Supreme Court Addresses Provincial Regulation Of Banks And Class Action Standing In Bank Of Montreal V. Marcotte Trilogy

Introduction

The Supreme Court of Canada recently released its decision in Bank of Montreal v. Marcotte1and its companion cases, Marcotte v. Fédération des caisses Desjardins du Québec2and Amex Bank of Canada v. Adams.3 It held that: (1) certain provincial consumer protection legislation imposing fee disclosure requirements on credit card issuers, and remedies for their breach of these requirements, can constitutionally apply to banks; and (2) a representative plaintiff in a multi-defendant class action in Québec does not need to have a direct cause of action against each defendant to have standing to pursue the class action.

Background

Three class actions were brought in Québec based on the disclosure requirements of the Québec Consumer Protection Act (CPA). The plaintiffs alleged that issuers of credit cards had not disclosed the charges levied for foreign currency conversion and, when disclosing them, had failed to treat the fees as "credit charges" under the CPA, which would require increased disclosure and a 21-day grace period.4 All but one of the issuers were federally regulated banks. The bank issuers argued that, because of exclusive federal authority under the Constitution to regulate banking, and the federal regulations governing bank-issued credit cards, the constitutional doctrines of interjurisdictional immunity (IJI) and federal paramountcy rendered the CPA disclosure requirements inapplicable or inoperative to the banks' activities.

The Superior Court found for the plaintiffs. The Québec Court of Appeal reversed in part, holding that the conversion charges were not credit charges; however, the issuers remained liable because for several years they had failed to properly disclose the fees. The constitutional doctrines of IJI and paramountcy did not apply. The Court of Appeal also found that the representative plaintiffs had standing to proceed with the class actions despite lacking direct causes of action against each defendant.

The Supreme Court Decisions

Justices Rothstein and Wagner wrote the trilogy of decisions for a unanimous Court. The heart of the legal analysis is contained in Bank of Montreal. The Court denied the issuers' appeals, allowed the plaintiffs' appeal in part, and restored punitive damage awards against certain issuers for the breach of their disclosure obligations.

Conversion Charges under the Québec Consumer Protection Act

The Court determined that conversion charges are not "credit charges" under the...