Class Actions and Limited Preemption

A door to preemption may be opening in Canada. And while multi-jurisdictional product-liability class actions remain uncertain, the mass tort movement has found increasing favor.
STRICTLY SPEAKING, THE DOCTRINE of preemption does not exist in Canada, as it does in the United States. That, however, should not be taken to mean that regulatory compliance is irrelevant in Canadian product-liability law.

“Canadian courts have ruled that compliance with a regulatory regime does provide persuasive evidence that a defendant met a standard of care and may indeed provide a substantive defense to product-liability claims,” says Craig Lockwood of Osler, Hoskin & Harcourt LLP in Toronto. “Indeed, the Supreme Court of Canada has ruled that legislative standards are relevant to, but not co-extensive with, the common-law duty of care.”

The extent of the gulf between regulatory and common-law duties, then, is an issue of considerable significance. “Recent jurisprudence suggests that that gulf may not be as broad as earlier jurisprudence has suggested,” Lockwood says. “In particular, recent decisions in the Food and Drugs Act context demonstrate that, while compliance with federal regulations does not preclude a manufacturer’s or distributor’s liability to consumers as a matter of law, it may do so as a matter of fact or — at the very least — will be materially relevant to the defense of consumer claims.”

In Andersen v. St. Jude Medical, the Ontario Superior Court of Justice dismissed claims involving the Silzone prosthetic heart valve. In doing so, the court gave significant weight to the evidence of regulatory compliance. “The very fact of regulatory approval led the trial judge to conclude that St. Jude conducted appropriate and sufficient testing that met industry and regulatory standards.”

The plaintiffs in this case also claimed that St. Jude’s post-market surveillance and warnings were inadequate, notwithstanding the fact that Health Canada had not made any recommendations regarding changes to the label or product design. As Lockwood explains, “The fact that Health Canada was aware of the risks but took no action led the trial judge to find that the plaintiffs had not established that St. Jude fell below the requisite standard of care.”

Interestingly, the trial judge also took the fact of regulatory approval into account on the issue of causation. As the court saw it, Health Canada’s subsequent approval of similar devices corroborated the safety of the Silzone device. “The decision suggests that the regulatory standards developed and applied by Health Canada may be the most persuasive evidence of the corresponding common-law standard of care,” Lockwood says. “By extension, any plaintiff who seeks to prove that a different or higher standard should apply will be tasked with compiling significant evidence sufficient to displace the evidentiary impact of the regulator’s approval.”

Still, the British Columbia Court of Appeal’s decision in Wakelam v. Wyeth Consumer Healthcare represents the closest a Canadian court has come to adopting some form of the preemption doctrine. The case involved labeling rules introduced in 2008. They required the re-labeling of children’s cough medicine to provide that the products not be administered to children under six. Wyeth complied with the rules. The plaintiffs, however, claimed that in failing to provide the warning before 2008, Wyeth had engaged in a “deceptive practice” contrary to BC’s Business Practices and Consumer Protection Act.

Wyeth raised a constitutional paramountcy argument in defense, alleging that it would have been impossible to comply with federal regulations as they existed before 2008 without breaching the BC statute. Although the court ruled that there was no “real conflict” between the two, it suggested that a conflict could arise “at a future time and on different facts.”

According to Lockwood, this statement means that the doctrine of paramountcy could be a defense to a statutory product-liability claim. “Arguably, the Wakelam decision leaves open the possibility of a modified form of preemption defense in the context of claims brought pursuant to consumer protection — or other — provincial legislation, where there is actual conflict with the FDA or related federal regulatory schemes.”

Legislative and regulatory developments may also be opening the door to preemption in Canada. Of particular significance are the marketing authorization (MA) regulations introduced by the federal Health Minister in 2012. They allow the Minister to exempt products from certain FDA requirements. “Unlike the provisions of the FDA that give rise to regulation, provisions that exempt products from regulation are arguably regulatory ceilings,” Lockwood explains. “The federal government, by granting an exemption, is expressly telling a market participant what they do not have to do.”

According to Health Canada, the MA regulations are intended to “allow more efficient approvals of safe foods that can address emerging safety issues, and better respond to innovation.” Courts could conclude that provincial laws that effectively undermine these exemptions would frustrate their regulatory purposes and be rendered ineffective by the paramountcy doctrine.

Still, the issue has not been considered by any court. “The most that can be said at this stage is that MAs and other exemptions have the potential to breathe life into a more expansive paramountcy defense — on the appropriate facts — which may be in line with certain aspects of the preemption doctrine that has developed in the US,” Lockwood says.

CLASS ACTION SCRUTINY

Plaintiffs are facing new challenges in product-liability class actions, an arena that their lawyers have traditionally prodded to fertility with a fair degree of success. “These cases are getting a lot more scrutiny, even though judges have in the past referred to them as quintessential class proceedings,” says Michael Eizenga of Bennett Jones LLP in Toronto.

One key issue is whether courts should allow certification of class proceedings by genre. “The question is whether plaintiffs should be able to lump a bunch of multiple model products into a case without showing they have a common specific design defect,” Eizenga says.

But the law remains unclear. “Judges are moving down different tracks,” says Derek Ricci of Davies Ward Phillips & Vineberg LLP in Toronto. Ricci cites conflicting decisions in Ontario arising from Superior Court Justice Edward Belobaba’s certifying a class in Dine v. Biomet (leave to appeal denied), in which Ricci was co-counsel with colleague Kent Thomson, and Justice Paul Perell’s refusal to grant certification in O’Brien v. Bard Canada and in Vester v. Boston Scientific. “In some cases, judges are taking a hard look at the evidence to see whether the products are similar enough,” Ricci says. “In others, judges are criticizing counsel for even leading evidence on the issue.”

The plaintiffs’ Bar is reacting to the uncertainty by investigating new approaches to product-liability litigation involving medical devices. “Mass torts are now clearly at our doors,” Eizenga says. These lawsuits cover a much broader range of claim types than class actions. They are particularly useful when defective products injure a large number of consumers. Because defects can cause a wide range of problems for claimants, the cases may be difficult to group into a single class.

“For example, it’s almost impossible to get drug or medical device cases certified in the US, but that hasn’t meant that there’s no access to justice,” Eizenga says. “While these cases may not normally be viable as one-offs for law firms, they become so when plaintiff’s counsel and even trial lawyer organizations coordinate their actions and assemble large numbers of cases.”

Paul Miller of Toronto and his firm, Will Davidson LLP, have spearheaded the mass tort movement in Canada. Encouraged by the results of the Vioxx litigation in the United States, they decided to forgo a class action in favor of a “mass tort” approach for their more than 200 clients with claims arising from allegedly defective pelvic mesh devices — despite the fact that Siskinds LLP and McKenzie Lake Lawyers, two Ontario firms, had already instituted class actions.

The mass tort movement is finding increasing favor with plaintiffs and defendants. “Courts are encouraging it, and both sides of the class-action Bar are responding and getting good results,” says Cheryl Woodin of Borden Ladner Gervais LLP in Toronto.

JURISDICTIONAL MAZE

The law on multi-jurisdictional class actions in Canada remains confused. “The uncertain situation in Canada is ridiculous in this world of multi-jurisdictional litigation,” says Louis Sokolov of Sotos LLP in Toronto. “It doesn’t serve anyone, including the courts and especially the class members.”

Many product-liability class actions are multi-jurisdictional in nature. The Volkswagen emissions litigation gave rise to some 29 class actions in Canada. Multi-jurisdictional cases are becoming “more and more frustrating,” says Michael Peerless of McKenzie Lake Lawyers LLP in London, Ont.

Fortunately, decisions from five appellate courts shutting down duplicative class actions as an abuse of process have restored some order to a near-chaotic situation. “In the last year, counsel have been able to collaborate by mutual agreement to avoid multiple proceedings in multiple jurisdictions,” Woodin says, citing the system access fee telecommunication cases and the Volkswagen emission litigation.

The SCC, meanwhile, has granted leave in two cases, Parsons v. The Canadian Red Cross Society and Endean v. The Canadian Red Cross Society, that will determine the right of judges from one province to sit with judges from others to hear arguments on multi-jurisdictional class actions. The entire class-action Bar is hopeful that the SCC will provide guidance on procedural steps that could further facilitate dealing with such cases.

Compounding the problem are carriage issues, which have become more heated than ever. “There is definitely a rise in carriage fights,” says Wendy Berman of Cassels Brock & Blackwell LLP in Toronto. “The problem is that counsel appear to be moving away from their prior approach of working out carriage disputes to letting the courts sort them out.”

As Kirk Baert of Koskie Minsky LLP in Toronto sees it, the courts aren’t doing enough. Despite the fact that his firm was part of the consortium appointed as class counsel in the most recent decision on carriage, Kowalyshyn v. Valeant Pharmaceuticals International, Baert cites the case as indicative of the problematic nature of the issue.

“Carriage motions continue to be expensive, complex and hard fought, as evidenced by the fact that the Kowalyshyn ruling is 250 paragraphs long,” he says. “We need a better, more objective system to determine carriage.”

SERIOUS ABOUT ENFORCEMENT

For the first time, Health Canada has imposed significant fines for non-compliance with the Canada Consumer Product Safety Act (CCPSA). The case involved a recall notice to an Alberta company, Orange TKO Industries, regarding its cleaning product known as “Orange TKO Super Concentrated All Purpose Cleaner.” The product did not meet the labeling and child-resistant packaging requirements established by CCPSA regulations.

Orange ignored the recall order and continued selling the product. “The company was warned a number of times and did not follow through,” says Mary Thomson of Gowling WLG (Canada) LLP in Toronto.

Health Canada classified the violation as serious and in September 2014 fined Orange $75,000, resulting from a fine of $15,000 per day for the five days that the violation persisted. Several months later, HC discovered that Orange had sold the product, still bearing non-compliant labels, to a retailer and imposed an additional penalty of $20,000 in February 2016.

“Health Canada is clearly demonstrating that it wants to be aggressive in this area,” Thomson says.