CITATION: Peter v. Medtronic, Inc.; Robinson v. Medtronic, Inc., 2010 ONSC 3777
COURT FILE NO.: 89/10, 90/10
DATE: 20100716
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
herold, lederman AND swinton JJ.
B E T W E E N:
FRANK PETER, Mrs. BERNADETT PETER, MARK PETER, Ms. BERNADETT PETER, BRIAN FREDERICK FOOTE, RHONDA LYNN LO MONACO, ANITA PRAIN, FRANCINCE NOROUZI, and HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE OF ALBERTA as represented by the Minister of Health and Wellness
Won J. Kim, Victoria Paris and Alec Dimson, for the Plaintiffs (Appellants)
Plaintiffs (Appellants)
- and –
MEDTRONIC, INC. and MEDTRONIC OF CANADA LTD.
Defendants (Respondents)
AND BETWEEN:
SHERRY MARIE ROBINSON, GREGORY ROBERT HORNING, DAN AUSTEN and GLENDA AUSTEN
Plaintiffs (Appellants)
- and -
MEDTRONIC, INC. and MEDTRONIC OF CANADA LTD.
Defendants (Respondents)
Patrick O’Kelly, Danielle Royal and Samaneh Hosseini, for the Defendants (Respondents)
Won J. Kim, Victoria Paris and Alec Dimson, for the Plaintiffs (Appellants)
Patrick O’Kelly, Danielle Royal and Samaneh Hosseini, for the Defendants (Respondents)
HEARD at Toronto: June 10, 2010
SWINTON J.:
Overview
[1] These reasons deal with two appeals heard at the same time. In Peter v. Medtronic, the representative plaintiffs in a certified class proceeding appeal the order of Perell J. dated September 29, 2009 (reasons issued October 20, 2009), in which he ordered bifurcation of discovery and trial of two common issues relating to quantification of compensation for waiver of tort from other common issues in a certified class proceeding.
[2] In Robinson v. Medtronic, the representative plaintiffs in a class proceeding appeal the order of Perell J. dated October 20, 2009, in which he refused to certify the issue of punitive damages as a common issue, and he ordered bifurcation of discovery and trial of two issues relating to quantification of compensation for waiver of tort.
[3] Leave to appeal both orders was granted by Dambrot J.
Factual Background
The Peter Class Action
[4] Medtronic is a multinational corporation that manufactures and sells medical devices and technology to treat heart disease and vascular illness. The Peter class action deals with implantable defibrillators. It was certified as a national class proceeding by Hoy J. in December 2007. In the action, the appellants allege negligence, failure to warn, waiver of tort and conspiracy against the respondents relating to the design, development, testing, manufacture, assembly, licensing, marketing, distribution and sale of six types of implantable cardiac defibrillators. The allegations relate to defects in the batteries that operate the defibrillators.
[5] In the Peter action, the appellants seek over $550 million in damages. In the alternative, they seek an accounting and disgorgement of revenues based on the doctrine of waiver of tort. Sixteen common issues were certified, including six related to waiver of tort.
[6] The appellants have sought extensive disclosure of financial documents in relation to the accounting and disgorgement aspect of the waiver of tort issues. Some of this information is highly confidential, as it includes information about volume discounts and rebate programs that would be of interest to the respondents’ customers and competitors.
[7] On a motion for directions brought by Medtronic, the motion judge bifurcated two of the issues related to waiver of tort for purposes of discovery and trial. These two issues are:
If all or part of the Class can so elect [to have damages determined through an accounting and disgorgement of the proceeds of sale of the defibrillators], in what amount and for whose benefit is such accounting to be made?
Is OHIP or any other provincial health insurer entitled to a portion of such accounting?
[8] In his reasons, the motion judge acknowledged that as a general rule, a multiplicity of proceedings is to be avoided. However, he noted that class proceedings are inherently an exception to this rule, although he was also aware of the caution in Garland v. Consumers’ Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629 (at para. 90) that litigation by instalments should be avoided.
[9] Nevertheless, the motion judge concluded that this was “one of the extraordinary and rare cases where it would be fair and just to have divided discovery and to bifurcate the common issue of the quantification of the amount of the waiver of the tort claim” (at para. 21). He was of the opinion that it would be more efficient to determine liability on the basis of waiver of tort before embarking on discovery of the quantification of disgorgement. In his view, the issue of quantification is distinct from issues pertaining to the scope of waiver of tort and entitlement.
[10] He noted that the law relating to waiver of tort is uncertain – for example, whether it is an independent cause of action or only a choice of remedy after an actionable wrong has been proved. It is also uncertain whether it is available only for certain tortious acts and not others.
[11] The motion judge concluded that it was advantageous for all parties to determine the entitlement issue before quantification, and time and expense will be saved through bifurcation. He also concluded that the respondents would suffer serious prejudice if they had to disclose confidential and commercially sensitive business information at the common issues trial.
The Robinson Class Action
[12] In this class proceeding, the appellants allege that the respondents were negligent in the design, testing, development, manufacture and distribution of four models of defibrillator leads, and the respondents failed to warn the public about alleged defects in the leads. The appellants also allege conspiracy to conceal the defects and seek relief on the basis of waiver of tort.
[13] The motion judge certified 15 common issues relating to negligence, conspiracy, waiver of tort and subrogated claims of provincial insurers and family members. However, he refused to include the following as a common issue: “Should one or both of the Defendants pay punitive damages?” The motion judge also ordered bifurcation of the discovery and trial of two common issues relating to the quantification of compensation for waiver of tort. With respect to that decision, he relied on his reasons in Peter, supra.
[14] With respect to the punitive damages issue, the motion judge relied on a detailed analysis of the decision of the Supreme Court of Canada in Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595 where Binnie J. for the majority set out the principles governing the award of punitive damages (at paras. 94 and 123). The motion judge concluded that entitlement to punitive damages could not be determined on a class-wide basis; rather, entitlement must await a determination of individual issues relating to causation, harm and compensatory damages (Reasons, para. 167). He concluded (at para. 191):
There may be cases where at the common issues trial, the court is in a position to rationally and proportionately decide the questions of whether a defendant should pay punitive damages to the class and the amount of those punitive damages. In my opinion, however, this is not one of those cases.
The Standard of Review
[15] A discretionary procedural decision of a case management judge, particularly in a class proceeding, is entitled to a high level of deference. Therefore, with respect to the bifurcation order, the issue in this appeal is whether the motion judge erred in principle or made a palpable and overriding error in his findings of fact (Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R 235 at paras. 3-7).
[16] With respect to the decision not to include punitive damages as a common issue, an appellate court should also show deference to the motion judge. In respect of certification motions, an appellate court should interfere only in matters of general principle (Cloud v. Canada (Attorney General), [2004] O.J. No. 4924 (C.A.) at para. 39). As the Court of Appeal stated in Cassano v. Toronto-Dominion Bank, 2007 ONCA 781, [2007] O.J. No. 4406 at para. 23, “legal errors by the motion judge on matters central to a proper application of s. 5 of the CPA displace the deference usually owed to the certification motion decision”.
The Bifurcation Decision
[17] The motion judge had the authority to order bifurcation based on three different grounds, and he considered them all. First, pursuant to s. 12 of the Class Proceedings Act, 1992, S.O. 1992, c. 6 (“CPA”), the court has a broad discretion to make any order it considers appropriate respecting the conduct of a class proceeding “to ensure its fair and expeditious determination”. In doing so, the court may impose such terms on the parties as it considers appropriate.
[18] Second, the court has inherent jurisdiction to order bifurcation (Elcano Acceptance Ltd. v. Richmond, Richmond, Stambler & Mills, [1986] O.J. No. 578 (C.A.) at para. 10). In determining whether to make such an order, the court considers the factors summarized by Nordheimer J. in Air Canada v. Westjet Airlines Ltd., [2005] O.J. No. 5512 (S.C.J.) at para. 31:
Are the issues of liability clearly separate from the issue of remedies?
Is there an obvious advantage to all parties by having the liability issues tried first?
Will there be a substantial saving of time and expense if bifurcation is granted?
Will the overall time frame of the proceeding be unduly lengthened by granting bifurcation?
Do the parties agree that bifurcation is appropriate?
[19] Third, pursuant to rule 30.04(8), the court may order divided disclosure “where a document may become relevant only after the determination of an issue in the action and disclosure or production for inspection of the document before the issue is determined would seriously prejudice a party.”
[20] In the present case, the motion judge exercised his discretion to order bifurcation of the class members’ entitlement to claim an accounting and disgorgement of sales proceeds on the basis of waiver of tort from issues related to quantification. In my view, he committed no error of principle in reaching his decision.
[21] The law relating to waiver of tort is far from settled, as is evident from the discussion in the leading Ontario case, Serhan Estate v. Johnson & Johnson, [2006] O.J. No. 2421 (Div. Ct.), leave to appeal denied. In that case, the Court held that it was not plain and obvious that there is no cause of action known as “waiver of tort”.
[22] In Serhan, the defendants had argued that waiver of tort is not an independent cause of action, but rather a remedy that may be sought after an actionable wrong has been committed. The plaintiffs argued that waiver of tort is a distinct cause of action, not an alternative remedy for a claim in tort. A majority in the Divisional Court held the issue as to whether waiver of tort is an independent cause of action should be determined on the basis of a full factual record (at para. 69).
[23] The Court also commented on the uncertainty surrounding the availability of the remedy of disgorgement of profit, noting that there was a “sustained debate about whether it is appropriate to award proprietary disgorgement for wrongdoing that has not involved the appropriation of property previously held by the plaintiff” (at para. 123).
[24] It is in the context of uncertainty about the scope of waiver of tort that the motion judge made his decision on bifurcation of the liability issues from quantification.
[25] The appellants argue that the bifurcation order is a collateral attack on the certification order. I disagree. The motion judge’s order does not remove the quantification issue from the list of common issues. Rather, the motion judge has exercised his discretion to modify the litigation plan in order that there can be a fair and expeditious determination of the proceeding.
[26] Other class proceedings judges have ordered bifurcation of certain issues. See, for example, Markson v. MBNA Canada Bank, a decision of Cullity J. on October 26, 2009 (bifurcation of the central legal issues, including liability and the possibility of an order for restitution or an award of damages, from detailed disclosure relating to the amount of damages or restitution), and Anderson v. St. Jude Medical Inc., 2010 ONSC 77 (S.C.J.), a decision of Lax J. ordering bifurcation of discovery and trial of the common issue relating to the quantification of compensation for waiver of tort (at para. 27).
[27] In exercising his discretion pursuant to s. 12 of the CPA, the motion judge is required to keep in mind the underlying policy objectives of that Act, including expeditious access to justice and judicial efficiency. Here, the motion judge noted that class proceedings are inherently bifurcated and concluded that it would be more efficient, expeditious and less costly to bifurcate the liability and quantification issues relating to waiver of tort.
[28] In coming to his decision, he applied the factors from Westjet, supra. He concluded that entitlement to elect waiver of tort is independent and severable from the amount of an accounting or disgorgement arising from the waiver of tort claim. In my view, he correctly concluded there is a key threshold issue to be determined in relation to waiver of tort – namely, when is it that there has been a breach of a legal obligation giving rise to a claim to compensation in waiver of tort.
[29] There is no merit to the appellants’ argument that bifurcation will deprive the court of the full factual record needed to determine the waiver of tort claim. Given the facts of this case and the pleading, there is no need for extensive disclosure of the financial information sought at this stage of the proceeding.
[30] The motion judge also concluded that the appellants would be unable to make an informed decision whether to elect a disgorgement remedy without the ability to compare the value of compensatory damages. Such damages can only be determined in this case after individual trials on causation and liability.
[31] The appellants have made arguments that the time frame for the proceeding will be lengthened, and emphasized the vulnerability of class members because of their age and state of health. However, the motion judge concluded that bifurcation will advance the trial process while the discovery relating to quantification would delay the process. In effect, the appellants ask this court to weigh the factors in favour of and against bifurcation and substitute our decision. That is not our task on this appeal.
[32] The decision of the motion judge was a reasonable one, based on a consideration of the factors in Westjet, as applied to the facts and pleadings in this case. Moreover, the motion judge made a finding that there would be serious prejudice to the respondents if discovery were not divided, given the potential impact on the respondents’ competitive position. The appellants have not established any palpable and overriding error in the finding made by the motion judge.
[33] For these reasons, I would not give effect to this ground of appeal in either Robinson or Peter.
Punitive Damages as a Common Issue
[34] The appellants also seek to overturn the motion judge’s refusal to include punitive damages as a common issue when he certified the Robinson proceeding under the CPA.
[35] The starting point for analysis of this ground of appeal must be the Whiten decision, supra. In that case, the Supreme Court of Canada emphasized that punitive damages are the exception, rather than the rule. The Court made it clear that “punitive damages should be assessed in an amount reasonably proportionate to such factors as the harm caused, the degree of misconduct, the relative vulnerability of the plaintiff and any advantage or profit gained by the defendant”. They are to be awarded only when misconduct would otherwise not be punished or where other penalties, including compensatory damages, are insufficient to accomplish the objectives of retribution, deterrence and denunciation. Finally, they are to be awarded in an amount “no greater than necessary to rationally accomplish their purpose” (at para. 94).
[36] The appellants suggested that these passages do not reflect the governing legal principles for the award of punitive damages since they are found in a description of the content of a jury charge on that issue. However, these principles also apply in a non-jury context (see Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, [2002] 1 S.C.R. 678 at paras. 77-78).
[37] The motion judge reasonably held that a trial judge would be unable to rationally and appropriately consider punitive damages without knowing the amount of compensatory damages as well as the degree of misconduct, the harm caused, and the availability of other remedies. This is consistent with what the Supreme Court said above at para. 94 of its reasons, as well as at para. 123. In this class proceeding, causation, liability and the quantum of compensatory damages will not be determined at the common issues trial. Therefore, the motion judge correctly concluded that entitlement to punitive damages cannot be determined at the common issues trial.
[38] Counsel for the appellants asserts that the present decision departs from a large number of cases in which entitlement to punitive damages has been included in the common issues, arguing that this case is having a “profound impact” on class proceedings. However, it is apparent that each case turns on its own facts. In McKenna v. Gammon Gold Inc., 2010 ONSC 1591, 2010 CarswellOnt 1460 (S.C.J.), the issue of punitive damages was held to be a common issue, while in Ramdath v. George Brown College of Applied Arts & Technology, 2010 ONSC 2019, [2010] O.J. No. 1411 (S.C.J.), entitlement to punitive damages was not a common issue. In contrast, in Anderson v. St. Jude Medical Inc., 2010 ONSC 77, [2010] O.J. No. 8 (S.C.J.), the trial judge ordered bifurcation of the issues of liability for and quantification of punitive damages. However, the following common issue is to be determined in the common issues trial: “Does the defendants’ conduct merit an award of punitive damages?”
[39] I note that Chief Justice McLachlin in Rumley v. British Columbia, 2001 SCC 69, [2001] 3 S.C.R. 184 observed that “the appropriateness and amount of punitive damages will not always be amenable to determination as a common issue” (at para. 34). In that case, liability was based on allegations of systemic negligence. Therefore, the issue of punitive damages was appropriately a common issue.
[40] In the present case, liability to class members in negligence or conspiracy will not be determined until the trials to determine the individual issues. The motion judge correctly applied the principles from Whiten when he concluded that entitlement to punitive damages could not be determined until after the individual trials to determine causation and the quantum of compensatory damages. Therefore, he made no error in principle in rejecting punitive damages as a common issue.
Conclusion
[41] For these reasons, the Peter and Robinson appeals are dismissed.
[42] Counsel for the appellants suggested that if they were to succeed on the appeals, costs of $15,000 would be appropriate for each appeal. Given the success of the respondents, they shall have costs of $30,000 inclusive of GST and disbursements.
Swinton J.
Herold J.
Lederman J.
Released: July 16, 2010
CITATION: Peter v. Medtronic, Inc.; Robinson v. Medtronic, Inc., 2010 ONSC 3777
COURT FILE NO.: 89/10, 90/10
DATE: 20100716
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
herold, lederman AND swinton JJ.
BETWEEN:
FRANK PETER, Mrs. BERNADETT PETER, MARK PETER, Ms. BERNADETT PETER, BRIAN FREDERICK FOOTE, RHONDA LYNN LO MONACO, ANITA PRAIN, FRANCINCE NOROUZI, and HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE OF ALBERTA as represented by the Minister of Health and Wellness
Plaintiffs (Appellants)
- and –
MEDTRONIC, INC. and MEDTRONIC OF CANADA LTD.
Defendants (Respondents)
AND BETWEEN:
SHERRY MARIE ROBINSON, GREGORY ROBERT HORNING, DAN AUSTEN and GLENDA AUSTEN
Plaintiffs (Appellants)
- and -
MEDTRONIC, INC. and MEDTRONIC OF CANADA LTD.
Defendants (Respondents)
REASONS FOR JUDGMENT
Swinton J.
Released: July 16, 2010