19980226
Docket: T-2408-91
Between:
MERCK & CO. INC., and
MERCK FROSST CANADA INC.
Plaintiffs
- and -
APOTEX INC.
Defendant
REASONS FOR ORDER
MacKAY, J.:
[1] These are Reasons for an Order filed February 25, 1998, which allowed two motions by the defendant Apotex, and which quashed two Subpoenas Duces Tecum, each dated February 19, 1998 and served the following day upon Mr. Jack Kay, President of Apotex, and Mr. Richard Barbeau, Vice President of Apotex.
[2] In each case the subpoena directed the person served to appear before the Court on February 23, 1998 when hearings resumed in relation to an order of Mr. Justice Pinard dated April 27, 1995, as later amended, directing that Apotex and Dr. Bernard Sherman, now Chairman of Apotex, show cause why the company and he should not be found in contempt of court. Both subpoenas direct production to the Court of documents set out in Schedule "A" to the subpoenas, and in this case the Schedules "A" to the two subpoenas are identical. The documents there described to be produced are set out in 9 general classifications, as may be seen in the copy of Schedules "A" appended to these Reasons as Annex A.
[3] Both Messrs. Kay and Barbeau are witnesses summoned to appear, each with a prior Subpoena Duces Tecum directing production to the Court of documents described in three more general classifications than those appearing in Schedule "A" to the second subpoenas now issued to them. They have earlier responded to the first subpoenas and, with some further exhortation to counsel for Apotex, they have produced for the Court documents, so far as those were earlier discovered, that appeared to be within the classifications in the first subpoenas. When the second subpoenas were served Mr. Kay had completed examination by the plaintiffs and cross examination by counsel for Apotex and Dr. Sherman, and he had been excused as a witness. Mr. Barbeau was being examined by counsel for plaintiffs when the Court last recessed in December and he was expected to continue testimony by continuing examination and cross examination when the hearing was scheduled to resume on February 23, 1998.
[4] For the record I note that, after some preliminary interlocutory proceedings the show cause hearing commenced July 21, 1997 and since then hearings have continued over 18 days scheduled to meet convenience of all counsel. Thus far almost seven months have elapsed since the hearings commenced, and the evidence called by the plaintiffs is not yet complete.
[5] The subpoenas served on February 20, 1998 followed after arrangements were made for discovery in relation to the matter of a reference as to damages or profits arising from infringement by Apotex of Merck's patent interests. Those arrangements included the examination of Gordon Fahner on behalf of the defendant on January 14 and 15, 1998, and a follow up visit by accountants, retained by the plaintiffs Merck, to Apotex offices in order to view certain documentation adduced in relation to Fahner's examination, and supporting documentation for a process of calculating sales and damages, or profits resulting to Apotex, because of infringing activities. Included in the plaintiff's representatives both for purposes of the examination of Mr. Fahner and the visit to Apotex premises was Mr. Gary Timm, a foresenic accountant retained by Merck for advice, who has already testified in the show cause proceedings and whose retainer apparently includes providing advice in relation to matters arising in the reference as to damages or profits.
[6] By affidavit sworn February 23, 1998 in response to motions proposed by Apotex to quash the subpoenas here in question, Mr. Timm sets out the facts of his involvement in the discovery process for the reference. In that process he learned of Apotex's methods for provision of sales allowances and discounts to customers, through payment to customers, or through credits granted in relation to customer accounts receivable. As a result of that review he avers he learned that virtually all third parties who sent apo-enalapril to Kohler Distributing Inc., a wholesale drug distributor, received credit from Apotex. Aware from involvement in this show cause proceeding that there were certain sales discounts involving Kohler's that were unresolved as of April 1996, he reviewed Apotex accounts for the period relevant in these proceedings.
[7] It is on that basis that the plaintiff Merck issued the second subpoenas to Messrs. Kay and Barbeau, requiring they bring all documents within the classes as described in Schedule "A" as set out in the annex to these reasons.
The positions of the parties
[8] Apotex has several objections to the subpoenas. They are said to be contrary to the spirit of the Order of August 1, 1995, by Mr. Justice Rothstein whereby he stayed pursuit of any claims by Merck to punitive damages pending completion of the show cause proceedings. Further, it is said that Merck is here simply seeking to avoid the implications of an Order of January 10, 1996, by Mr. Justice Noël whereby he refused Merck's application for discovery of the defendant Apotex and of Dr. Sherman in relation to the show cause proceeding. Apotex is also concerned that information provided in relation to the reference proceedings was for purposes of those proceedings only and there was not consent expressed or implied to production of information which then would be used in these show cause proceedings.
[9] In Merck's view that conception of separate proceedings, in relation to the original trial, to these show cause proceedings and to the reference proceedings, is inappropriate, particularly in view of my comments earlier in interlocutory proceedings when I denied that the contempt proceedings were separate and distinct from other proceedings in the action
T-2408-91, see Merck & Co. v. Apotex Inc, (1996, 65 C.P.R. (3d) 292 at 312 (F.C.T.D.). I do not withdraw from that general principle but, in my view, it does not assist directly in determining whether the subpoenas here issued should now be quashed.
[10] Apotex also opposes the subpoenas on other grounds arguing that it is an abuse of process for Merck to have Mr. Timm use the opportunity to assess evidence for purposes of the reference, and to then seek to have evidence thus found brought forward in these proceedings. Further, it is urged there is unwarranted delay by Merck in now requesting documents that could have been asked for at the commencement of the show cause proceedings in July 1997, but in my view that assumes an unwarranted understanding, in advance of this proceeding, about Apotex's accounting and business practices that would assist in identifying documentation as now described. Finally, it is urged the subpoenas are an abuse of the Court's process since the basic information said to be sought on the basis of Mr. Timm's affidavit, concerns Apotex's discounts and allowances for sale of its products, a matter said not relevant to the issues in the show cause proceeding. That information is said to be intended only to complete the picture of so-called triangular sales arrangements which plaintiffs appear to believe were established by Apotex after it was enjoined from selling directly in the market place.
[11] For the plaintiffs, it is urged that the challenge by Apotex to the subpoenas, as issued, before return of the witness compelled to produce documents can only be maintained if the subpoenas are seen as an abuse of process. It was urged that is not the case here.
Analysis
[12] I acknowledge the significant role of the Subpoena Duces Tecum, particularly in a case where virtually all documentation is in possession of one party and that party is directed to show cause why it should not be held in contempt of the Court. Nevertheless, in the circumstances of this case, at this stage in the proceedings, a subpoena directing production of documents as described in the Schedule"A" listing, in my view, comes close to abusing the Court's process. As described the list would require of a conscientious party yet another virtual sweep of its sales records. The terms of description in my opinion are too broadly drawn.
[13] The circumstances here are essentially the reverse of those in play when in October 1997, I allowed a motion by Merck to quash subpoenas issued on behalf of Apotex and Dr. Sherman to Mr. Quesnel, counsel for Merck Frosst Canada Inc., which subpoenas I found to be too broadly drawn. Then, and again with the subpoenas now in question, the party seeking documentation, by too broadly describing what is desired, may be seen to be fishing in hopes of finding information relevant to the issues that concern it. That is not an appropriate use of the subpoena, particularly where proceedings are well underway and they concern alleged contempt of Court, for those proceedings carry special concerns for notice, for fairness, and for disclosure.
[14] There is, in my opinion, a question of relevance and significance of the information, here sought by the plaintiffs, in regard to the issues before the Court in the show cause proceedings. I am not persuaded that details of credits or allowances of Apotex to distributors or customers purchasers of its products are relevant where, as I understand it, there is no denial that Apotex had a system for providing discounts or allowances on sales of its products. Whether that was applicable in the case of one, five, ten or twenty customers or distributors, is not relevant to determination of whether Apotex was in contempt of Court, nor in my opinion is it relevant to the measure of an appropriate penalty if contempt be found. Admittedly, as counsel for Merck suggested in argument, if the evidence were to establish contempt in a technical sense only, the penalty might be affected by the sort of evidence now sought, but that is an unlikely outcome here.
Conclusion
[15] For these reasons, I allowed Apotex's two motions and quashed the subpoenas, served on Mr. Kay and Mr. Barbeau, respectively, on February 20, 1998. Particularly at this stage of proceedings, any additional Subpoenas Duces Tecum should only issue, and, if challenged, should only be upheld, where the information directed to be produced is discretely described to avoid further "sweeps " of records, and where it can be demonstrated that the documents sought are significant for issues for consideration of the Court.
[16] As I did in allowing the earlier application of Merck to strike Subpoenas Duces Tecum issued to Mr. Robert Quesnel, and as I advised counsel at the hearing on February 25, 1998 the order issued is without prejudice to any application the plaintiffs may make for a further subpoena seeking documents described with greater particularity than in the subpoenas served on Messrs. Kay and Barbeau on February 20, 1998, and with a basis for determining the relevance to the principal issues before the Court of the documents sought, if that be challenged.
"W. Andrew MacKay"
Judge
Toronto, Ontario
February 26, 1998
Annex A
Reasons dated 26 February, 1998
This is the text of Schedule "A" in the Subpoenas Duces Tecum served on Messrs. Kay and Barbeau on February 20, 1998.
SCHEDULE "A"
1. All records and documentation including cheque requisitions and cheque copies, including cheques of Medichem Inc., reflecting payments of discounts, credits, allowances to customers of Apotex Inc. who purchased APO-ENALAPRIL products on December 14 to 22, 1994 and after January 9, 1995 and before April 28, 1995.
2. All records and documentation, including cheque requisitions and cheque copies, including cheques of Medichem Inc., reflecting payments of discounts, credits, allowances to purchasers of APO-ENALAPRIL products who purchased APO-ENALAPRIL products after January 9, 1995 and before April 28, 1995 from third party sources other than Apotex Inc.
3. All records and documentation relating to payments of transfers from Apotex Inc. to Medichem Inc. relating to discounts, credits, allowances in respect of sales of APO-ENALAPRIL from December 14 to 22, 1994 and January 9, 1995, along with supporting documentation.
4. All records and documentation relating to payments or transfers from Apotex Inc. to Medichem Inc. relating to discounts, credits, allowances to purchasers of APO-ENALAPRIL products who purchased such products after January 9, 1995 and April 28, 1995 from third party sources other than Apotex Inc., along with supporting documentation.
5. All accounts receivable subledgers for December 1994 to April 1996 for Apotex customers who purchased APO-ENALAPRIL from December 14 to 22, 1994 and January 9, 1995.
6. All accounts receivable subledgers for January 1995 to April 1996 for purchasers of APO-ENALAPRIL products after January 9, 1995 and prior April 28, 1995 from third party sources other than Apotex Inc. and who received sales allowances, discounts, credits or other compensation from Apotex Inc. or Medichem Inc.
7. Debit and credit notes reflected in the accounts receivable subledgers with supporting documentation relating to any credit notes, discounts or allowances on the accounts receivable subledger accounts, for all sales of APO-ENALAPRIL product on December 14 to 22, 1994 and January 9, 1995 and for all credits, allowances, discounts to purchasers of APO-ENALAPRIL products from third parties after January 9, 1995 and prior to April 28, 1995.
8. Debit notes and credit notes for each entry in the accounts receivable subledgers together with supporting documentation relating to debit notes or credit note entries in the accounts receivable subledger, for all sales of APO-ENALAPRIL from and including December 14 to 22, 1994, and January 9, 1995 and for purchases by third parties of APO-ENALAPRIL products from other third parties from after January 9, 1995 and prior to April 28, 1995.
9. Apotex Inc. and Medichem Inc. credit notes to customers of Apotex Inc. or of other third parties for APO-ENALAPRIL products sent to Kohlers Distributing Inc. or other wholesalers, distributors or pharmacists after January 9, 1995 and before April 28, 1995.
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
COURT NO: T-2408-91
| STYLE OF CAUSE: MERCK & CO. INC. and |
MERCK FROSST CANADA INC.
- and -
| APOTEX INC. |
DATE OF HEARING: FEBRUARY 24, 1998
PLACE OF HEARING: TORONTO, ONTARIO
REASONS FOR ORDER BY: MACKAY, J.
DATED: FEBRUARY 26, 1998
APPEARANCES:
Mr. Charles C. Beall
Mr. Emmanuel Manolakis
For the Applicants
Mr. H. Radomski
Mr. David Scrimger
For the Respondent
Mr. Brian Greenspan
For Dr. Bernard Sherman
- 2 -
SOLICITORS OF RECORD:
Gowling, Strathy & Henderson
2600-160 Elgin Street
P.O. Box 466, Station D
Ottawa, Ontario
K1P 1C3
For the Applicants
Goodman Phillips & Vineberg
Suite 2400
250 Yonge Street
Toronto, Ontario
M5B 2M6
For the Respondent
Greenspan, Humphrey
2714-130 Adelaide Street West
Toronto, Ontario
M5H 3P5
For Dr. Bernard Sherman
FEDERAL COURT OF CANADA
Date: 19980226
Docket: T-2408-91
Between:
| MERCK & CO. INC. and |
MERCK FROSST CANADA INC.
Applicants
- and -
| APOTEX INC. |
Respondent
REASONS FOR ORDER