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In Perdikaris v. Purdue Pharma, 2019 SKQB 281, the Chief Justice of the Saskatchewan Court of Queen’s Bench has ruled that a conflict of interest between Provincial Health Insurers (“PHIs”) and the Representative Plaintiffs and/or Class Members that emerges as the matter proceeds will not automatically disqualify Class Counsel from continuing to represent the Class. This decision may have wide-ranging potential implications for all personal injury class action.

In most Canadian jurisdictions where a plaintiff advances a claim for personal injury, the plaintiff is obliged to advance a subrogated claim for any healthcare costs incurred by the province’s health insurer (such as OHIP in Ontario). If the matter proceeds to settlement, plaintiff’s counsel is required to negotiate in good faith on behalf of both the plaintiff and the PHI. Each province’s legislation requires that plaintiff’s counsel obtain the relevant PHIs’ consent to any settlement for less than full recovery, but most legislation is completely silent on how to proceed if a conflict arises between the PHI and the plaintiff regarding the settlement.

Perdikaris marks the first time that a Canadian court has addressed a conflict of interest between PHIs and plaintiffs in a class action. The case is one of several longstanding class actions against the makers of OxyContin on behalf of people who became addicted to the drugs as prescribed by their physicians. In April 2016, after years of litigation, the parties reached a Settlement Agreement to resolve all the actions. The Agreement was subsequently amended, and then approved by the courts in Ontario, Quebec and Nova Scotia. However, approval in Saskatchewan was initially sought in 2017 before Ball J., who did not grant the application but identified areas for additional evidence and submissions. Justice Ball then retired.

A further hearing was held in January of 2018 before Barrington-Foote J., who did not grant the application, but held upon the prospect of approval on the provision of additional evidence and submissions in a decision released in March of 2018.

Following the March 2018 decision, the PHIs took the position that the Settlement could not be approved. Class Counsel maintained that the Settlement was fair and reasonable and in the best interests of Class Members, and that further efforts should therefore be made to have it approved.

Recognizing that the interests of the Class and the PHIs had diverged, Class Counsel declared a conflict and stated that they could no longer act for the PHIs. The PHIs subsequently took the position that the “bright line rule” regarding situations where one client’s interests are directly adverse to another client’s interests requires that Class Counsel be disqualified from continuing to act for either the PHIs or the Class.

In holding that Class Counsel could continue representing the Class, Chief Justice Popescul affirmed that the Courts have inherent powers to resolve issues of conflicts in cases that come before them. He held that disqualifying Class Counsel at this late stage, after they had spent years moving the lawsuit forward, would produce an unfair and perhaps disastrous result for the Class. Attempting to transition a multijurisdictional complex class action from one set of counsel to another would be next to impossible. Conversely, the PHIs were well represented and capable of insuring that their respective legal positions were advanced. Permitting Class Counsel to remain on file would not bring the administration of justice into disrepute, but Class Counsel’s disqualification could have that result.

This decision suggests that it will be very difficult for a subrogated interest, such as a PHI to have Class Counsel in a longstanding class disqualified on the basis of any conflict of interest arising between the Class and the PHI, due to the inherent unfairness that would result for Class Members from the loss of their choice of counsel.

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