A Class Action Story: Vitamins, Minerals, & $600,000.

As you may know, there are many companies that produce natural products such as vitamin/mineral pills. In this class action, the representative plaintiff brought forward a case where she had suffered from joint pain; on the recommendation of a pharmacist, she purchased glucosamine sulphate (“GS”) in 2009. From that time to 2019, a period of nearly 10 years, the plaintiff periodically purchased the same supplement from various retail outlets.

As summarized by Mr. Justice Branch in Krishnan v Jamieson Laboratories Inc., 2021 BCSC 1396:

…she purchased was a “Webber Naturals” branded product. It does not say GS on the front of the label. Rather, it says “Glucosamine Chondroitin”. However, the listed ingredients include GS.

The plaintiff alleges that the defendant manufacturers, being Jamieson Pharmaceuticals Ltd. (“Jamieson”), WN Pharmaceuticals Ltd. (“WN”) and Natural Factors Nutritional Products Limited (“Natural Factors”), (collectively the “Defendant Manufacturers”) manufactured supplements labelled as containing GS (“GS Products”) when, in reality, the products did not contain GS. The plaintiff admits that she does not know for certain what is in the bottles, but argues that what is important is that it was not GS. The plaintiff says she would not have purchased the supplements if she had known that the bottles contained a product different from that indicated on the label.

In short, the main ingredient she required for her health - GS - was not contained in the ingredients. She, in sum, was taking the supplement for no reason. As such, a class action was brought forward.

Ultimately, the defendants settled the lawsuit for the sum of $600,000, among other things. In the above case, a class action was certified which then led to settlement negotiations. As indexed at Krishnan v Jamieson Laboratories Inc., 2021 BCSC 1425, the Court stated as follows:

[4]         The settlement includes the following core components:

1.   a commitment to seek relabelling of their GS Products;

2.   cooperation through the provision of documents; and

3.   payment of $600,000.

[5]         As for the re-labelling, the Settlement Agreement contemplates a label change such that, once effected, these products will no longer reference "glucosamine sulfate", "glucosamine sulfate potassium chloride", "glucosamine sulfate KCL", or "glucosamine sulfate ♦ KCL". Instead, it is contemplated that the front labels will reference "glucosamine" or one or more brand names, and the back labels will reference "glucosamine hydrochloride" or such other commonly accepted chemical or proper names as are approved by the regulatory authorities.

[6]         In terms of cooperation, the Settling Defendants will provide a representative sample of documentation (purchase orders, bills of materials, certificates of analysis, and regulatory information sheets) from their manufacturers and suppliers of the raw glucosamine ingredients. Because much of this information is not publicly available, the plaintiff submits that this information will assist in the ongoing conduct of the action against the remaining defendants.

[7]         The Settlement Agreement also provides for payment of $600,000. Class counsel says that in arriving at this figure, they considered confidential information provided by the Settling Defendants during the negotiation process, including information regarding the volume of commerce, the Settling Defendants' market share, and the Settling Defendants' profitability on the relevant sales. There is no proposal to distribute these funds at this time. They will be held in trust for the benefit of the class. A distribution plan will be put forward at a later date.

The test for settlement, as Justice Branch notes in Krishnan, 2021 BCSC 1425 is as follows:

[11]      The test for settlement approval is as set out in Wilson, at paras. 56-61. To those comments, I would add the following guidance from Piché at 129, 141, 146-7, 149-150:

[The] judge must be active, forthcoming and engaged in “ascertaining ultimate verities.” Judicial review must be “exacting and thorough.”  To overcome potential abuse, he or she must carefully scrutinize the proposed settlement, to determine whether it is “fair, reasonable and adequate” to the class…

In the Canadian common law provinces, the court’s role at the settlement approval stage is considered to be one of “protector of the interests of absent class members.”…

In the class action context, judges are naturally led to be more active and involved, due to the public interest nature of this kind of litigation, and to its length and complexity. This natural propensity to be more involved and active is even greater at the stage of assessing the fairness of proposed settlements. Hence, at that stage, judges should actively address and discuss the merits of the case, the extent of the injury at stake, and the elements each party has relinquished in the settlement negotiation process. They should also actively engage in ascertaining the substantive elements of fairness regarding the proposed settlement…

In the peculiar context of class action settlement review, where settlement parties are more vulnerable and their rights more fragile, reviewing judges should be principally preoccupied with finding the truth and what is “just” about the settlement. They should assume that the truth will arise from a thorough review of the relevant evidence in light of what they believe are the true interests and advantages of the settlement to class action members. To find the “truth,” judges should become closely involved in defining the legal and factual issues, and verifying that they are addressed adequately in the settlement agreement. They should never rely entirely on the lawyers to adequately gather and interpret the evidence. Class action representatives should be asked to explain why they agreed to the proposed settlement. Arguments from objectors and attorneys on file should be welcomed and carefully evaluated. This more “paternalistic,” activist and outspoken judicial role would certainly, in my view, help preserve the rights of absent class members, and the respect of their interests…

… Acting inquisitorially does not necessarily require conducting an additional extensive inquiry into the facts. It requires sifting through the evidence, absorbing oneself in it, and asking questions – aloud or not. These tasks can properly be effectuated by the judge. And, in any event, when a judge acquires full knowledge and understanding of his case, he or she “knows what to look for,” and what questions must be asked.

[Footnotes omitted.]

[12]      I agree wholeheartedly with this guidance. Consistent with it, I advised counsel during the hearing of my expectation as to the level of disclosure required before I would be able to properly assess the proposed settlement. In particular, I emphasized the importance of putting the court in a position to appreciate whether the proposed settlement is reasonable or not. The court will not be in a position to assess whether to approve a settlement unless the court understands:

1.   the potential recovery if the action were to be successful;

2.   the general nature of the risk discounts applied in order to validate the recommendation that the settlement be approved. These may include the following risks, among others:

i.      losing certification;

ii.   losing a preliminary motion, such as a motion to strike, or a motion challenging jurisdiction;

iii.   losing on the merits;

iv.   non-recovery, even if the case succeeds on the merits; or

v.   class size contraction over time.

3.   the significance of any non-monetary benefits, such as the value of:

i.      obtaining information that will increase the odds of success against the remaining parties;

ii.   simplifying the prosecution of the case against those remaining parties.

In review of the test for certification, the Court generally stated as follows in Krishnan 2021 BCSC 1396:

[38]      The plaintiff claims that the Defendant Manufacturers:

1.   negligently misrepresented the contents of the GS Products to the class;

2.   contravened provisions of the Business Practices and Consumer Protection Act [BPCPA] and equivalent consumer protection statutes in other provinces (collectively, the “Provincial Consumer Protection Legislation”) for deceptive acts and practices such that the class is entitled to restitution or repayment of the purchase price of the GS Products, or alternatively, damages, pursuant to those statutes;

3.   contravened the Competition Act, R.S.C. 1985, c. C-34 [Competition Act] through false or misleading advertising and labeling such that the class is entitled to damages and the costs of investigation; and

4.   were unjustly enriched at the class' expense by the receipt of funds for GS which the class did not receive.

[39]      The test for class certification is set out in s. 4 of the CPA:

4(1)      Subject to subsections (3) and (4), the court must certify a proceeding as a class proceeding on an application under section 2 or 3 if all of the following requirements are met:

(a)  the pleadings disclose a cause of action;

(b)  there is an identifiable class of 2 or more persons;

(c)  the claims of the class members raise common issues, whether or not those common issues predominate over issues affecting only individual members;

(d)  a class proceeding would be the preferable procedure for the fair and efficient resolution of the common issues;

(e)  there is a representative plaintiff who

(i) would fairly and adequately represent the interests of the class,

(ii) has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and

(iii) does not have, on the common issues, an interest that is in conflict with the interests of other class members.

(2)        In determining whether a class proceeding would be the preferable procedure for the fair and efficient resolution of the common issues, the court must consider all relevant matters including the following:

(a)  whether questions of fact or law common to the members of the class predominate over any questions affecting only individual members;

(b)  whether a significant number of the members of the class have a valid interest in individually controlling the prosecution of separate actions;

(c)  whether the class proceeding would involve claims that are or have been the subject of any other proceedings;

(d)  whether other means of resolving the claims are less practical or less efficient;

(e)  whether the administration of the class proceeding would create greater difficulties than those likely to be experienced if relief were sought by other means.

[40]      The plaintiff bears the onus of satisfying each of these five certification requirements. The plaintiff must show “some basis in fact” for each of the certification requirements, other than the cause of action requirement in s. 4(1)(a), which is decided based on the pleadings alone: Hollick v. Metropolitan Toronto (Municipality), 2001 SCC 68 at para. 25.

[41]      The court has an important gate-keeping role requiring it to screen proposed claims to ensure they are suitable for class action treatment. In Thorburn v. British Columbia, 2012 BCSC 1585, appeal dismissed 2013 BCCA 480, the court stated:

[117]   The goal of the CPA is to be fair to both plaintiffs and defendants… “it is imperative to have a scrupulous and effective screening process, so that the court does not sacrifice the ultimate goal of a just determination between the parties on the altar of expediency.”

[42]      That said, the CPA must be construed generously in order to achieve its objectives of access to justice, judicial economy, and behavior modification: Pro-Sys Consultants Ltd. v. Infineon Technologies AG, 2009 BCCA 503, leave to appeal ref’d [2010] S.C.C.A. No. 32 [Infineon].

[43]      The certification stage does not involve an assessment of the merits of the claim, and is not intended to be a pronouncement on the viability or strength of the action. Rather, it focuses on the form of the action so as to determine whether the action can appropriately go forward as a class proceeding: Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57 [Microsoft] at para. 102. The court should not weigh or seek to resolve conflicting facts and evidence at this stage. As the Supreme Court of Canada held in AIC Ltd. v. Fischer, 2013 SCC 69, "the court cannot engage in any detailed weighing of the evidence but should confine itself to whether there is some basis in the evidence to support the certification requirements" (para. 43).