Del Giudice dismissed: Court of Appeal shows how the certification ‘cause of action’ component can be used to end meritless claims

In a recent decision, Del Giudice v. Thompson, 2024 ONCA 70, the Court of Appeal for Ontario reaffirmed that the cause of action component of the certification test is intended to be a meaningful screening device to weed out meritless claims. It is a helpful example of how defendants can use a pleadings challenge to end a proposed class action at an early stage.

Background

The action was filed after a Capital One database stored on Amazon Web Services’ computer servers was hacked by a previous employee of Amazon Web Services. The breach was estimated to affect six million Canadians.

After four sets of pleading amendments, the plaintiffs’ statement of claim included 19 causes of action, including data misuse claims and data breach claims. Justice Perell found that the claim “egregiously” contravened the rules of pleading and failed to plead any viable cause of action. He also observed that previous amendments to the claim transformed a straightforward data breach claim into a $240 billion action for data misappropriation and misuse. Ultimately, Justice Perell struck the claim without leave to amend.

Court of Appeal confirms valuable practice points

The Court of Appeal dismissed the plaintiffs’ appeal, reaffirming that the cause of action test is designed to “weed out claims that are doomed to fail”. In doing so, the Court confirmed valuable points for defendants, including:

• The motion judge was entitled to consider contractual documents that contradicted the pleaded allegations. The Court of Appeal rejected the plaintiffs’ argument that these documents were “evidence” that could not be considered in the cause of action analysis. Rather, a statement of claim is deemed to include any document to which the claim refers — and these contractual documents, which were filed with the Court in a motion record, were incorporated by reference into the pleading. This was especially valuable for the defendants in defeating allegations that the defendants had used the plaintiffs’ information for unauthorized purposes. The Court confirmed that the contractual documents authorized multiple uses, rendering the pleaded allegations incapable of proof. The Court of Appeal found that Justice Perell made no error in finding that the documents incorporated by reference resulted in a pleaded narrative that was patently ridiculous and allegations that were mutually incapable of proof.
• The motion judge was entitled to strike out the claim without leave to amend. The Court of Appeal confirmed that this decision was discretionary and subject to deference, and deferred to Justice Perell’s decision. Even though the motion judge mentioned that the plaintiffs could have pleaded a straightforward claim for breach of contract against Capital One, those claims were never advanced. Accordingly, the Court of Appeal found that: “The appellants were given ample opportunity to advance a viable claim and are now out of runway.”

Finally, the Court of Appeal upheld the significant $1.2 million cost award granted by Justice Perell, noting that the costs appeal was filed late and the merits of the costs appeal were weak.

Conclusion

This decision is another helpful reminder that certification and, in particular, the cause of action test, is a meaningful screening device designed to dispose of claims that are doomed to fail before the parties incur the significant costs of discoveries. The Court of Appeal and the motion judge’s rigorous review of the pleadings shows that defendants have the ability in some circumstances to defeat bald or patently untrue claims, despite the position frequently put forward by plaintiff’s counsel that all pleadings must be accepted as true. The decision also reinforces that a plaintiff should not be entitled to limitless amendments and will, eventually, run out of runway.