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Product Liability e-COMMUNIQUÉ - September 2016

Published: 09/01/2016

By Peter Henein, Stefanie Holland, Emily Larose, Glenn M. Zakaib, Carly Cohen, Christopher Horkins, Jeremy Martin, Stephanie Voudouris

In This Issue

  1. The Great Merits Debate Continues: Alberta Court of Appeal Reaffirms Low Evidentiary Threshold for Certification of Product Liability Class Action
  2. How To Win a Case with No Evidence: Divisional Court Finds Defect In Small Claims Court’s Decision
  3. It’s Not Too Late To Say Sorry: Pleadings Struck in Takata Class Action Based on Ontario’s Apology Act
  4. Cassels Brock Product Liability Group Contributes to “Getting the Deal Through: Product Liability Canada 2016”
  5. Regulating Risk: Keeping You Up-To-Date on Product Regulation
  6. What We’re Up To

The Great Merits Debate Continues: Alberta Court of Appeal Reaffirms Low Evidentiary Threshold for Certification of Product Liability Class Action

By Glenn M. Zakaib

In the recent Alberta Court of Appeal decision in Warner v Smith & Nephew, the Court overturned a denial of certification in the case of a proposed class action involving hip implants which were alleged to fail prematurely and deposit toxic cobalt into the body.1  Much like the Ontario certification decisions in Vester v Boston Scientific and Dine v Biomet, which we reviewed in our February 2016 newsletter, the Alberta Court of Appeal’s decision in Warner highlights the ongoing debate over the certification criteria and the degree of merits analysis which is appropriate on a motion to certify a product liability class action.

Overview and Initial Denial of Certification

The plaintiff had undergone hip surgery and had a Birmingham Hip Resurfacing System (the System) implanted into her joint.  Within months of the surgery she experienced popping and clicking and further tests revealed the presence of cobalt at toxic levels.  She underwent a further procedure to have her hip replaced and then initiated a proposed national class action on behalf of all recipients of the System and their derivative claimants.

The motions judge at the Alberta Court of Queen’s Bench dismissed the plaintiff’s certification motion due to lack of evidence of an identifiable class of 2 or more persons, that the claims did not raise a common issue, that a class proceeding was not a preferable method for resolving the common issue, and that the appellant was not a proper representative plaintiff.

Certification by Alberta Court of Appeal and Rejection of Merits Analysis

In overturning the dismissal of certification, the Alberta Court of Appeal noted that product liability class actions lend themselves well to certification and provide a more efficient means of recovery for plaintiffs who have suffered harm from a mass-produced product. The Court further noted that class proceedings legislation should be construed liberally and the principle that certification is intended to address the form of the action and not the merits.

In keeping with this view, the Court held that only the minimum amount of evidence is required to address each of the certification criteria. The Court reaffirmed that consideration of the merits of the litigation is neither required nor warranted, nor is the weighing of conflicting evidence. Reviewing each of the certification criteria, the majority of the Court of Appeal believed that the motions judge had engaged in a merits rather than procedural evaluation of the case.

In examining the “preferable procedure” criteria, which the motions judge had particularly focused on in his decision, the Court concluded that the motions judge’s approach demonstrated an improper weighing of the merits. The Court held that the question at this stage is not whether the claim will succeed or that there is some basis in fact for the claim, but rather whether there is some basis in fact for the procedural requirement that a class action be a preferable procedure.

A Dissenting View

A dissenting judge at the Court of Appeal took the view that a review of the merits could become indirectly relevant during some parts of the analysis of the certification criteria.  He held that the test of the merits on certification is a very low standard, but must be something more than symbolic scrutiny. He further noted that the sufficiency of the evidence may be a factor in determining, ultimately, whether a class proceeding is a “preferable procedure.” Nonetheless, he agreed with the majority that the motions judge’s evaluation of the merits in this case had gone too far.

In examining the “preferable procedure” criteria, the dissenting judge noted particularly the evidence that no scientist or doctor had been able to resolve the issue of what effect metal ions released into the bloodstream from friction in metal implants would have and that it would be unrealistic to think that a trial judge would be better placed to determine this issue. With this background the dissenting judge questioned how the plaintiff would be able to prove on a balance of probabilities some “credible or plausible” strategy to determine the common issue at trial. Ultimately, the dissenting judge would have still overturned the motions judge’s decision in part, certifying the proposed class proceeding on a narrower class definition and set of common issues than that adopted by the majority.

Key Take-Away Principle

This case demonstrates the ongoing struggle of Canadian courts with respect to the extent to which the merits of the litigation should be considered, if at all, at the certification stage of a product liability class proceeding. It also highlights the continuing view of the courts that products liability class actions are, for the most part, ideal for class treatment, particularly where the court views there to be class-wide commonality. The prevailing view has been to move further away from any merits consideration and focus solely on the procedural requirements for class certification. The courts also continue their trend of lowering the evidentiary bar for demonstration of some basis in fact for the elements of class certification.

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1 2016 ABCA 223, <http://canlii.ca/t/gsnhz> [Warner].

 

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How To Win a Case with No Evidence: Divisional Court Finds Defect In Small Claims Court’s Decision

By Stefanie Holland

In Marcil v Eastview Chevrolet Pontiac Buick GMC Ltd., a troubling decision for automotive dealers, the Ontario Divisional Court recently overturned a Small Claims Court judge’s dismissal of a Sale of Goods Act claim against an auto dealer despite the fact that the evidence disclosed no proof of a defect in the vehicle.1

Overview

The plaintiff purchased a new 2009 GMC Sierra Duramax truck in April 2010. While driving, the plaintiff alleged that his vehicle began to accelerate suddenly despite his attempts to brake. Believing their lives were in danger, both the appellant and his passenger jumped out of the moving vehicle, sustaining significant injuries. After the incident, the vehicle was inspected by two different GM dealers’ service departments. Both dealers were unable to identify any problems with the vehicle. The plaintiff commenced a claim against the dealer who sold the vehicle for the cost of a replacement vehicle plus the value of options not included in the replacement vehicle.

At trial, the Ontario Small Claims Court dismissed the plaintiff’s claim, finding no evidence of a defect in the vehicle or that there was a breach of an implied warranty pursuant to Ontario’s Sale of Goods Act.  The plaintiff appealed the decision to the Ontario Divisional Court.

Appeal to the Divisional Court

On appeal, the Divisional Court set aside the Small Claims decision, finding that there was evidence of a defect, but no evidence as to the cause of such defect. The Court relied on the principle that in cases dealing with a breach of warranty arising from an alleged defective product, the defect need only be proven on a balance of probabilities.  Where the cause of the defect is simply unknown, the Court held that a plaintiff may be able to meet this burden of proof by way of inference.

In this case, the Court found the plaintiff’s evidence regarding the alleged sudden acceleration event to be credible and that he had established a foundation for an inference of a defect as a result of his evidence of the accident and by demonstrating that there had been no misuse of the vehicle prior to its alleged failure. This was sufficient for the Divisional Court to conclude that the only reasonable inference to be drawn was that the incident could only have occurred as a result of a defect, whether or not the cause of that defect could be determined.

Key Take-Away Principle

This decision is unsettling. It suggests that courts may conclude that a product is defective, despite having no evidence of the nature of such a defect. Even more unnerving is that such a conclusion could be drawn from a simple inference, rather than from actual evidence, and in the face of multiple mechanical inspections of the vehicle which disclosed no defect.

By this reasoning, liability might be found simply by virtue of the fact that an accident has happened. At its worst, the Divisional Court’s decision in Marcil presents the worrisome possibility of a revival of the doctrine of res ipsa loquitur in Canadian law, which would allow plaintiffs to succeed in defect claims without any evidence of the alleged defect. An unexplained or unexpected incident does not constitute a defect in law but this decision suggests that a simple inference may be able to change that.

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1 2016 ONSC 3594, <http://canlii.ca/t/gsdbl> [“Marcil”].
 

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It’s Not Too Late To Say Sorry: Pleadings Struck in Takata Class Action Based on Ontario’s Apology Act

By Christopher Horkins

A recent decision from the Ontario Superior Court of Justice demonstrates how Ontario’s Apology Act can be a useful tool for defendants in product liability cases. The decision by Justice Perell in Coles v Takata Corporation, a series of five proposed class proceedings arising from the highly publicized mass recall of Takata airbag inflators, granted a motion by the defendant airbag manufacturer to strike portions of the Statements of Claim citing apology statements made by Takata executives as admissions of liability.1

Background and Alleged Admissions

The proposed class actions were commenced on behalf of all purchasers in Canada of the vehicles containing the recalled Takata airbag inflators, which were alleged to contain a defect causing the airbags to rupture and pose a danger to vehicle occupants.

In their Statements of Claim, class counsel pleaded, under the heading “ADMISSIONS BY TAKATA CEO,” excerpts of statements made by executives of Takata apologizing for the injuries and fatalities caused by the airbag inflator products at issue. The statements were made at meetings of Takata shareholders in Japan as well as before United States Senate Committees in Washington D.C. The Statements of Claim pleaded that these statements were “an admission” that Takata breached its standard of care in manufacturing the airbag inflators at issue and in its dealings with consumers and regulators in Canada and the US.

The Apology Act

Ontario’s Apology Act, introduced in 2009, is a short piece of legislation which states that an apology will not constitute an admission of fault or liability and will not be admissible evidence in a civil proceeding for that purpose. The Apology Act is based on similar legislation in other jurisdictions, however there is no equivalent statute in either Japan or the District of Columbia.

The plaintiffs contended that, since the statements at issue were made outside of Ontario, the Apology Act did not apply. The Court rejected this argument, finding that the Apology Act related to the law of evidence, which is procedural rather than substantive and must therefore apply to any action brought in Ontario courts. Alternatively, the Court would have struck the pleadings at issue on the basis that the statements were pleadings of evidence, not material fact, and therefore offended the basic rules of pleadings under Ontario’s Rules of Civil Procedure. The Court did note, however, that while the pleading of an apology should be struck, this does not prevent a party from raising such a statement on an examination for discovery in order to test whether the statement is in fact an apology or whether certain portions of the statement would be relevant, non-apologetic evidence going towards liability.

Key Take-Away

The decision in the Takata cases demonstrates that Ontario’s Apology Act can be used to shield statements of apology from being relied upon as admissions in a pleading, regardless of whether those statements were made outside of Ontario. This will likely be a useful tool for product liability defendants in cases which involve allegations of defects in mass-produced products. The broad applicability of the Apology Act should also help ease potential conflicts between public relations and legal advice in such cases by helping ensure that a well-intentioned public apology is not later used against a defendant manufacturer in court.

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1 2016 ONSC 4885 (CanLII), <http://canlii.ca/t/gsr7k> [“Takata”].

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Cassels Brock Product Liability Group Contributes to “Getting the Deal Through: Product Liability Canada 2016”

Senior members of the Cassels Brock Product Liability team, Emily Larose, Glenn Zakaib and Peter Henein, once again contributed to the Canadian portion of “Getting the Deal Through: Product Liability” 2016 Edition. Getting the Deal Through is an informative guide to the Canadian legal system and landscape for product liability claims. Click here for a copy of the publication.

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Regulating Risk: Keeping You Up-To-Date on Product Regulation

Here’s a look at what’s new with product regulation and oversight in Canada.

1. Health Canada Releases Report on Regulatory Transparency and Openness

Health Canada has issued its Annual Report summarizing the steps it took in 2015-2016 to provide Canadians with tools and information to assist them in making health decisions.

The report notes that Health Canada’s launch of the Drug and Health Product Inspections Database. This database provides previously unavailable information about drug manufacturing, clinical trials, medical devices, pharmacovigilance practices and cells, tissues and organs.

Planned 2016-2017 activities of note include:

  • Providing information to the public on drug shortages
  • Providing more guidance to support compliance with regulatory requirements
  • Expanding publicly available information about Health Canada’s approval decisions regarding high risk
  • Expanding and enhancing inspection reporting across a wide range of products including drugs, medical devices, marijuana for medical purposes and consumer products

The report can be accessed at here.

2. New Crib, Cradles and Bassinet Regulations

Health Canada has released new Cribs, Cradles and Bassinets Regulations under the Canada Consumer Product Safety Act to replace the existing regulations, originally brought into force under the Hazardous Products Act.

The new regulations come into force on December 29, 2016. They can be found at here.

3. Consumer Product Safety Reports and Enforcement Activity

Health Canada reports that in the January 1, 2016 to March 31, 2016, period it received 451 reports on human health or safety concerns related to consumer products and cosmetics.  54% of these were received from industry. The largest proportion of reports involved either appliances or housewares, which made up just under half, collectively.

Health Canada’s Consumer Product Safety Program has also released reports on its cyclical enforcement projects relating to:

  • Teethers
  • Charcoal
  • Rattles
  • Phthalates

These reports can be found here.

4. Microbeads Designated as Toxic Substance

As of June 29, 2016 Microbeads have been added to Schedule 1, under the Canadian Environmental Protection Act 1999. Microbeads are defined as plastic microbeads that are less than or equal to 5 mm in size.

It is anticipated that this designation will be followed by regulatory mechanisms to restrict or even prohibit the use of microbeads in cosmetics and other consumer products.

More information regarding the status of microbeads can be found here.

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What We’re Up To

  • Cassels Brock continues to receive recognition for its industry leading Product Liability team in 2016:
     
    Peter Henein and Glenn Zakaib were recently named to the 2017 Edition of Best Lawyers in Canada for Product Liability, joining a contingent of 50 Cassels Brock lawyers named for their expertise in various practice areas. Glenn Zakaib and Tim Pinos were also named for Class Actions.
    o Cassels Brock was recognized as a leading firm for Product Liability and Class Actions litigation in the Canadian Legal Lexpert ® Directory 2016. Glenn Zakaib was also recognized individually for expertise in Product Liability and Class Actions.
    Glenn Zakaib was named to the 2016 edition of the Best of the Best Expert Guide published by Euromoney Legal Media Group for Product Liability. 
  • Chris Horkins will be speaking on “Defending Product Liability Claims in Canada: What You and Your Clients Need to Know” at the Young Lawyers’ Breakout Session of the Defence Research Institute’s 2017 Product Liability Conference in Las Vegas, Nevada, on February 8-10, 2017.

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