Federal Court of Appeal Upholds Disqualification, But Refuses to Invalidate Cobalt’s Notice of Allegation

Federal Court of Appeal Upholds Disqualification, But Refuses to Invalidate Cobalt’s Notice of Allegation

Valeant Canada LP v Canada (Health), 2014 FCA 50

This is an appeal by Cobalt from Federal Court’s decision to grant Valeant’s motion to disqualify Cobalt’s in-house lawyer from any further involvement in the application before the Court on the ground that he could be presumed to have Valeant’s confidential information. The motion was brought in a prohibition application commenced by Valeant under the PM(NOC) Regulations. Valeant, in turn, appeals from the trial judge’s decision refusing to declare that Cobalt’s notice of allegation was invalid. [2]-[5] The PM(NOC) proceedings related to diltiazem hydrochloride (TIAZAC), covered by Valeant’s Canadian Patent Nos. 2,242,224 and 2,307,547.

Both appeals are dismissed. [6]

Law firm of Deeth Williams Wall LLP (“Deeth”) was representing Cobalt in the application. However, Deeth was the law firm of Valeant’s predecessor, Biovail, and had represented Biovail in five proceedings in the Federal Court relating to diltiazem hydrochloride, the same medicinal ingredient that is the subject-matter of the notice of allegation. [9]

After Valeant objected, Deeth withdrew as Cobalt’s counsel. [12] However, Cobalt employs a Mr. Mingus, who was employed as a lawyer by Deeth when Deeth acted for Biovail. Valeant objected that Mingus was privy to Biovail/Valeant’s confidential information by virtue of this employment. [15] In addition, Valeant argued that Cobalt’s notice of allegation prepared with the help of Deeth was a product of Deeth’s improper use of Biovail/Valeant’s confidential information, and therefore must be declared invalid. [15] Valeant brought a motion to disqualify Mingus and invalidate Cobalt’s notice of allegation. The trial judge disqualified Mingus, but refused to invalidate the notice of allegation.

The Court upheld Mingus’ disqualification, under the test for disqualification set out in MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235. The Court noted that there was evidence that Mingus had access to Biovail/Valeant’s confidential information, and in such a case, disqualification is automatic since Mingus, as counsel for Cobalt, was in a position of acting against his former client Valeant. [26]

Next, addressing Valeant’s motion to invalidate Cobalt’s notice of allegation, the Court held that such a motion should not be granted. [33] The Court stated that it was “not persuaded on the record before…[it] that the notice of allegation is the product of the misuse of information and an improper conflict of interest.” [35] The Court also stated that “satisfying the test for disqualification in Martin does not inexorably lead to the relief Valeant seeks.” [37] However, the Court left open “whether there might be an exceptional case where the Court’s plenary power to redress an abuse of process might be triggered and justify the sort of additional relief sought in this case.” [40]