Friday, May 29, 2020

Expediency of One Action Is Exclusive Purpose of Joinder Rules under PM(NOC) Regulations

Teva Canada Limited v Bayer et al 2020 FCA 86 Nadon JA: Pelletier, de Montigny JJA rev’g 2019 FC 1039 Pentney J
2,547,113 / 2,624,310 / 2,823,159 / 2,396,561/ rivaroxaban /XARELTO

This appeal clarifies several important procedural points under the new the PM(NOC) Regulations. In the main part of the decision, the FCA greatly clarified the meaning and implications of s 6.02, which provides that no action may be “joined” to a s 6(1) action during the period of the statutory stay. Two other points arose tangentially. The FCA also noted that procedural precedent under the former Regulations is not necessarily applicable under the new Regulations, given the change in purpose; and Nadon JA remarked that that disposing of cases brought under the Regulations within 24 months “remains a goal—not an obligation on the Court” [132].

This appeal concerns a motion to add defendants in a trial of common issues under the PM(NOC) Regulations. The issue of joining actions is important both for the usual procedural concerns of fairness and efficiency of adjudication, and also because it raises the issue of whether the first generic to serve an NOA can get a practical first-mover advantage over later generics. Under the US Hatch-Waxman patent linkage system, the first applicant to challenge a drug patent is entitled to 180 days of exclusivity against subsequent generic applicants (21 U.S.C. § 355(j)(5)), with the idea that this provides an incentive for the first generic to bear the cost of litigation. There is no equivalent statutory exclusivity period in the NOC Regulations, but the first generic to get its NOC will nonetheless get a practical head start.

In the underlying motion, Teva and Apotex resisted a motion to add Taro and Sandoz as additional defendants in the PM(NOC) action brought by Bayer against all four. Teva and Apotex argued, in part, that adding Taro and Sandoz would deprive Teva and Apotex of the potential first-mover advantage. As discussed here, in the decision under appeal Pentney J rejected this argument, and then went on to order Taro and Sandoz to be added, in light of a balancing of the usual considerations of balancing judicial economy against potential prejudice to the parties. While Pentney J did not provide the specific basis for his order, the FCA held that Rule 105 does give the discretion to make an order of that type [41].

The FCA also affirmed that the potential loss of the first-mover advantage should not be considered. While the procedural requirements under the PM(NOC) Regulations may result in a practical first-mover advantage, there is nothing in the Reuglations or the RIAS to suggest that this is the purpose: [53-54]. Indeed, the contrast with the US example where a first-mover advantage is explicitly provided for suggests that no such purpose was contemplated in the Canadian patent linkage system: [55].

The FCA nonetheless reversed. While Rule 105 permits an such an order to be made, it does not grant an unfettered discretion. In particular, the exercise of the discretion must not fall afoul of s 6.02 of the Regulations, which provides that no action may be “joined” to an action commenced under s 6(1) during the period of the statutory stay [81].

The FCA held that “joined” is not merely synonymous with “consolidated” [110]. This conclusion turned in part on the textual meaning of the two terms [99]-[121], where Nadon JA concluded that the words do not suggest that the meaning of “joining actions” is confined to consolidation: “Rather, they suggest that actions are joined whenever they are brought together, connected or brought into close association” [114].

The FCA’s conclusion turned primarily on the purpose of the Regulations. Nadon JA drew a very strong contrast between the purpose of s 6.02 and Rule 105:

[122] Having analyzed the wording of section 6.02 of the Regulations, I now turn to consider more closely the purpose of the prohibition. The entire raison d’être of the section 6.02 prohibition is to promote the expediency of one action, and one action only, instituted pursuant to subsection 6(1), in the context of the 24-month time period within which that action is meant to be determined. My meaning in saying that the prohibition is concerned with the expediency of one action only becomes clear when the purpose of the prohibition is contrasted with the purpose of Rule 105(a). The various forms of relief available under Rule 105(a) seek to promote the most expedient and least expensive determination of multiple proceedings before the Court that share similar issues. In other words, in making an order under Rule 105, a judge or a prothonotary seeks to achieve the most efficient and inexpensive way of dealing with two or more proceedings, both in the interest of the parties and of the Court. Not so with section 6.02 of the Regulations. Section 6.02 is exclusively concerned with the progress of a single action to ensure it is determined within the 24-month deadline that applies to it. The concerns that animate an order under Rule 105(a)—efficiencies and cost savings across multiple parties in multiple proceedings, and as they apply to the court—have no bearing on section 6.02 of the Regulations, the singular focus of which remains exclusively on determining that single action before its peculiar deadline. Thus, to make an order under Rule 105 for the arrangement of multiple proceedings that would result in time and cost savings for multiple parties and the court would still be contrary to the purpose of the section 6.02 prohibition if that arrangement made it at all less likely that any single action brought pursuant to subsection 6(1) would be determined within its 24-month deadline.

Further, the concern under s 6.02 “is whether the Rule 105 order could possibly result in the appellants’ actions exceeding their 24-month deadlines” [124] (emphasis added).
Nadon JA did not undertake a deep inquiry into exactly what would or would not be considered “joining” as the Court was satisfied that the practical effect of the order at issue was tantamount to a consolidation: [129], [131]. In coming to this conclusion, the FCA observed that while the discoveries that had taken place prior to the appeal were nominally conducted by all parties upon consent, the appellants were not “truly free to arrange their proceedings as they saw fit”: “I doubt very much that the Federal Court would have appreciated being advised by the appellants that they refused to cooperate with Taro and Sandoz in regard to the examinations on discovery or in regard to any motion arising from the common issues” [128].

Two other points deserve mention. Nadon JA noted that procedural precedent under the former Regulations would not necessarily be applicable under the new Regulations:

 [77] [I]t is not a foregone conclusion that the principles set out in Sanofi-Aventis [relating to abuse of process], which dealt with the former Regulations, will find identical application under the current Regulations, as the purpose of proceedings commenced under subsection 6(1) of the current Regulations differs from the purpose of proceedings commenced under the former Regulations.

Finally, Nadon JA also noted the 24-month period contemplated for the resolution of actions brought under the Regulations is a goal, not an obligation on the Court:

do not require the Federal Court to render judgment within 24 months. . . . Consequently, it is my view that, in case-managing these cases, judges should bear in mind that they are not positively duty-bound to decide them within the 24-month period. I wish to be clear that I am not suggesting that the 24-month guideline be dealt with flippantly. However, it should be recognized that disposing of cases within 24 months remains a goal—not an obligation on the Court. It bears recalling that even if, in a given case, judgment is rendered by the Federal Court in the 24-month period, appeals taken from such a judgment do not extend the stay period.

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