The Product Liability and Mass Torts Group at McCarthy Tétrault LLP is pleased to bring you our analysis of recent decisions for businesses manufacturing or selling products in Canada:
- Settling Smart: Key Insights from Dine v. Biomet Inc., 2024 ONSC 5949
- Testing, Recalls, and Liability: Lessons from Muss v 735084 Alberta Inc., 2024 BCSC 2078
- No Harm, no Action: Rejected Common Issues in Bosco v Mentor Worldwide LLC, 2024 BCSC 1931
Settling Smart: Key Insights from Dine v. Biomet Inc., 2024 ONSC 5949
Dine v. Biomet Inc., a recent decision from the Ontario Superior Court of Justice, is a useful reminder that defendants benefit from building a strong case on the merits even if they ultimately settle. It also emphasizes the importance of appropriately tailoring a settlement structure.
The issue before the Court was approval of a settlement against Biomet, a manufacturer of medical devices. In considering the fairness of the settlement, the Court referred repeatedly to the "significant litigation risks" the plaintiffs faced. Those risks were a result of the defendants' "vigorous" efforts to defend the case.
Background
The plaintiffs were individuals who had undergone hip replacement surgeries with Biomet hip implants. They alleged serious complications following surgery, including pain, discomfort, and metal-related pathologies, and asserted claims of negligent design.
Biomet was prepared to "vigorously defend the safety and efficacy of their products," through "many complex stages" of litigation,1 and, consequently, the plaintiffs' case "developed more risks" than in comparable precedent cases.2
Faced with the prospect of a lengthy and uncertain trial, both parties engaged in settlement negotiations.
Outcome
The Court approved the settlement as fair and reasonable in the circumstances.3 The Court emphasized that the settlement provided significant benefits to the class members, especially when considering the risks associated with continuing the litigation.4 Justice Glustein's decision placed considerable weight on the litigation risks that the plaintiffs faced if the case proceeded to trial.5 Those risks included the possibility of an unfavourable decision, such as a finding that Biomet's implants were not defectively designed, which would result in no compensation for the class. It was acknowledged that the particular risks related to Biomet's implants were unique and their device performed better than other hip implant systems that used comparable components in other class actions.
The Court also observed that the proposed settlement structure – a "claims-made" settlement structure – was superior to an aggregate fund structure in the circumstances, and this fact supported the settlement's fairness.6
In an aggregate fund settlement, a fixed pool of money is created to pay out class members' claims. Under a claims-made settlement, the amount of money used to pay claims depends on how many claimants come forward. The settlement is "made" by the number of claimants who ultimately do come forward.
In Biomet, the parties did not know exactly how many class members had the surgeries implicating Biomet's medical devices, due in part to the absence of a national registry in Canada tracking this information. There was a major risk of creating an aggregate fund that was either too large or too small since the total number of potential claimants was unknown. A claims-made structure was, therefore, considered to be a much fairer basis on which to settle the claims.
Given the litigation risks and the preferable structure of the settlement, the court concluded that the settlement was in the best interests of the class members.7 The approval reflected the balance between the benefits of the settlement and the potential uncertainties of a prolonged legal battle.
Key Takeaways
- As a defendant, building a strong case on the merits is essential, even when cases will likely settle, as it will strengthen negotiation leverage.
- The proposed settlement structure for a class action must be carefully considered to match the particular circumstances of the class and the case in order to maximize the likelihood that it is approved by the court.
Testing, Recalls, and Liability: Lessons from Muss v 735084 Alberta Inc., 2024 BCSC 2078
In Muss v. 735084 Alberta Inc., the British Columbia Supreme Court provided helpful commentary on the importance of pre-market testing and recall management, especially in respect of dangerous products.
Background
The defendant Earth Management designed and distributed pyrotechnic explosive devices called bear bangers. The plaintiff suffered injuries when one of Earth Management's bear bangers exploded in his hand.
Earth Management became aware of problems with the bear bangers between about April 2016 and October 2017. The bangers had a tendency to explode rather than to shoot up into the air as intended. Earth Management had stopped selling the bangers in October 2017 because "too many people [were] getting injured, and its not right".8
A limited recall was attempted. An Earth Management executive created a list of retail customers that had bought the bangers (there were fewer than 80) and sent a letter asking them to stop selling the bear bangers.9 However, there was no proof any of the letters had been received. Earth Management never received a response from any of its customers. It followed up with its largest customer, but not with any of the others.10
The plaintiff alleged that Earth Management negligently distributed a defective product and also negligently conducted its recall.
Outcome
The Court found that Earth Management had negligently distributed the bear bangers, causing the plaintiff's injury. Earth Management's pre-market testing of the bear bangers fell short of industry standards, and indeed was limited to sporadic random detonations by a company executive. There was no record of these tests and no system in place for quality control.11 Justice Wilkinson pointed out that more thorough testing could have revealed the defect and prevented harm.12
The Court also found Earth Management liable for negligence in respect of the recall. The scope of the recall – writing a single letter and not following up – was inadequate given the serious risk of harm posed to users of the bear bangers.13
A recall meeting the requisite standard of care would have, at minimum, have involving phoning or emailing each customer to confirm that they received the letter and were aware that the product was dangerous to users and should not be sold. That did not happen, and seemingly, the plaintiff was able to purchase a defective bear banger years after the intended recall.14 The court awarded damages to the plaintiffs, reflecting the financial and safety impacts caused by the product defect and the recall's shortcomings.
Key Takeaway
1. Businesses must conduct thorough pre-market testing that meets or exceeds industry standards to identify potential defects before products reach consumers. Failure to do so not only increases the risk of harm but also exposes companies to legal and financial liabilities.
2. When defects are identified, companies must act swiftly and comprehensively to execute a dependable recall program. Clear communication, robust outreach efforts, and guidance for affected users are essential to minimize harm and demonstrate diligence in addressing known product issues.
Footnotes
1. At para. 149, 152.
2. At para. 150.
3. At para. 129.
4. At para. 129.
5. At paras 92-94.
6. At para. 96.
7. At para. 129.
8. At para. 125.
9. At para. 129.
10. At paras. 128-129.
11. At paras. 112-114, 169.
12. At para. 146.
13. At para. 163.
14. At para. 165.
To view the full article click here.
To view the original article click here
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
