Proposed class “too large and arbitrary to certify”: Rieger v Plains Midstream Canada ULC

The Alberta Court of Appeal recently set aside an order certifying a class action lawsuit claiming damages for pure economic loss arising from environmental damage allegedly caused to public lands by an oil spill. 

Background

In 2012, crude oil from a pipeline owned and operated by Plains Midstream Canada ULC (Plains) spilled into the Red Deer River and migrated downstream to Gleniffer Lake. As a result of the spill, the river and the lake—both of which are public property—were closed for recreational use. Plains accepted responsibility for the spill.

Two individuals who owned property near Gleniffer Lake that was not physically damaged by the oil spill commenced a class action lawsuit, alleging they had suffered loss of use of the river and the lake, and diminished property value. The plaintiffs claimed damages for “relational economic loss,” a subset of pure economic loss that arose from the plaintiffs’ relationship to other persons whose property was physically damaged. The plaintiffs pleaded six causes of action: strict liability, negligence, vicarious liability, nuisance, trespass, and breach of the Environmental Protection and Enhancement Act. The proposed class included all persons that resided or owned property within a 1,500-square kilometer geographic area in the vicinity of the spill.

The chambers judge certified the action as a class proceeding. In particular, the chambers judge noted that “different courts, in different contexts, have come to different conclusions on the degree of stability of the current law on recovery for pure economic loss” and held that plaintiffs’ claim was therefore not hopeless or bound to fail. 

Alberta Court of Appeal decision

The Alberta Court of Appeal overturned the certification order on two grounds. First, the court held that, in light of the Supreme Court of Canada’s decision in Maple Leaf Foods (released six months after the chamber judge’s decision), the plaintiffs’ claim for relational economic loss could not succeed. Second, the court held that the class definition proposed by the plaintiffs was too large and arbitrary to be certified.

No Claim for Relational Economic Loss

Maple Leaf Foods clarified that “there is no general right, in tort, protecting against the negligent or intentional infliction of pure economic loss.” Rather, damages for pure economic loss are only recoverable where a plaintiff can establish a sufficiently proximate relationship to the defendant. 

Given the Supreme Court’s emphasis on proximity, the Court of Appeal held that Maple Leaf Foods “significantly changed the likelihood that the Riegers’ claim for pure economic loss could be successful.” Specifically, the fact the proposed plaintiffs’ property and the pipeline operated by Plains were in physical proximity to Glennifer Lake was not enough to establish a sufficiently proximate relationship to give rise to tort liability. The plaintiffs had not otherwise established any basis in fact that Plains owed them a duty of care, and so the plaintiffs’ claim did not disclose an action in negligence, as required by section 5(1)(a) of the Class Proceedings Act.

Proposed Class Too Large and Arbitrary To Certify

Although the plaintiffs’ proposed class definition was similar in some respects to the proposed classes in Hollick v Metropolitan Toronto (Municipality) and Windsor v Canadian Pacific Railway, two cases that also involved pollutants released into surrounding areas to the detriment of property owners, the Court of Appeal distinguished this case from both Hollick and Windsor. 

First, the plaintiffs’ proposed class definition was based on a significantly larger geographic area. In Hollick, the proposed class was defined to be within a 16-square-mile area. In Windsor, the proposed class consisted of persons located within a specific community in southeast Calgary. In this case, the plaintiffs proposed a class definition based on a geographic area of 1,500 square kilometers, which, in the Court of Appeal’s view, significantly increased the likelihood the proposed class was over-inclusive and contained members with no claim against Plains.

Second, the alleged pollution in this case arose from a single event. In Windsor, the area affected by the alleged pollution was both uncertain and in dispute, as the pollution occurred over several decades, making the task of proposing an appropriate class much more difficult. Notably, the plaintiffs in this case failed to adduce any expert evidence indicating how large the scope of affected properties may be, and it was unclear how the proposed class had been determined. The Court of Appeal held that they had failed to establish any basis in fact that there was a rational relationship between the proposed class and the common issues.

Key takeaways

The ripple effects of the majority’s decision in Maple Leaf Foods extend far beyond the product liability realm. Plaintiffs seeking to certify class actions for environmental torts will need to provide sufficient evidence to establish proximity. That evidentiary burden, and the court’s willingness to infer an over-inclusive class where the class is defined with reference to a large geographical area, could circumscribe future proposed class sizes. 

This case is also consistent with the broader trend in certification decisions from the Alberta courts, where judges have been increasingly willing to more closely scrutinize plaintiffs’ evidence, thereby affirming that certification, although a low bar, should nonetheless function as a meaningful screening device (see, for example, Setoguchi v Uber B.V).

The author wishes to thank Austin Cooper, law student, for his help in preparing this legal update.