On August 17, 2022, the Federal Court of Appeal dismissed class counsel’s appeal of Chief Justice Crampton’s decision at the Federal Court of Canada striking out a putative class action claim relating to minor hockey.[1]

This decision represents a clear victory for Hockey Canada[2] and the CHL defendants, and reinforces the widely understood interpretation of key provisions under the Competition Act, namely that: (i) the prohibition on anti-competitive arrangements in section 48 is limited to arrangements or agreements between clubs or teams in the same league; and (ii) the prohibition in section 45 is restricted to agreements or arrangements with respect to the supply or sale of products, and does not apply to agreements between purchasers of a product or service.

The decision also has broader implications for the class action bar generally, regarding the utility of motions to strike where a plaintiff argues the claim discloses a cause of action because the claim raises a novel point of law.

[For further information on related class action developments, see our two-part series here and here.]

Background

The underlying class action claim, Mohr v. National Hockey League et al., alleged a vast conspiracy among all of the major hockey leagues in North America — the NHL, AHL, ECHL, CHL (and its member leagues, the WHL, OHL, and QMJHL) — and Hockey Canada to deny junior hockey players career opportunities and compensation. The suit sought $825 million in damages, and received extensive national media coverage. If successful, the claim would have represented an existential threat to the future of major junior hockey in Canada.

The Motion to Strike, Federal Court of Canada

Within days of the first case management conference, Hockey Canada and the CHL defendants brought a motion to strike the claim in its entirety, arguing that:

• The plaintiff errantly pleaded a violation of section 48 of the Competition Act, governing conspiracies relating to professional sport, as that provision applies only to agreements between teams and clubs within the same league, and not to an inter-league conspiracy as alleged by the plaintiff in his claim; and
   
• The general conspiracy offence in section 45 of the Act did not apply to the conduct alleged, as the defendants were not “competitors” for the product or service at issue and, in any event, section 45 does not apply to agreements among buyers for the purchase of a product or service.

On May 27, 2021, Chief Justice Crampton of the Federal Court of Canada granted the motion striking out the class action claim and denying the plaintiff’s motion to amend. The Court accepted both arguments, acknowledging them to be “an insurmountable hurdle for the plaintiff”.[3]

The decision was the first to expressly recognize what cartel defence practitioners have long maintained, and the Competition Bureau has recently expressly acknowledged,[4] that section 45 of the Competition Act does not apply to agreements between buyers of a product or service.[5]

On June 28, 2021, the plaintiff appealed Chief Justice Crampton’s decision.

The Appeal, Federal Court of Appeal

On January 12, 2022, a panel of the FCA, consisting of Justices Stratas, Rennie and Mactavish, heard the appeal. In a judgement issued on August 17, it dismissed the appeal in its entirety.

In doing so, the panel opined on two key questions of statutory interpretation related to sections 45 and 48 of the Competition Act, concluding that the claim had no reasonable prospect of success. Specifically, on a plain and ordinary meaning of the statute:

• The prohibition on anti-competitive arrangements in section 48 is limited to arrangements or agreements between clubs or teams in the same league; and
   
• The prohibition in section 45 is restricted to agreements or arrangements with respect to the supply or sale of products, and does not apply to agreements among buyers for the purchase of a product or service.

The proposed amended statement of claim was therefore untenable, because it asserted claims related to a conspiracy regarding the purchase or acquisition of players’ services across multiple unrelated leagues.

Key Takeaways

The FCA decision confirms key principles in interpreting the Competition Act, and reinforces the jurisprudence on the rules of evidence on motions to strike:

• The section 48 offence applies only to intra-league, not inter-league, conspiracies, finding that the words were “precise and unequivocal”,[6] and that “consistent with subsection (3), the focus of paragraph (2)(b) is on teams “in the same league” […] paragraph (2)(b) would be redundant, if not nonsensical, if the scope of subsection 48(3) were widened to include other leagues and umbrella organizations”.[7]
   
• As stipulated by section 48(3), any impugned agreement must also “relate exclusively to the matters set out in section 48(1)” that is: (1) agreements to limit unreasonably the opportunities for any other person to participate, as a player or competitor, in professional sport or to impose unreasonable terms or conditions on those persons who so participate; or (2) agreements to limit unreasonably the opportunity for any other person to negotiate with and, if agreement is reached, to play for the team or club of his choice in a professional league. To the extent that an alleged agreement extends to other matters or conduct, it must necessarily fall outside the scope of section 48.[8]
   
• Citing the prior cases of Dow Chemical[9] and Latifi,[10] and as found by Chief Justice Crampton in the court below, the FCA maintained the conclusion that section 45 only prohibits arrangements between suppliers and not buy-side or purchaser agreements.[11]
   
• The panel solidified three key principles regarding the law of evidence on a motion to strike, following the jurisprudence set out in Imperial Tobacco:[12]
  • Notwithstanding that no evidence is admissible on a motion to strike, the courts may consider all evidence relevant to statutory interpretation in order to discern legislative intent;[13]
     
  • It is permissible to rely on Hansard debates, among other evidence of statutory interpretation, on a motion to strike a pleading; and
     
  • The prohibition on the use of evidence must be understood in the context of the broader architecture of the court’s rules, which in this case provided a “range of procedural options” to parties to resolve these kinds of preliminary legal issues.[14]

Finally, this case has broader relevance for motions to strike in the context of class actions generally. Here, the court rejected the appellants’ argument that the low bar of having a “reasonable cause of action” was met simply because the plaintiffs put a novel interpretation of the statute at issue and that, accordingly, there was no binding precedent to preclude the action from proceeding at this early stage. Had the appellants succeeded on appeal based on this argument, the absence of a definitive precedent on the meaning of any particular statute would mean that every case which raised a point of interpretation for the first time, no matter how futile the argument, would survive a motion to strike, rendering useless this important judicial power. The FCA did not accept this position.

Casey Halladay and Akiva Stern of McCarthy Tétrault LLP represented Hockey Canada on the successful motion to strike in Federal Court, and the successful appeal in the Federal Court of Appeal

 

 

 

 

 

[1] Mohr v. National Hockey League, 2022 FCA 145 [“Mohr Appeal”].

[2] The motion, and subsequent appeal, were jointly brought by Hockey Canada and the Canadian Hockey League (and its member leagues, the WHL, OHL and QMJHL), with the CHL defendants represented by Norton Rose Fulbright.

[3] Mohr v. National Hockey League, 2021 FC 488 [“Mohr”], at para 35.

[4] See Competition Bureau, News Release, “Competition Bureau statement on the application of the Competition Act to no-poaching, wage-fixing and other buy-side agreements”, 27 November 2020, https://www.canada.ca/en/competition-bureau/news/2020/11/competition-bureau-statement-on-the-application-of-the-competition-act-to-no-poaching-wage-fixing-and-other-buy-side-agreements.html. See also our client bulletin on those developments, “Canada’s Competition Act: No Poach, No Problem? A Qualified Yes”, 27 November 2020, https://www.mccarthy.ca/en/insights/articles/canadas-competition-act-no-poach-no-problem-qualified-yes.

[5] Mohr, para 43.

[6] Mohr Appeal, para 23.

[7] Mohr Appeal, para 19-20.

[8] Mohr Appeal, para 17.

[9] Dow Chemical Canada ULC v. NOVA Chemicals Corporation, 2018 ABQB 482 [“Dow Chemical”].

[10] Latifi v. The TDL Group Corp., 2021 BCSC 2183 [“Latifi”].

[11] Mohr Appeal, para 40.

[12] R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42.

[13] Mohr Appeal, para 64.

[14] Mohr Appeal, para 67.