In this proposed class action brought under Ontario’s Class Proceedings Act, 1992, SO 1992, c 6 (the “CPA”), the plaintiffs allege that the defendant financial institutions conspired with each other to fix prices in the market for foreign exchange instruments. The plaintiffs allege that the defendants carried out their conspiracy by communicating directly on multiple chat rooms at Bloomberg LP with names such as “The Cartel,” “The Bandits’ Club,” and “The Mafia.”
Prior to certification, one of the plaintiffs brought an ex parte application in the United States District Court of New York pursuant to Section 1782 of Title 28 of the United States Code, to compel non-party discovery from Bloomberg LP for use in the Ontario class action (the “Section 1782 Application”). Section 1782 allows any interested person in a foreign proceeding to apply to an American court to obtain evidence (including from persons not party to a proceeding) for use in the foreign proceeding. The Section 1782 Application was brought without notice to the defendants and without having sought or obtained letters of request from the Ontario court.
The Section 1782 Application was successful, and the plaintiff obtained a subpoena to compel non-party discovery from Bloomberg LP (“Bloomberg Subpoena”). Subsequently, the defendants brought this motion for an order directing that the plaintiffs seek and obtain authorization from the Ontario court pursuant to Rules 30.10 and/or Rule 31.10 of the Ontario Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”) before taking any act or step effecting or in furtherance of the Bloomberg Subpoena.
The motion judge’s findings
The motion judge granted the defendants’ motion.
The reasons focused on the relevant Ontario procedural provisions, particularly section 35 of the CPA (which provides that the Ontario Rules apply to class proceedings) and section 12 of the CPA (which equips case management judges with wide and broad powers that can be deployed as a flexible tool to address issues that arise in the course of a class action).
The motion judge highlighted that under the Ontario Rules, documentary and oral discovery follows the close of pleadings which, in class actions, occurs after certification. As for the discovery of non-parties, such discovery is governed by Rules 30.10 and 31.10, which prescribe specific procedures in seeking non-party discoveries and require an order of the court. Non-party discovery is an exceptional relief balanced against fairness and necessity. It is predicated on the principle that non-parties are not to be subject to discovery unless the criteria of the Rules are met. The information sought is to be confined to matters relevant to a “material issue” in the action.
In light of the foregoing principles, the motion judge agreed with the defendants that the plaintiffs’ attempt to obtain discovery from Bloomberg LP through United States laws and proceedings was improper from the perspective of class action procedure in Ontario. The motion judge held that the plaintiffs circumvented non-party discovery rules in Ontario. Specifically, the motion judge suggested that plaintiffs should have disclosed that the action was case managed; the case management judge had considerable powers under the Ontario Rules and CPA; pre-certification discovery in Ontario is narrow and focused on matters relevant to the criteria for certification; and that the Ontario Rules expressly addressed the matter of discovery from non-parties which was different from the United States.
The motion judge noted that “while Canadian courts will always be appreciative of the assistance of American courts, they only sometimes welcome it depending on the circumstances of each particular case.” Further, “the case at bar is a thanks-but-no-thanks situation until after this court has had an opportunity to consider whether it wishes to seek the American’s court’s assistance, which it may yet do”.
The decision is under appeal.
This case is of interest for several reasons.
Departure from existing case law
First, this case represents a notable departure from existing Canadian law. In Catucci v Valeant Pharmaceuticals International, for example, the Quebec Superior Court held that a section 1782 application was not an attempt to circumvent Quebec legal procedures because there was no presumption that any evidence gathered pursuant to the section 1782 application would form part of the record. The Quebec court therefore refused to interfere in the plaintiffs’ fact-finding investigation conducted through the section 1782 process. Despite finding that Catucci was “directly on point to the issues of the case at bar”, the motion judge rejected the reasoning of the Quebec court.
Expansive interpretation of the Rules
Second, the motion judge considered the Bloomberg subpoena and section 1782 procedure to be discovery under the Rules, and therefore subject to oversight from the Ontario court.
This is a notable conclusion considering that, on their face, the Rules do not purport to have any bearing on general evidence gathering or investigatory activities. As defined by the Rules, “discovery” is a specific process. Rule 1.03 provides that “discovery” is the “discovery of documents, examination for discovery, inspection of property and medical examination of a party as provided under Rules 30 to 33.” Evidence gathering (including the use of extra-jurisdictional procedures such as section 1782) does not fall within the confines of this definition, nor is there any prior case law suggesting otherwise.
The effect of this expansive interpretation may be to limit litigants to the mechanisms found in the Rules to obtain evidence from non-parties – even if such evidence is only being collected for investigatory purposes.
Cooling effect on cross-border litigation
Third, the motion judge’s order could have unintended consequences in cross-border litigation. The motion judge prohibited counsel from taking any steps “to acquire documents or any other evidence from non-parties through extra-jurisdictional procedures.” Given the broad wording of this order, the order could be interpreted as preventing counsel from conducting routine investigatory tasks in a foreign jurisdiction (for example, bringing a Freedom of Information request or interviewing witnesses), without leave of the court. This is a significant impact in all Ontario cases with cross-border elements.