The recent settlement in the bitterly contested litigation between Air Canada and WestJet Airlines Ltd. proves yet again that there''s nothing that encourages dispute resolution more than a court putting the parties to work and expense.
The case settled on May 28, just three weeks after Justice Ian Nordheimer ordered Air Canada to manually review 75,000 documents before producing them to WestJet.
"Air Canada simply wanted to send them over to WestJet and leave WestJet with the obligation to return privileged or irrelevant documents," says Bryan Finlay of Toronto's WeirFoulds LLP, one of WestJet's lawyers.
"This decision is the first Canadian case to deal with the obligation to review documents manually, and what it says is that you can't have your cake and eat it too," Finlay told Law Times. "It's a important statement on what's becoming a hugely important issue."
Air Canada sued WestJet in April 2004, accusing the defendant of hacking into a confidential internal web site. Air Canada went so far as to hire a detective who discovered shredded documents by rummaging through the garbage of a WestJet co-founder.
In the end, WestJet admitted to spying on Air Canada, acknowledged that management at the highest levels were directly involved in the spying, paid Air Canada $5 million, and made a $10-million donation to children's charities in the names of both airlines.
While the settlement seems a clear cut-victory for Air Canada, the airline may well have taken a much tougher stance on its $200-million claim had it not been for Nordheimer's order.
Ironically, it was Air Canada's own motion that led to the order. It followed on a mass production order that Nordheimer made in January.
"The judge ordered Air Canada to produce more than 50 categories of documents," Finlay says.
After producing some 10,000 documents, Air Canada said that it had 75,000 more to deliver. It had identified these documents by way of an electronic search on the basis of search terms on which the parties had agreed.
But Air Canada wanted to produce the 75,000 documents without reviewing them manually for privilege or relevance issues. Such an undertaking, argued the company's counsel ? Earl Cherniak, Peter Jervis and Susan Wortzman of Lerners LLP's Toronto office ? was too costly and laborious.
Air Canada sought an order that the inadvertent production of privileged documents would not constitute a waiver of privilege nor would the production of irrelevant documents constitute an admission of relevance.
As Nordheimer saw it, neither the Guidelines for the Discovery of Electronic Documents in Ontario nor the Rules of Civil Procedure supported Air Canada's position.
The commentary in the guidelines, Nordheimer noted, expressly contemplated a "detailed review for relevance and privilege" after completion of the electronic search.
"I do not see how that detailed review could properly be accomplished other than manually," Nordheimer wrote.
As well, solicitor and client privilege was "too important a principle" to be left to a process that "has a very large potential for the disclosure of privileged material." With regard to the relevance issue, the motion was unnecessary because Rule 30.05 provided that production of a document was not to be taken as an admission of its relevance.
Finally, Nordheimer was "unmoved" by Air Canada's pleas regarding laboriousness and expense. Air Canada had instigated the case and chose to cast its claim in a manner that made the production of voluminous documents relevant.
"It does not seem to me to lie with Air Canada to institute what it says is the largest corporate espionage case ever seen in Canada, couple it with a claim in the order of $200 million and then complain that the production process is going to take more than the usual amount of time and then cost more than the usual amount of money," Nordheimer wrote.
At the same time, Air Canada was not under an obligation to manually review each page of each document.
"Presumably different categories of documents will require different levels of review," Nordheimer wrote. "It is up to Air Canada and its counsel to determine to what extent a detailed review of the electronic documents must be conducted."
"They must do so, however, cognizant of the obligations under the Rules of Civil Procedure regarding the production of documents that include the requirement that an officer of the corporation swear an affidavit of documents that confirms that a 'diligent search' has been conducted for all documents."
Finlay notes that WestJet came to the motion on the high road.
"We had started our production a year earlier, had manually reviewed and produced our documents, and hadn't asked for any indulgences," he said.
"Our position was simply that non-manual review was not permissible."
Lerners' Wortzman says an amendment to the rules is not necessarily required to deal with e-discovery.
"The difficulty is the jurisprudence which says a party must produce anything that has a 'semblance of relevance,'" she said. "What may be more appropriate is the margin utility test that has been developed in the U.S. That test measures the scope and manner of production by what is reasonable given what's at stake in the litigation."
In a practical sense, Wortzman adds, that's what Canadian counsel are working toward.
"Lawyers are not spending their time regarding discovery on motions but rather on grappling with agreements that will determine the parameters of production," she said.