Summary

Palmer v. Teva Canada Ltd., 2022 ONSC 4690 (“Palmer”) is a class certification proceeding in which the proposed representative plaintiffs were persons who were prescribed the prescription drug valsartan, a generic drug used primarily for the treatment of high blood pressure. The defendants were manufacturers of valsartan.

In the summer and autumn of 2018, several global manufacturers of valsartan, including the defendants, recalled some lots of the product due to contamination with N-nitrosodimethylamine (“NDMA”) and N-nitrosodiethylamine (“NDEA”).

The plaintiffs alleged causes of action in:

1. Negligence or product liability;
2. Strict liability;
3. Toxic battery;
4. Breach of consumer protection laws, including those in BC, Ontario, and most other Canadian provinces;
5. Breach of the Civil Code of Québec;
6. Breach of the federal Competition Act; and
7. Unjust enrichment.

The plaintiffs asserted “this case is about compensation for increasing the risk of a cancer diagnosis and is not about compensation for suffering cancer now or in the future as a result of ingesting valsartan” (para 7).

The Court declined to certify the class on several grounds, primarily for the absence of any viable cause of action. A common element running through each of the alleged causes of action was the Court’s determination that it was plain and obvious no compensable harm was pleaded, primarily owing to the fact that under Canadian law “there is compensation for the actuality of harm; however, there is no compensation for an increase in the potentiality of harm” (para 206).

Detailed Description

1. Facts

NDMA and NDEA are chemical compounds known as nitrosamines, which are found in packaged and preserved meats, cheeses, preserved or canned fish, preserved vegetables, and also in drinking water and in the air. Nitrosamines have been shown to produce liver damage, hemorrhagic lung lesions, convulsions, and comas in rats. The Court determined that NDMA and NDEA can cause cancer in humans, but “that theoretical underpinning, however, is insufficient by itself to draw the conclusion that there is some basis in fact that NDMA and NDEA are cancer carcinogens in humans” (para 78).

The Court went on to determine that there was “some basis in fact for the proposition that the exposure to NDMA and NDEA in the Defendants’ contaminated valsartan very modestly increases the risk of being diagnosed with cancer” (para 103).

The defendants voluntarily recalled valsartan from retailer distributors on July 9, 2018 and on July 13, 2018 one of the plaintiffs commenced the proposed class action by Notice of Action.

The plaintiffs, as noted above, did not advance claims of damages for bodily harm caused by the ingestion of the contaminated valsartan. Plaintiffs’ counsel acknowledged that “persons with such claims or persons anticipating such a sad prospect would have to opt out of the class proceeding to preserve the claim for physical injuries” (para 120), and would otherwise be barred by res judicata.

Instead, the plaintiffs claimed damages related to “compensable psychiatric harm from being advised that their risk of a cancer diagnosis had increased because they had ingested valsartan” (para 123). The plaintiffs also argued they suffered the “pure economic loss of medical bills, medical monitoring, refunds, and costs for drugs thrown away” (para 121).

2. Issues

At paragraph 136, the Court outlines the five-part test from s. 5 of the Ontario Class Proceedings Act, 1992 (the “Act”) which requires the court to certify an action as a class proceeding when:

1. the pleadings disclose a cause of action;
2. there is an identifiable class of two or more persons that would be represented by the representative plaintiff;
3. the claims of the class members raise common issues;
4. a class proceeding would be the preferable procedure for the resolution of the common issues; and
5. there is a representative plaintiff who:
   1. would fairly and adequately represent the interests of the class;
   2. 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
   3. does not have, on the common issues for the class, an interest in conflict with the interests of other class members.

3. Analysis

(a) Cause of Action, Common Issues and the Preferable Procedure Criteria, Generally

The Court decided to consider the cause of action, common issues and preferable procedure criteria simultaneously, as it would reveal “that all the various causes of action are not certifiable” (para 141).

The “plain and obvious” test is used to determine whether a proposed class proceeding discloses a cause of action under the Act, where the “pleading is read generously, and it will be unsatisfactory only if it is plain, obvious, and beyond a reasonable doubt that the plaintiffs cannot succeed” (para 145).

The Court recognized that novel claims would not necessarily be defeated in class proceedings but must “have some elements of a cause of action recognized in law and be a reasonably logical and arguable extension of established law” (para 147).

With respect to the common issues criterion, the plaintiffs had the burden to show that there is “some basis in fact that: (a) the proposed common issue actually exists; and (b) the proposed issue can be answered in common across the entire class” (para 152).

The preferable procedure criterion “captures the ideas of: (a) whether a class proceeding would be an appropriate method of advancing the claims of the class members; and (b) whether a class proceeding would be better than other methods such as joinder, test cases, consolidation, and any other means of resolving the dispute” (para 153).

Collectively, these three criteria were applied independently to each of the alleged causes of action, all of which were determined to have not met the standard required by the Act for certification.

(b) Products Liability

The Court recognized there were four established genres of product liability causes of action in negligence, and sets these out at paragraphs 158 to 161:

1. Design negligence, where manufacturers have a duty of care in designing the product to avoid safety risks and to make the product reasonably safe for its intended purposes;
2. Manufacturing negligence, where manufacturers have a duty of care to consumers to see that there are no defects in manufacture that are likely to give rise to injury in the ordinary course of use;
3. A duty of care to compensate consumers for the cost of repairing a dangerous product that presents an imminent real and substantial danger; and
4. A duty to warn consumers of dangers inherent in the use of the product of which the manufacturer has knowledge or ought to have knowledge.

The Court described the plaintiffs’ product liability claim as having two branches, the first being a personal injury claim for psychological harm, and the second for “pure economic loss of medical bills, medical monitoring, refunds, and costs for the drugs thrown away” (para 163).

(i) Products Liability and the Claim for Psychological Harm

The Court described the plaintiffs’ submissions as claiming “the shock and trauma of learning that one has been ingesting a carcinogen on a daily basis for months or years is self-evidently a traumatic event that rises above the ordinary annoyances of life” (para 166).

The Court declined to find this was a compensable harm, as “the current law is that the creation of risk is not wrongful conduct” (para 165). Further, the Court determined that for negligence actions “not to be doomed to fail there must be wrongful conduct causing actual harm” (para 173), and that negligence law “does not recognize the risk of injury or harm or the increased risk of harm or injury as a compensable type of damages,” (para 176) while acknowledging countervailing precedent which no longer represented “the current state of the law in Canada” (para 177). These findings were applied equally to the risk of future physical or psychological harm as well as the “present anxiety occasioned by the risk of future physical or psychological harm” (para 186).

However, even if there were a legal basis for the psychological injuries claim, this cause of action would fail at the common issues and preferable procedure stages, as they would “at best, only [be] tenuously satisfied, if they are satisfied at all” (para 188). The plaintiffs’ own expert evidence was that all eight proposed representative plaintiffs had “fully recovered from any alleged psychological harm within a few months of the recall” while four had not suffered any psychological injuries all (para 192). As a result, the evidence did not demonstrate any mental injury of a “serious and prolonged nature for the overwhelming majority of the class” (para 193).

(ii) Negligence / Product Liability

The Court next analyzed the claims for pure economic losses, characterizing the case as one for negligent manufacturing. After going over the other three categories of product liability cases and determining it was plain and obvious they did not fit, the Court stated:

[198]    […] Of the four genres of products liability causes of action, listed above, it is readily apparent, and it is plain and obvious that the case at bar is not a design negligence case since the NDMA and the NDEA were not in the valsartan as a matter of design choice.

[199]    It is also plain and obvious that the case at bar is not a duty to warn products liability case. There is no duty to warn of a danger that is not inherent in the use of the drug. […]

[200]    In the immediate case, there is no suggestion that the Defendants failed to warn about a danger inherent in the use of valsartan as it was designed and as it should have been manufactured. There is no suggestion that the Defendants failed to recall the contaminated valsartan. In the immediate case, it is a non sequitur to submit that the Defendants had a duty to warn of a danger inherent in the use of the valsartan, when the presence of NDMA and NDEA was aberrant not inherent in the use of the drug.

However, the cause of action for negligent manufacturing could not be substantiated, as it was a predicate for recovery for pure economic loss that the goods present an imminent real and substantial danger to health and safety, whereas the facts of this case disclosed a “latent but presently unproven causation of harm” which was the “opposite of imminent danger” (para 204).

This failure to establish causation of harm was fatal to the plaintiffs’ claim, even if the defendants had a duty of care and breached the standard of care, which the Court conceded “appears to be the situation,” (para 206) especially given the higher standard of care attaching to the manufacture of goods for human consumption, which approaches strict liability.

The Court proceeded to conclude very swiftly that the claim in products liability negligence for pure economic losses likewise did not satisfy the common issues criterion.

(c) Strict Liability

This cause of action was quickly dispatched by the Court, as products liability, which was the “fundamental core of the proposed class action” (para 209), is a matter of negligence and not strict liability and would also require damage to have incurred from the drug being ingested, which the court determined had not, given the analysis above.

(d) Toxic Battery

The plaintiffs’ claims for toxic battery were unique relative to their other claims, as they did not require proof of damage. The Court noted that actions of battery in respect of medical treatments are confined to “cases where surgery or treatment has been performed or given to which there has been no consent at all or where, emergency situations aside, surgery or treatment has been performed or given beyond that to which there was consent” (para 216).

Nevertheless, the Court determined it plain and obvious there was no certifiable battery cause of action. First, because the pleaded material facts are allegations of negligence, not an advertent act, and that:

The Defendants did not manufacture valsartan with the intent that it contain NDMA or NDEA and the presence of these contaminants was not an advertent act but an inadvertent one because, to quote the Plaintiffs’ Statement of Claim the Defendants “failed to adequately, sufficiently and properly inspect the safety and quality of the valsartan Drugs”, and “failed to identify the valsartan Drugs as a safety hazard” (para 222.)

Second, because valsartan was consensually prescribed by physicians for the treatment of hypertension, and there was no evidence the ingestion of the drug failed to treat that hypertension.

Third, and finally, even if there were facts to support the intentionality of harming the class members, there was no psychological harm from the battery since the class members would not be aware of the metabolization of NDMA and NDEA but for the human biology evidence at the common issues trial.

On the common issues and preferable procedure criteria, the Court determined an action for compensation should not be set in motion on account of trivial injury.

(e) Breach of Consumer Protection Laws

The Court determined that consumer protection legislation requires damages as a constituent element for liability, and there was “no basis in fact that any Class Members have suffered any compensable harm,” and the damages for refunds and the expense of bills thrown away were “de minimis and do not satisfy the preferable procedure criterion” (para 232)

Additionally, the Court found that there was no suggestion valsartan was ineffective at treating hypertension, its intended purpose, but rather that it was alleged to be impure – however there was no compensation available under the consumer protection laws for shoddy goods.

Finally, recognizing that privity of contract is not required by British Columbia, Saskatchewan or Manitoba’s consumer protection laws, it is in Ontario, and there was none.

(f) Breach of the Competition Act

The Competition Act prohibits misrepresentations, however the Court determined a “failure to disclose a non-dangerous defect in a product is not a representation for the purposes of s. 52 of the Competition Act” (para 253), and since the Competition Act also required proof of damages in the form of actual loss or damage caused by a materially false or misleading representation, and all the forms of loss or damage were already determined to be non-compensable, the plaintiffs could not meet this burden.

(g) Breach of the Civil Code of Québec

The Court’s discussion on this point was extremely brief: “for the same reasons that the Plaintiffs’ breach of consumer protection laws and Competition Act causes of action are not certifiable, the Québec causes of action are not certifiable” (para 263).

(h) Unjust Enrichment

The plaintiffs’ claims for unjust enrichment failed for several reasons. First, there had been no transfer of money, goods, or valuable services from the class members to the defendants, and while there remains a possibility for the law to recognize indirect transfers as a basis for an unjust enrichment claim, the class members did receive value in exchange for what they paid for the drugs. Secondly, the loss from a shoddy good is not a type of deprivation that is amenable to an unjust enrichment claim. Finally, even if the loss was a type of loss for unjust enrichment claims and there existed a transfer of wealth, the contract of sale between the defendants and the retailer of the pharmaceuticals “is a juristic reason for the transfer of wealth” (para 271).

(i) Identifiable Class Criterion

The Court determined that, “standing alone, as a technical matter, the class definition criterion is satisfied”, however since there were no certifiable causes of action the issue is moot (para 283).

(j) Common Issues Criterion

(i) General Causation

The common issues criterion was not satisfied, as there were no certifiable causes of action, as described above. Even still, the general causation issues failed to meet the standards required. As the court notes at paragraph 289:

In fashioning common issues by asserting that there is some basis in fact for an increased risk of cancer while conceding it is premature to conclude that valsartan causes cancer is confounding, confusing, and baffling and makes the general causation issue uncertifiable.

(ii) Aggregated Damages

For there to be a determination of aggregate damages, a plaintiff must be able to prove all the elements of their cause of action at the common issues trial. Since all the plaintiffs’ claims, with the exception of battery, required proof of damages which were uncertifiable, the only basis for a claim of aggregate damages was with respect to the battery claim.

This too failed, however, as battery was not a certifiable cause of action, and even if it were the question on aggregate damages would not have been certifiable, since most class members would not be aware that any metabolic conversion had occurred, which was an idiosyncratic trespass to the person, if a trespass at all, and “not susceptible to a rational assessment of a minimum base level award” (para 295).

(iii) Punitive Damages

Awarding punitive damages requires the quantification of compensatory damages and the adequacy of compensatory damages to achieve the objectives of retribution, deterrence, and denunciation, and since those damages could be not made out the claim for punitive damages necessarily failed.

The Court did recognize case law from British Columbia which suggested that whether a defendant’s conduct warranted punitive damages could be certified as a common issue; however, to succeed, the plaintiffs must point to evidence beyond the pleadings to establish a basis in fact and could not.

(k) Preferable Procedure Criterion

It was necessarily that since the cause of action and common issues criteria were not met, neither would the preferable procedure criterion.

Nevertheless, the Court analyzed the alternative that if the other certification criteria were satisfied, the preferable procedure criterion would still not be satisfied: the plaintiffs’ claims were either non-compensable or de minimis, the behaviour management function of class actions would have no impact on the defendants, and the procedure was not judicially economical, with the Court likening it to a “howitzer firing BBs and not mortar shots, which is an inefficiency metaphor for a class action with both inefficient overkill and inefficient underkill” (para 312).

(l) Representative Plaintiff Criterion

The Court determined the fifth and final criterion was met, but that the point was moot, since the other certification criteria were not satisfied. Despite that, the Court canvassed the criterion in some detail, stating the test at paragraph 314:

The fifth and final criterion for certification as a class action is that there is a representative plaintiff who would adequately represent the interests of the class without conflict of interest and who has produced a workable litigation plan. The representative plaintiff must be a member of the class asserting claims against the defendant, which is to say that the representative plaintiff must have a claim that is a genuine representation of the claims of the members of the class to be represented or that the representative plaintiff must be capable of asserting a claim on behalf of all of the class members as against the defendant.

The issue of conflict of interest was discussed at length, with the defendants alleging the plaintiffs’ litigation plan was inadequate to warn of the res judicata issue identified above. The Court’s answer to this problem was to recognize the putative class members could decline to participate in the class proceedings and pursue their rights individually.

Conclusion

Palmer is a lengthy decision that provides detailed analysis of several alleged causes of action in the context of a class certification proceeding. Despite the low evidentiary standard imposed on plaintiffs at the class proceeding stage, the plaintiffs could not succeed in certifying the class, primarily because the concept of abstract psychological harm is not compensable in Canadian law, which in turn foreclosed the plaintiffs from certifying a cause of action or proving the element of causal damages to the extent required by other class certification criteria.

---

If you require further assistance, please contact David McKnight or Hollis Bromley.