Court File and Parties

Court File No.: 216/16 Date: 20160715 Superior Court of Justice - Ontario

Re: Ipex Inc., Plaintiff And: Lubrizol Advanced Materials Canada, Inc. and Lubrizol Advanced Materials, Inc., Defendants

Before: Conway J.

Counsel: Benjamin Zarnett, Jessica A. Kimmel and Suzy Kauffman, for the Plaintiff Peter E. J. Wells and Joanna Vatavu, for the Defendants

Heard: In Writing

Endorsement

[1] The defendants, Lubrizol Advanced Materials Canada, Inc. and Lubrizol Advanced Materials, Inc. (collectively, “LZAM”), seek leave to appeal the decision of Belobaba J. dated April 19, 2016, dismissing LZAM’s motion for partial summary judgment.

[2] The plaintiff (“IPEX”) is a manufacturer of a multi-layer thermoplastic pipe (“Kitec Pipe”) used in plumbing and heating applications. LZAM is a supplier of resin used in the inner layer of the Kitec Pipe. AT Plastics Inc. (“ATP”) is another supplier of the resin.

[3] IPEX received complaints from end users that the Kitec Pipe was failing prematurely and concluded that the primary culprit was defective resin supplied by LZAM and ATP. IPEX commenced actions against ATP and LZAM in 2006 and 2008, respectively, for breach of contract and for contribution and indemnity under the Negligence Act.

[4] Beginning in 2007, over 29 class actions were commenced against IPEX in several jurisdictions in the United States and Canada. They were consolidated into a single Multi-District Litigation proceeding in 2009. IPEX did not add LZAM and ATP as third parties in the class actions.

[5] In March 2011, IPEX entered into a settlement (the “Settlement”) with the class action plaintiffs pursuant to which it paid US$100 million into a settlement fund for class members and US$25 million to class counsel for legal fees (the “Settlement Funds”). The Settlement was approved by the U.S. and two Canadian courts. The Settlement provides that in order to obtain payment from the fund, a class member must complete a detailed claim form. The claims administrator is restricted from disclosing information about the individual class members to third parties due to privacy concerns.

[6] Under the Settlement, the class members gave a complete release to IPEX, excluding any claims the class members had against the resin suppliers. Class members assigned those rights to IPEX. IPEX is not suing LZAM or ATP on the assignments.

[7] IPEX seeks to recover the Settlement Funds from LZAM and ATP (the “Class Action Claim”) on the basis that IPEX paid these amounts due to the exposure it faced from the supply of the alleged defective resin by LZAM and ATP.

[8] LZAM and ATP brought motions for partial summary judgment to dismiss the Class Action Claim against them. They stipulated on the motions that the causes of the Kitec Pipe failure were not before the motions judge. As the motions judge noted, that issue “will be decided (with extensive expert evidence) at trial.”

[9] The motions judge dismissed the motions. He held that the moving parties had misunderstood IPEX’s breach of contract claim, the nature and extent of the Settlement, the application of the causation requirement, and the bounds of what could be summarily decided on the motion. LZAM (not ATP) seeks leave to appeal the motions judge’s decision refusing partial summary judgment.

[10] Pursuant to Rule 62.02(4) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, leave shall not be granted unless: (a) there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or (b) there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.

[11] In my view, on each of the arguments raised by LZAM, there are no decisions that conflict with the motions judge’s decision, nor is there good reason to doubt the correctness of his decision. Further, the matters do not raise any issues of public importance.

[12] With respect to the breach of contract claim, IPEX’s position is that LZAM supplied resin that was unfit for the purpose (in breach of its contract), IPEX was exposed to claims from class members and IPEX sustained losses by paying the Settlement Funds. The motions judge rejected LZAM’s argument that because IPEX paid for an assignment of the class members’ claims against the resin suppliers (as opposed to a settlement and release of those claims against the resin suppliers), IPEX was precluded from recovering the Settlement Funds as damages on its own contract claim against LZAM. He observed that IPEX was not suing on the assignments but “in its own capacity to recover the damages that IPEX itself sustained”. LZAM admits that there is no conflicting case on point. There is no reason to doubt the correctness of the motions judge’s decision that IPEX is not restricted from asserting its claim for contract damages against LZAM because of the assignment.

[13] The motions judge also rejected LZAM’s argument that IPEX could not establish causation to support its contract claim without relying on the individual claims data. He found that IPEX had demonstrated by largely uncontroverted evidence that the resin was at least “a” cause of the pipe failures that led it to enter into the Settlement. He reasoned that since LZAM and ATP had acknowledged that the causes of failure could only be decided at trial, then it followed that the contract claim could not be dismissed summarily. There is no conflicting decision on this point and no good reason to doubt the decision, particularly in light of LZAM’s stipulation that the causes of failure were not issues to be determined by the motions judge.

[14] LZAM makes numerous arguments with respect to deficiencies in IPEX’s contribution and indemnity claim. The motions judge held that once the contract claim was going to trial, the claim for contribution and indemnity under the Negligence Act must also proceed to trial, as it would be “neither sensible nor appropriate” to bifurcate the two pleaded causes of action (given that they raised the same basic issues and relied on the same evidence). He specifically recognized that LZAM could raise any defences on the contribution and indemnity claim at trial. There is no conflicting decision on this point and no good reason to doubt the motions judge’s decision.

[15] Finally, there is nothing in this case that transcends the interests of the parties or raises issues of public importance or matters relevant to the development of the law and the administration of justice: Comtrade Petroleum Inv. v. 490300 Ontario Ltd., [1992] 7 O.R. (3d) 542 (Div. Ct.), at p. 3.

[16] The motion for leave to appeal is dismissed. LZAM shall pay costs of $18,000, all inclusive, to IPEX on a partial indemnity basis.

Conway J. Date: July 15, 2016