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Death of the Protective Order in the Federal Court of Canada?

Seedlings Life Science Ventures LLC v. Pfizer Canada Inc., 2018 FC 443 is the second decision (following Live Face on Web, LLC v. Soldan Fence and Metals (2009) Ltd.) wherein Prothonotary Tabib held that the Federal Courts should no longer routinely issue protective orders. Prothonotary Tabib held that the Court has power and discretion to issue protective orders but, given the protection afforded by the implied undertaking rule, should not do so unless the parties demonstrate the “necessity of an express order” or the existence of “other unusual circumstances.”

Protective orders are commonplace in the Federal Courts and these decisions represent a major departure from recent practice. Given the scope of commercially sensitive information exchanged in many Federal Court proceedings, it will be interesting to see how this change and the upcoming appeal of the Seedlings decision affect litigation going forward.

A confidentiality order permits the filing of confidential materials under seal with the Court. By contrast, a protective order governs the way in which parties may designate information and documents as confidential and how this will be exchanged amongst themselves in the pre-trial phase of an action.

The parties agreed to the terms of a protective order and Pfizer brought a consent motion for its issuance. In the motion, Pfizer argued that it had met the test enunciated by the Supreme Court of Canada in Sierra Club.  Prothonotary Tabib, after conducting a review of the history and jurisprudence of protective orders, including hybrid protective/confidentiality orders as in Sierra Club, concluded that such orders are not desirable due to their use of court time and resources, and not necessary due to the implied undertaking rule in Canada which provides:

 … a party to whom documents or information are transmitted in the course of pre-trial discovery is taken to have given an undertaking to the Court that he or she will not disclose or use them for any purpose other than the litigation in which they are produced. Any collateral or ulterior use constitutes a contempt of court.

The Court noted that most provisions in a typical protective order are already covered by the implied undertaking rule. To the extent parties desire further protection (e.g. limits on the number of employees at each party that are permitted to access confidential documents), they can incorporate such provisions into a private agreement. The Federal Court does not typically have jurisdiction over contractual disputes. Citing Live Face on Web, Prothonotary Tabib noted that such contracts will be “amenable to enforcement by the Court”, including by contempt proceedings, because the agreements constitute undertakings by counsel, which the Court has jurisdiction to enforce as part of its inherent jurisdiction to control its own process.

Pfizer raised concerns that third parties (such as experts, consultants and service providers used in litigation) may not be bound by the implied undertaking. Prothonotary Tabib held that since these third parties act as agents or sub-contractors for the parties “it would be unthinkable that these agents would not be bound by the same obligation as their principals.” Further, the parties’ private agreement can include a requirement to have any person to whom disclosure is to be made sign an undertaking to be bound by the agreement and attorn to the Court’s jurisdiction. A Court order would not add further protection.

Pfizer also raised concerns regarding the ability to enforce the implied undertaking rule on persons outside the Court’s jurisdiction. Prothonotary Tabib noted that the Court has no power to enforce the execution of its own judgments outside its territory in any event. Assistance of authorities in the country where the person resides is necessary even with a Court order.  Accordingly, the Court was not satisfied that a protective order “offers any great advantage in ensuring enforcement against persons outside the jurisdiction.”

Prothonotary Tabib held that a protective order was not needed and declined to grant Pfizer’s motion to issue the protective order agreed upon by the parties. Justice Ahmed heard Pfizer’s appeal of this decision on May 29, 2018. Seedlings did not oppose the appeal and did not file a responding motion record.

A copy of the decision can be found here.