ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-13-494560
DATE: 20140122
BETWEEN:
Stephen R. Neuwirth
Applicant
– and –
Anthony DaCosta, Al Zinn and Doug Dolphin
Respondents
Michael C. Spencer, for the Applicant
Nikiforos Iatrou Scott McGrath and Bronwyn Roe, for the Respondents Anthony DaCosta and Doug Dolphin
Martin Mendelzon, for the Respondent Al Zinn
HEARD: January 14, 2014
Goldstein J.
[1] Flexible polyurethane foam is one of those things that everybody uses but nobody notices. It is used for cushioning and insulation in things like mattresses and car seats. In 2011 purchasers of polyurethane foam launched a series of class action lawsuits against manufacturers in various United States district courts. The purchasers and the manufacturers alike are generally very large corporations. The plaintiffs alleged that the manufacturers conspired to fix the price of foam, contrary to the Sherman Act, which is the American equivalent of our Competition Act. The class actions were launched in several jurisdictions but ultimately consolidated in the United States District Court for the Northern District of Ohio.
[2] The Respondents reside in Ontario. They are non-parties in the United States. The Applicant says that they have evidence (and in the case of Mr. DaCosta and Mr. Dophin, documents) relevant to the consolidated action. The District Court issued letters rogatory to take evidence and compel the production of documents from the Respondents. The Applicant is counsel for one of the class of plaintiffs in the United States. He has been authorized by the District Court to take evidence pursuant to the letters rogatory. He applies in this Court for orders to enforce them.
[3] For the reasons that follow, the application should be granted with respect to the Respondents Dolphin and DaCosta, with conditions. The application with respect to the Respondent Zinn is dismissed.
FACTS
[4] The Respondents were all employees of Foamex Canada Inc. Foamex Canada was a subsidiary of Foamex International Inc. Foamex International went bankrupt. Foamex International’s assets were purchased by FXI-Foamex Innovations Inc., which is the legal successor to Foamex International and a defendant in the U.S. class actions. All three Respondents are named as conspirators in the consolidated U.S. class action.
[5] As is common in these matters, there are also proposed Canadian class action lawsuits in relation to fixing the price of foam. Many of the proposed parties are Canadian subsidiaries of U.S. corporations. There are outstanding actions in Ontario and British Columbia. Mr. DaCosta and Mr. Dolphin are named defendants in at least two Canadian actions.
[6] Criminal investigations often go hand-in-hand with class action lawsuits in competition matters. The Respondents say that Competition Bureau has an open investigation into polyurethane foam price-fixing, based on a press release filed in evidence. I accept for the purposes of this application that there is such an investigation. There is no evidence that any of the Respondents are targets of that investigation. There is also no evidence that the Respondents are the targets of an anti-trust investigation by the United States Department of Justice.
[7] As noted, the U.S. actions were consolidated in the District Court. Judge Jack Zouhary is assigned. As is the practice in that Court, he is responsible for all aspects of the litigation, up to and including trial. On November 18, 2013 the collective Plaintiffs in all of the proposed classes submitted a memorandum to Judge Zouhary requesting the letters rogatory. Judge Zouhary issued the letters rogatory to this Court on November 20, 2013. I do not know whether Judge Zouhary issued reasons. No reasons have been provided to me, but I trust that if he had done so one of the parties to this Application would have provided them.
[8] The proposed U.S. class actions have not yet been certified. Judge Zouhary was scheduled to hear the certification motion on January 15, 2014. I do not know the outcome of that motion. None of the proposed Canadian class actions have been certified either. In a further wrinkle, the U.S. Federal Rules of Civil Procedure provide for pre-certification discovery, which is the opposite of the practice in Ontario. The discovery period in the consolidated U.S. actions closes on February 14, 2014.
ANALYSIS
[9] In my view, this Application raises four issues:
Has the Applicant met the conditions for the enforcement of the letters rogatory?
Would the proposed examination violate the Respondent’s rights against self-incrimination?
Is the U.S. stipulated protective order sufficient to protect the rights of the Respondents?
If the order is granted, what conditions should attach?
Has the Applicant met the conditions for the enforcement of the letters rogatory?
[10] The basic principle was set out in R. v. Zingre, 1981 32 (SCC), [1981] 2 S.C.R. 392 by Dickson J. (as he then was). This Court will give effect to the request of a foreign court as a matter of comity. Exercising the discretion granted to this Court, requires a consideration of two factors: the impact of the proposed order on Canadian sovereignty, and whether the interests of justice require that the order be granted: Fecht v. Deloitte and Touche, 1997 1799 (ON CA), [1997] O.J. No. 511, 32 O.R. (3d) 417 (C.A.); France v. DeHavilland Aircraft of Canada (1991), 1991 7180 (ON CA), 65 C.C.C. (3d) 449 (Ont. C.A.).
[11] In Re Friction Division Products Inc. v. E.I. DuPont De Nemours & Co. (No. 2), 1986 2827 (ON SC), [1986] O.J. No. 1026, 56 O.R. (2d) 722, 32 D.L.R. (4th) 105 (C.A.) the Court of Appeal set out the criteria for giving effect to letters rogatory:
[12] Before an order giving effect to letters rogatory will be made, the evidence (including the letters rogatory) must establish that:
(1) the evidence sought is relevant;
(2) the evidence sought is necessary for trial and will be adduced at trial, if admissible;
(3) the evidence is not otherwise obtainable;
(4) the order sought is not contrary to public policy;
(5) the documents sought are identified with reasonable specificity;
(6) the order sought is not unduly burdensome, having in mind what the relevant witnesses would be required to do, and produce, were the action to be tried here.
Is the evidence sought relevant?
[13] Mr. Dolphin and Mr. DaCosta do not resist the Application on the basis that the evidence is irrelevant. I agree with that concession. Relevance is defined by pleadings. The Respondents have been named as participating in a conspiracy to fix prices. They have also been named in a Request to Admit.
[14] Mr. Zinn, however, is in a different position from Mr. DaCosta and Mr. Dolphin. In his affidavit he states that he simply has no documents. The Applicant is no longer seeking documents from him. Mr. Zinn also states in his affidavit that until 1995 he was Vice President and General Manager of Canadian Operations at Foamex Canada. In 1995 he was transferred to the position of Vice President of Bedding, where he had no responsibilities for pricing and sale. He retired in 1998. The class period alleged in the consolidated U.S. action begins on January 1, 1999. The memorandum submitted to Judge Zouhary stated that three Respondents left the employ of Foamex Canada no later than 2006. With respect, inaccurate information was obviously placed before Judge Zouhary. Although Mr. Zinn is also named in the complaint and in a Request to Admit, the current evidentiary record does not support granting an order. I would not foreclose the possibility that further and better evidence could be placed before Judge Zouhary, and that this Court would consider a renewed request from the District Court.
Is the evidence sought necessary for trial and will it be adduced at trial, if admissible?
[15] The Respondents do not take the position that the evidence is unnecessary and will not be admitted at trial. It is not necessary to conduct a detailed analysis of this factor.
Is the evidence not otherwise obtainable?
[16] Mr. Iatrou argues on behalf of Mr. DaCosta and Mr. Dolphin that the Plaintiffs have not exhausted their discovery prospects in the United States. The Plaintiffs, he says, have failed to show that the evidence cannot be obtained from the almost 1000 boxes that have been made available to Plaintiff’s counsel.
[17] I disagree. FXI-Foamex, the American defendant, told the Plaintiffs in discovery that it could not locate documentary evidence after a reasonable search and that it was not in possession of documents regarding the Respondents. FXI-Foamex was given notice of the request to Judge Zouhary for the letters rogatory. FXI-Foamex did not oppose the request.
[18] On December 23, 2013 Mr. Iatrou wrote to Cozen O’Connor, counsel for FXI-Foamex. He asked for further information and documents. On January 7, 2014 Lezlie Madden replied. Ms. Madden is a lawyer at Cozen O’Connor. She stated that it was not correct that FXI-Foamex had claimed that it could not locate documents. She stated that FXI-Foamex had transported 978 boxes of Foamex Canada documents to the United States. Plaintiffs counsel, she said, had been given access to the boxes, reviewed 59 of them, and copied 10 boxes of material. She stated that within the 59 boxes there were documents relating to the Respondents. She also stated that within the electronic records there were 1500 hits regarding the Respondents.
[19] After receiving the Madden letter, Adam Wolfson, one of the U.S. Plaintiff’s counsel, swore a supplementary affidavit. In that affidavit he took the position that “Ms. Madden’s letter is at odds with the correspondence and oral representations I received from her and other defense counsel during the course of discovery…” Copies of Ms. Madden’s correspondence are attached to his affidavit. Those letters suggest that the information given to Mr. Iatrou is different from the information given to Mr. Wolfson. It is clear, as well, that the index to the Foamex documents was provided to Mr. Wolfson.
[20] The bottom line is that FXI-Foamex appears to have taken the position that it did not have relevant documents regarding the three Respondents until the letter to Mr. Iatrou. It is significant that FXI-Foamex decided not to oppose the request to Judge Zouhary. I draw the inference that the evidence is not otherwise obtainable in the United States.
[21] Mr. Iatrou also argues that any discussions that Mr. DaCosta and Mr. Dolphin had regarding price-fixing are readily available by way of discovery in the United States. His point is that price-fixing discussions, if any, took place with other parties. He says that the Plaintiffs should discover them, instead.
[22] I disagree. Respectfully, that position ignores the reality of testimonial evidence. Mr. DaCosta and Mr. Dolphin may well have different versions of conversations that took place. Indeed, rare is the trial where parties to a conversation recollect the same version of events. These are fraud-like allegations. Where such allegations are in play evidence providing confirmation of other information is important: Treat America Ltd. v. Nestle Canada Inc., 2011 ONCA 560, 2011 CarswellOnt 8487, 340 DLR(4th) 707 at para. 24.
Is the order sought contrary to public policy?
[23] The Respondents Dolphin and DaCosta argue that the proposed order is contrary to public policy because it circumvents the class proceedings process in Ontario. They rest their argument on three points: first, Ontario law does not permit pre-certification discovery: Parker v. Pfizer Canada Inc., 2012 ONSC 1652. Second, that the discovery process would result in the possibility that the Canadian plaintiffs would be given a roadmap for the pursuit of the Canadian case; and third, that the U.S. plaintiffs will obtain greater discovery than would be permitted under Canadian law: Aker Biomarine AS v. KGK Synergize Inc., 2013 ONSC 4897.
[24] I disagree with all three points. I am satisfied that an order can be fashioned that protects the Respondents. The fact that Ontario law does not permit pre-certification discovery is irrelevant. A deposition can be sought at the pre-trial stage of discovery: AstraZeneca LP v. Wolman, 2009 69793 (ON SC), [2009] O.J. No. 5344 (Sup.Ct.); Zingre. The evidence is being sought in a U.S. proceeding. The notion that the proposed letters rogatory might result in a “roadmap” for the Ontario plaintiffs assumes that U.S. plaintiff’s counsel will breach the stipulated protective order and provide the material to Canadian plaintiffs counsel. I am not prepared to assume that Canadian and American lawyers routinely breach their ethical obligations. I assume the opposite. I acknowledge the possibility that some lawyers might do so, but surely the Respondent’s counsel in the Canadian proposed class actions will be able to take action in Ontario if that happens.
[25] I accept, however, that the scope of the discovery should be somewhat curtailed. Given that the Mr. Dolphin and Mr. DaCosta are only named in two paragraphs of a very large complaint, as non-parties discovery should be limited to the issues on which the letters rogatory were specifically based. Thus, the fact that greater discovery is permitted in U.S. cases than in Ontario will be dealt with by way of an Order that the deposition be conducted pursuant to Ontario’s Rules of Civil Procedure.
[26] The Respondents also suggest that to grant an order in this case will set a problematic precedent. They argue that to grant discovery at this stage will prejudice the Canadian class actions where the identity of the parties is the same or similar.
[27] I disagree. The Respondents cited no authority for that proposition. I do not accept the reasons that they have articulated. Furthermore, there is no rule that this Court will only give effect to letters rogatory in trial proceedings: Zingre; Republic of France v. DeHavilland. Cross-border class actions are common. The Respondent’s submissions amount to a submission that foreign requests should never be granted where there are different pre-trial procedures. I take the opposite view: failure to give effect to a reasonable request from a foreign court that is not otherwise a violation of Canadian sovereignty would offend public policy, as it could undermine this Court’s ability to obtain evidence in Canadian proceedings. The political, military, economic and legal relationship between this country and the United States is deep, intertwined, and extensive. It is obviously in our interest to facilitate cooperation in legal matters as a matter of enlightened self-interest.
Are the documents sought identified with reasonable specificity?
[28] I have reviewed Schedule A to the Letters Rogatory. I am satisfied that the documents sought are identified with reasonable specificity. In any event, the Respondents do not suggest that the requests are unduly broad.
Is the order sought unduly burdensome?
[29] The Respondents Dolphin and DaCosta had not filed evidence. Although I am aware that the burden is on the Applicant in this matter, some evidence as to the difficulties the Respondents would have in complying with an Order of this Court would be helpful. As it stands, they do not seriously suggest that it would be unduly burdensome and I do not believe it would be appropriate to refuse the order on this basis.
- Would the proposed examination violate the Respondent’s rights against self-incrimination?
[30] The Respondents argue that a compelled examination would violate the Respondent’s rights against self-incrimination. They are concerned that the stipulated protective order in the American litigation would be insufficient to protect their Charter rights, since it is possible, they say, that copies of their transcripts might find their way to the Competition Bureau. The Bureau might then use the transcripts to further a criminal investigation. The Bureau, the Respondents argue, might use the information in the transcripts to obtain further investigative tools, such as search warrants, or to simply use the transcripts as a kind of roadmap. The Respondents acknowledge that they are not currently targets of the Bureau’s investigation, as far as they are aware.
[31] Without in any way minimizing the concerns of the Respondents, I do not accept these arguments. I believe that the proposed examination would not violate their rights under the Charter, and that an order can be fashioned to protect them. As well, I adopt the same procedure used by Campbell J., the motion judge in the in Treat America v. Leonidas, 2012 ONCA 748, 306 O.A.C. 219, 2012 CarswellOnt14784 (C.A.) and invite the Commissioner of Competition to make submissions prior to finalizing the order.
[32] There is no question that the Respondents enjoy use immunity for any compelled evidence: s. 13 of the Charter; R. v. Nedelcu, 2012 SCC 59, [2012] 3 S.C.R. 311.
[33] The Respondents, however, take a much broader view of the right against self-incrimination. As the Respondents Dolphin and DaCosta put it their factum, “nothing prevents the Bureau from using evidence obtained from the U.S. Action to further its investigation, putting [Dolphin and DaCosta] at risk of being implicated in a time-consuming and expensive investigation. The Canadian Competition Bar recognizes that ‘an investigation or allegation that does not ultimately result in conviction can still be, and usually is, costly, disruptive and damaging to reputations.’”
[34] In effect, the Respondents argue that s. 7 and s. 13 of the Charter go beyond mere use immunity and provide absolute derivative use immunity. I disagree. The Ontario Court of Appeal rejected the Respondent’s position in Treat America v. Leonidas. Where evidence has been obtained during the course of an inquiry where the predominant purpose is to obtain evidence for a civil matter there is no automatic bar to introduction at a criminal trial: R. v. Jarvis, 2002 SCC 73, [2002] 3 S.C.R. 757 at para. 95.
[35] With respect, I believe that the position advanced by the Respondents is at odds with the fundamental nature of a criminal investigation. Nothing prevents the Bureau from using evidence obtained from any source to further an investigation regardless of whether this Court issues an order or not, provided the Bureau obtains that evidence in a lawful manner. Furthermore, the Respondents come close to suggesting that the right against self-incrimination includes a right not to be investigated. There is no such right.
[36] Applying the predominant purpose test, it is clear that the predominant purpose of the proposed deposition is to obtain evidence in a civil proceeding, not to incriminate the Respondents: Treat America v. Leonidas, para. 45. The Respondents distinguish Treat America v. Leonidas, a case that is very similar to this one, on the basis that the Commissioner of Competition was a party and addressed the issues raised in the particular circumstances of that case.
[37] In my view, the Respondent’s concerns can be met by fashioning an order that will protect their right against self-incrimination. In addition to the protections supplied by the stipulated protective order (which I deal with below) the order of this court will make it clear that the Respondents will testify with all of the protections supplied by the Charter and the various Evidence Acts. In order to deal with concerns surrounding the Bureau’s investigation, I will adopt the same approach as Campbell J. in Treat America v. Leonidas and invite submissions from the Commissioner. I ask the parties to transmit a copy of my reasons to the Commissioner with an invitation to make an appointment to see me at everyone’s earliest convenience, or to provide written submissions within 30 days of the day that this judgment is released. I recognize that there is some urgency to the application, but that is hardly the fault of the Respondents.
- Is the U.S. stipulated protective order sufficient to protect the rights of the Respondents?
[38] The Respondents Dolphin and DaCosta argue that the undertaking given by the Applicant is insufficient. They argue that given the multiple parties, if there is a breach of the undertaking and their transcripts are provided to an outside party it will be impossible to take contempt action.
[39] I agree with the Respondents that the undertaking is insufficient, but the real protection is found in the stipulated protective order signed by Judge Zouhary. It is clear that the order is wide-ranging and detailed. In some ways it is more comprehensive than our implied undertaking rule. I do not accept that it is insufficient. Treat America v. Nestle was a similar proceeding: a set of multi-district class actions consolidated before a single District Court judge at the pre-certification stage. Although the protective order in that case was no specifically at issue, it is clear that there was one and that it was considered by Justice C. Campbell, the motion judge in this Court, and the Court of Appeal. In my view, the fears of the Respondents in this regard are over-wrought. If they were correct, then no non-party could ever be compelled to give evidence in complicated, multi-party litigation for fear that the source of the leak (if there was one) could not be identified.
- If the order is granted, what conditions should attach?
[40] In my view, the proposed order should contain conditions that the Respondents DaCosta and Dolphin testify with the protections of s. 7 and 13 of the Charter, and of the Canada and Ontario Evidence Acts. Before finalizing the order, the parties will make the Commissioner of Competition aware of my judgment. The Commissioner will have the opportunity to send me written submissions as to the appropriate or to arrange for an attendance through my assistant within 30 days of the date that this judgment is released.
[41] It is clear that a judge may order that the examination be taken pursuant to U.S. rules unless public policy concerns such as the constitutional or fundamental rights of the proposed witness are at stake: Connecticut Retirement Plans and Trust Funds v. Buchan, 2007 ONCA 462, [2007] O.J. No. 2492, 225 O.A.C. 106, 2007 CarswellOnt 4050 (C.A.). In this case, however, I decline to order that the witnesses will have the benefit of refusing to answer questions based on the Fifth Amendment. The governing law in such a proceeding is Canadian law unless, as noted, public policy concerns militate otherwise: Treat America v. Leonidas, at para. 33; United States of America v. Pressy (1988), 1988 4530 (ON CA), 65 O.R. (2d) 141 (C.A.); Davidson v. Barnhardt, [2012] O.J. No. 6010, 13 O.R. (3d) 475 (Sup.Ct.). See also: Catalyst Fund General Partner I Inc. v. Hollinger Inc., 2005 39860 (ON CA), [2005] O.J. No. 4666, 79 O.R. (3d) 70 (C.A.). In this case, the self-incrimination concerns that have been identified relate only to a potential Canadian criminal investigation. There is no evidence that the Respondents are targets of that investigation. There is also no evidence of an American criminal investigation, and no evidence that the Respondents are targets of an American criminal investigation. If there were, I it is possible that I might take a different view of the propriety of invoking the Fifth Amendment.
[42] It is also appropriate, for the reasons that I have described, that the scope of the depositions is limited to that permitted pursuant to the Rules of Civil Procedure. That term will also be reflected in the order.
[43] I ask that the parties prepare the draft order in accordance with this judgment, subject to receiving submissions from the Commissioner of Competition.
CONCLUSION
[44] In balancing the various factors, it is my view that the requested order does not infringe on Canada’s sovereignty, and that it is in the interests of justice that the letters rogatory be enforced. Sovereignty concerns are addressed by The rights of the Respondents can be adequately addressed. In addition, the, principle of judicial comity militates in favour of granting the order. Although this Court should not accept the request from the District Court as a blank cheque, it should also be remembered that Judge Zouhary is well versed in the matter. He is assigned to hear all aspects of the multi-jurisdictional litigation. As I understand it, he has heard motions and will be presiding over the trial or trials. He obviously has the background, notwithstanding that inaccurate information regarding Mr. Zinn was placed before him. His decision is entitled to a certain amount of deference: Treat America v. Nestle, at paras. 19; Connecticut Retirement Plans, at para. 13.
COSTS OF THE EXAMINATION
[45] In my view, it is appropriate that the Applicant bear the reasonable counsel costs of Mr. Dolphin and Mr. DaCosta to a maximum of $5000 per Respondent: AstraZeneca, at para. 66.
COSTS OF THIS APPLICATION
[46] The usual rule is that costs are awarded to the successful party: Schreiber v. Mulroney, 2007 31754 (ON SC), [2007] O.J. No. 3191 (Sup.Ct.) although costs are in the discretion of the court: Courts of Justice Act, s. 131(1); Rule 57.01(1) of the Rules of Civil Procedure.
[47] There is authority for the proposition that a non-party is entitled to full indemnification no matter what the outcome: j2Global Communications, Inc. v. Protus IP Solutions Inc, [2009] O.J. No. 5762; j2Golbal Communications, Inc. v. B.C., [2010] O.J. No. 2880; GST Telecommunications Inc. v. Provenzano, [2000] B.C.J. No. 378, 73 B.C.L.R. 72 (Sup.Ct.). There is also authority for the proposition that costs should be payable at a substantial indemnity rate: Oticon Inc. v. Gennum Corp., 2010 ONSC 1638, [2010] O.J. No. 1082. As my colleague D.M. Brown J. pointed out in that case, courts have also ordered partial indemnity costs and no costs in matters involving the examination of non-parties.
[48] A Court fixing costs should set an amount that is fair and reasonable in the circumstances: Boucher v. Public Accountants Council for Ontario, 2004 14579 (ON CA), [2004] O.J. No. 2643, 71 O.R. (3d) 291, (C.A.). In this case, I am satisfied that it is fair and reasonable that the Respondents, as non-parties, not be required to bear the costs of legitimate opposition to the Application. The question is, on what scale.
[49] Since Mr. Zinn was successful in his defence, it is appropriate that costs be ordered at full indemnity. I say this for the following reasons:
• Mr. Zinn is a non-party and long retired from Foamex;
• The request for documentary production was abandoned in the face of Mr. Zinn’s affidavit;
• It appears that inaccurate and possibly misleading information was placed before Judge Zouhary regarding Mr. Zinn’s employment;
• The application was continued notwithstanding un-contradicted evidence that Mr. Zinn was not involved in sales and pricing after 1995.
[50] Thus, costs in the amount of $11,089.82, inclusive of disbursements and HST, are ordered for Mr. Zinn.
[51] I am less inclined to order full indemnity costs for Mr. DaCosta and Mr. Dolphin. As Mr. Spencer pointed out, they have been coy about whether or not they actually possess documents. The answer to that question would have avoided some aspects of this litigation. That said, I do think that they are still entitled to substantial indemnity costs. Accordingly, costs in the amount of $24,074.65, inclusive of disbursements and HST, are ordered for Mr. DaCosta and Mr. Dolphin.
Goldstein J.
Released: January 22, 2014
COURT FILE NO.: CV-13-494560
DATE: 20140122
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Stephen R. Neuwirth
Applicant
– and –
Anthony DaCosta, Al Zinn and Doug Dolphin
Respondents
REASONS FOR JUDGMENT
Goldstein J.
Released: January 22, 2014