Written By Joey Blinick and Shaan Tolani
On April 30, 2020, the Nova Scotia Court of Appeal released its decision in the Organigram class action (Organigram Holdings Inc. v Downton, 2020 NSCA 38) limiting the scope of the claims previously certified by the Supreme Court of Nova Scotia (Downton v Organgram Holdings Inc., 2019 NSSC 4).
The action against Organigram was brought on behalf of a class of purchasers of Organigram's cannabis that was subject to a product recall due to the use of unauthorized pesticides on the plants. The lower court initially certified two distinct categories of claims: (i) consumer claims; and (ii) adverse health claims. However, the defendants successfully appealed the portions of the certification order that allowed common issues to proceed on the adverse health claims, with the Court of Appeal finding that there was insufficient evidence of a workable methodology that could demonstrate the alleged adverse health effects had a common cause. The court also struck the plaintiff's unjust enrichment claim as the facts as pled by the plaintiff could not support such a cause of action in light of the contractual arrangement between class members and Organigram.
The decision provides helpful guidance for cannabis companies and other organizations that may be subject to product liability claims as it clarifies a plaintiff's burden (i) when seeking to establish a workable methodology showing general causation, and (ii) when pleading unjust enrichment.
The Need for a Workable Methodology Grounded in the Facts
To establish a negligence-based product liability claim, a plaintiff must establish causation—a link between the harm they claim has been suffered and the negligence itself. In the class action context, there must be a workable methodology to show general causation, including how the impugned products caused harm, what that harm could be, and how it can be assessed on a class-wide basis. Moreover, the methodology must be "grounded in the facts of the case".
The plaintiff faced an uphill battle in proving harmful health effects occasioned by use of the recalled cannabis. The evidence established that: (i) when inhaled, the recalled cannabis only contained an additional 1/1000th of the amount of hydrogen cyanide already found in cannabis generally; (ii) the pesticides were approved for agricultural use; and (iii) the broad symptoms complained of by the plaintiff—including nausea, vomiting, dizziness, breathing difficulties, and headaches—were predicted side effects of smoking cannabis generally (according to Health Canada).
While the lower court initially found the plaintiff had met her burden, ruling that the methodology offered could show adverse health consequences from inhaling cannabis contaminated with the pesticides, the Court of Appeal disagreed, finding the claim of adverse health consequences was too generic and vague, and unsupported by the evidence, to be capable of a common cause determination. The burden on the plaintiff to establish a workable methodology meant showing that the trace presence of the pesticides in the recalled cannabis could cause the specific symptoms of which the plaintiff complained. The Court of Appeal found that the plaintiff had failed to meet her burden in this respect:
- While the plaintiff’s expert noted potential harm from inhaling cannabis contaminated with the pesticides, he did not specify that such harm could occur with the trace amounts of pesticides contained in the specific recalled cannabis. Rather, the evidence showed that a general causation test involving the minimal levels of pesticides contained in the recalled cannabis was not possible.
- Of the potential injuries the plaintiff’s expert identified could occur from inhaling the pesticides, none of these injuries were those specifically pled by the plaintiff (or alleged by other class members in the affidavit evidence filed on the certification motion).
Without this evidence, the Court of Appeal found that a court would not be able to determine whether the harm complained of was, or even could be, caused by exposure to the pesticides, and this was fatal to the adverse health claims.
While it did not need to decide the issue, the Court of Appeal also ruled that even if adverse health effects were capable of a common cause determination, a class action would not be the preferable procedure for advancing such claims because the common issues would be overwhelmed and subsumed by individual issues of causation and quantum related to each plaintiff's particular symptoms.
Unjust Enrichment Claim Unsustainable as Pled
While most of the consumer claims went unchallenged by Organigram on appeal, the unjust enrichment claim was challenged and ultimately struck by the Court of Appeal for the plaintiff's failure to plead the necessary facts to support the cause of action.
In order to make out a valid claim for unjust enrichment, a party must plead facts that establish (i) enrichment of the defendant, (ii) a corresponding deprivation of the plaintiff, and (iii) the absence of a juristic reason for that benefit.
The plaintiff failed to plead any discernible benefit to Organigram other than the contractual price class members paid for the recalled cannabis. The Court of Appeal found that this was not enough to make out an unjust enrichment claim, as case law has confirmed that a contract qualifies as a "juristic reason" for a benefit. Instead, these facts supported the plaintiff's breach of contract claim (for Organigram's alleged failure to deliver the products that the class members contracted to purchase). Given that there was no other benefit pled by the plaintiff, the Court of Appeal found that the plaintiff's breach of contract was inconsistent with the unjust enrichment claim and the two could not co-exist. Thus, while the breach of contract claim could proceed, the unjust enrichment claim could not. This is an instructive ruling which serves to discourage the pleading of multiple and often inconsistent causes of action for the purpose of bolstering the chances of certification.
The Nova Scotia Court of Appeal delivered Organigram a favourable judgement as it is now able to avoid responding to any adverse health claims in the context of the class action. Because the certification ruling is a procedural analysis only, the case which remains must now be tested on its merits, albeit on a narrower basis.
More broadly, the Court of Appeal's judgment is a favourable outcome for defendants who are subject to product liability claims as the decision has helpfully clarified the critical importance of there being a viable, workable methodology grounded in the specific facts of the case that can establish general causation on a class-wide basis. The decision also confirms that the gate-keeping function of the Court at the certification stage is not merely symbolic but requires detailed scrutiny of the evidence put forward by both the moving party and the respondent.
If you have any questions about the information in this blog post or are in need of legal counsel regarding product liability or class action issues, please contact a member of the Bennett Jones Class Action Litigation group.