Tuesday, November 12, 2013

Supreme Court Certifies "Indirect Purchaser" Class Action Against Microsoft

The Supreme Court of Canada has ruled that a class action commenced against Microsoft Corporation and Microsoft Canada (Microsoft) for allegedly overcharging for their operating systems may proceed in British Columbia ( Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57 )
The representative plaintiff in the class action alleged that, beginning in 1988, Microsoft engaged in unlawful conduct by overcharging for its Intel-compatible PC operating systems and Intel-compatible PC applications software.  The plaintiff sought certification of the class action under the British Columbia Class Proceedings Act ("Act").   The proposed class is made up of ultimate consumers, known as "Indirect Purchasers" who acquired Microsoft products from re-sellers. 
The British Columbia Supreme Court certified the proceeding as a class action.  Microsoft appealed from that decision.  The British Columbia Court of Appeal allowed Microsoft's appeal and dismissed the action, ruling that indirect purchaser actions were not available as a matter of law in Canada and therefore the class members had no cause of action. 
The plaintiff appealed that decision to the Supreme Court of Canada (SCC) which allowed the appeal.  
The SCC held that indirect purchasers do have a cause of action against the party who has caused the overcharge to occur at the top of the distribution chain and who has injured the indirect purchasers as a result of the overcharge being passed on to them".  The Court acknowledged that it had rejected the "passing-on"  defence in the context of the imposition of ultra vires taxes.  However, the fact that the passing-on defence had been rejected did not lead to a corresponding rejection of the offensive use of passing on.  Accordingly, indirect purchasers should not be foreclosed from claiming "losses" passed on to them.  The risk of double or multiple recovery where actions by both direct and indirect purchasers are pursued at the same time or where parallel suits are pending in other jurisdictions can be managed by the court. 
The SCC further held that In bringing the action, indirect purchasers willingly assumed the burden of establishing that they have suffered a loss.  Whether they meet their burden is a factual question to be decided on a case by case basis.  Indirect purchaser action may, in some circumstances, be the only means by which overcharges are claimed and deterrence is promoted.  Allowing such an action is consistent with the remediation objectives of restitution law because it allows for compensating the parties who have actually suffered the harm rather than reserving those actions for direct purchasers who may have in fact passed on the overcharge.
As to meeting the test for certification under the Act, the SCC held that the pleadings disclosed causes of action that should not be struck out at the certification stage.  No such remedy should be given by the courts unless it was "plain and obvious" that the plaintiff's claim could not succeed.  The class representative must show some basis in fact for each of the certification requirements set out in the Act, other than the requirement that the pleadings disclose a cause of action.  However, the certification stage is not meant to be a test of the merits of the action, rather it is concerned with forum and with whether the action can properly proceed as a class action.  


Regards,

Blair

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