Warren K.

Winkler Class Actions Moot

2017 Moot Problem (Detailed Version)

1. Factual Summary1

A. Introduction

[1] It is a period of economic recovery and reformation. Conventional capital markets were
crippled by successive food safety and security crises that gripped industrialized nations in the early
2000s. In the aftermath, agriculture has outpaced all other sectors for investment and trade. New
marketplaces, exchanges, institutions, and currencies displaced the former behemoths of the
financial sector as investors sought refuge from other floundering markets.

[2] This new economic reality is driven as much by investor savvy as government action and
innovation. In response to the crises, governments and regulators have instituted scientific and
market interventions to control the quality and safety of the food supply. In the meat production
sector, for instance, biotechnological advancements have led to the complete commodification of
North American livestock.

B. The Cowmoddities Sector

[3] Buyers and sellers of beef must trade their interests in cattle on the newly-formed Bovine
Stock Exchange (the BSE), created as a means of controlling agricultural investor confidence and
ensuring access to a safe meat supply by producers, buyers, and various wholesalers and dealers.
To the irritation of many in the Canadian agricultural sector, the BSE is located in Toronto and is
governed by Ontario law.

[4] The BSE trades exclusively in live beef cattle (not dairy cattle) and has emerged as the
national marketplace for doing so. Sellers on the BSE are primarily large-scale cattle farmers or
agents representing pools of small farms cow supply, whereas buyers are primarily entities that turn
live cattle into sides of beef. Other BSE traders buy and sell interests in cattle for the purpose of
arbitrage. Well-known corporations that trade in live cattle include such brands as Milky White Co.,
Minotaur Meat Co., Valley Veal Co., and EIEIO Co.

[5] Prices on the BSE are quoted through an intermediary trading desk, and trade on the BSE is
denominated in Beefcoin (BFC []). Beefcoin (or moooney, as it is affectionately known) is a
suede-print currency minted in Alberta. While the value of Beefcoin depends in part on the volume of
trading on the BSE, it is also affected by the Beefcoin Return Generating Rate (BRGR). BRGR is
calculated and published online daily by the BSE. BRGR and Beefcoin are positively correlated
when BRGR increases (decreases), the value of Beefcoin increases (decreases). This fluctuation is
not based on a fixed proportional factor or multiple.

[6] The new, bullish economy has also spawned specialized beef banking businesses, which
have some influence over trades in cattle. For instance, the value of BRGR is the average of the
interest rates that these banks estimate that they would pay to other banks to borrow Canadian
dollars for a one-month period if they were to borrow on the day the rate is being set. The banks
individually provide their daily rates to the BSE (which determines and publishes the value of BRGR)
and publish their individual rates on their websites every day. The leading beef industry banks are

1
Unless explicitly directed otherwise by the moot organizers:
1. Student facta are only to rely on the motion records for factual citations; and
2. Where there is a perceived conflict or inconsistency between facts as depicted in this document versus a
motion record, the motion record takes precedence.
Moo Money Bank (MM Bank), Investing Lean Co. (IL Bank), and Kattle Kommercial Bank (KK
Bank) (collectively and colloquially, MMILKK or the Beef Banks). The Beef Banks customers
consist exclusively of players in the beef industry, from individual farmers to large institutional clients
in need of leverage to support their business operations and investments.

[7] In addition to the BSE, which is the primary market for live cattle, secondary and tertiary
markets have also emerged. The secondary market consists of the purchasing of beef from persons
who trade directly on the BSE in order to make processed beef products. The tertiary market
consists of purchasing secondary market products for further processing. Typically, secondary and
tertiary market participants negotiate standing offer contracts, so-called cow futures, and other
instruments to facilitate their supply needs. These contracts typically limit the margin available to
their supplier by a factor linked to BRGR, but denominate the purchases in Canadian dollars. It is
also common for other beef market participants to make purchase, sales, and pricing decisions
based on BRGR. Notably, end consumers are conventionally not considered to be part of the
secondary or tertiary markets due to their distance downstream in the supply chain (and the fact that
most of them have never heard of BRGR).

C. The Alleged Market Manipulation

[8] Bessie Brown was a finance intern with the BSE a position she landed after graduating
with an MBA in farm finance from the University of Guelph in June 2015. Coming of age in a period
of drastic economic transformation, Bessie had been optimistic about the prospect of significant
structural change taking place in Canadian society after the collapse of financial markets in the
2000s. However, like many of her contemporaries, she was disillusioned to see (what she perceived
as) the same centralization of power and wealth from the former one percent reflected in the new
economys power players, including among the leading corporations that now dominated the BSE
and the banks that catered to these entities.

[9] In January 2016, Bessie reached her breaking point and abruptly resigned from the BSE,
decrying that she couldnt take any more of the bull-. She found a new job as a freelance journalist
with the agribusiness news website Moos from the Herd (Moos). While conducting research for an
article she was looking to write about the Beef Banks, Bessie became frustrated with her inability to
find a juicy story. She came upon a website for Angry@Agri (A@A), a nomadic and diffuse
hacktivist network consumed with exposing what it views as the deceit of Big Cow Business in the
New e-Cow-nomy (in the words of their About Us webpage).

[10] To her surprise, mere minutes after she sent an email to A@A introducing herself, she
received a reply from Leni Leather, the groups head hacker. Leni requested an urgent meeting. At
their meeting, Leni revealed to Bessie that she had recently hacked into the email accounts of two
traders at MM Bank Patty Prowteen and Ronald Rump. From these emails, Leni uncovered that
Patty and Ronald, along with several other traders at the other Beef Banks, had been providing false
interest rate information to BSE from January 1, 2014 to December 31, 2015, in order to covertly
manipulate BRGR and the value of Beefcoin (which would, in turn, affect trading prices on the BSE,
when calculated in Canadian dollars, and the transaction prices of secondary and tertiary market
participants).

[11] Bessie was delighted at the prospect of being the face of this story. Leni agreed to hand over
the stolen emails to Bessie on the condition that Bessie would expose the Beef Banks. As
promised, on February 1, 2016, Bessie published a dramatic account of what she had just learned
on the Moos website, along with all emails she received from Leni. Bessie accused the Beef Banks
of orchestrating a massive conspiracy affecting the entire beef industry. Bessies article was
immediately picked up by major mainstream media organizations and shared widely on social
media.

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 D. The Plaintiff Commences an Action

[12] Chuck Charolais owns and operates a small beef farm operation near Kenora, Ontario with
about 200 head of cattle. He took over the family farm from his parents in 1997. Chucks business
has undergone tremendous transformation to stay alive in the BSE-controlled beef market and make
its meat make ends meet. Chuck maintains an active social media presence to promote agricultural
lifestyle and discuss the challenges facing small farm operators. Chucks means of accessing the
BSE is by pooling his cattle with the services of Hector Holstein, an agent who deals in bulk live
cattle sales on the BSE. This is a common arrangement for the hundreds of small farms across the
province of Ontario who would either rather focus on raising cattle or do not have the cattle volumes
or trading sophistication to independently trade on the BSE.

[13] Chuck is a longtime reader of Moos. He read Bessies posts on February 2, 2016, and was
instantly incensed at the prospect that the prices he had received for his cattle had been
manipulated by the Beef Banks. In a series of Twitter posts on the trending hashtag #BSEbusted,
Chuck expressed interest in banding together with other impacted parties to bring a class action law
suit.

[14] Clarabelle Cow Corp. (Clarabelle) is a large industrial beef farm based in Cornwall, Ontario
that primarily sells live cattle on the BSE. Clarabelle has about 100,000 head of cattle. Clarabelle
was also following the BSE story that was unfolding since Bessies revelations on Moos. On
February 3, 2016, Clarabelles general counsel, Angus Aberdeen, noticed the Tweets from Chucks
Twitter handle (@cowabunga97). After conferring with senior management, Angus directed
Clarabelles social media department to respond to Chuck on Twitter (from @claracowcorp) and
suggest that he retain a reputable plaintiff-side class actions firm to begin the process of certifying a
class.

[15] Chuck retained the law firm Horne & Huff LLP, and on June 1, 2016, he commenced an
action in the Ontario Superior Court of Justice in Toronto against the three Beef Banks. The
Statement of Claim indicates that Chuck is seeking to certify a class proceeding under the Ontario
Class Proceedings Act, 1992 (the CPA) on behalf of all persons who engaged in buying or selling
on the BSE or in the secondary or tertiary markets at times when BRGR was wrongly manipulated
between January 1, 2014 and December 31, 2015. Chuck alleged misrepresentation, relying on the
common law cause of action for negligent misrepresentation as well as a statutory cause of action
contained in the Ontario Livestock Exchange Act, 2010 (the LEA). The relevant provisions of the
LEA are similar to section 138.3 of the Ontario Securities Act, which requires leave to commence a
proceeding under the statutory provision for misrepresentation.

[16] The defendant MM Bank retained Udder & Tuhg LLP. The other two Beef Bank defendants
agreed to adopt the submissions (written and oral) that counsel for MM Bank will make throughout
the class proceedings. Lead counsel for the defendants have indicated in media releases that senior
Beef Bank executives deny the allegations contained in the Statement of Claim, and in any event,
that each of their institutions has policies against such behaviour. In an effort to bolster confidence in
the beef market, MMILKK has instituted a special fund to compensate persons who can prove they
incurred losses as a result of any proven manipulation of the BRGR.

[17] In an early case conference, it was ordered that Moe Cowbell J. would first hear a motion for
leave under the statutory misrepresentation claim, before proceeding to a certification motion. The
leave motion was heard on October 1, 2016. Notorious for his speedy decision-writing abilities,
Cowbell J. released his decision on October 10, 2016. He denied leave to proceed under the
statutory cause of action for misrepresentation. The plaintiff has decided not to appeal this ruling.
Based on Cowbells decision, the plaintiff amended his Statement of Claim and motion materials in
order to remove reference to the statutory cause of action, focusing solely on common law negligent
misrepresentation.

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[18] In an effort to gain an upper hand in the class proceedings before the next certification
motion is heard, the defendants hired a private investigator to see if they could dig up any dirt about
Chuck. The investigator discovered that Chuck was receiving funding for the class action from a
company called Beef Au Jus-tice Inc. (BAJI). Corporate searches revealed that BAJI was a wholly-
owned subsidiary of Clarabelle and had only one director Sally Simmental and no employees.
Chuck had not disclosed any funding agreement to the court during the leave motion dealing with
the statutory cause of action. While disclosure of a funding agreement is not required at the
certification stage of a class proceeding, a party may raise it in their arguments with respect to the
certification criteria under section 5 of the CPA. The defendant banks have instructed their counsel
to raise the newly discovered funding agreement at the upcoming certification motion.

E. The Motion for Certification

[19] The motion for certification will be heard on February 25, 2017. Motion records have been
filed with the court. Facta are due by the deadlines specified.

2. Tips from the Organizers

In preparation for the moot, students are advised to turn their minds to whether all of the criteria for
certifying a class action under section 5 of the CPA are met. Specifically, students should consider:

a. Is the class definition appropriate (given that the class definition includes purchasers and
sellers of beef products on the secondary and tertiary markets and the Class Period includes
all days during the two-year period from January 1, 2014 to December 31, 2015)?

b. Are there sufficient issues in common between the proposed class members (given the
elements for demonstrating common law negligent misrepresentation and unconscionability,
and the potentially varying effects that the Defendants representations may have had on
potential class members)?

c. Is a class action a preferable procedure for the common law negligent misrepresentation
claim (given the rejection of the claim under the statutory cause of action)?

d. Should the third party funding agreement be approved?

Note that the methodologies reflected in the expert reports have been fabricated for the purposes of
this problem and should be accepted as real scientific methods in this fictional world.2 Students are
encouraged to make submissions about the strengths or weaknesses of a methodology, but cannot
challenge the existence of the methodology compared to real world science.

McCarthy Ttrault will hold a strategy session for all student participants on November 1, 2016 from
6:30 to 8:00 PM. Our practitioner speakers at the event will provide insight into the above issues and
written and oral advocacy techniques in the class actions context. All mooting teams are strongly
encouraged to participate. The event will be available by videoconference or for in-person
participation in Toronto.

3. Questions?

All questions must be directed to the moot organizers by the date(s) specified in the rules for the
moot. Please review the rules prior to raising questions concerning moot procedure and submission
requirements.

2
All characters and events depicted in the materials for the 2017 Winkler Moot are fictional.

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