October 19, 2023

Two Many Steps: What Is The Test For Establishing A Common Issue?

by Adil Abdulla

Courts have split on the test for certifying a common issue. Some courts have held that the plaintiff only needs to show that there is a basis in fact that a question is common to all class members (the “One-Step Test”). Others have held that the plaintiff must also show that there is a basis in fact that the question “exists” (the “Two-Step Test”).

This article starts by assessing how these tests differ, arguing that they are not that dissimilar. In most cases, satisfying one test will also satisfy the other. This article then looks at three recent decisions on this issue, showing that the choice of test would have made little difference.

(HOW) DO THESE TESTS DIFFER?

Both the One-Step Test and the Two-Step Test are designed to assess whether there is a basis in fact for the third criterion for certification. The leading case on what is necessary to meet that threshold is Pro-Sys Consultants Ltd v Microsoft Corporation, 2013 SCC 57, in which the Supreme Court of Canada held:

In order to establish commonality, evidence that the acts alleged actually occurred is not required. Rather, the factual evidence required at this stage goes only to establishing whether these questions are common to all the class members.

What does it mean for a “question” to be “common to all the class members”? In Pro-Sys, the court agreed with the motion judge’s conclusion that certain questions were common because “their resolution is indeed necessary to the resolution of the claims of each class member”. Thus, for a question to be common to all the class members, deciding that question must be relevant to the resolution of each of their claims.

Both steps of the Two-Step Test assess that issue. At the first step, the court eliminates questions that are not shared by all class members – such questions are not common. At the second step, the court eliminates questions for which there is no evidence that they are relevant to resolving any class member’s claim – such questions are not at issue in the proceeding.

The One-Step Test does essentially the same thing. Consider Nissan Canada Inc v Mueller, 2022 BCCA 338, where the British Columbia Court of Appeal rejected the argument that the plaintiff needed “two distinct categories of evidence”, rejected a “two-step evidentiary requirement”, and asked only one question: “whether there is some evidence that supports the argument that it is a common issue across members of the class”. This suggests that the court chose the One-Step Test. The court found that this test was satisfied because “there was sufficient evidence to support the common issues related to whether there was an engine defect”. In other words, evidence that the defect existed was sufficient to establish a basis in fact for the defect being common.

More generally, the easiest way to satisfy the One-Step Test is often to present evidence that one class member was affected (e.g. their car had a defect) and that other class members are similarly situated (e.g. they all bought the same model of car). That also satisfies the Two-Step Test.

Meanwhile, a plaintiff would fail to meet both tests if it presented no evidence that anyone was affected (e.g. if its only evidence was that, if there was a defect, it would be common). Both tests require a basis in fact that the question is common to class members, not that it could be common.

There are two situations in which the outcomes of the two tests might differ.

The first is if a proposed common issue applies to all class members (e.g. their cars all have defects in the brakes) but it is not relevant to the resolution of their claims (e.g. the claim is about defects in the engines). In that case, the One-Step Test would be satisfied but the Two-Step Test would not. However, experienced class counsel would not propose irrelevant issues, and if they were only partially relevant, judges would revise them to only include the relevant parts. Thus, this is rare.

The second is if the proposed common issue is one of law or one of remedies. This is analyzed further in the discussion of Bowman, below. In brief, the second step of the Two-Step Test is never applied in this case because it makes no sense to do so.

This may help explain why so many cases have refused to decide which test applies, or applied the Two-Step Test “out of an abundance of caution”, recognizing that the choice of test would not have affected the result.[1]

THREE RECENT CASES

JENSEN

In Jensen v Samsung Electronics Co Ltd, 2023 FCA 89, the Federal Court of Appeal upheld a decision that applied the Two-Step Test. The certification judge found that this test was not satisfied because there was no evidence of the alleged conspiracy, and no regulatory investigation in any jurisdiction other than China.

The same conclusion would have been reached under the One-Step Test. In the absence of any evidence that there was a conspiracy, the plaintiffs could not have shown that class members were similarly affected by that non-existent conspiracy.

Meanwhile, if the plaintiff had presented any evidence that the defendants had conspired to limit the supply of DRAM, then that would have been a basis in fact for both the One-Step Test and both steps of the Two-Step Test. In that case, the defendants could have responded that some class members were not similarly affected by the conspiracy, but that argument would have applied to both the One-Step Test and rhe Two-Step Test.

O’CONNOR

In O’Connor v Canadian Pacific Railway Limited, 2023 BCSC 1371, the plaintiff sought to certify a common issue that the defendant’s train negligently caused a wildfire. Chief Justice Hinkson of the Supreme Court of British Columbia held that the plaintiff was not required to adduce evidence showing that the defendants were negligent, but did not foreclose using the Two-Step Test. It is unclear what test the court ultimately applied, but this was irrelevant. The court said:

regardless of whether it is called a one- or two-step test, the plaintiff’s burden is the same. He must show some basis in fact that the issues are common to the class …

I struggle to see how the plaintiff can meet his burden of showing that an issue can be proven in common for the class without providing some basis in fact that there is a common issue in the first place. Thus, whether the one-step or two-step articulation of the test is used, the outcome is the same.

The court ultimately refused to certify this common issue because the plaintiff’s evidence was insufficient to establish a basis in fact that the train caused the wildfire.

Again, the same conclusion would have been reached under the One-Step Test. In the absence of any evidence that the train caused the wildfire, the plaintiff could not have shown that class members were similarly affected by the train causing the wildfire.

Meanwhile, if the plaintiff had presented evidence that the train caused the wildfire, then that would have been a basis in fact for both the One-Step Test and the Two-Step Test. In that case, the defendants could have responded that some class members were not similarly affected by the wildfire, but that argument would have applied to both the One-Step Test and the Two-Step Test.

BOWMAN

In Bowman v Kimberly-Clark Corporation, 2023 BCSC 1495, Justice Matthews of the Supreme Court of British Columbia endorsed the quotes listed above in O’Connor, adding:

In most cases, evidence of commonality will often also be evidence of the existence of the matter the issue seeks to address.

The court did not expressly decide what test to apply for most common issues, but it rejected the Two-Step Test for aggregate damages – and possibly for all pure questions of law – holding:

There is a lack of cogency if the courts impose a rigid evidentiary requirement to demonstrate the ‘existence’ of an issue because the Class Proceeding Act defines common issues as issues of fact and issues of law arising from common facts. The ‘existence’ of legal issues will not always be amenable to evidentiary demonstration, although the requirement that they are based on common facts is amenable to evidence and is the one step evidentiary test …

Fitting this common issue [aggregate damages] into the two-step evidentiary test with a requirement of some basis in fact for the ‘existence’ of the common issue is awkward as the existence of the issue arises from s.29 of the Class Proceedings Act.

The court ultimately certified aggregate damages because the plaintiff presented expert evidence that aggregate damages could be assessed without proof from individual class members. This was clearly an application of the One-Step Test.

It is unclear whether the same result would have been reached under the Two-Step Test, but more importantly, it is unclear how one could apply the Two-Step Test to this common issue. As with all questions on remedies, this issue only needs to be answered if the defendants are found liable. Until that liability finding, the issue does not exist. It is not necessarily relevant to the resolution of any class member’s claims. It’s an issue that could be common, not one that is common.

But of course, it would be absurd to reject all common issues on remedies on the basis that they do not exist yet. Is the solution to do what the court in Bowman did and apply the One-Step Test to those questions? A better option is to simply accept that these tests are not as different as they are made out to be, and focus on the substance: whether an issue is sufficiently common that certifying it would make the proceeding more efficient.