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High stakes litigation

Cover Story
|Written By Glenn Kauth

It took more than a year, and months of contentious negotiations in a New York conference room, for lawyers to settle the tainted pet-food case against Menu Foods Income Fund.

In the case against drug maker Merck Frosst Canada Ltd., litigation has continued since 2004 over complaints its painkiller Vioxx was causing heart complications.

And in one of the country’s messiest and most drawn-out class action sagas, lawyers battled it out for roughly eight years before finally reaching the final chapter in the case against Servier Canada Inc., the maker of the diet drug Fen-Phen. Litigation in that case involved multiple appeals as well as 65 motions, says Joel Rochon, a partner at Rochon Genova LLP who acts for plaintiffs in many high-profile class actions.

Long and expensive battles in and out of court are typical in class actions, but one case stands out as an exception: Maple Leaf Foods. Just six months after a corporate nightmare that saw 20 people die from tainted meat began, the Toronto-based company appeared to have rid itself of a flurry of lawsuits with claims adding up to hundreds of millions of dollars. A settlement reached in January that has yet to be finalized would see Maple Leaf pay as much as $27 million to victims, as well as their next of kin, who contracted listeriosis in the summer of 2008.

“I think this is the fastest resolution of a case I’ve ever seen,” says Rochon, who calls the Maple Leaf lawsuit a “high-water mark” for dealing with class actions in Canada.

The litigation had the potential to be a mess, he adds. With nine law firms representing victims who numbered in the thousands, the case could easily have degenerated into legal squabbles both among plaintiffs’ lawyers and with Maple Leaf. Instead, a two-day mediation in November in Vancouver before former Alberta Court of Appeal justice Roger Kerans led to what many of the players thought was an agreement in principle. By late January, the parties had reached a proposed settlement awaiting court approval.

To the surprise of many, then, Maple Leaf has managed to mitigate what could have been a fatal crisis for the company. Chief executive officer Michael McCain has received much of the credit, with observers lauding him for making a quick public apology following a recall of Maple Leaf products found to be tainted with the listeria bacteria. The deft response, which involved throwing away the predictable legal advice to avoid making public comments acknowledging responsibility for the outbreak, led editors and broadcasters surveyed by The Canadian Press to vote him the 2008 business newsmaker of the year.

It’s clear, however, that Maple Leaf’s public relations coup was about more than just personality. Instead, the peculiarities of the crisis, including the grave circumstances in which elderly people became sick or died from something as simple as having their lunch, made the company’s response somewhat inevitable, say lawyers who both were involved in and who have observed the case.

John Campion, a senior partner with Fasken Martineau DuMoulin LLP in Toronto, compares the severity of Maple Leaf’s predicament to the infamous shower scene in the movie Psycho as well as to the 2000 tainted-water tragedy in Walkerton, Ont. “Why was that more horrible than many other horror scenes which were much more violent?” he asks, referring to Psycho. “The reason is we all take showers. And the reason why Walkerton was so horrible. . . . [was that] drinking water and dying from it is pretty horrible. All of us do it every day. We in Canada think our water is safe, but this was a worldwide story because of that single fact.”

As a result, Campion, who has defended companies in some of Canada’s highest-profile class actions, says the writing was on the wall for McCain. “I assume they took one look at this mess and they said, ‘We are not going to go through this process. This was a mistake. There were people who died, and they got their money. Everybody else, suck it up.’”

Steve Stieber, who led Maple Leaf’s defence as its external counsel, says the company and its insurers made a decision early on to eschew any moves to fight the case through the usual legal maneuvers, such as challenging certification, tying up the process through battles over which jurisdiction should hear it, or denying liability. “I think we all collectively recognized at a very early stage that at the end of the day settlement was clearly in everybody’s best interest. Clearly, the class gets their [money] quickly. From the defendants’ perspective, the case that sits longer doesn’t get better. It’s not like good wine [where] the longer it takes the better it gets. Our history and our experience have been that cases tend to get worse; cases tend to get more expensive.”

At the same time, Stieber says that while he feels the company had potential defences, including the fact that it had followed food-safety protocols in place at the time, in the end Maple Leaf was likely to lose. “Number one, we recognized we had a case where 20 people had died across the country. . . . Most of them were elderly in nursing homes with multiple diseases, but ultimately each of them had had Maple Leaf products. We also recognized that the tendency of the courts as it relates to food products is to exact an exceptionally high standard. . . . We believed that the court would find liability at the end of the day.”

In fact, Stieber says there was barely any exchanging of documents leading up to the settlement. Instead, negotiations took place through a flurry of phone calls between counsel, including after hours and on weekends. Most of the discord, in fact, involved disagreements among plaintiffs’ counsel, many of whom had sparred in previous class action cases.

“[On] the plaintiffs’ side where the lawyers [are involved] in a large class action, it’s often difficult to distinguish [them] from a Grade 6 schoolyard,” says Tony Merchant, a Regina lawyer who represents 26 of the 29 alleged death cases resulting from Maple Leaf’s tainted meat. (Maple Leaf argues just 20 people died of listeriosis last summer, a conclusion it says comes from information provided by public health authorities).

But in the Maple Leaf case, counsel for the victims managed to avoid much of the typical wrangling over which lawyer represents whom, which jurisdiction should hear the case, and what the legal strategies should be. “We put aside the usual plaintiffs’ bar squabbling because we saw that if we worked together, we could accomplish something quickly for the class,” says Merchant.

That’s no small achievement, in fact, since many of the lawyers involved in Maple Leaf were the same people who have been battling over Vioxx. Both Rochon and Merchant, for example, have been facing off in that case for years. While Rochon, along with 18 other law firms, won the fight for carriage in Vioxx in 2006, the battle continues after both Merchant and his adversaries got the case certified in competing jurisdictions.

“This case had all the same markings as Vioxx,” says Rochon, referring to Maple Leaf. “There was an early decision amongst plaintiffs’ counsel to avoid a Vioxx [from] replicating.”

Rochon points out, however, that the competing interests that can drag class actions on for years aren’t unique to the plaintiffs’ side. Contrasting the Maple Leaf litigation with the Menu Foods case, he says the delays in settling came largely from defendants representing everyone from retailers of melamine-laced pet food to insurers for the various companies named in the suit. “It was everything that Maple Leaf could have been but wasn’t, starting with the 50-odd defence lawyers in one conference room in New York.”

As a result, mediation in Menu Foods went on for four months. But Stieber, who was also involved in that case at one point, notes that the cross-border aspects made it more difficult to resolve. “I think that with the number of class actions going on in the [United States] concurrently with Canada, there were just too many people driving the bus,” he says. At the same time, he argues the dynamics of U.S. litigation add to the challenge. “I think as a group we’re a far smaller community. You have a certain respect for other lawyers which I don’t think exists in the U.S. There’s a greater degree of, call it camaraderie, call it relationships, call it trust, that I can pick up the phone and call any one of the plaintiffs’ class action guys and discuss how we see resolving it.”

The Menu Foods case differed from Maple Leaf in other respects as well. While McCain won kudos for publicly accepting responsibility for the tragedy and quickly went on to showcase the company’s efforts to improve food safety in its plants, Menu Foods executives have been quiet by comparison. That company, of course, was able to pin some of the blame on Chinese exporters that supplied the tainted wheat gluten used in its products. Menu Foods declined to comment for this article.

The settlement reached in Menu Foods also was less generous than what Maple Leaf agreed to. The pet-food company offered compensation only for economic damages, such as for veterinary bills, but avoided paying consumers for the loss of their animals. Maple Leaf, by contrast, settled on a compensation grid that awards victims anywhere from $750 in cases where people became ill for a short period to at least $125,000 in cases where people died. Significantly, the agreement also included awards for people who suffered so-called nervous shock, “psychological injuries or trauma,” according to language in the settlement, something plaintiffs’ lawyer Clint Docken, of Docken & Co., says is rare in class actions. As a result, most lawyers representing victims in the Maple Leaf case call the agreement a fair one.

“At the legal end, they really did handle it appropriately,” says Merchant.

Nevertheless, Docken argues the case was more amenable to a quick settlement. The fact that most of the fatalities involved elderly people, for example, meant the parties didn’t have to haggle much over payments for loss of dependency. As well, many of the illness claims involved minor ailments such as stomach aches. At the same time, Docken says the motivation to settle tends to be greater in cases involving food than for those involving drug liability since consumers are less familiar with pharmaceutical brands. “With Maple Leaf, there was very strong public awareness and identification with their product generally. I suspect that you don’t often get that.”

As a result, part of Maple Leaf’s rationale throughout the crisis was a bid to rebuild its public image, of course. But while McCain’s appearances before TV cameras apologizing to victims at the outset may make some lawyers cringe, Stieber says he was supportive. “I was impressed along with many other people because I thought we don’t see that very often. Everybody sort of runs for cover, and the day before the trial is to start, all of a sudden the defendants come out and say, ‘I think we should settle now.’ As defence counsel, you never want your client to admit liability except where, in this particular circumstance, you are of the view that liability would ultimately be found.”

George Addy, a former chief general counsel for Telus Inc. who once headed up the federal Competition Bureau, agrees that Maple Leaf’s approach was the correct one. “Is it wise from a business perspective? It is because dealing with these issues decisively, earnestly, and quickly I think is in the best interests of the corporation,” says Addy, now a partner with Davies Ward Phillips & Vineberg LLP in Toronto. “As unfortunate as the circumstances were with that company, no corporation is in the business of making and prolonging lawsuits. Their business is whatever the corporate activity is.”

Addy says while the typical legal advice might be to deny liability, current thinking about the role of corporate counsel includes a recognition in-house lawyers are part of an executive team that ideally should consider the wider business issues the company is dealing with. “As in-house counsel, when you’re sitting down with a CEO who is faced with this type of process, your duty is to outline the legal risks associated with the potential business options open to [them] at that time. That’s your job as legal counsel, but you’re also there to bring that advice to him in the context of a business environment. You’re not advising on the basis of [saying], ‘Well here’s a nice little theory that we might want to try or test.’ After all, the CEO is faced with the crisis [and] he or she is faced with a host of issues to resolve around that crisis.”

Of course, whether the listeriosis crisis heralds the turning of a new leaf in class action litigation remains an open question. For his part, Merchant nevertheless criticizes Maple Leaf for what he says were delays in warning the public about the tainted products. He argues as well that who the players were on the defence side was an important factor in resolving the case. “I think in part this comes from the McCain attitude. They’re rich enough to be gentlemen.”

Campion, who successfully defended investment firm Nesbitt Burns in the Bre-X class action 10 years ago, adds that a contrite apology and quick resolution won’t always be the correct approach. He worries, for example, about trends in the medical device field in which companies noticing a few glitches in their products risk liability for sending out mandatory advisories to doctors. He’s concerned plaintiffs’ lawyers will see the advisory as an admission of negligence, something that could have the perverse consequence of making companies reluctant to send it out in the first place.

Campion notes another trend in which the Ontario Court of Appeal has begun certifying class actions based in part on whether the wording in the pleadings is correct, something he feels is leading to a “slippery slide into certification by formality.”

“What has happened is this as far as I can see from a public policy perspective: Access to justice is on everybody’s lips. And this is the right vehicle to try to right that balance. What I say is that yes, access to justice is important. But I also say it can’t be unfair to defendants and it can’t be a set of automatic cases that come out of things like . . . public advisories which are part of a regulatory system [and] are to be encouraged,” he says.

At the same time, plaintiffs’ lawyers such as Docken argue that confusion over jurisdiction in class action cases hampers their work as well and makes the collegiality evident in the Maple Leaf litigation the exception rather than the rule. Vioxx is the obvious example, but Docken says disputes over which provinces’ courts should handle a case are a constant headache. It’s an issue that Ontario Chief Justice Warren Winkler waded into during an Ontario Bar Association panel in February. As a potential solution, he proposed that the various courts in Canada come to an understanding in which they randomly choose three judges from amongst themselves who would decide both which lawyers would have carriage of the case and which jurisdiction would hear it.

“People recognize that we have to come to grips with this now,” he said. “We’ve just reached that point in the evolution of the jurisprudence. We now have a statute pretty well in every jurisdiction. We have these competing claims. It’s gotten to be almost a plaintiffs’ industry because now there are plaintiffs’ lawyers in almost all jurisdictions.”

  • Interesting

    No Win No Fee
    Litigation cases like this can take a very long time, especially when large corporations with huge financial backing are involved. However this isn't always the case - smaller cases can also involve huge time elements. As personal injury solicitor in the UK, we see this all the time.