Canada: The New Canada Consumer Product Safety Act: A Catalyst For Cross-Border Mass Tort Litigation?

Edited by Keith Batten.

New and expanded product safety legislation in Canada, superimposed on a backdrop of jurisdictions willing to certify mass tort and personal injury claims, has created an environment ripe for increasing class action activity across the U.S./Canada border. Thus, the development of the law governing cross-border production issues bears watching.

Mass tort claims north of the 49th parallel are a popular choice for plaintiffs' counsel in part because of the perception that the certification of personal injury claims is less onerous in Canada. There is no national class action legislation. Class actions legislation of some type exists in all provinces except one, Price Edward Island. In Ontario, class actions are governed by the Class Proceedings Act, 1992 and must first be certified by a court before they can proceed. Importantly, unlike the American regime, there is no requirement that common issues predominate over individual issues under the Ontario statute Western Canadian Shopping Centres v. Dalton: (2001). Instead, common issues relating to duty of care, whether a defect exists, and the state of the manufacturer's knowledge of the defect may satisfy the common issues threshold in the appropriate case despite the necessity of individualized assessment of causation and damages, if it is found that they will "advance the litigation" and "avoid duplication of fact finding or legal analysis": Ford v. F. Hoffmann-La Roche Ltd. (2005).

In addition, Ontario courts appear willing to recognize 'world-wide classes' of claimants who, while having a connection with a tort committed in a Canadian jurisdiction, reside internationally. In Canada, jurisdiction of a court over the parties and subject matter in a claim is determined by way of a 'real and substantial connection' test.

In Ramdath v. George Brown College of Applied Arts and Technology (2010) the Ontario Superior Court certified a class of international students. In this case, the plaintiffs sought certification of a class action against a college alleging that the course calendar for its International Business Management Program misrepresented the benefits of the program and that it falsely stated that the program would allow them to obtain three industry designations in addition to the college certificate. Importantly, the proposed class consisted of students who took the program in Toronto, but resided in China and India at the time that the claim was brought. Ramdath is arguably limited to its facts (including the relative lack of access to a comparable class actions framework for non-resident class members). The recent case of Silver v. Imax (2009) suggests, however, that Ontario courts will certify classes extending beyond their borders despite the existence of parallel proceedings. Here, the plaintiffs sought certification of a class proceeding alleging misrepresentation in the secondary securities market as well as a statutory claim under the Canadian Securities Act. The plaintiffs proposed a global class of claims consisting of everyone, including non-residents, who held IMAX shares during the period in issue. The trial judge allowed the certification of a global class and found that there was authority to certify an international class provided there was a "real and substantial connection" to the jurisdiction.

An appeal of the certification decision in IMAX to the Ontario Divisional Court was dismissed. Justice Corbett endorsed the reasons of the trial judge, but also alluded to the possibility of overlapping class proceedings in different jurisdictions. Specifically, it was held that, "[t]he proceedings are and should be complementary, to achieve a proper vindication of the rights of plaintiffs, fair process for the defendants and plaintiffs, respect for the autonomous jurisdictions involved, and an integrated and efficient resolution of claims. This requires common sense, judicial comity, and fair process. It does not require balkanization of class proceedings, but rather sensitive integration of them".

Following Ramdath and IMAX, it is plausible that future Canadian courts will accept jurisdiction in global mass tort claims involving non-residents in circumstances where the product is designed, manufactured, sold or distributed from Canada.

The relationship between product recalls and class actions is well established by case law, with many examples of class actions following product recalls. At the same time, and over the last decade, there have been increasing class actions across the Canada/U.S. border, particularly in the area of mass tort and products liability with a developing trend of mass tort products liability claims migrating to Canada. It is suggested that the ability to recycle aspects of U.S. proceedings and the lower threshold for certification in Canada are factors leading to the export of products litigation.

This relationship is only likely to be solidified as a result of new product safety legislation. In the period since the Canada Consumer Product Safety Act (2010) (CCPSA) came into force, counsel and their clients have been waiting for the first public recall reports. The interest in the CCPSA stems from its requirement that those who manufacture, import or sell consumer products in Canada report all incidents related to the product to Health Canada. Importantly, the scope of what constitutes an "incident" extends to worldwide recalls or other actions taken by foreign governments regarding the product in question. In addition, Health Canada now has authority to unilaterally initiate product recalls. The CCPSA may therefore draw significant attention to multinational consumer product companies who either conduct business in Canada or sell products in Canada and abroad.

As a result of a combination of these two factors ((i) robust reporting and recall legislation; and (ii) fertile ground for mass tort class actions), manufacturers and their counsel will want to pay very careful attention to instances of recall and reporting under the CCPSA. They will also want to pay careful attention to the important procedural implications of cross-border products liability class actions, two of which are discussed below.

I. The Canada Consumer Product Safety Act: A New Recall and Oversight Regime

The scope of the CCPSA is broad. It not only applies to manufacturers, but also to those who import and sell the product. Pursuant to section 14, upon becoming aware of an incident related to a product, importers, manufacturers, or those who sell a consumer product must report the incident to Health Canada within two days. A written report detailing the incident, the products involved, any products that could be involved in a similar incident and any measures proposed to be taken with respect to the products, must be filed within ten days.

Section 14 of the CCPSA defines 'incident' very broadly. It includes, "an occurrence in Canada or elsewhere that resulted or may reasonably have been expected to result in an individual's death or in serious adverse effects on their health, including serious injury." A recall initiated by a foreign entity for human health or safety reasons is an 'incident' for the purposes of the CCPSA.

Prior to the enactment of the CCPSA, product recalls in Canada operated on a voluntary basis by the manufacturer. As a result of section 31, however, the Minister of Health (Health Canada), has been granted statutory authority to oversee the recall of consumer products. By virtue of section 31, if the Minister believes on reasonable grounds that a consumer product is a danger to human health and safety, he or she may order that the manufacturer, importer or seller recall the product.

The CCPSA also provides the Minister of Health with wide ranging authority to order manufacturers and importers to take measures in response to recalled and dangerous products. Under section 32, Health Canada may order a manufacturer, importer, seller, or advertiser of a consumer product to take measures such as: stopping the manufacturing, importation, packaging, storing, advertising, sale, labeling, testing or transportation of the consumer product. Health Canada may also order any measure that it considers necessary to remedy non-compliance with the CCPSA or the regulations. The Minister may also order these measures if there has been a voluntary recall undertaken by the manufacturer or importer.

Section 33 of the CCPSA grants the Minister of Health the authority to carry out a recall or measure at the person's expense if there has been non-compliance with an order under sections 31 and 32.

Finally, by virtue of sections 16, 17 and 18 of the CCPSA, confidential business information may be disclosed where the information relates to a serious and imminent danger to human health and safety, where the disclosure of the information is essential to address the danger. This information may be disclosed to other persons, governmental bodies and the general public. Importantly, the decision as to whether to disclose confidential information is made unilaterally by Health Canada.

Under the CCPSA, the Minister of Health is granted the authority to make a wide array of regulations related to the sale and marketing of consumer products, as well as the recall and communication requirements under the CCPSA. Presently, 33 regulations have been enacted. At this point, there are no enacted regulations related to the recall of products, communication of warnings, or to the measures that Health Canada may order under section 32. Over time it is expected that additional regulations will be enacted to address these sections of the CCPSA.

II. Procedural Implications of Cross-Border Mass Tort Claims

On the assumption that the CCPSA will contribute to the growing trend of cross-border mass tort class actions, the differences between production and disclosure obligations in Canada and the U.S. may create significant tactical implications for counsel and clients involved in cross-border litigation.

A) Discovery in Parallel Canada-U.S. Claims

In the case of parallel class actions brought in Canadian and American jurisdictions, the use of documentary production in one action for the benefit of another is a developing trend. While protective orders are typically issued in the U.S., American counsel should be aware that protective orders are not necessarily a bar to plaintiff's access to discovery evidence in a parallel action in Canada.

In the case of Vitapharm v. F. Hoffman-LaRoche Ltd (2001) (Ontario), Canadian plaintiffs in parallel price fixing litigation sought access to U.S. discovery evidence. To obtain the evidence, the Canadian plaintiffs applied to intervene in the U.S. proceeding in order to modify the protective order. Subsequently, the defendants brought a motion in Canada to prevent the plaintiffs from accessing the discovery documents. The case settled before the American court was able to address the issue. However, the Ontario Superior Court dismissed the defendants' motion and held that the court should not require the plaintiffs to withdraw their application to intervene. It was held that the plaintiffs' motion was brought for the purpose of saving time and money in the Canadian proceedings. Justice Cumming further explained that access to the discovery evidence in the U.S. was consistent with the three policy objectives of the Class Proceedings Act, being: facilitating access to justice, judicial efficiency and behaviour modification. The case of In Re Linerboard Antitrust Litigation (E.D. Pa. 2004), is an example of a successful motion to intervene granting plaintiffs in the Canadian proceeding access to all discovery in the U.S. action.

While there is precedent for modification of protective orders in the U.S. to allow Canadian plaintiffs to obtain discovery evidence, we await a decision on the issue of whether parallel U.S. claimants will be able to obtain discovery evidence from actions first commenced in Canada.

In Ontario, Rule 30.1.01(3) of the Rules of Civil Procedure provide for a 'deemed undertaking' whereby all parties and their lawyers are deemed to undertake not to use evidence or information for any purposes other than for the proceeding in which the evidence was obtained. Subsection 8 provides for limited relief from a deemed undertaking if a court is satisfied that "the interest of justice outweighs any prejudice that would result to a party who disclosed evidence".

Prior to the codification of the deemed undertaking rule, a common law 'implied undertaking' rule applied. The scope of the implied undertaking was addressed by the Ontario Court of Appeal in Goodman v Rossi (1995). In this case, the court highlighted the general U.S. rule that "a party obtaining documents through the discovery process has the right to use them for any purpose unless the other party has obtained a protective order with respect to their use". In Ontario, the U.S. approach was not intended to be adopted with discovery intended to operate under an implied undertaking not to make use of evidence for any other purpose than the proceedings in which it was produced.

Recent Canadian jurisprudence suggests a shift away from strict adherence to the deemed undertaking rule in the context of parallel proceedings. In Logan et al. v. Harper et al. (2004), plaintiffs in a group of class actions suing for damages suffered as a result of temporomandibular joint implants, brought a successful motion for relief from the deemed undertaking rule so that production could be shared amongst the parties in 37 actions. In allowing the motion, Master MacLeod explained, "the [deemed undertaking rule] was never intended to act as a complete barrier to co-operation between counsel representing various plaintiffs in parallel litigation in which a defending party had the same or similar production obligations". The court further stated that while the rule was intended to prevent plaintiffs from using discovery information to launch a different proceeding, "this does not mean that in parallel actions under common case management each plaintiff should have to go through a process of discovery and production and purposely blind themselves to knowledge concerning what information exists and is properly producible".

While Logan involved parallel national claims, the court's reasons and the result in Vitapharm v. F. Hoffman–LaRoche Ltd. suggest that discovery evidence from a Canadian proceeding may be available to U.S. plaintiffs pursuing a parallel class action with similar common issues.

B) Litigation Privilege and the Work-Product Rule in Canada and the United States

There are significant differences in the Canadian and U.S. approaches to the privilege attached to third party information and solicitor work product. It is important to take note of the cross-border differences relating to the protection of this information.

In both Canada and the United States, litigation or work-product privilege, has been recognized to create a zone of privacy around counsel as they prosecute or defend an action. While Rule 26 of the Federal Rules of Civil Procedure in the U.S. provides an exception, whereby a party may obtain work-product if "it has substantial need for the materials to prepare its case and cannot, without undue hardship, obtain their substantial equivalent by other means", Canadian common law does not generally recognize a similar exception. As a result, during the active prosecution or defence of an action, third party and lawyer opinions and conclusions are generally not discoverable in Canada.

A second difference between the two approaches is that in the U.S. work-product is given a perpetual protection. The Canadian common law protection is time-limited and ceases to apply upon the termination of the litigation. The differences between the Canadian and American approaches to solicitor work-product must be carefully considered. With the liberalization of cross-border discovery, manufacturers and their counsel must be aware that opinions and conclusions formed in the course of a Canadian parallel action may become discoverable by American plaintiffs at its conclusion. Conversely, Canadian Courts may order disclosure of documents that otherwise meet the test for privilege in the American jurisdiction when the documents were created.

CONCLUSION

While no actions have yet been brought as a result of the recall and reporting requirements in the CCPSA, these provisions will result in the public disclosure of all globally known serious incidents. This requirement has the potential to spark considerable mass tort products liability litigation in Canada, as well as parallel actions in the United States.

The availability of international classes and a track record of certifying mass tort claims resulting in personal injury will continue to make Canada a destination jurisdiction. While currently in a fairly primitive state, it is anticipated that the law governing cross-border production of documents will develop rapidly in the next several years.

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