Two recent decisions illustrate just how difficult Canada is becoming as a jurisdiction for class actions defendants, particularly companies in the pharmaceutical industry. Frequently, identical consumer products, drugs, and medical devices are marketed in Canada as well as the U.S. When a product is recalled, or new science suggests risks in a product leading to American product liability and mass tort litigation, Canadian plaintiff attorneys have not been bashful about bringing copycat litigation, borrowing from U.S.-conducted theories and discovery. However, Canada appears not to be mimicking the trend against personal injury class actions in the U.S.
Quebec was the first Canadian province to enact class action procedures in 1978, and a 2003 amendment to the Quebec Code of Civil Procedure simplified the class “authorization” process. In practice, the amendment may have made it easier for plaintiffs to obtain certification. The requirements are that the claims of the members raise identical, similar or related questions of law or fact (true commonality not required); the facts alleged seem to justify the conclusions sought; the composition of the group makes joinder difficult or impracticable; and the member to whom the court intends to ascribe the status of representative is in a position to represent the members adequately. Not a daunting challenge in some fact patterns. Notice the absence of predominance, superiority, and manageability as explicit factors.
In Ontario, class action procedures were developed much more recently, dating back only to 1992. They permit certification when there is an identifiable class of two or more persons that would be represented by the representative plaintiff or defendant; the claims or defenses of the class members raise common issues; a class proceeding would be the preferable procedure for the resolution of the common issues; and there is a representative plaintiff who would fairly and adequately represent the interests of the class, has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and does not have an interest in conflict with the interests of other class members.
First, in the latest ruling in the HRT litigation against Wyeth, the Supreme Court of British Columbia refused to dismiss a putative class action in which plaintiffs in Canada allege that Premarin and Premplus therapy treatments caused breast cancer. Stanway v. Wyeth Canada Inc., 2008 BCSC 847 (June 27, 2008). The company denies the claims alleged in the litigation, insisting the products have carried an adequate label warning of a heightened risk of breast cancer, based on state of the art. Indeed, HRT drugs are still approved by the FDA as safe and effective and remain on the market.
The Canadian plaintiffs asserted two causes of action against the defendants. The first is for negligence, and the second is a statutory cause of action for deceptive acts and practices under the province’s Business Practices and Consumer Protection Act. Wyeth’s motion asserted that the court lacked “territorial competence” over the U.S. entities of the company pursuant to the Court Jurisdiction and Proceedings Transfer Act, S.B.C. 2003, c. 28 (the “CJPTA”).
The U.S. Wyeth entities offered the position that there is no real and substantial connection between British Columbia and the facts upon which the proceeding against the U.S. defendants is based. Wyeth presented affidavits showing that the executives and staff of the U.S. defendants have not managed and do not manage North America as a single market. They have not interfered and do not interfere with the Canadian market. The U.S. defendants do not play a controlling or decision-making role in the pharmaceutical operations of the Canadian defendants. Individuals within Wyeth Canada reported directly or indirectly to the president of Wyeth Canada, not to anyone at Wyeth Pharmaceuticals. Employees of Wyeth Canada may have liaised with counterparts at Wyeth Pharmaceuticals but did not answer to them. Wyeth Canada owns the Canadian patents and trademarks for Premarin, holds various approvals for Premarin from Health Canada.
Moreover, Wyeth Canada runs its own marketing campaign and designs its own packaging, independently from U.S. Wyeth. The U.S. defendants do not conduct any sales or promotional activity related to Premarin or Premplus in Canada. Wyeth Canada runs its own marketing campaigns and designs its own packaging. Wyeth Canada generates its own promotional literature and a copy review committee of Wyeth Canada signs off. Warnings and other information are the responsibility of Wyeth Canada. It has its own independent training group and there is no functional reporting relationship between Wyeth Canada and Wyeth. Wyeth Canada’s marketing employees meet with their worldwide counterparts to exchange ideas and practices. Wyeth Canada tracks sales and decides whether or not to market a particular product.
The only Premarin tablets sold in Canada during the period the plaintiff says that she was prescribed the product would have been manufactured in Canada. At no time have any packages of Premarin or Premplus sold in Canada identified any association with U.S. Wyeth.
The plaintiff’s allegation was that Premarin and Premplus were introduced into and maintained within the Canadian stream of commerce. She alleged that the defendants are jointly involved with or responsible for the negligent manufacturing, testing, marketing, labeling, distribution, promotion and sale of Premarin and Premplus to consumers in British Columbia, and that they failed to warn her about the dangers of taking these drugs.
The Court noted that the plaintiff must prove circumstances that constitute a real and substantial connection between British Columbia and the facts on which a proceeding is based. The statute gives a non-exhaustive list of relevant factors, including whether the tort was committed in British Columbia, and whether the claim concerns a business carried on in British Columbia.
Despite the powerful showing by Wyeth, the Court concluded that the plaintiff successfully established a link between British Columbia and the tort allegedly committed by the U.S. defendants under the CJPTA. The Court concluded that there is no dispute that the plaintiff alleges that she suffered damage in British Columbia. It is in the interest of the forum to protect the legal rights of its residents, and to allow injured plaintiffs “generous access” to litigation. The defendants engaged in “harmonization” and “coordination” of matters involving core monograph and labeling requirements, the efficacy of the products, and the collecting and sharing of other clinical research or trial information, said the Court. Wyeth Pharmaceuticals’ role as a central repository and coordinator for adverse event reporting for all the Wyeth affiliates worldwide demonstrated, the Court concluded, a sufficient involvement of the U.S. defendants in promoting the efficacy of the drug and its safety.
In the second recent decision, involving Eli Lilly and its Zyprexa schizophrenia drug, an Ontario appeal court affirmed the lower court’s decision that class action plaintiffs may proceed with an attempt to recover damages tied to company sales rather than individual damages. Andrea Heward vs. Eli Lilly & Co., No. 181/07, Ontario Superior Court of Justice, Divisional Court (Toronto) (July 2, 2008).
Plaintiffs accused Lilly of failing to warn that Zyprexa may allegedly cause diabetes and other disorders. Zyprexa is approved by the FDA and Canadian regulators to treat schizophrenia and bipolar disorder. The proposed national class (excluding British Columbia and Quebec) has an estimated 575,000 members. In addition to claims sounding in negligence, plaintiffs allege a so-called “waiver of tort” theory that resembles an unjust enrichment theory seeking disgorgement of profits and/or a constructive trust of the proceeds of the defendants’ sale of the drug. The interlocutory appeal was confined to the issues whether the motion court had erred in concluding that the damages (accounting, disgorgement, constructive trust) was a common issue, and whether the class proceeding is the preferable procedure to resolve the claim of waiver of tort.
Defendants asserted that the amount of damages would implicate individual issues because all class members would not have taken Zyprexa even if they had been warned as plaintiffs asserted they should have been, and plaintiffs could not show that Health Canada would not have approved Zyprexa for sale if the warnings had been different. Indeed, Zyprexa continued to be used for years after the label was amended to change the language about diabetes risks.
The Superior Court noted that “waiver of tort” is confusing nomenclature. It does not refer to waiving a right to sue, but an election to base a claim in restitution. The Court acknowledged the debate over whether the waiver of tort theory constitutes an independent cause of action or a remedy in Ontario. It is an “uncertain area of law” raising “policy concerns” which “require clarification in our jurisprudence.”
However, the Court concluded that the embryonic nature of the waiver of tort doctrine simply meant that no decisions should be made absent a full evidentiary record. The class action procedures provide options for the common issues phase to create subclasses, and craft the boundaries of the remedy of disgorgement to fit the requisite causal link, and even decertify common issues when necessary. The Court concluded that individual issues that factor into the determination of the quantum of the restitutionary disgorgement or constructive trust would not undermine the applicability of waiver of tort on a class-wide basis. This seems to confuse two issues: individual issues on quantum of damage might not alone defeat certification, but that does not make them common questions, which was the issue on appeal.
Regarding the second issue, the Court concluded that even if the amount of relief based in waiver of tort cannot be assessed in aggregate, a class action remains the preferable procedure for this claim. In potentially troubling language for defendants, the Court noted that “the only necessary evidence with respect to waiver of tort may well be simply the wrongful conduct of the defendants.” While conditional, such an interpretation of this type of claim may affect future certification decisions and stands to make future defendants liable for truly enormous amounts of damages unless clarified.