Date: Mon, 7 Jul 2008 15:22:34 -0700 (PDT)

From: David Cheifetz

Subject: Interesting CA angle on damages

The Eli Lilly story isn't necessarily over yet. That the Ontario Div Ct decision, not an Ont CA decision, on the certification motion. I expect Eli Lilly will appeal but I'm not optimistic they'll get leave, unless the Ont CA decides it wants to reconsider the merits of Serhan. Also, unless the grounds upon which the appeal was argued in the Div Ct were increased after leave was granted by the Div Ct, the grounds didn't include the merits of the waiver of tort as disgorgement of profits claims.

Leave to appeal to the Div Ct had been granted on the narrow issue of whether the causation issues relating to the waiver of tort claim were so individualistic as to preclude those claims being common enough to be asserted in a class action, so as to preclude certification of the waiver of tort claim. See Heward v Eli Lilly, 2007 CanLII 26607, at paras. 32-34.

David

----- Original Message ----
From: John Swan
To: "Wright, Richard"
Sent: Monday, July 7, 2008 2:31:11 PM
Subject: RE: Interesting CA angle on damages

Richard,

The decision in Heward v. Eli Lilly should not have been unexpected but it deals only with the preliminary question whether a class action should be certified or not; not with whether the plaintiffs have a valid claim to what they seek.

In Serhan v. Johnson & Johnson (2006), 269 D.L.R. (4th) 279 (Ont. Div. Ct), leave to appeal to S.C.C. ref'd, [2006] S.C.C.A. No. 494, the Divisional Court held that a class action could be certified on the same ground, viz., that the members of the class could sue for the gains made by the defendant from the sale of defective diagnostic equipment. The standard for certification is low - in my view absurdly low - and, particularly in the light of Serhan, almost entirely ineffective in screening out bizarre claims.

I have been told, but do not know, that Serhan will proceed to trial. It is to be hoped that the wholly bizarre reasoning of the trial judge in Serhan, holding that a class, the members of which did not pay for what they used and who suffered no injury caused by the defect, could nevertheless sue for the gains made by the defendant (which, depending on how one counted them, may not have existed) on the basis of "waiver of tort".

The particular tragedy of Serhan and now perhaps, Heward, was the failure of the Court of Appeal to give leave to appeal in order to review the standard a class has to meet to be certified.

I’d like to be able to say that I have confidence that the absurdity of Serhan will be recognized at the trial, but I can’t.

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