Executive Summary: Key Legal and Evidentiary Issues

• Federated Co-operatives’ new Loyalty Program was found to unfairly prejudice and unfairly disregard Calgary Co-operative’s interests, violating the Canada Cooperatives Act.

• The chambers judge appropriately granted partial summary judgment, finding the Loyalty Program issue to be discrete and severable from other disputes.

• Business judgment rule did not protect Federated’s conduct, as the Loyalty Program lacked a justifiable business purpose and was not within a reasonable range of decisions.

• Calgary Co-operative was excluded from the new Loyalty Program due to its grocery supply shift, despite maintaining fuel purchases under contract.

• The Alberta Court of Appeal upheld the chambers judge’s findings and dismissed Federated’s appeal; one justice dissented, raising evidentiary concerns.

• Calgary Co-operative was awarded $90,000 in lump sum costs for the appeal, plus GST, aligning with trial-level cost percentages.

Background and business relationship

Calgary Co-operative Association Limited (“Calgary Co-op”), a large retail member of Federated Co-operatives Limited (“Federated”), sourced most of its groceries and fuel from Federated for over 60 years. Calgary Co-op annually purchased approximately $250–$350 million in groceries and over $400 million in fuel-related products. Between 2000 and 2019, Calgary Co-op received patronage returns totaling just over $720 million, with about two-thirds attributed to fuel purchases.

In August 2019, Calgary Co-op formally notified Federated of its decision to stop purchasing groceries and grocery-related products, effective April 13, 2020. It continued to honour its fuel supply agreements. Federated did not accept Calgary Co-op’s offer to negotiate a transition plan. On January 31, 2023, Calgary Co-op also ceased sourcing fuel from Federated, a matter tied to separate litigation.

The loyalty program and its implications

Following Calgary Co-op’s grocery withdrawal, Federated’s board replaced the long-standing patronage distribution model with a new Loyalty Program at meetings held on October 24 and November 16–17, 2019. The Loyalty Program required members to purchase 90% of their total annual goods from Federated to qualify for quarterly payments based on fuel litres purchased. Calgary Co-op could not meet the threshold due to its shift to Save-On Foods and was thus excluded from the program.

Calgary Co-op alleged that the Loyalty Program was unfairly prejudicial and disregarded its interests. It sought damages equivalent to what it would have received under the Loyalty Program from November 1, 2019, to January 31, 2023. It withheld other claims, including declarations related to membership termination and share redemption of approximately $167.8 million.

Summary judgment and legal reasoning

The chambers judge found the Loyalty Program issue suitable for partial summary judgment under Rule 7.3 of the Alberta Rules of Court and the test in Hryniak v Mauldin. She concluded that Calgary Co-op’s exclusion violated its reasonable expectations under s 340 of the Canada Cooperatives Act and that Federated’s decision was unfairly prejudicial and unfairly disregarded Calgary Co-op’s interests.

The judge determined that the Loyalty Program amounted to a distribution of profits or patronage returns “under a different name or label,” designed in a manner that disproportionately disadvantaged Calgary Co-op. She rejected Federated’s argument that the program had a justifiable business purpose and found it was not protected by the business judgment rule. The judge awarded Calgary Co-op $35,351,440.12 plus pre- and post-judgment interest, calculated as if Calgary Co-op had participated in the Loyalty Program during the relevant period.

Court of Appeal decision

In 2025 ABCA 142, the Alberta Court of Appeal (Justices Antonio and Feehan, majority; Justice Slatter, dissenting) upheld the chambers judge’s findings. The majority found no error in law or principle and concluded that partial summary judgment was appropriate, fair, and proportionate. The majority confirmed that Federated’s conduct unfairly disregarded Calgary Co-op’s reasonable expectations as a member of a co-operative and that the remedy granted was tailored and minimally intrusive.

Justice Slatter dissented, asserting that the matter was not suitable for summary judgment and that the chambers judge made errors in evidentiary treatment, particularly regarding the affidavit of Federated’s CEO, Mr. Banda. He disagreed with the finding that the Loyalty Program was unjustifiable and asserted that the program had a valid business rationale and was consistent with co-operative principles.

Costs ruling

Following the dismissal of the appeal, the Court of Appeal issued a separate decision on costs in 2025 ABCA 249. Both parties agreed that Calgary Co-op was entitled to costs, but not on the amount. Calgary Co-op sought 50% of its unassessed solicitor and client costs or, alternatively, a lump sum of $90,000. Federated argued for costs based on Schedule C of the Rules of Court. The Court awarded Calgary Co-op a lump sum of $90,000, plus GST, inclusive of fees, disbursements, and other charges.

Conclusion

The courts concluded that Federated Co-operatives’ Loyalty Program was unfairly prejudicial to Calgary Co-op, violating statutory protections under the Canada Cooperatives Act. Calgary Co-op was entitled to damages equal to what it would have earned under the new program for its fuel purchases. The decision highlights the requirement for equitable and fair treatment within co-operative associations and affirms judicial scrutiny over structural changes that materially impact member rights and expectations.