Assumption not enough to win class-action certification

Class Action /
M. Steven Rastin
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By Tony Poland, LegalMatters Staff • Preparation is vital in getting a class-action lawsuit past the all-important certification stage, says Barrie-area litigator Steve Rastin. 

Rastin, senior counsel at Rastin Gluckstein, says failing to win certification can be the death knell of a class action. However, if the plaintiff is successful, “what often follows is some sort of serious settlement negotiation.”

For that reason, it is essential to “come to the table with a cogent theory that the court is going to accept. If you don’t have that, you are going to get blown out at the initial stage,” he tells LegalMattersCanada.ca.

‘Class-action litigation inherently more complicated’

“Class-action litigation is an inherently more complicated and difficult form of litigation. They are complex, and there are many moving parts,” says Rastin, who has joined Gluckstein Lawyers associate Jordan Assaraf to handle class action and mass tort lawsuits.

“The challenges that plaintiffs must overcome to get a matter certified continue to grow and the process is becoming more difficult. Counsel engaging in the potential class proceedings must spend the time to develop a theory of their case, including evidence of compensable loss and methodology of measurement in advance. Given the new timeline for the requirement of certification, all that evidence needs to be prepared within the one-year time frame.”

He points to a recent Ontario Superior Court case that failed to win certification. The lawsuit involved the purchase or lease of diesel-engine Volkswagen Jettas. The representative plaintiff, who the court heard was “passionate about environmental protection and pollution control,” leased a 2011 Jetta in large part because of the automaker’s “clean diesel” promise.

In 2014, the man returned the car “without incident or complaint.” A year later, the model was part of “the ‘defeat device’ scandal that rocked the automotive world and resulted in high-level prosecutions, guilty pleas and billion-dollar fines,” the court was told.

Canadian car owners won $2.1-billion settlement

Because he had returned his car when his lease ended, the man was not part of a $2.1-billion Canadian settlement with 105,000 diesel owners in 2016.

A few months later, however, he filed a lawsuit, saying he was “extremely disappointed to learn that I had been driving a car that produced excessive and illegal pollution levels. I would never have leased my Jetta TDI if I had known that it did not comply with all relevant environmental regulations. I would have leased a less expensive gasoline powered vehicle.”

However, the class action failed to win certification because Justice Edward Belobaba ruled the man failed to provide “evidence of economic loss or of a plausible methodology that could measure this loss on a class-wide basis.”

“The ‘some basis in fact’ requirement is easily satisfied in the vast majority of proposed class actions. There is almost always some evidence of economic loss,” Belobaba writes. “The challenge here was to find such evidence in a pre-disclosure context when the fraud hadn’t been revealed, the market hadn’t yet responded, and the required starting point showing some evidence of economic loss was difficult, if not impossible, to establish.”

The judge adjourned the matter to afford the plaintiff more time to clarify their position. After failing to convince the court, the man was offered a second adjournment to bolster his case, but he declined.

‘The plaintiff has still provided no evidence of economic loss’

“So, I find myself in this position: after one adjournment and the rejection of an offered second adjournment, the plaintiff has still provided no evidence of economic loss or of a plausible methodology that could measure this loss on a class-wide basis,” writes Belobaba. “None of the theories or models presented by their expert were relevant or helpful because they lacked this all-important starting point — some evidence (consisting of evidence grounded in facts) that the affected owners or lessees paid extra for a clean diesel or low emissions benefit that was promised but not provided.”

Rastin, who was not involved in the case but comments generally, says this was a case where the plaintiff was “either unable or not ready to answer the questions that were clearly being telegraphed by the judge.”

“The judge made his concerns known well in advance of his decision, and he gave the plaintiff every opportunity to address those concerns and make sure that his ducks were lined up in a row. The interesting aspect about this is they have a case but, at the certification level, they couldn’t meet the burden of convincing the judge that there was a demonstrable class,” he says. “A judge wants a theory, not an assumption, and if you cannot bring that forward, you do so at your own peril. 

Must do the work in advance

“If plaintiffs are looking to advance these types of claims in Ontario, they have to do this work in advance and come to the table with a cogent theory that the court is going to accept,” Rastin adds. “Even if the theory of loss is not complete, you have to turn it around and say, ‘Here is the starting point and here is how we are going to establish the damages.’”

He says the court wants to hear something more than a theory of a loss. The starting point cannot be an assumption.

“So even though you may have been wronged, you still must address the concept of whether there was a compensable loss. The judge is really saying, ‘You better have your experts lined up to a level that is going to meet with my approval in advance,’” Rastin says. “It is not merely a matter of preparation but having a fully developed theory of the case before you go into certification, including expert evidence.”