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Canadian Class Actions Monitor

Individual Issues Overwhelm Common Issues in a Nuisance Claim

Posted in Class Actions
Patrick Williams

In Baker v. Rendle, 2017 BCCA 72, the British Columbia Court of Appeal upheld the lower court’s decision denying class certification of a nuisance claim. The Court found that a class proceeding was not a preferable procedure because resolving the proposed common issues would not have significantly advanced the action. The Court’s analysis is specific to claims in nuisance, but suggests that nuisance claims are not suitable for certification unless the defendant’s conduct has a near-uniform impact on the class members.

The Rendles obtained a permit to operate a composting business on their farm and thereafter began to import and compost food waste from the surrounding area. Complaints related to the noise and odours generated by the composting operation soon followed. Mr. Baker, who resides on land adjacent to the farm, brought a claim for nuisance. He sought certification as a class proceeding on behalf of other residents in the area. Continue Reading

Uncertain Implications for Global Class Certification: The Ontario Court of Appeal’s Decision in Excalibur Special Opportunities

Posted in Class Actions
Paul DavisBrandon Mattalo

In December 2016, the Ontario Court of Appeal had an opportunity to clarify the requirements for certifying a global class in Excalibur Special Opportunities LP v. Schwartz Levitsky Feldman LLP.[1] In a series of decisions over three levels of court, Ontario judges adopted shifting analyses of the global class issue, and a majority of the Court of Appeal appears to have further complicated the law on this issue by using language which suggests that it applied the conventional test for assumed jurisdiction over an individual action to the separate issue of whether to certify a global class. With a strong dissent, the law is ripe for further development in the future.

American Investors Rely on a Canadian Audit Report about a Chinese Hog Farm

Excalibur Special Opportunities LP (“Excalibur”), a Toronto-based partnership, was one of fifty seven investors in a Nevada corporation that owned and operated hog farms in China. In addition to Excalibur, only one other investor was based in Canada (in British Columbia). The vast majority (50 of 57) of the investors were based in the United States. Excalibur and the other investors allegedly relied on an audit report prepared by a Toronto and Montreal-based accounting firm, Schwarts Levitsky Feldman LLP (“SLF”), when deciding to invest. Continue Reading

A Most Dysfunctional Application

Posted in Class Actions
Alexandre Mireault

The recent decision Baratto v. Merck Canada Inc. presents a rare occasion where the Superior Court of Québec refuses permission to institute a class action lawsuit. The plaintiff, who suffered from depression and erectile dysfunction, claimed his problems were caused by medication produced by the defendant. Based on the Court’s analysis of the facts, the plaintiff could not properly advance the rights of the class he sought to represent, which the Court characterised as poorly defined. The Court also considered the plaintiff’s medical history, which was riddled with alternative possible causes of his problems, and determined that the plaintiff’s claims could not justify the conclusions sought.

Merck developed, produced, sold and distributed two pharmaceutical products targeted by the proposed class action. Propecia was prescribed for the treatment of balding; Proscar was prescribed for the treatment of enlarged prostates and the prevention of urological problems. Both products contain Finasteride, an inhibitor of enzymes.

In October of 2008, Baratto, then 25 years old, received a prescription for Proscar in order to treat his baldness; he claimed to have taken 1.25 mg per day, equivalent to a quarter of a tablet, though he never took Propecia. After a month, Baratto stopped the treatment and self‑diagnosed as suffering from depression and erectile dysfunction. Seeking the cause of his problems, Baratto stumbled upon a website which linked Finasteride to depression and erectile dysfunction. Relying on the conclusions presented on the website, Baratto claimed that the secondary side effects of Finasteride resulted in his psychological and sexual problems.

Baratto sought authorisation to institute a class action for all persons residing in Québec to whom the products Propecia and/or Proscar were prescribed prior to November 18, 2011, and who had taken said products for the treatment of baldness. Baratto claimed that Merck did not adequately advise the proposed class members of the health risks associated with the use of medication containing Finasteride. He pled that Merck should have known the risks associated with the products, but failed in its obligation to undertake adequate clinical tests.

The Court qualified the alleged faults as purely hypothetical. The Court stated that, in spite of the low bar at the authorisation stage, it nonetheless had a responsibility to proceed beyond a superficial analysis of the facts. Particularly, the Court said it could not ignore the uncontradicted evidence relating to the plaintiff’s medical history. While taking Proscar, Baratto had also begun taking Prednisone, a medication known to cause erectile dysfunction. The Court also noted Baratto’s existing psychological problems related to his baldness and stress in his personal and professional life.

The Court concluded that the action sought by Baratto did not satisfy the first criteria required to institute the class action lawsuit, i.e. similarity. An analysis of the evidence of the proposed members of the class could only be done on an individual basis. As a result of the numerous potential causes of depression and erectile dysfunction, the class action would have transformed the Court into an inquest, with facts varying from member to member; the proposed class action therefore would be ill-suited to advance the rights of the members of the class proposed.

Furthermore, the group as defined was both too large and not sufficiently related to Baratto’s own personal case. Baratto had done too little to qualify the group in light of a prejudice suffered, particularly as it was not limited to those, like Baratto, who suffered from depression or erectile dysfunction. The Court refused to redefine the group of its own accord.

The Court also concluded that Baratto failed to show that the facts alleged justified the conclusion sought. The Court declared dubious the proposed causal relation between Merck’s alleged fault and damages purportedly suffered by Baratto. Not only had Baratto never taken Propecia, he also took Proscar in smaller doses that had been suggested by Merck and for reasons other than those for which the product had been conceived. Finally, as a result of the absence of a professional diagnosis of erectile dysfunction, and in light of the numerous potential psychological and medical causes present in the plaintiff’s file, the Court refused to link Baratto’s problems to Propecia or Proscar.

Baratto appealed the Superior Court decision on January 20, 2017; we will monitor the case and keep you posted on the Court of Appeal’s decision.

On Limitations: Alberta Court Reiterates Importance of Reasonable Diligence to Identify Defendants in Class Proceedings

Posted in Class Actions
Michael Shahinian

In Condominium Corporation No 0610078 v Pointe of View Condominiums (Prestwick) Inc (“Condo Corp 0610078”), the Alberta Court of Queen’s Bench (“ABQB”) considered the extent to which a party that suffered damage is required to identify the parties responsible for that damage for the purpose of triggering the commencement of the limitation period in the context of a certified class proceeding.[1]

Background

The representative plaintiffs in Condo Corp 0610078 brought an application to amend their claim to add certain defendants. The certified class action claims $2.7 million in damages for the cost of repairs and remediation resulting from a condominium’s construction deficiencies. Continue Reading

Amending certification applications: When does the “procedural guillotine” fall?

Posted in Class Actions
Robyn Gifford

In recent certification decisions, BC courts have demonstrated a willingness to permit plaintiffs to amend their materials and re-apply for certification, often with substantial guidance from the court on the scope of the amendments. In Winter v. British Columbia, the BC Supreme Court once again permitted such a re-drafting, though in this case imposing a strict time limit and indicating that this would be the plaintiff’s final opportunity to amend.[1]

Winter is a potential class action involving former employees of the British Columbia College of Teachers. In January 2012, the Province dissolved the College and replaced it with the Teacher Regulation Branch of the Ministry of Education.[2] Most of the employees of the College were offered and accepted employment with the Ministry upon dissolution of the College. Ms. Winter now seeks to certify a class action to recover the severance payments stipulated in the employees’ original employment contracts with the College.[3] Continue Reading

Successful Resistance of Certification in a Pharmaceutical Class Action

Posted in Class Actions
Dorothy Charach

In recent years, many pharmaceutical class actions in Canada that have proceeded to a motion for certification have been certified. However, the recent case Batten v. Boehringer Ingelheim (Canada) Ltd.[1] [Batten] is another welcome example of a Canadian court denying certification of a proposed pharmaceutical class action.[2] The case involves the novel oral anticoagulant (NOAC), Pradaxa®.

Despite pleading many causes of action, the plaintiffs pursued only their “failure to warn” claim for certification. The allegation centred around the fact that, for the majority of the relevant time period, Pradaxa® (unlike the pre-existing commonly used anticoagulant, warfarin) did not have a specific antidote that could reverse its anticoagulant effect.

The plaintiffs requested that Perell J. find that the following key issues (among others) existed and were certifiable as common issues:

  1. Did any of the Defendants have a duty to warn the Class Members of the risks of harm, namely from the lack of an antidote for Pradaxa®?
  2. Can the lack of an antidote for Pradaxa® give rise to or exacerbate dangerous or life-threatening events for persons who have ingested Pradaxa®?

Justice Perell ultimately found that there was no basis in fact to support the existence of either as common issues.

A Reminder that Plaintiffs Must Show “Some Basis in Fact”

Justice Perell reminds readers in his decision that, despite a lowered evidentiary bar at certification, it is still the plaintiff’s burden to show that there is some basis in fact that the proposed common issues exist:

[160]     The representative plaintiff must come forward with sufficient evidence to support certification, and the opposing party may respond with evidence of its own to challenge certification: Hollick v. Toronto (City), supra at para. 22.

[161]     The purpose of a certification motion is to determine how the litigation is to proceed and not to address the merits of the plaintiff’s claim… However, the plaintiff must show “some-basis-in-fact” for each of the certification criteria other than the requirement that the pleadings disclose a cause of action: Hollick v. Toronto (City), supra at paras. 16-26. Certification will be denied if there is an insufficient evidentiary basis for the facts on which the claims of the class members depend [citations omitted].

[162]     In particular, there must be a basis in the evidence before the court to establish the existence of common issues [citations omitted].[3]

No Basis in Fact to Support a Duty to Warn

In relation to the first question, Perell J. found that there was no basis in fact to conclude that a common issue about a duty to warn about the absence of an antidote exists. He noted that there was a lack of evidence that a patient on Pradaxa® who experiences a bleeding event is at a greater risk of unstoppable bleeding due to the lack of an antidote than a patient on warfarin who experiences a bleeding event.

Perell J. further concluded that the evidence showed the lack of an antidote was not an “undisclosed hazard”, as it was not a hazard at all, based on the following evidence:

  • There is no increased risk for developing life-threatening injuries for patients who are prescribed Pradaxa® rather than warfarin; and
  • Regardless of the prescribed anticoagulant, the physician treating a patient for excessive bleeding would use conventional methods to abate the bleeding and would resort to an antidote or reversal agent as a last resort, because a reversal agent to an anticoagulant carries the very serious risk of precipitating a devastating and perhaps life-ending stroke.

No Basis in Fact to Support Commonality

Justice Perell also found that there was no basis in fact to conclude that the question of whether the defendants had a duty to warn about the absence of an antidote could be answered in common across the class of persons who ingested Pradaxa® because:

  • A patient’s risk of experiencing a stroke and his or her risk of experiencing a bleeding event, of which there is a wide range of variance in nature and intensity, are patient-specific;
  • The need for an antidote to treat bleeding would depend on patient-specific factors;
  • The nature of a patient’s specific bleeding event would depend upon patient-specific factors;
  • The need for a patient to be told about reversal agents or the absence of them is patient-specific and very much a matter of physician judgment on a case-by-case basis.

Justice Perell explained that, since the alternative for a patient to taking a NOAC like Pradaxa® would be to take warfarin, knowing about the lack of antidote for Pradaxa® ought not to affect a patient’s decision to take it, as warfarin has a longer half-life and, therefore, takes longer to reverse itself.

Justice Perell concluded that the absence of commonality is inherent in the nature of this case. He noted that most duty to warn cases involve an alleged failure by the defendant to warn about a hidden defect or potential risk of harm caused by the use of the product; however, in this case, the absence of commonality arises from the particular nature of the duty to warn problem: an alleged failure to warn a learned intermediary about the absence of an antidote when there is no basis in fact for concluding that the absence of an antidote was a hidden defect or that the absence of an antidote posed a common and material risk across the class.

A Lack of Methodology to Prove General Causation for the Class

The second common issue that the plaintiffs requested be certified was classified by Perell J. as their general causation question. Justice Perell found that it failed as a common issue for the same reasons as the first question and for two additional reasons:

  1. There is nothing generalized, i.e., common across the class, about the circumstances of a life-threatening bleeding event and the absence of an antidote, and whether the patient on Pradaxa® (or warfarin) needs a reversal agent is a patient-specific circumstance; and
  2. Where a plaintiff seeks to address questions of causation on a class-wide basis as the foundation for his or her class action, there must be some evidence of a methodology that will enable the plaintiff to prove causation on a class-wide basis and the plaintiffs provided no such evidence.

Practical Takeaways

Batten provides an excellent precedent for defendants of future pharmaceutical class actions. A few key takeaways are:

  1. While the evidentiary burden on a certification motion of “some basis in fact” is low, it exists for a reason. In order for a class action to be certified, plaintiffs must be able to satisfy a judge that there is a sufficient evidentiary basis for the facts on which the claims of the class members depend, i.e. that the common issues exist and are, in fact, common.
  2. There are some cases where commonality will be impossible to prove. Where a plaintiff alleges that a defendant failed to warn a learned intermediary about something that is neither a hidden defect of the product nor a material risk across the class, defendants should seriously consider resisting certification on that issue.
  3. The general causation principle in Pro-Sys Consultants v Microsoft[4] holds true for pharmaceutical class actions: where a plaintiff seeks to certify questions of causation, there must be some evidence of a methodology that will enable the plaintiff to prove causation on a class-wide basis.

[1] 2017 ONSC 53

[2] Certification was also denied in Martin v AstraZeneca, 2012 ONSC 2744, aff’d 2013 ONSC 1169 (Div. Ct.)

[3] Batten, 2017 ONSC 53 at paras. 160-162

[4] Pro-Sys Consultants v Microsoft, 2013 SCC 57 at para. 115

The Role of Representative Plaintiffs from Other Jurisdictions: An Update

Posted in Class Actions
Theodore StathakosAndrew Foster

We previously reported in June 2016, on a Saskatchewan Court of Queen’s Bench decision holding that, in certain circumstances, a representative plaintiff in a multi-jurisdictional class action in a province other than Saskatchewan can (a) adduce evidence and make argument in a certification application in a Saskatchewan class proceeding and (b) apply for a stay of that Saskatchewan proceeding (Ammazzini v Anglo American PLC, 2016 SKQB 53). This decision was based on section 5.1 of The Class Actions Act, which provides generally that a representative plaintiff in a multi-jurisdictional class action commenced in a province elsewhere in Canada involving the same or similar subject-matter “may make submissions at the certification hearing” in the Saskatchewan class proceeding. The Court of Queen’s Bench granted a stay of the Saskatchewan class proceeding upon the application of a representative plaintiff in a similar Ontario class proceeding action (the “Ontario Plaintiff”). This decision was appealed to the Saskatchewan Court of Appeal.

The Saskatchewan Court of Appeal has now decided that the Court of Queen’s Bench was correct to permit the Ontario Plaintiff to adduce evidence and present arguments in the certification application, but that section 5.1 could not be construed so broadly as to permit him to apply for a stay of the Saskatchewan class proceeding (Ammazzini v Anglo American PLC, 2016 SKCA 164).

The Court of Appeal held that the Ontario Plaintiff’s right to make “submissions” pursuant to section 5.1 was not limited to the right to make oral representations, but included the right to make written argument and adduce evidence. The Court of Appeal held that section 5.1 was intended to confer a right to present information or argument to the certification judge so that he or she can be fully informed of all relevant information,[1] but in particular, of information required to determine whether it would be preferable for the claims or common issues raised in the Saskatchewan class proceeding to be resolved in a different proceeding in another jurisdiction.[2]  In order to make this determination, the certification judge should be informed of (1) the nature and status of class proceedings in other jurisdictions and (2) the views or perspectives of the representative plaintiffs in other class proceedings regarding the resolution of claims outside of Saskatchewan.

On this basis, the Court of Appeal concluded that the right to “make submissions” did not extend so far as to confer the right to apply for a stay of the Saskatchewan class proceeding. For one thing, the plain meaning of making “submissions” did not include the right to initiate a proceeding that may result in specific relief.[3]  In addition, in other provisions by which the statute conferred the right to make an application, the word “apply” was specifically selected.[4]  Its absence from section 5.1 suggested that the Legislature did not intend for that section to confer a right to make an application.  Finally, it did not serve the purpose of section 5.1 (to ensure that the certification judge could make an informed decision regarding certification) to also allow representative plaintiffs from other jurisdictions to initiate applications that could change the course of a class proceeding in Saskatchewan.

Although overturning part of the certification judge’s interpretation of section 5.1, the Court went on to rule that the judge was right to order a stay of the Saskatchewan class proceeding pursuant to section 6(2).  That section provides that, where a multi-jurisdictional class action commenced elsewhere involves the same or similar subject-matter to the Saskatchewan class proceeding, the judge must consider whether it would be preferable to deal with the claims in the other action.  Thus, the certification judge was required to perform the very same analysis that the judge did perform in deciding the Ontario Plaintiff’s stay application.  Indeed, the certification judge expressly held that, even were it not for the stay application, he would have granted the same stay order.[5]  The Court of Appeal agreed with this conclusion and the stay order was therefore upheld.

The Court of Appeal’s decision in this case has further clarified the role that a representative plaintiff from a jurisdiction other than Saskatchewan may play in a Saskatchewan class proceeding. Such a plaintiff may make oral and written argument and adduce evidence but may not initiate applications such as stay applications.

[1]           Ibid, at paras 30, 45.

[2]           Ibid, at para 45.

[3]           Ibid, at para 50.

[4]           Ibid.

[5]           Ibid, at para 53.

The Québec Court of Appeal confirms the dismissal at the authorization stage of a shareholder class action against the directors and officers of a public company

Posted in Class Actions
Jean-Philippe Mathieu

In Groupe d’action d’investisseurs dans Biosyntech c. Tsang, 2016 QCCA 1923, the Québec Court of Appeal (Justices Schrager, Dutil and Parent) recently confirmed the decision of the Québec Superior Court to dismiss at the authorization stage a shareholder class action against the directors and officers of a public company.

Background

The Petitioner sought leave to institute a class action on behalf of the shareholders of BioSyntech, a medical device public company that filed for bankruptcy in 2010, against its eight directors and officers. BioSyntech was a biotech start-up and its success rested on its ability to access capital to develop and market a promising medical device, BST CarGel. In the aftermath of the financial crisis of 2008, BioSyntech was not able to access sufficient capital to conclude its pivotal trial and reach the European and Canadian markets with its product, which ultimately led to its bankruptcy in 2010. The Petitioner alleged that BioSyntech’s bankruptcy was avoidable and resulted from a pattern of faults of the directors and officers, who failed to properly address the company’s financial condition. The Petitioner argued that, as a result of the faults of the directors and officers, the shareholders were deprived of the possibility to share in the potential profits of BioSyntech and were therefore entitled to compensatory damages.

Before the Québec Superior Court (“QCSC”), the Respondents argued, inter alia, that the shareholders of BioSyntech did not have the necessary standing to institute a class action against its directors and officers since the alleged faults, should they ever be proven, would have been committed against the company and only indirectly against its shareholders and the alleged damages (i.e. the loss in value of BioSyntech’s shares) would have been suffered by the company and only indirectly by its shareholders. The QCSC accepted the damages argument and dismissed the Motion to Institute a Class Action on that basis.

On appeal, the Petitioner argued that the QCSC interpreted the Supreme Court’s leading cases of Peoples v. Wise and BCE Inc. v. 1976 Debentureholders too restrictively. The Petitioner argued that the Supreme Court opened the door to a direct action by shareholders against the directors and officers based on the violation of their duty of care under section 122 b) of the Canada Business Corporations Act.

The Decision of the Québec Court of Appeal

The Québec Court of Appeal (“QCCA”) first noted that “the facts of the matters before the Supreme Court did not strictly require consideration of whether shareholders are included in “stakeholders” to whom the directors owed their duty of care under Section 122 b) C.B.C.A.” and that “the debate is ongoing as to whether a direct right of action is open to shareholders against directors” (para. 21). Yet, for the purposes of the appeal, the QCCA, much like the QCSC, was prepared to adopt the Appellant’s view that shareholders had such a direct right of action against the directors and officers of a company post-Peoples and BCE Inc.

The QCCA agreed with the Respondents that irrespective of the question of the duty of care owed by the directors and officers to the shareholders, the proposed class action in the case at hand had no chance of success because the damages alleged by the Petitioner were indirect. The QCCA referred to other decisions rendered by the Courts of Appeal in British Columbia (Roback v. Gardner) and Newfoundland (Npv Management Limited v. Anthony). The QCCA also referred to the common law rule in Foss v. Harbottle, whereby shareholders cannot sue a wrongdoer where a company already has a right of action against the same wrongdoer for the same damages:

“[23] Indirect damage is not that caused by the act of the wrongdoer, but rather is caused by the damage which the wrongdoer caused. In this case, the damages claimed for the loss of share value were not caused directly by the directors alleged breach of their duty of care by not obtaining, for example, adequate financing for BioSyntech. That alleged fault might (arguably) have caused (in whole or in part) the insolvency and inability of BioSyntech to pursue its business. It is the insolvency which caused the shares to lose their value so that such damage would be caused indirectly to the shareholders by the directors.

[24] Such distinction, at least in the corporate context, is hardly exclusive to Quebec civil law. The principle is known in Common Law jurisdictions as the rule in Foss v. Harbottle. It is certainly recognized in Quebec and was explained by Laforest, J. speaking for a unanimous bench of the Supreme Court in Hercules Managements Ltd. v. Ernst & Young : […]

[…]

[26] Peoples and BCE did not change the rule in Foss v. Harbottle – they did not (and it was not necessary to) address the rule. Again, and at best, the only assistance to Appellants in Peoples and BCE is the recognition of the possibility that the Section 122 b) C.B.C.A. duty of care is owed by directors directly to shareholders. However, there is really nothing in either of the Supreme Court cases to suggest that a breach of the duty of care entitles shareholders to recover compensation from directors for indirect injury.”

Our Comments

Importantly, the QCCA confirmed that it is still possible for a class action in Québec to be dismissed at the authorization stage, despite recent Supreme Court and QCCA rulings. The QCCA refers to its recent decision in Charles v. Boiron Canada inc., where Justice Bich questions the utility of the authorization process in Québec, but still decides to maintain the dismissal of the Motion for Authorization.

According to the QCCA, the QCSC’s analysis in the case at hand had not gone beyond the filtering mechanism applicable at the authorization stage and the authorization judge was correct in denying authorization based “purely on a meticulous analysis of the legal argument under-pinning the factual allegations” (para. 33). Accordingly, it was legitimate for the QCSC to dismiss the proposed class action at the authorization stage.

Saskatchewan Court of Appeal Upholds Certification, Finds Attempted Appeal an Abuse of Process

Posted in Class Actions
Sara Albert

Summary

The Saskatchewan Court of Appeal recently confirmed that parties don’t get another “bite at the cherry” in Saskatchewan Medical Association v Anstead, 2016 SKCA 143. The Saskatchewan Medical Association’s (the “SMA”) application for leave to appeal on one decision was dismissed; however, the SMA then attempted to appeal a different but related decision using the same grounds of appeal. The Court of Appeal struck the second appeal as an abuse of process. Continue Reading

Ghost in the Machine – Pure Economic Loss in the Time of Recalls

Posted in Class Actions
Ljiljana Stanic

Plaintiffs are, in certain circumstances, able to recover pure economic loss caused by the negligent supply of dangerous products from the manufacturers of those products. [1] As long as the defect poses a “real and substantial danger” to persons or property, the plaintiff may recover for lost profits and for the costs of avoiding the danger posed by the defective products.

Generally, however, these product liability cases arise on the supply of the defective products. Is pure economic loss recoverable in the product liability context when a dangerous good is recalled and no longer supplied precisely because it has been identified as dangerous? In other words, is the absence or spectre of the dangerous good enough to ground liability for the manufacturer? In recent decision of the Ontario Superior Court on a motion to certify a class proceeding, fittingly released on Halloween, Justice Leitch opens the door to this possibility.[2] Continue Reading