Treat America Limited v. Nestlé Canada Inc., 2011 ONCA 560

CITATION: Treat America Limited v. Nestlé Canada Inc., 2011 ONCA 560

DATE: 20110824

DOCKET: C53415

COURT OF APPEAL FOR ONTARIO

Feldman, Blair and Watt JJ.A.

BETWEEN:

Treat America Limited Applicant (Respondent in Appeal)

and

Nestlé Canada, Inc. Respondent (Appellant)

Robert E. Kwinter and Daniel J. Stern for the appellant, Nestlé Canada, Inc.

Darryl T. Mann for the respondent, Treat America Limited

Heard: July 26, 2011

On appeal from the order of C. Campbell J. of the Superior Court of Justice (Commercial List), dated February 25, 2011.

R.A. Blair J.A.:

Background

[1] Nestlé Canada, Inc. seeks to set aside the order of Justice C. Campbell, dated February 25, 2011. In that order, Campbell J. allowed the application of Treat America Limited to enforce a Letter of Request (“LOR”) from Judge Christopher C. Conner of the United States District Court for the Middle District of Pennsylvania.

[2] The LOR asked for the assistance of the Superior Court of Justice in requiring Nestlé Canada to produce documents maintained by or for three of its former or current employees and to produce a representative to be examined in relation to the documents and to the issues raised in the pleadings in proceedings pending in the U.S. District Court. Those proceedings (the “U.S. Proceedings”) consist of a number of class actions against several large producers and distributors of candy products alleging violations of U.S. antitrust laws by conspiring to fix prices of chocolate candy sold in the United States. These actions have been consolidated for pre-trial purposes and are now proceeding as a Multi-District Litigation in the U.S. District Court. Judge Conner is supervising them. A certification hearing is pending.

[3] The U.S. Proceedings target various corporate entities relating to well-known candy brands – Hershey, Mars, and Cadbury, as well as Nestlé. Nestlé Canada is part of the world-wide group of Nestlé companies which, together, form the largest food and beverage enterprise in the world. Nestlé S.A., a Swiss corporation, is the parent company. Nestlé U.S.A., like its Canadian sibling, is also a subsidiary.

[4] The U.S. Proceedings appear to spring from an earlier 2007 investigation by the Canadian Competition Bureau into alleged price fixing relating to the supply of chocolate confectionery products in Canada between 2002 and 2007. Those allegations involved Nestlé Canada and the Canadian entities from the Hershey, Mars and Cadbury enterprises. Search warrants were executed and records seized based on affidavits sworn by Daniel Wilcock, an officer of the Competition Bureau – affidavits that set out in some detail various “price fixing” conversations, meetings and email exchanges involving the three targeted individuals at Nestlé Canada and individuals from the other candy corporate enterprises in Canada.

[5] Nestlé Canada has never been charged with any offence as a result of the Competition Bureau’s investigation, and none of these conversations, meetings or email exchanges related to any activities in the United States.

[6] Although Nestlé Canada was initially named as a party to the U.S. Proceedings – along with Nestlé S.A., Nestlé U.S.A., and various entities connected with the Hershey, Mars and Cadbury enterprises – the claims against it were dismissed in August 2009 on jurisdictional grounds. Nevertheless, the plaintiffs in the U.S. Proceedings continue to assert allegations respecting the conduct of Nestlé Canada and its representatives in the pleadings. However, since the U.S. claims have been dismissed against Nestlé Canada, neither the U.S. District Court nor the parties in the U.S. Proceedings have any direct means to compel Nestlé Canada to produce documents that may be relevant to the pleadings or to require its representatives to be examined. This is why the respondent has resorted to the LOR application asking the Superior Court of Ontario for assistance.

The Superior Court Proceedings

[7] Treat America is one of the plaintiffs in the U.S. Proceedings and has been authorized to bring the LOR application in the U.S. proceedings and to seek its enforcement in Canada. Judge Conner issued his initial LOR on July 1, 2010. Treat America commenced an application in the Superior Court (Commercial List) on September 13, 2010, seeking an order giving effect to the LOR.

[8] Justice C. Campbell presided over the application and a series of case conferences held to resolve issues relating to production of the requested documents, but without success. Campbell J. then heard the application and delivered reasons on January 25, 2011, canvassing the facts, the issues and the law, but ultimately adjourning the application pending receipt of clarification from Judge Conner with respect to three particular areas of concern, namely,

a) whether there was any mechanism for Nestlé Canada to challenge before the U.S. District Court the scope of discovery sought on the basis of relevance in the U.S. Proceedings before production and discovery was made;

b) what assumptions the U.S. District Court makes with respect to the applicability of immunity rules and admissibility of the evidence obtained; and

c) whether he could adjourn the motion for enforcement of the LOR until after the certification motion in the U.S. Proceedings without interfering with the due process of those Proceedings.

[9] Judge Conner responded to the requests for clarification by way of a Renewed LOR dated February 15, 2011. He advised, first, that while there was no mechanism by which Nestlé Canada could challenge the scope of discovery in the U.S. Proceedings, the challenges now raised in the Ontario application (as set forth in Nestlé Canada’s factum filed before Campbell J. and provided to Judge Conner) “substantially duplicate Nestlé USA’s earlier challenges” in the U.S. Proceedings prior to the issuance of the LOR. Secondly, Judge Conner assumed that Canada’s immunity rules would apply to the discovery provided by Nestlé Canada, including the deposition testimony of the targeted witnesses and that the practical effect of that would have to be addressed in the U.S. Proceedings. He also noted that there is a Protective Order in place with respect to the U.S. Proceedings that will permit Nestlé Canada to designate as confidential, documents and testimony produced in the Proceedings pursuant to the LOR. Finally, Judge Conner advised that the Ontario court could not adjourn the LOR application until after the class certification phase in the U.S. Proceedings because of the requirement in those Proceedings that he “examine plaintiffs’ factual and legal allegations thoroughly, with a ‘rigorous analysis’ which ‘may include a ‘preliminary inquiry into the merits’” (emphasis in original).

[10] Campbell J. then heard further submissions and released his decision, with further reasons, on February 25, 2011. He stated that he was “more than satisfied with the responses to the questions posed [and] contained in the Renewed Letter of Request” and that he was “satisfied that as a matter of comity it is appropriate to honour the Letter of Request.” He granted the order for enforcement of the LOR.

Analysis

[11] Nestlé Canada appeals from that decision. Mr. Kwinter argues on its behalf that the respondent has failed to establish that the documentation and information sought are relevant or necessary for use in the U.S. Proceedings or not otherwise obtainable. He also submits that the scope of production sought is too broad and that the order sought is unduly burdensome on Nestlé Canada since it is no longer a party to the U.S. Proceedings.

[12] These arguments track the essential criteria that an Ontario court is to consider when determining whether to give effect to a letter of request, as outlined in Re Friction Division Products, Inc. and E.I. Du Pont de Nemours & Co. Inc. et al. (No. 2) (1986), 1986 CanLII 2827 (ON SC), 56 O.R. (2d) 722, at p. 732, and confirmed by this Court in a number of subsequent decisions: see, for example, France (Republic) v. De Havilland Aircraft of Canada Ltd. (1991), 1991 CanLII 7180 (ON CA), 3 O.R. (3d) 705; Fecht v. Deloitte & Touche (1997), 1997 CanLII 1799 (ON CA), 32 O.R. (3d) 417; O.P.S.E.U. Pension Trust Fund v. Clark (2006), 2006 CanLII 20839 (ON CA), 270 D.L.R. (4th) 429; and Presbyterian Church of Sudan (Re) (2006), 2006 CanLII 32746 (ON CA), 275 D.L.R. (4th) 512. Enforcement must also be consistent with the laws of Ontario and not contrary to public policy.

[13] Mr. Kwinter’s overarching argument, however – into which the others fold – is that the application judge failed to exercise an independent discretion with respect to the foregoing criteria, being content instead not to go beyond the LOR on its face and to rely on the findings of Judge Conner. He says this constitutes an error in law.

[14] I do not accept these submissions. In my view, the application judge considered and applied all of the pertinent principles, did not accept the LOR at face value and independently determined that it was appropriate, as a matter of comity, to honour the LOR. I say this for the following reasons.

[15] First, while it is true that the application judge’s reasons are relatively brief and that he did not engage in an extensive analysis of the evidence and the principles involved, context is important. This was a case-managed proceeding on the Commercial List in which there had been a number of case conferences attempting to sort out the issues relating to production and the parameters of production. The application judge is a seasoned Commercial List judge. He referred to the Friction Division Products criteria in his reasons and those very criteria – without regard to their content – would have formed the framework for the case management discussions. I am satisfied that the application judge was alive to, and applied, the relevant principles in arriving at his decision.

[16] Secondly, the application judge was sensitive to the issues of comity and deference to the foreign court that properly underlie requests for assistance, but was not a slave to them. I do not agree that he simply accepted the LOR at face value, failed to look beyond it, and did not exercise an independent discretion.

[17] Canadian courts take a broad approach to such requests, and as the application judge noted, “the exercise of discretion is based on the general principle that international comity dictates a liberal approach to requests for judicial assistance.” The classic statement in this regard is that of Dickson J. (as he then was) in R. v. Zingre, 1981 CanLII 32 (SCC), [1981] 2 S.C.R. 392, at p. 401:

It is upon this comity of nations that international legal assistance rests. Thus the courts of one jurisdiction will give effect to the laws and judicial decisions of another jurisdiction, not as a matter of obligation but out of mutual deference and respect. A foreign request is given full force and effect unless it be contrary to the public policy of the jurisdiction to which the request is directed ... or otherwise prejudicial to the sovereignty of the citizens of the latter jurisdiction.

[18] Had the application judge simply accepted the LOR at face value, he would not have made the requests for clarification that he posed to Judge Conner before finalizing his decision. Those requests touched on the extent to which the U.S. District Court would be made aware of the objections being advanced by Nestlé Canada, the extent to which the U.S. District Court would be responsive to immunity issues, and whether the request for assistance could be deferred until after the certification hearing in the U.S. District Court. The application judge received responses that satisfied him on all counts. Most significant for present purposes, perhaps, is the response to the first question: while the answer was that no procedure existed for Nestlé Canada to object to the scope of production requested in the U.S. Proceedings, Nestlé U.S.A. had in fact made all of the arguments presented before the application judge (and before us) on behalf of Nestlé Canada in the course of opposing the LOR before Judge Conner; the U.S. District Court was therefore fully apprised of the issues raised by Nestlé Canada with respect to the nature and scope of the production and examination requested.

[19] The law is clear that Judge Conner’s decision is entitled to considerable deference in the Canadian application and that the court receiving the request for assistance does not sit in appeal from the decision of the requesting court: Connecticut Retirement Plans and Trust Funds v. Buchan (2007), 2007 ONCA 462, 225 O.A.C. 106 (C.A.), at para. 13. In this case, in addition, it is apparent that Judge Conner’s decision was arrived at after a thorough review of the pleadings in the U.S. Proceedings and the evidence before him, and after full and contested argument. The LOR itself reflects the careful findings he made and his conclusions as to why the information requested is relevant to those proceedings. Judge Conner, too, is case managing a complex series of class actions that comprise the Multi-District Litigation, and is therefore familiar with the issues involved in those proceedings.

[20] These factors distinguish the application from that considered by this Court in Presbyterian Church of Sudan, where the LOR had been granted on the basis of an unopposed motion and the representations of counsel. This Court concluded that the record did not support the sweeping production order sought and that the application judge had failed to direct his mind to the important issues of relevance and obtainability. In those circumstances, the Court held at para. 32, that “an Ontario court is not bound to accept the language of the foreign request as the final say, but is entitled to go behind it to examine precisely what it is the foreign court is seeking to do,” in order to ensure that the requirements of Ontario law are met in giving effect to the foreign request. In this case, the LOR application before Judge Conner was supported by the affidavit evidence of Mr. Wilcock of the Canadian Competition Bureau, referred to above, which explains the role of the targeted Nestlé Canada individuals and sets out in considerable detail the investigative information concerning conversations, meetings and email exchanges in which they were involved. That evidence was also in the record before Justice Campbell.

[21] Mr. Kwinter argues that the Wilcock evidence does not meet the relevance test in these circumstances because the information does not pertain to anything that happened in the United States and the U.S. Proceedings do not allege any antitrust price fixing in Canada. I do not accept this submission.

[22] The pleadings in the U.S. Proceedings continue to set out allegations against Nestlé Canada and its representatives, alleging a connection between the conduct of the Canadian representatives and the U.S. antitrust activities. The pleadings tie this Canadian conduct into the U.S. Proceedings on the basis that the U.S. and Canadian markets for candy are tightly interwoven – involving integrated and substantial cross-border commerce, cooperation through the use of licensing agreements, and memberships in trade associations. It is alleged that because the Nestlé business is organized by geographic region and because Nestlé Canada and Nestlé USA are part of Nestlé’s “Zone Americas”, it is likely that decisions relating to pricing in Canada were part of an overall North American budgeting and strategic planning process which necessarily affected pricing in the United States; hence the relevance of production and discovery from the Canadian entity and its representatives.

[23] Whether these allegations can be substantiated at trial is not the question. Judge Conner has found the sought-after Canadian production and testimony to be relevant to the U.S. Proceedings. His findings to this effect are entitled to considerable deference and, it seems to me – as it did to the application judge – that they are supported on the record before him and before the application judge.

[24] I am also satisfied, as was the application judge, that the other Friction Division Products criteria are met on the record. Treat America has requested the sought-after information from Nestlé Canada in a number of ways, but without success. Since the Canadian entity is no longer a party to the U.S. Proceedings, the information is not compellable in any other fashion. It is not an answer to say that some information pertaining to the Canadian operations might be obtained from production and depositions of the other candy producers and distributors. The issue is whether evidence of the same value as that sought from the person to be examined can otherwise be obtained: Connecticut Retirement Plans and Trust Funds v. Buchan, at para. 19. That cannot be the case, in my view, because production and discovery from the other candy producers and distributors will not provide access to internal memoranda, notes of meetings and email exchanges that may exist within the confines of the Nestlé Canada internal information system. Moreover, as this Court has previously noted, where fraud-like allegations are in play – as they are in the U.S. Proceedings – evidence providing confirmation of other information is important: Connecticut Retirment Plans and Trust Funds v. Buchan, at para. 19. The criterion that the information is not otherwise readily obtainable has been met.

[25] So, too, has the criterion of necessity. For the reasons set out above in the relevance analysis, the sought-after information is necessary for the trial and for the disposition of the U.S. Proceedings. Because of the thorough and rigorous examination of the record that is necessary for the certification procedure under the U.S. rules – as explained by Judge Conner – the information is necessary at the certification stage as well.

[26] Nestlé Canada does not argue that enforcement of the LOR would be contrary to public policy.

[27] Finally, I do not accept the argument that the sought-after production and discovery would be unduly burdensome to Nestlé Canada. First, we were advised that the Nestle Canada representative would be required for no more than a day. Secondly, as part of the case management process, electronic search parameters were developed that will enable Nestlé Canada to search for, identify and produce the documents in an orderly and expeditious manner. Nestlé USA has agreed to operate under similar parameters in the U.S. Proceedings. Moreover, it appears that similar documentation has already been organized and produced in the Canadian Competition Bureau investigation.

Conclusion

[28] It is not contested that the application judge considered and applied the requirements of s. 60 of the Evidence Act, R.S.O. 1990, c. E.23 and s. 46 of the Canada Evidence Act, R.S.C. 1985, c. C-5: the LOR is issued by a foreign court of competent jurisdiction in relation to a civil proceeding in that jurisdiction, and the targeted witnesses are within the jurisdiction of the Ontario courts. The record amply supported the application judge’s conclusion that the necessary criteria for enforcement of the LOR had been met, and I see no reversal of the burden of proof or other error in the exercise of his discretion in granting the order sought.

[29] It follows that I would dismiss the appeal.

[30] Treat America is entitled to its costs of the appeal, fixed in the agreed upon amount of $30,000 inclusive of disbursements and all applicable taxes.

“R.A. Blair J.A.”

“I agree K. Feldman J.A.”

“I agree David Watt J.A.”

RELEASED: August 24, 2011