Ontario Court of Appeal clarifies standards for compensable psychological injury in product liability claims: Palmer v. Teva

On March 27, 2024, the Court of Appeal for Ontario released its much awaited decision in Palmer v. Teva.[1] The decision sends a clear signal that claims based on weak science and remote or tenuous risks of future injury are unlikely to be certified. It is consistent with the clear trend in the Ontario jurisprudence refusing to certify class actions in the absence of compensable injury to class members.[2]

Background

Palmer v. Teva is one of a number of proposed class actions in Canada alleging psychological damage from the alleged increased risk of cancer resulting from exposure to nitrosamine impurities, which have been found in various prescription and over-the-counter medications.[3] Palmer concerned allegations that the defendants’ valsartan blood pressure medications contained N-nitrosodimethylamine (NDMA) and N-nitrosodiethylamine (NDEA). NDMA and NDEA are ubiquitous and can be found in common foods and beverages, drinking water and the air. NDMA and NDEA are not harmful at low levels and the FDA sets recommended daily intake limits for NDMA, NDEA and other nitrosamines.

Perell J. denied certification in Palmer in August 2022.[4] In 2023, the B.C. Supreme Court summarily dismissed a similar action involving allegations of unacceptable levels of NDMA in ranitidine heartburn medications.[5]

In Palmer, the defendant manufacturers voluntarily recalled certain lots of valsartan products after discovering that the active pharmaceutical ingredient might contain NDMA and NDEA following manufacturing process changes. In the summer of 2018, Health Canada issued consumer bulletins relating to the defendants’ valsartan recalls but advised patients that they should continue taking their medications unless advised to the contrary by a physician or pharmacist. One of Health Canada’s bulletins advised that based on the levels of NDMA found in valsartan, the potential increased risk of cancer over a lifetime was between 1:11,600 and 1:93,400 (i.e. one additional cancer case for every 11,600 or 93,000 people taking the product). The bulletin further put these figures into context, noting that “nearly 1 in 2 Canadians is expected to develop cancer during their lifetime.”

The Palmer plaintiffs did not seek compensation for consumers who had been or may be diagnosed with any cancer as a result of consuming valsartan. Rather, they claimed for damages for the potential increased risk of being diagnosed with cancer in the future, as well as costs for medical services and monitoring, refunds for medications consumed, costs for medications thrown away, and psychological and punitive damages.

In dismissing the certification motion and the action, Perell J. found that there was no basis in fact for concluding there is a causal relationship between valsartan and cancer, but some basis in fact for the proposition that exposure to NDMA and NDEA in contaminated valsartan very modestly increases the risk of being diagnosed with cancer. He found that a small proportion of class members will have sustained psychological harm for a relatively short period, but that it was plain and obvious that neither the risk of future physical or psychological harm nor the present anxiety occasioned by that risk is compensable in law. Perell J. also found that the plaintiffs failed to satisfy the commonality and preferability criteria.

The plaintiffs appealed to the Court of Appeal for Ontario.

Outcome and Key Takeaways

In a long-awaited decision, the Court of Appeal unanimously affirmed Perell J.’s decision in a decision written by B.W. Miller J.A. (Huscroft and Paciocco JJ.A., concurring). The decision clarifies at least 9 important principles in claims involving exposure to potentially harmful products and substances:

1. Actual damage (physical or psychological) is an essential element of a claim in negligence. Therefore, mere allegations of damage that has never materialized, and may never materialize, are doomed to fail.
2. Claims for genotoxic injury (i.e. cellular or molecular changes) without more are generally insufficient to establish actual damage in negligence.[6] As the Court stated, “[a] physical change with no perceptible effect upon one’s health is not compensable in negligence.”[7]
3. Claims for present psychological harm based on the risk of future injury may be compensable, but only if both aspects of the test in Mustapha[8] and Saadati[9] are met. The Court of Appeal clarified that the Supreme Court of Canada’s decisions in Mustapha and Saadati require the following for mental injury based on future physical harm to be reasonably foreseeable: (1) a basic threshold of injury; and (2) the ordinary fortitude standard. The plaintiffs’ claim failed to meet the basic threshold because it pled no material facts establishing mental injury that rose above the ordinary annoyances, anxieties and fears experienced by people living in civil society. The plaintiffs’ claim would have also foundered on the ordinary fortitude standard; the Health Canada bulletins assuaged, rather than inflamed, consumers’ concerns.
4. The test for pure economic loss requires imminent risk of a real and substantial danger.[10] The basis for recovery for pure economic loss – that the plaintiff must take steps to prevent an imminent injury that it would otherwise suffer – “vanishes where the defect presents no imminent threat”.[11] The plaintiffs’ claims for medical expenses and medical monitoring failed in Palmer because it was plain and obvious that discarding the pills was sufficient to avert any danger and pure economic loss does not extend to other losses, such as product replacement value or refunds.
5. Exposure to an allegedly contaminated product does not give rise to a claim in battery. While battery can be committed intentionally or negligently, battery requires a direct, offensive, physical contact with the plaintiff, which is the immediate cause of the plaintiff’s harm. And unlike negligence, battery cannot be based on a “failure to act”, which is what the plaintiffs in Palmer
6. As with negligence, damage is an essential element of recovery for statutory claims for false, misleading, deceptive or unconscionable representations under the Ontario Consumer Protection Act, 2002.[12] Section 18 of the Ontario Consumer Protection Act, 2002 provides that the primary remedy for an unfair practice is rescission, but s. 18 also provides that “the consumer is entitled to any remedy that is available in law, including damages.” Damages for an increase of a risk of harm or damages for mental injury that fail to meet the Mustapha and Saadati standards are not compensable “in law”.
7. Failure to disclose a non-dangerous defect cannot constitute a “representation” under s. 52(1) of the Competition Act. Affirming prior decisions,[13] the Court of Appeal held that “[t]he object of s. 52(1) is to target deceptive marketing practices, not create liability for defective products.”
8. Unjust enrichment claims against manufacturers for product defects are generally not viable. The law of unjust enrichment does not permit recovery for incidental collateral benefits. In Palmer, any benefits received by the defendants from class members were indirect (because the purchase price for medications was paid to retailers, not the defendant manufacturers). Furthermore, the Court of Appeal held that plaintiffs do not suffer the element of “deprivation” required for a claim in unjust enrichment where they received the very product they bought. Class members paid for valsartan blood pressure medication and received it.
9. Claims for psychological injury, even if compensable, may be uncertifiable if they are inherently idiosyncratic. The Court of Appeal upheld the motion judge’s finding that even if some claims for psychological harm based on fear of cancer were viable on the pleadings, at most, a minority of the class would have suffered compensable psychological injury based on the evidence. The “hard work” therefore remained for the individual issues trials and a common issues trial would have been of marginal utility.

Case Information

Palmer v. Teva, 2024 ONCA 220

Docket: COA-22-CV-0085

Date: March 27, 2024

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[1] 2024 ONCA 220 [Palmer].

[2] See e.g. Hoy v. Expedia Group, Inc., 2024 ONSC 1462 (Div. Ct.), at para. 85.

[3] See Health Canada, “Nitrosamine impurities in medications: Overview”, online: https://www.canada.ca/en/health-canada/services/drugs-health-products/compliance-enforcement/information-health-product/drugs/nitrosamine-impurities.html.

[4] 2022 ONSC 4690.

[5] Dussiaume v. Sandoz Canada Inc., 2023 BCSC 795.

[6] In the U.S., some state courts have held that the genotoxic damage is sufficient for Article III standing. Others have dismissed actions based on genotoxic injury for want of Article III standing.

[7] Palmer, supra note 1 at para. 52.

[8] Mustapha v. Culligan of Canada Ltd., 2008 SCC 27, at para. 3 [Mustapha].

[9] Saadati v. Moorhead, 2017 SCC 28 [Saadati].

[10] Cf. Nissan Canada Inc. v. Mueller, 2022 BCCA 338, at paras. 40-67.

[11] Palmer, supra note 1, citing 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2020 SCC 35, at para. 46.

[12] S.O. 2002, c. 30, Sched. A.

[13] Arora v. Whirlpool Canada LP, 2013 ONCA 657, at paras. 50-51 citing Williams v. Canon Canada Inc., 2011 ONSC 6571, at para. 227, aff’d on other grounds, 2012 ONSC 3692 (Div. Ct.).