Upon further review the call on the ice stands

On August 17, the Federal Court of Appeal upheld a decision to strike a proposed class action alleging a conspiracy amongst the major North American hockey leagues to limit the professional opportunities of Canadian hockey players.

The decision confirms that section 45 of the Competition Act (the Act) does not apply to “buy-side” conspiracies between competitors for the purchase or acquisition of a product or service (subject to an important caveat in the employment law context discussed below). The case also marks the first time a court has substantively considered the scope of the lesser-known professional sports conspiracy provisions of the Competition Act.

From a procedural perspective the decision also provides guidance on motions to strike as an important tool for weeding out unmeritorious class action claims at an early stage in the proceedings.

Background

Mohr v National Hockey League et al involved a proposed class action against all major North American Hockey leagues, including the NHL, AHL, ECHL, CHL, and Hockey Canada.

The plaintiff, a former CHL hockey player, alleged that the defendant hockey leagues and Hockey Canada conspired to limit Canadian major junior hockey players’ opportunities to negotiate and play in the professional league of their choice, contrary to the criminal provisions of section 48 of the Act prohibiting conspiracies relating to professional sport.

The CHL, its member leagues, and Hockey Canada, sought to strike the proceedings on two principal grounds: 

• section 48 applies only to a specific types of agreements between teams or clubs within the same sports league and does not apply to the “inter-league” conspiracy that was being alleged by the plaintiff; and
• section 45 of the Act (the general criminal conspiracy provisions) was inapplicable, as it applies only to certain agreements between competitors to fix prices, restrict supply or allocate markets relating to “the production or supply” of a product or a service – in other words, “sell-side” conspiracies. In this case, the plaintiff alleged a “buy-side” agreement, i.e., that the defendant hockey leagues had conspired with respect to the terms on which they acquired or contracted for the services of the major junior hockey player.

At first instance, Chief Justice Crampton of the Federal Court agreed with both of these arguments and struck the plaintiff’s claim in its entirety without leave to amend.

Decision on appeal

The plaintiff appealed the Federal Court of Appeal decision. In a unanimous judgment, the court dismissed the plaintiff’s appeal and confirmed that motions to strike are an important judicial screening tool in the context of class actions. 

While the Federal Court of Appeal disagreed with certain aspects of the lower court’s decision, they agreed on the two critical points above: (i) section 48 was inapplicable, because that provision applies only to certain agreements within a given sports league, whereas the plaintiff was alleging a inter-league conspiracy involving different leagues and Hockey Canada and (ii) section 45 was also inapplicable, as it did not apply to the alleged “sell-side” agreement. Having reached these conclusions, the Federal Court of Appeal held that the claim had no reasonable chance of success and was properly struck.

Key takeaways

This decision confirms that section 45(1) of the Act does not apply to agreements between buyers for the purchase or acquisition of a product or service. Buy-side agreements will (subject to the caveat below) be reviewed under the civil provisions of the Act.

The important caveat to this statement is that, in June 2022, the Act was amended to include a new provision that expressly criminalizes “wage-fixing” and “no-poach” agreements between employers. These provisions come into force on June 23, 2023, and will prohibit agreements between non-affiliated employers to “fix, maintain, decrease or control salaries, wages or terms and conditions of employment” and “to not solicit or hire each other’s employees.” Once in force, the new offence will bring Canadian law more in line with other jurisdictions, including the US, where these types of employer agreements are already criminalized. The new provisions apply only to certain agreements between non-affiliated employers. Where there is no employer-employee relationship (as is the case for major junior hockey players), the civil provisions of the Act would apply. 

This decision also confirms the strategic importance of bringing dispositive motions, such as motions to strike, early on in the class proceedings. In this case, the defendants acted quickly and advised the court of their intention to bring the motion at the first opportunity. As a result, the Federal Court was persuaded that the motion should be heard prior to certification, resulting in significant cost and time savings for the parties.

Norton Rose Fulbright Canada successfully represented the CHL and its member leagues, the WHL, OHL and QMJHL on the motion to strike and before the Federal Court of Appeal.