First-to-file rule flows from lis pendens principle and is a matter of judicial policy, says court
The Quebec Court of Appeal has explained the principles of lis pendens and inherent jurisdiction as applied to concurrent proposed class actions.
In Micron Technology Inc. c. Hazan, 2020 QCCA 1104, the respondent filed an application with the Quebec Superior Court for authorization to institute a class action, alleging claims pursuant to the Competition Act that the class members had paid artificially inflated prices due to a price-fixing conspiracy among the appellants. Two days afterward, another individual went to the Federal Court with a claim for damages for price fixing against the same appellants, with a motion for certification as a class action.
The appellants filed a joint application for a stay of the class action, which the Quebec Superior Court dismissed on the basis that the application with the Superior Court was filed before the one with the Federal Court. Judge Donald Bisson described the situation as quasi-lis pendens because, while the proceedings involved the same parties and the same facts and sought the same object, the Quebec proceedings invoked the Civil Code of Quebec, the Consumer Protection Act and provincial consumer protection legislation, while the Federal Court proceedings pertained to only tort claims.
After the release of the judgment of the Superior Court, the Quebec Court of Appeal issued its judgment in FCA Canada inc. c. Garage Poirier & Poirier inc., 2018 QCCA 490, which provided that the Superior Court has jurisdiction under Article 49 C.C.P. to suspend an application for authorization to institute a class action in favour of another application instituted outside Quebec, even if the situation does not comply with the conditions under Article 3137 C.C.Q.
The appellants brought the case before the Quebec Court of Appeal, which dismissed their appeal. The appeal court stated that Judge Bisson correctly applied the lis pendens principle and dismissed the stay application on the basis that the filing in the Quebec proceedings preceded the filing in the Federal Court proceedings. However, the judge could have considered suspending the Quebec proceedings pursuant to the court’s inherent jurisdiction in light of the FCA case, said the appeal court.
The appeal court stressed that the first-to-file rule flows from the lis pendens principle. The rule, which is a matter of judicial policy, aims to simplify and “to avoid having an expensive carriage motion between competing law firms that could become a beauty contest,” wrote Justice Stephen Hamilton for the appeal court. The suspension of a stay action should have some other basis if the first-to-file rule has been excluded, such as through invoking the Superior Court’s inherent jurisdiction, as stated in the FCA case, said the court.
The appeal court then said that it would be premature to suspend the Quebec proceedings at this point because the case should be allowed to move forward to authorization. The matter may then be revisited if a situation arises where the Superior Court has authorized the class action and the Federal Court has certified it as a class action.
“To stay or not to stay: the Quebec Court of Appeal provides clarification on the test to be applied,” said a blog by Kristian Brabander, Samuel Lepage and Nicolas Monet of McCarthy Tétrault LLP, providing a chart summarizing the rules applicable to the stay of proposed class actions initiated before different courts.
“Following Hazan, parties seeking a stay in Quebec should be prepared to disclose to the Superior Court judge exactly where and how they intend to proceed with their application for a class action,” wrote the blog authors. “Transparency is key.”