly, however, the Court of Appeal also recognized that the Superior Court has inherent jurisdiction under Article 49 of the Code of Civil Procedure to suspend a case pending before it, even if the requirements relating to international lis pendens are not met, provided that the interests of the Quebec residents and the proper administration of justice justify such a measure.
C. Concurrent class actions in Federal Court
There is no precedent for the application of the “first to file” rule to a class action before the Federal Court. The fact that the action is not brought before the Superior Court means that the application of the rule in Servier Canada inc cannot be invoked. Similarly, the action cannot be considered to have been brought before a foreign authority so as to justify the application of the rule in FCA Canada inc. Indeed, as per Article 8 of the Code of Civil Procedure, the Federal Court is a court having jurisdiction in Quebec in matters that fall within the jurisdiction of the Acts of the Parliament of Canada.
For the Court of Appeal, the consideration of an application to stay a Quebec class action in favour of a class action instituted in Federal Court thus falls within the inherent powers of the Superior Court to manage the cases before it and to deal with cases for which the law does not offer a solution.
Given the comity among the courts in our Canadian federation, and the idea that courts considering similar issues should reach similar conclusions, the possibility of a Quebec class action progressing despite the existence of a class action in Federal Court may lead the latter Court to stay its proceedings.
D. The appropriate test for an application to stay a class action, based on the Superior Court’s inherent jurisdiction
In the absence of a framework for staying a class action under the rules on lis pendens, a stay may be granted pursuant to the inherent powers of the Superior Court if the interests of the Quebec members and the proper administration of justice militate in favour of a stay.
For the purposes of considering the best interests of Quebec residents in presence of duplicative class actions raising similar issues, the Court identified the following elements relevant to the analysis:
a) it will generally not be in the interests of justice or the parties to have two class actions proceed in parallel at the merits stage, taking into account the risk of conflicting judgments, the cost to the parties, and scarce judicial resources;
b) the causes of action, the remedies sought, the definition of the class, and the territorial scope of the actions may influence the scope and content of the means to be deployed before each court; and
c) the importance of adequate protection of Quebec residents’ rights and interests and their proper representation, including the benefits they may derive from the other action, the benefits of any applicable Quebec legislation, and the language of notices and other communications likely to be addressed to them.
The Court also pointed out the difficulty that arises from the fact that an application to stay a class action is generally made before either action is authorized or certified, entailing that the Court does not have the benefit of insight into the outcome of the other action, its class definition, its causes of action, or its common issues. Thus, an application to stay a Quebec class action before it has been authorized or before the other class action that gave rise to the application for suspension has been certified may often be premature.
E. The outcome of the defendants’ application for a stay of proceedings
In this case, contrary to the finding of the Superior Court, the “first to file” is not applicable for the determination of the defendants’ application for suspension, since the other action is being brought in Federal Court.
However, despite the similarity of the actions against the defendants, the manner in which they are likely to be disputed, the cost to defend themselves against two class actions, and the other factors raised by the defendants, consideration of the interests of the members of the Quebec class action and the proper administration of justice does not justify a stay of the Quebec proceedings at this stage, given the lack of progress in the actions and the many uncertainties with respect to how the cases might unfold.
Thus, the Court of Appeal found that the application for a suspension was premature at this stage of the proceedings, but could be reconsidered at a later stage, depending on the progress of the concurrent action.
The decision in Micron Technology Inc. will undoubtedly serve as a guide for courts and practitioners with regard to the suspension of class actions in Quebec, which will have to strike a balance between the two fundamental premises set out by the Court of Appeal:
a) it is possible to submit an application to suspend a class action when situations arise that do not call for the conventional application of the “first to file” rule or lis pendens; and
b) an application for a suspension at the embryonic stage of a class action and before the authorization stage (or the certification stage in the parallel class action) may be premature and may not permit a comprehensive assessment of the interests of the members of the Quebec class action and the interests of justice.
The case law to be developed in this area will certainly be of great interest, given the importance of multi-jurisdictional class actions.
1 2020 QCCA 1104.
2 R.S.C. (1985), c. C-34.
3 CQLR, c. P-40.1.
4 Hazan v. Micro Technology Inc, 2018 QCCS 5891.
5 Hazan v. Micron Technology Inc., 2019 QCCS 387.
6 1999 CanLII 13363 (C.A.).
7 2012 QCCA 2132.
8 2019 QCCA 2213.