Palmer: certification denied for class action based on risk of future harm

In Palmer v. Teva Canada Limited¹, the Ontario Court of Appeal dismissed the plaintiffs’ appeal from the lower court’s decision denying certification of a proposed product liability class action that claimed damages for a potential increased risk of being diagnosed with cancer in the future. The Court’s decision confirms that this type of alleged harm is not compensable, and also that proposed common issues must have a minimal evidentiary foundation to clear certification.

What you need to know

• No compensation for risk “in the air”. In order for a proposed class action in negligence to be viable, actual harm (compensable damage) must be alleged. Exposure to an increased risk of future harm is not compensable and, therefore, cannot ground a cause of action for a class action.
• Minimal evidentiary foundation for commonality. At certification, plaintiffs must provide some minimal evidentiary foundation to satisfy the common issue criterion. There must be some basis in fact that a proposed common issue actually exists for each member of the class before courts in Ontario will certify the claim.

Background: the Palmer class action

The plaintiffs sought to certify a proposed class action against the defendant pharmaceutical companies in respect of valsartan, a medication used to treat high blood pressure. In 2018, the defendants recalled certain lots of valsartan after discovering that the active pharmaceutical ingredient, which was supplied by a third party, had been contaminated with N-nitrosodimethylamine (NDMA) and N-nitrosodiethylamine (NDEA). The plaintiffs alleged that these compounds are toxic carcinogens and commenced a class action on behalf of people who were prescribed and ingested valsartan.

While the plaintiffs advanced several causes of action, their principal claim was for negligent manufacture. The plaintiffs claimed damages for the potential increased risk of developing cancer or other adverse health effects in the future, as well as for mental distress over the fear of potentially suffering future adverse health effects. The plaintiffs also sought damages for the costs of medical screening and monitoring for early detection of adverse health effects, the costs of drugs thrown away after the recall and refunds for contaminated drugs consumed. At first instance, the motion judge denied certification, holding that the plaintiffs failed to satisfy the cause of action, commonality and preferability criteria.

No negligence “in the air”

The Court of Appeal agreed with the motion judge that the plaintiffs failed to plead a viable cause of action in negligence as required by section 5(1)(a) of Ontario’s Class Proceedings Act². The Court explained that actual damage is a necessary component of a claim in negligence: “there is no liability ‘in the air’ and no right to be free from the prospect of damage”³. Here, the plaintiffs were not alleging that they had actually been diagnosed with cancer or had actually experienced adverse health effects. Rather, the plaintiffs claimed there was an increased risk of this potentially happening in the future. The Court of Appeal applied the Supreme Court of Canada’s decision in Babstock v. Atlantic Lottery, holding that exposure to an increased risk of injury or harm is not compensable in negligence.

The plaintiffs’ claim for damages based on mental distress was also not viable. While psychological injury over the fear of future harm could be compensable, such injury must rise above ordinary annoyances and be “serious and prolonged”. The injury must also be reasonably foreseeable in a person of ordinary fortitude. Here, the plaintiffs failed to plead material facts demonstrating that the alleged mental distress rose above ordinary anxieties and fears. However, even if they had, the Court held that any such injury would not be foreseeable in a person of ordinary fortitude. The Health Canada recall notices announcing the contaminated valsartan acknowledged that there theoretically was a potential increased risk of developing cancer, but that this was between 0.0011% and 0.0086%. The recall notices advised that the baseline lifetime risk of developing cancer is already 50%. They also told individuals to continue taking their medication unless advised otherwise by a doctor. On these facts, the Court held that the recalls would not cause a person of reasonable fortitude to suffer a compensable level of psychological injury.

Finally, the Court agreed with the motion judge that the plaintiffs’ claim for costs of medical monitoring, costs of drugs thrown away after the recall and refunds for drugs consumed was likewise not viable. Damages for pure economic loss in negligence (i.e., in cases without bodily injury) are recoverable in only limited circumstances. When dealing with an alleged shoddy good, only expenditures for avoiding injury from a product that presents an imminent risk of physical harm can be claimed. The plaintiffs’ pleading did not establish that the valsartan was imminently dangerous, and the damages the plaintiffs claimed were not for avoiding or repairing the alleged defect in the product. Indeed, the plaintiffs admitted discarding the contaminated valsartan. They therefore had no basis for recovery.

No commonality

The Court of Appeal also upheld the motion judge’s conclusion that the plaintiffs did not satisfy the common issue criterion under section 5(1)(c) of the Class Proceedings Act. In so doing, the Court affirmed the motion judge’s analysis, which applied the two-step evidentiary framework for determining whether the plaintiffs’ evidence meets the commonality requirement for certification. As we previously reported, the two-step framework requires plaintiffs to demonstrate a minimal evidentiary foundation for the proposed common issues. Plaintiffs must show that there is “some basis in fact” that (1) the proposed common issues actually exist, and (2) they are common across the class.

Here, while there was some basis in fact that NDMA and NDEA cause an increased risk of developing cancer, there was no basis in fact that the alleged psychological injury from being notified of this increased risk was a common issue. In reviewing the evidence, the Court assessed both whether this issue existed (step 1) and whether it was common across the class (step 2):

• There was no basis in fact that this issue existed for all proposed class members. At most, the evidence demonstrated only a minority of the proposed class suffered mental distress that might be compensable. Indeed, the plaintiffs’ own expert found that all proposed representative plaintiffs who were assessed had either recovered from any alleged psychological harm or did not suffer this harm at all.
• The Court also observed that claims for psychological damage are often inherently individualized. The Court affirmed the motion judge’s conclusion that “the hard work remains for individual issues trials and the common issues trial is of marginal utility”⁴.

In light of the analysis on the cause of action and commonality criteria, the Court declined to address preferability.

Implications

The Court of Appeal’s decision draws a clear distinction between negligence cases dealing with actual harm and those dealing with the mere risk of harm. Proposed product liability class actions that claim damages based only on an increased risk of future harm will likely be difficult to certify.

The Court of Appeal’s decision also confirms that plaintiffs will need to show some minimal evidentiary foundation in order to satisfy the commonality criterion at certification. The existence of a proposed common issue will not be assumed on the basis of the plaintiffs’ pleadings in Ontario. There must be some basis in fact that the issue actually exists for each member of the proposed class. This conclusion is consistent with emerging case law from other appellate courts, as we have discussed in a previous publication.