Product Liability e-COMMUNIQUÉ - May 2017

Product Liability

05/24/2017       By Glenn M. Zakaib, Peter Henein, Stefanie Holland, Christopher Horkins, Jeremy Martin, Stephanie Voudouris

In This Issue

  1. The Robotic Revolution – Are Autonomous Vehicles an Escape from Accountability?
  2. Canadian VW Diesel Emissions Class Action Settlement Granted Court Approval
  3. Regulating Risk: Keeping You Up-To-Date on Product Regulation
  4. Defendants Burned as Economic Loss Claim Certified in Glass-Fronted Fireplace Class Action
  5. Finding Common Ground: Plaintiffs Get Certification Second Time Around in Boston Scientific Class Action
  6. What We're Up To

The Robotic Revolution – Are Autonomous Vehicles an Escape from Accountability?

By Stefanie Holland

“Through an examination of technical, social and legal histories. … researchers have pointed to ways in which automation does not eliminate human error, but rather creates new and unexpected errors.”1

Autonomous vehicles (AVs) are quickly transforming the auto industry. One of the main issues with this innovation is the question of accountability. If an AV crashes, who is liable? The human, even if they are not driving? The car manufacturer? Can an AV get a speeding ticket? Can a passenger get a DUI if the vehicle is in AV mode? These are all questions pointing to the issue of legal liability, the answers to which hold a particular interest for lawyers. 

Back to the Basics - What are Autonomous Vehicles?

AVs are driverless or self-driving vehicles that are capable of detecting the surrounding environment using artificial intelligence, sensors and global positioning system coordinates. Section 1(2) of Ontario Regulation 306/152, which came into force on January 1, 2016, defines the various levels of automation in an AV as follows:

Level 0 – No automation;
Level 1 – Driver assistance;
Level 2 – Partial automation;
Level 3 – Conditional automation;
Level 4 – High automation; and
Level 5 – Full automation.

Possible Shifts in Liability

Traditionally, a driver can be held liable for the negligent use or operation of a vehicle and a failure to maintain the vehicle.  So long as the driver is able to assume or resume control of the vehicle, it would appear that there would be a continuing basis for driver negligence and liability as they currently exist according to the common law.  However, for AVs that are fully autonomous, this may not be the case. Legislative amendments may be required in order to clarify whether the owner is vicariously liable and in what circumstances. 

A manufacturer can also be found liable for design defects, misrepresentation and a failure to warn consumers of the risks associated with the reasonable use of their vehicles. The concern that AVs are going to lead to greater liability for car manufacturers is very real because manufacturers have the greatest knowledge and control over its AV systems.

Recent fatalities involving AVs have demonstrated challenges with establishing legal liability. In January 2016, Gao Yanin died when his Model S Tesla reportedly hit a truck on a highway in the Chinese city of Handan at a great speed, with no apparent attempt at braking. Tesla stated that the damage to the car was so great that the company could not determine whether the autopilot was engaged at the time of the crash. Chinese authorities concluded that the crash was the result of driver error.3  Just a few months later, in May 2016, Joshua Brown of Canton, Ohio, was killed when his Tesla Model S crashed into a tractor-trailer at 74 miles per hour.  Tesla stated that the autopilot may have failed to detect the white truck against the bright sky.4

These incidents illustrate that AV-related accidents are going to raise challenging evidentiary, as well as liability, issues for courts to decide.

Protection of Privacy and Cybersecurity

AVs also pose significant challenges with respect to data security. They are designed to share and collect information from a wide variety of sources, including connected vehicles, devices belonging to drivers and passengers and surrounding infrastructure. In an age focused so heavily on cybersecurity, concerns over breaches of access to and control over the vehicle’s autonomous system will be a concern to both consumers and manufacturers, giving rise to obligations pursuant to the Personal Information Protection and Electronic Documents Act.5

Regulatory Framework in the US and Canada

In September 2016, the U.S. Department of Transportation issued the Federal Automated Vehicles Policy,6 which sets out expectations for manufacturers developing AVs and discusses new tools the government may need as the technology evolves and is deployed more widely. In November 2016, the Transportation Minister of Ontario announced that AVs were hitting Ontario streets, after the province became the first in Canada to open a pilot project to test AVs on public roads.7 Led by the University of Waterloo, this pilot project is restricted to testing purposes only and will run for 10 years, including interim evaluations.All test AVs must comply with Canada’s current Highway Traffic Act and Motor Vehicle Safety Act.

Implications for the World at Large

With the innovation of AVs comes both opportunities and challenges to various industry sectors. The legal framework on which these sectors are based will have to anticipate, prepare for and adjust to such changes. One thing is for sure - regulatory guidance is required to protect the automobile industry, as well as the safety of drivers. Only then can the framework for future litigants be defined. But this is not new. Think about all the new vehicle technologies that have been developed in the 20th century that were once controversial and are now considered indispensable, such as seat belts, airbags, child seats, rear view cameras, vehicle data recorders and anti-lock brakes. Courts have continuously adapted to new technology over the ages, ensuring that new innovations, and the implementation of same, are safe. One can only predict that AVs will be no exception. 

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1 M.C. Elish and Tim Hwang, Data Research Institute M.C. Elish and Tim Hwang, Praise the Machine! Punish the Human! Data & Society Research Institute, May 18, 2015, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2720477.
2 https://www.ontario.ca/laws/regulation/150306
3 https://www.nytimes.com/2016/09/15/business/fatal-tesla-crash-in-china-involved-autopilot-government-tv-says.html?_r=0
4 https://www.nytimes.com/2016/07/30/business/tesla-faults-teslas-brakes-but-not-autopilot-in-fatal-crash.html
5 SC 2000, c 5
6 https://www.transportation.gov/AV/federal-automated-vehicles-policy-september-2016
7 http://www.huffingtonpost.ca/2016/11/28/self-driving-cars-ontario-canada_n_13287038.html
 https://news.ontario.ca/mto/en/2016/11/automated-vehicles-coming-to-ontario-roads.html
8 http://www.mto.gov.on.ca/english/vehicles/automated-vehicles.shtml 

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Canadian VW Diesel Emissions Class Action Settlement Granted Court Approval

By Christopher Horkins

In a decision released on April 26, 2017, the Ontario Superior Court of Justice granted court approval to a settlement reached in the Canadian class action against Volkswagen Group Canada Inc. and its affiliates over allegations that it installed “defeat devices” in its 2.0 litre diesel engine powered vehicles.1

The settlement provides class members with a damages payment as well as the option to return their vehicle for a “Buyback Price” equal to the wholesale value before the emissions issue was publicized or keep their vehicle and obtain an emissions modification free of charge. The settlement generally mirrors the settlement reached in parallel US litigation roughly two months before the Canadian class action was certified.

In his decision approving the settlement, the Court compared the settlement outcome with the likely recovery of class members under Canadian tort law and under applicable consumer protection legislation, finding that many class members would likely receive more from the settlement than if they were to pursue their claims individually. As a result, he concluded that the settlement was fair and reasonable.

The Court’s decision closely follows the Quebec Superior Court’s approval of the settlement in the context of the parallel Quebec class action. The Quebec court took a different approach, noting the approval of a neutral expert in a report filed by the parties as well as the great time and expense that would otherwise be required to litigate the case to its conclusion.
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1 Quenneville v Volkswagen, 2017 ONSC 2448, <http://canlii.ca/t/h3dxt>.

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Regulating Risk: Keeping You Up-To-Date on Product Regulation

Here’s a look at what’s new with product regulation and oversight in Canada. 

a. Moving Towards Legalization and Regulation of Marijuana For Non-Medical Purposes

On April 13, 2017, the federal government released draft cannabis legislation.  If enacted, this will make Canada the first G7 country to legalize recreational cannabis. Cannabis will remain illegal for non-medical purposes as the bill moves through the legislative process. If it is approved by Parliament, the bill could become law with a target date of no later than July 2018, according to the Government of Canada.

The draft Cannabis Act sets out the federal regulatory framework for legalization of cannabis for non-medical purposes; however, many aspects of the Canadian framework remain unanswered. The proposed Cannabis Act provides significant discretion to the provinces and reserves significant discretion to be introduced through yet-to-be released regulations.

Here are some key highlights of what the Cannabis Act proposes:

  1. Licensing Regime – The Cannabis Act proposes federal licensing powers for the production, sale, testing, packaging, labelling, sending, delivery, transportation, sale, possession and disposal of cannabis for non-medical purposes. 
  2. Provincial Discretion – The proposed regime would defer significant powers to the provinces. This includes powers to authorize the distribution, sale and retailing of cannabis and cannabis products, establishing the minimum age for purchase and possession, implement restrictions on where adults can consume cannabis, lowering of the personal possession limit within their jurisdiction, and the creation of additional rules for growing cannabis at home.
  3. Products – The proposed legislation would prohibit products combining cannabis and either caffeine, ethyl alcohol or nicotine. It appears that various forms of cannabis products would be permitted, including edible products, resins, and concentrates, but this may also be subject to yet-to-be released regulations. 
  4. Packaging & Labelling – Under the proposed legislation, product packaging and labelling will be permitted to provide factual and accurate information. Misleading claims, any text or images appealing to children, self-service displays, and vending machines will be prohibited. Packaging requirements will also be subject to additional restrictions in the yet-to-be released regulations.
  5. Criminal Law Changes – Various amendments are proposed to the Criminal Code including decriminalizing the possession of fewer than 30 grams of cannabis. Significant amendments relating to impaired driving, police powers and road-side oral fluid testing are also proposed.

A copy of the proposed Cannabis Act can be found here.

This summary is a digest of our blog post on this topic, which can be found here.

b) Proposal to Allow For Importation of Unapproved Drugs To Address Urgent Public Health Needs

Health Canada has recently proposed amendments to the Food and Drug Regulations to allow the importation and sale of drugs for an urgent public health need. These proposed amendments would allow the importation of drug products that are not yet authorized for sale in Canada in the following circumstances:

  • A public health official has notified Health Canada in writing of an urgent public health need;
  • The drug is authorized for sale in the US, the EU or Switzerland (for the same urgent public health need purpose);
  • The drug is in the same category as the category for which the licence was issued;
  • The drug is imported directly from the country in which it is authorized for sale; and
  • The drug is listed on the “List of Drugs for an Urgent Public Health Need.”

The proposed mechanism would be available to bring as-yet unapproved drugs to Canadians in the event of public health emergencies, pandemics and outbreaks.

The draft regulations can be found here.

c) Consumer Product Regulations – Playpens

Health Canada has proposed new Playpens Regulations, which – if accepted – will repeal and replace the existing regulations.

The proposed new Playpens Regulations aim to align the majority of the Canadian requirements with U.S. requirements, and align other requirements with the current Cribs, Cradles, and Bassinets Regulations.

The draft is open for a 75-day comment period, until July 6, 2017, and can be reviewed here.

d) Mandatory Drug Shortage and Discontinuance Reporting

As of March 14, 2017, regulatory amendments implementing certain drug supply reporting requirements have come into force in Canada.  Although industry had established its own voluntary reporting system and website for this purpose in 2012, the newly implemented regulatory changes make such reporting mandatory and establish a new website.

Under the now-amended Food and Drug Regulations, drug manufacturers are required to report:

  • Anticipated drug shortages (defined as situations in which the manufacturer is unable to meet the demand for the drug);
  • Discontinuations of a drug; and
  • Any previously unreported shortages.

A new website has been launched by Health Canada to which manufacturers must post their reports. Visitors to the website can view these reports and run searches. Visitors can also set up email notifications for new or updated reports on shortages and discontinuations of specific companies, products or ingredients.

Health Canada’s Guidance for Manufacturers on the reporting requirements and associated timelines can be found here.

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Defendants Burned as Economic Loss Claim Certified in Glass-Fronted Fireplace Class Action

By Christopher Horkins

In Cantlie v Canadian Heating Products Inc., the British Columbia Supreme Court recently certified a class action alleging negligent design and manufacturing and failure to warn, among other claims, against a manufacturer of glass fronted fireplaces.1 The fireplace products are alleged to be defective and dangerous due to the high temperatures of the glass fronting when operational.

Certification Decision

The bulk of the Court’s reasons focused on a discussion of the requirement under BC’s Class Proceedings Act that the pleadings “disclose a cause of action.” The Court noted that this is a low bar and a proposed class action will only be denied certification on this portion of the test if it is “plain and obvious” it cannot succeed.

Negligent Design and Failure to Warn Claims Certified

The plaintiffs alleged that the defendants had designed and manufactured the fireplace products that they knew were not safe for use without an effective barrier. The Court found this to be sufficient to disclose a cause of action for both the negligent design and failure to warn claims.

With respect to negligent design, the Court underscored the requirement that a plaintiff must establish a defect, a substantial likelihood of harm as well as the existence of an alternative design that is safer and economically feasible to manufacture. The Court found this was sufficiently addressed through the identification of an “effective barrier” as the proposed alternative.

The Court rejected the defendants’ argument that the plaintiffs were essentially advancing an improper “pure economic loss” claim dressed up as a personal injury claim. While case law has limited the applicability of negligence claims for economic loss involving merely “shoddy” design, claims associated with a danger to health and safety have been recognized. This demonstrates an unsuccessful attempt to mount the defence that prevailed for the defendants in the previous Ontario case of Arora v Whirlpool LP.2

On the failure to warn claim, the plaintiffs were somewhat caught by their submission that “no warning would have been effective given the inherent dangers and defects of the product.” However, the Court still found there was substance to the claim that the manufacturer ought to have warned that the product should not be used without an effective barrier. The Court rejected the defendants’ argument that the duty to warn was not applicable because the danger of burning from a fireplace was “manifestly obvious.”

Negligent Misrepresentation and Waiver of Tort Claims Denied

On the bright side for manufacturers, the Court did find that two claims advanced by the plaintiffs, negligent misrepresentation and waiver of tort, were inadequately pleaded and not capable of certification.

The Court found the pleading of negligent misrepresentation to be deficient in that only portion of the pleading addressing the element of reliance was a “bald conclusory pleading.” Following the Ontario Superior Court decision in Martin v Astrazeneca3, the Court found that certification of such a claim requires “particularized pleadings” of reliance. While noting that this will be difficult for class actions, given the necessary involvement of individual issues, the Court nevertheless found this fatal to the certification of the plaintiffs’ negligent misrepresentation claim.

With respect to waiver of tort, the Court noted that the arcane legal doctrine has recently been the subject of judicial comment in a number of Canadian class actions decisions and the question of whether it amounts to an independent cause of action remains open.4 However, in this case, the Court found the bare bones pleading of the waiver of tort claim and the plaintiffs failure to argue it in “any meaningful way” did not merit certification. This hopefully signals a somewhat higher degree of scrutiny for waiver of tort claims which are often tacked on in products class actions.

Key Take-Away Principles

This decision offers parties involved in products class actions a helpful review of the elements of commonly pleaded causes of action and defences. Ultimately, while defences may be available, the court’s decision underscores the low bar to certification for such cases, even where the loss at issue may be characterized as purely economic. A potentially helpful development appears to be the stricter view taken of improperly particularized claims for negligent misrepresentation and waiver of tort. In Cantlie, these claims were not given a free ride simply due to the fact that the main causes of action could be certified.
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1 017 BCSC 286 (CanLII), <http://canlii.ca/t/gxn44> [“Cantlie”].
See our previous article on Arora v Whirlpool here
3 2012 ONSC 2744
4 For a more in depth discussion on waiver of tort’s resurgence in Canadian class actions jurisprudence, see Cassels Brock’s own Jeremy Martin’s article “Waiver of Tort: An Historical and Practical Summary”, Special Supplement to the Canadian Business Law Journal Vol. 52: http://www.casselsbrock.com/files/file/FINAL%20-%2052%20CBLJ%20473.pdf

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Finding Common Ground: Plaintiffs Get Certification Second Time Around in Boston Scientific Class Action

By Jeremy Martin

Earlier this year, Justice Perell released his decision in the adjourned certification motion on the Vester v. Boston Scientific1 action.

Round One – Adjourned To Allow for Further Evidence (December 2015)

Vester v Boston Scientific Ltd. (Vester) is a resumed class action certification motion. As reported in our earlier newsletter, in 2015, Justice Perell heard a certification motion regarding the plaintiffs’ claims that the transvaginal mesh devices that Boston Scientific designed, manufactured and sold to thousands of Canadian women were defective and unsafe.

Justice Perell concluded that the plaintiffs had established that the pleadings disclosed valid causes of action in negligent design and failure to warn; that there was an identifiable class; and that the plaintiffs might qualify as representative plaintiffs. His Honour determined, however, that the plaintiffs failed to show that there was a common issue in respect of the various device classes, and therefore also failed to establish that a class action was the preferable procedure for pursuing the claim. The certification hearing was adjourned to permit the plaintiffs an opportunity to return to court with further evidence to establish that there was “some basis in fact” for the belief that all nine products had the alleged issues in common, and to revise their litigation plan accordingly.

Round Two - Class Certification Granted (February 2017)

On the resumed motion, Justice Perell certified the class action. The Court determined that there was some basis in fact to support the claim that a discrete defect – common to all of the Boston Scientific medical devices at issue – may have existed, and that there was a plausible medical theory for determining the way in which the choice of material for such devices might have been a negligent design decision causing harm to individuals that had the devices implanted.

Key Take-Away Principles

The most interesting development in this case was the Court’s rejection of the defence argument that there was no valid methodology by which the plaintiffs could establish that the alleged microscopic defect was clinically significant. The Court found that the defendant’s arguments strayed too far into the merits of the case for a certification motion. The Court found instead that the plaintiffs met the low evidentiary threshold of demonstrating “some basis in fact” for its claims.

Although the Court’s analysis did not spell this conceptual difficulty out, it appears as though the defendant was caught walking a fine line in its submissions. Defendants have a valid line of attack at certification if the plaintiffs cannot establish a “credible and plausible methodology” for establishing classwide damages. In this case, the defendants had to establish that damages could never be proven, without making the case that damages could never be significant.

This case reinforces the ongoing difficulties faced in Canadian class certification motions regarding the admission of evidence on the merits of a claim. In products cases especially, and particularly in respect of claims where a de minimis harm is alleged, these fine distinctions will often mean the difference between success and failure at certification.

The Court also recently released its decision on costs, which included a significant discount for the defendants, partially on the basis that they ought not to be responsible for “educating” the plaintiffs on the first iteration of the certification motion. The decision was unfortunate for the defendants, who had unsuccessfully argued that costs ought to be a “wash”, given that they had “won” the first certification motion and the plaintiffs “won” the second after being granted leave to re-frame their motion with new common issues and new evidence.

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1 Vester v Boston Scientific Ltd., 2017 ONSC 1095

 

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What We're Up To

  1. Our Life Sciences Blog continues to be very active. Check it out!
  2. For those of you who defend automotive product claims, mark your calendars to attend the DRI Strictly Automotive conference being held in Troy, Michigan on September 14/15, 2017, Chaired by Glenn Zakaib. Contact Glenn for more details about the conference and how you can get involved in the Automotive Specialized Litigation Group of DRI.

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