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Court defers to Alberta in sorting out messy class action carriage dispute

|Written By Neil Etienne

An Ontario Superior Court of Justice judge has snipped the rope in a tug of war over who gets to represent some 70 claimants in a class action against a pharmaceutical company.

The case highlights the significant discretion the courts have in managing class actions, says Brian Radnoff.

On Sept. 25, Justice Paul Perell dismissed an interlocutory motion and cross-motion, effectively ending the matter of Kutlu v. Laboratorios Leon Farma as a class action for the time being and disqualifying two lawyers from acting on behalf of any class member in any similar case against the pharmaceutical companies involved.

“The most significant aspect of the ruling legally is it may signal that where competing actions exist, a firm with a significant number of high-value claims with a nexus on a similar or identical cause of action may have the option of opting out; and secondly, forming a joinder of claims which could range up to 70 or more individual actions with joinder through the Rules of Civil Procedure,” says Christopher Watkins, a lawyer in Thunder Bay, Ont., and one of the counsel disqualified from acting for the plaintiffs in the action.

“This may be the beginning of a new area of mass tort outside of the purview of a class action. This may solve issues of competing claims or give options to a group of clients opting out in a significant group to effectively litigate their matters in a cost-effective manner and in a manner consistent with wise use of judicial resources and court resources.”

The ruling, which followed a dispute over which law firm could represent the class members, came as the Alberta court certified a similar class action, Kohler v. Apotex Inc. and Laboratorios Leon Farma with a settlement approval hearing scheduled for the near future.

“The current circumstances justify discontinuing the rival class action in Ontario and continuing it as a joinder of actions for those from around the country with significant claims,” wrote Perell.

“I appreciate that class counsel in Ontario might want the extra mass of large class size, but wants are different from needs, and there is no reason to think that the assembly of significant joined claims in Ontario would be insufficient to make the action economically viable in Ontario, and there is no reason to think that the Kohler action cannot provide access to justice under the case management of Associate Chief Justice [John] Rooke, who will conduct a fairness hearing.”

The dispute over carriage arose about when a long-standing working relationship between Watkins and Alexander Zaitzeff, both of Thunder Bay, came to an end in the spring. Perell noted the two had shared office space and had worked together on class action files in the past. In the fall of 2013, Watkins brought a class action against Laboratorios Leon Farma and Apotex Inc. over alleged negligence in packaging a contraceptive drug that led to unexpected and unwanted pregnancies and health issues for many women or their newborns. None of the allegations have been proven in court.

“I have spared the details, but the record establishes that the circumstances of the breakup of their business relationship and personal tragedies in their private lives led to an unseemly dispute over clients between former friends,” wrote Perell.

“Class members, however, need not and should not be embroiled in the disputes. But in the circumstances of the disqualification of Mr. Zaitzeff and Mr. Watkins and in light of what is happening in Alberta, it is necessary to have a restart of the lawyer and client relationships.”

Watkins, whose wife was to be the representative plaintiff, assigned the file to Zaitzeff, according to Perell. Zaitzeff subsequently came into an agreement with Toronto-based class action firm Kim Orr, which he had also worked with in the past. The arrangement was that Kim Orr would be joint counsel in the proposed class action and would also carry the heavy load as lead counsel. Upon hearing Watkins’ media announcements of the class action, Carleen Kutlu — who would replace Watkins’ wife as representative plaintiff — contacted Zaitzeff and retained him. The judge noted some 70 women had signed retainer agreements for the action with Watkins and took the position they were clients of his firm and not Zaitzeff’s.

While the working relationship between Watkins and Zaitzeff appeared amicable when it ended, they began to quarrel through the summer months, according to Perell. When the court certified the Kohler action in June, he noted, Watkins began contacting the class members, advising them they had the option of not participating in the Kutlu matter and joining the Kohler one or starting individual actions with him as the lawyer on file. In August, the lead plaintiffs in the Kutlu action served a notice of change of counsel to substitute Zaitzeff’s new firm for Watkins’.

“What Mr. Watkins regarded as an amicable parting of ways now quickly soured and the relationship between lawyers became unseemly, to put it mildly,” wrote Perell.

“Kim Orr, which had remained more or less neutral about the dissolution of the arrangements between the Thunder Bay lawyers now took the side of Mr. Zaitzeff; [they] asked Mr. Watkins to cease and desist his communications with what they insisted were their clients. He refused, because he thought the clients’ interests were being sacrificed, as well as his own, for no good reason.”

In the motion before the court, the plaintiffs sought a declaration that their notice of change of counsel was of full force and effect. In part, Watkins didn’t oppose the motion because, as Perell noted in his ruling, “he wants it on the record that the putative class members should consider participating in a rival class action that is being litigated in Alberta, or at least to know that they have the option of individual class actions against the defendants.”

Watkins did oppose the balance of the motion that sought an injunction restraining him from contacting any class members who had retained Kim Orr and Zaitzeff and compelling him to direct those who contact him to the other firm for information about the Kutlu and Kohler actions.

Won Kim of Kim Orr says the ruling is “the start of a trend” in Canada in how class the courts manage class actions.

“It’s the start of a trend in Canada because we don’t have a national class action regime,” he says.

“Justice Perell carved out a real heavy-loss class and it’s his thought people with mega damages should go forward as a special class. I think what is very significant is that Justice Perell ordered pre-certification notice for a national notice program. It’s extraordinary. When have you ever seen a court order notice for a class that’s not certified?

He adds: “It’s a discretionary remedy, but I think it’s a brave decision.”

Perell also wrote that if Rooke rejects the proposed settlement in Alberta, “then the circumstances will have changed again, and counsel for the group can reactivate its request that the action be certified as a class proceeding.”

Lerners LLP partner Brian Radnoff calls the ruling a “rare” one that highlights the significant discretion the courts have in managing class actions.

“The court has a significant amount of discretion, so it can basically do what it believes is fair and just and in the interest of the plaintiff class,” he says.

“Justice Perell crafts a very specific order to this situation and I think what is more novel is his determination that if there is an action [in Ontario], depending on what happens in Alberta, this should not proceed not as a class action but as a multiple-plaintiff action.”

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