Legal Feeds Blog
- Appeal court reaffirms legal validity of conditional agreements
Frequently used legal phrases such as “subject to my client’s approval” are not meaningless boilerplate used by counsel to “protect their backsides.” To the contrary, these terms are meaningful stipulations of counsel’s limited authority that must be taken into account.
|Lawyer Andrew Brodkin says decision is a big relief for lawyers involved with negotiations.|
That’s one of the more important findings in last week’s ruling in Apotex v. Allergan, wherein the Federal Court of Appeal heard arguments from Apotex regarding a settlement that the company says it never actually agreed to.
The negotiation involved patents around gatifloxacin, an antibiotic sold in eye drops. Allergan alleged that Apotex had violated its patents, and a settlement between the parties would prevent Apotex from selling the drug commercially. In April 2012, both sides agreed to these terms, but the settlement didn’t mention the geographic scope of the deal.
When Apotex clarified that the settlement was limited to Canada, Allergan kept mum — neither agreeing nor disagreeing — and instead seemed to gloss over the issue with encouraging e-mails that suggested the parties “get the ball rolling” on formal documents.
That ball never got rolling, as Apotex felt that a major sticking point had not been resolved. Twenty-three months of negotiations followed, until 2014, when Allergan sent revised terms. Apotex’s counsel said they would “recommend” that their client accept the revisions, but never explicitly agreed to the offer on behalf of their client.
When Allergan went to Federal Court to have the settlement enforced, though, the court granted the motion, ruling that Apotex had already agreed to settle twice: first in April 2012, when basic terms (not including geographic scope) had been reached; and again in 2014, when lawyers stated that they would recommend the deal.
The motions judge was convinced that Apotex was holding up the settlement with non-essential issues. Moreover, the judge found that Apotex’s counsel were authorized to act on behalf of their client and that language around “recommendations” amounted to hollow statements used by counsel to “protect their backsides.”
Justice David Stratas, writing on behalf of a unanimous appeal court, disagreed on both points. The court found error with the lower court’s assessment of what was essential, which had relied on statements that Allergan had made about Apotex’s “fussing” and “wordsmithing.”
As the decision states, “. . . the Federal Court appears to have been distracted by Allergan’s subjective view of the importance of certain terms that had to be negotiated out, rather than keeping to an objective assessment of the matter from the standpoint of a reasonable businessperson.”
The subjective feelings of the parties were irrelevant, the court states. On the other hand, from the perspective of a reasonable businessperson, the geographic scope of an agreement was indeed an important matter.
“We must view the emails and drafts objectively from the standpoint of a reasonable businessperson, not subjectively,” Stratas writes. “Viewed in that way, the scope of the restrictions upon Apotex was not at all minor. It was a substantial part of the consideration that Allergan was to receive under the contemplated agreement.”
As for the “recommended” agreement in 2014, the court finds that, so long as advisers are clear about the limits to their authority, a client cannot be bound by suggestions made on their behalf:
“. . . counsel for Apotex stated that he did not have authority to bind his client; he would have to check with his client. So while Allergan was willing to agree to the draft that was circulated on January 13, 2014, Apotex’s position was unknown.”
Andrew Brodkin, the Goodmans LLP lawyer who represented Apotex before the appeal court, says the decision is a big relief for lawyers involved with negotiations.
“I received a number of calls after the [lower-court ruling] — people saying, ‘My god, how are we supposed to negotiate if we tell the other side that we don’t have formal instructions, and the court nonetheless finds that discussions carried out in that context result in a binding settlement?’
“That puts lawyers in a very, very hard spot,” he says.
If the courts were to dismiss conditional statements that express limited authority, such as “pending approval from my client,” it would be almost impossible to engage in open-ended negotiation.
“[The lower-court judge] just said that was careful lawyering,” says Brodkin, “but Justice Stratas and the rest of the panel, they came to the exact opposite view, which is that it’s the necessary language that you have to use if you’re a lawyer and you don’t have instructions.
“Lawyers have to be able to engage in negotiations without a fear that their negotiations will be treated as a binding contract.”
Human Rights Commission urges major reform in Ontario policing, The Toronto Star
The court of appeal has ruled evidence collected against an accused should be excluded if the police breached their Charter rights — regardless of whether the breach occurred before or after the evidence was collected.
|The ruling in Pino makes a subtle but important point in Charter litigation, says Howard Krongold.|
Howard Krongold, a partner at Abergel Goldstein & Partners LLP in Ottawa and counsel for Eneida Pino in the case, says the May 24 ruling is a further step towards a broad liberal approach to s. 24(2) of the Charter that the courts have traditionally taken.
“It’s been the law for a long time — that you don’t need to have a causal connection between a Charter breach and evidence — but it’s been at the very least uncertain whether you could have a case where the evidence comes first and the breach only materializes later,” says Krongold.
Michael Lacy sees the ruling as resolving “in a very final way” the debate in the cases, and among academics, about what the phrase “obtained in a manner” means in relation to s. 24(2).
“Essentially, you don’t need a straight-line connection between the breach and obtaining exclusion,” says Lacy, a criminal lawyer at Brauti Thorning Zibarras LLP in Toronto,.
While he feels the ruling will give “significant guidance to future courts,” Lacy says he won’t be surprised if the Crown seeks leave to appeal.
Beyond reaffirming Charter breaches should make it easier to get exclusion even when breaches occur after evidence is obtained, Krongold and Lacy both say Pino is breaking new ground by stating exclusion should also apply when police are found to be dishonest about their misconduct.
“While the accused bears the burden, there’s an evidentiary shift onto the Crown to deal with matters like good faith or the police mitigating explanation for their Charter breach,” says Krongold.
Pino reaffirms a principle originally set out by the Supreme Court of Canada in R. v. Bartle, where the court ruled the prosecution is required to provide evidence to explain Charter breaches.
“That’s an important principle as well because the way the trial decision came down in this case, it really put an accused in an impossible situation,” says Krongold.
In Pino, the accused convinced the judge the police were lying about their version of events, but had no way to explain why they lied. The trial judge had assumed the reason for the dishonesty — an explanation was never given by the Crown. The Court of Appeal ultimately found the trial judge’s assumed reason was speculation and reaffirmed the accused isn’t required to explain the Charter breaches by the police.
“It’s a subtle point but a really important one in Charter litigation,” explains Krongold.
“Frequently you have a conflict between what the accused says happened and what the police say happened. If the accused is able to show the police are being dishonest it’s very helpful to gain exclusion when you don’t have to also explain why they’re being dishonest.”
He’s not aware of any steps taken with respect to the officers involved in spite of the fact there was a “very clear finding by the judge that one of them in particular was less than truthful in his testimony in court under oath.”
On May 13, a similar appeal ruling came out in R. v. McGuffie, another Ottawa case that again saw evidence excluded following the police’s violation of an accused’s Charter rights and the trial judge “making mistakes,” says Krongold.
For Lacy, the appeal decisions in McGuffie and Pino are “a reminder that Charter jurisprudence is alive and well.”
“The Charter is going to be given a robust interpretation by the court as a check against improper state conduct.”
Search underway for armed suspect in Ottawa homicide, Canadian Press
Verdict expected today in murder trial of Matthew de Grood, Canadian Press
It’s being viewed as a win for the banks but a loss for insolvent oil companies and the environment.
|The court ruled a trustee in bankruptcy could disclaim its interest in certain licensed properties and was not bound by oil and gas well abandonment orders issued by the AER. (Photo: Todd Korol/Reuters)|
In the May 17 decision, Wittmann decided in favour of Grant Thornton Ltd., the bankruptcy trustee in the Redwater Energy Corp.’s receivership and bankruptcy proceedings, upholding its right to “disclaim” Redwater’s non-producing oil wells and sell its producing wells.
Redwater was a junior oil and gas producer that went into insolvency in the spring of 2015. It owed its bank, ATP Financial, about $5 million.
Upon appointment, the receiver conducted an assessment of Redwater’s assets and advised the Alberta Energy Regulator that of the 91 wells to which Redwater held licences, it would only be taking possession of 20 wells, facilities, and associated pipelines.
It was a case being watched closely by those in the oil sector — especially the banks.
At issue was whether the provincial regulatory regime under the Oil and Gas Conservation Act and the Pipeline Act conflicted operationally with the federal Bankruptcy and Insolvency Act.
Wittman looked to the Supreme Court of Canada’s 2012 decision Newfoundland and Labrador v. AbitibiBowater to decide if it is something that in fact falls within the jurisdiction of the federal legislation.
The decision dismissed the application of the AER and Orphan Well Association, which argued Grant Thornton should have to carry out the abandonment, reclamation, and remediation obligations of Redwater’s non-producing wells, or perform abandonment orders as issued by the AER, which included paying a security deposit.
The implications of this decision for the Alberta oil and gas industry are far-reaching, says Melanie Gaston, a partner with Osler Hoskin & Harcourt LLP in Calgary.
“Typically a receiver takes the less profitable wells or those that require decommissioning and sells them as packages. Now, with this decision, it’s clear that doesn’t need to happen. They can go in and pick the good, producing wells and leave the non-profitable ones,” says Gaston. “If I’m an oil company and I’m restructuring what I’m left with post-restructuring is not necessarily all that helpful.”
The question now becomes how to fund dealing with the non-producing wells of companies in an insolvency position. The court’s decision may lead to a dramatic increase in the number of wells determined to be “orphaned” by the AER. This will undoubtedly increase pressure on industry to fund the completion of work to abandon and remediate such wells, and on the boards of directors who serve companies in the industry.
“With these decisions the regulator is in a tough position because it will now be burdened with, potentially, exponentially more wells to manage with the Orphan Well Fund,” says Gaston.
If the legislation remains the same, the regulator will be left to find other sources of funding to manage it — possibly an increased levy on the oil companies already hurt by low prices and the fires in Fort McMurray, or approaching the government for an injection of funds from the taxpayers — just another hit for Albertans.
“The oil companies are now going to be challenged by what happens to them because it does give them some uncertainty. Is the AER, through the Orphan Well Fund, now going to increase levies so they have to pay more and therefore essentially support other players in the industry without having the necessary liquidity to do that right now?”
The court’s decision (which is not yet been posted publically) does however provide certainty to secured lenders that the priority is maintained over their interests.
“This certainty should result in continued access by the oil and gas industry to readily available credit,” Gaston wrote in a post last week about the decision.
Gowling WLG and Cassels Brock LLP served as co-counsel to Grant Thornton throughout the proceedings. They were not available for comment at time of posting.
It is expected an appeal will be launched.
As the federal government looks to expand protections for transgender people with bill C-16, an Ontario initiative is examining what barriers the transgender community still faces in accessing justice.
|The HALCO study wants to assess if and when rights exist that people are actually able to enforce those rights.|
“People have had issues with police, employment, family custody, and family access issues just because of who they are,” says Nicole Nussbaum, the lead lawyer on the project.
“And the frequency of these issues is also really shocking, so it’s the range of experiences as well as the frequency that has a really negative impact on not only the people who have had those experiences but trans people as a group.”
The HIV & AIDS Legal Clinic Ontario, which is conducting the study with funding from Legal Aid Ontario, hopes the information gathered will help legal service providers meet transgender peoples’ needs. HALCO first started to look into the possibility of launching a study with Nussbaum’s help after it realized very few people who identify as transgender were accessing the organization’s services.
A previous study researching health topics in Ontario’s transgender population, called the Trans Pulse Project, found 21 per cent of respondents had avoided going to the emergency room when they needed treatment for fear of discrimination or harassment.
“If people in the community feel safer outside of an emergency room in a medical emergency, how safe would they feel going to a lawyer’s office or accessing legal services when they have a real legal need?” asks Nussbaum.
The survey canvasses transgender people on their own experiences on legally dealing with or not dealing with problems such as discrimination, harassment and violence. It also asks whether they feel safe in legal spaces and about their interactions with police.
“Do people have positive or negative experiences walking into a court house, walking into a legal service provider’s office, interacting with court house staff?” says Nussbaum.
Nussbaum says part of the assessment will look to quantify negative experiences but also look at them qualitatively through its focus groups.
The study is also focusing on the legal struggles of transgender people affeted by HIV and AIDS, in particular as they often face “a double dose of discrimination,” says Nussbaum.
The study’s workshops and focus groups have also been providing transgender legal rights 101 advice to both legal providers and transgender participants.
The federal government introduced bill C-16 this week, which will assert human rights for transgender people across the country once passed.
Nussbaum says the study’s goal is to build upon the legislative gains such as bill C-16 to ensure the rights and protections they provide are upheld by appropriate legal access.
“When protections exist, the point isn’t for them to exist in the abstract, but for them toe exist in society in peoples’ life experience,” she says.
“So the legal assessment study is trying to identify the practical challenges to having those rights exist on an every day basis and being able to access legal assistance when its necessary to enforce rights.”
- Altman Weil study sheds light on competitive pressures, cultural inertia facing law firm partnerships
As big firms look to shed surplus capacity, highly paid, non-equity partners and senior associates are more vulnerable to staff reductions than those on the bottom rung.
|Are each of the lawyers in your firm sufficiently busy? Source: Altman Weil|
The survey canvassed managing partners and other law firm leaders at 356 firms with 50-plus lawyers across the United States to gauge perceptions around business prospects and competitive pressures facing the industry.
While 62 per cent of all law firm leaders believed that an erosion of demand was a “permanent trend,” law firms have generally not felt “enough economic pain” to warrant significant changes. As it stands, only 44 per cent of firms have made significant strategic changes to enhance efficiency, and only one-third of firms have looked at changing their basic pricing structure.
However, as the number of firms experiencing sharp drops in profit grows (up four points to 10 per cent in 2015), law firm leaders have begun to shift work to lower-paid lawyers. Already, according to the study, three-quarters of big firms are using part-time and contract lawyers.
And when managing partners were asked which tier of lawyers were considered “least busy,” they pointed not to low-level associates, but rather to their non-equity partners. Fully 62 per cent of managing partners felt their non-equity partners weren’t sufficiently busy, suggesting an ominous potential for cost savings.
As Catalyst Consulting’s Richard Stock puts it, the firms are moving away from the “pyramid” structure and toward more of an “hourglass” — top-loaded with senior partners, bottom-loaded with worker drones.
|Aside from your traditional law firm competitors, is your firm losing any business to other providers of legal services? Source: Altman Weil|
The trend has particularly negative implications for young lawyers looking to land at a big firm and eventually get on a partnership track. According to Stock, that career path is quickly vanishing.
“What they do is, they simply don’t retain as many past the third-year call,” he says. “So essentially they’re hiring worker bees . . . who have no expectation of getting on a partnership track at that stage of life. They’re just happy to do large volumes of work and pay down their debt and then make a decision in three or four years.
“Unless you’re on a specialist track, you’re going to end up like Prince Charles waiting 70 years to inherit the throne. It’s just not going to happen.”
The study also underscores what law firm leaders perceive to be the greatest competitive threats — and it’s not technological automation of routine work. Rather, in-sourcing is cited as the most immediate competitive concern: 83 per cent of large firms report having business taken in-house by their client; another 15 per cent view it as a potential threat, leaving less than two per cent of large firm leaders who don’t see it as a concern.
Stock says this is no surprise, given the corporate-commercial, transactional, and commoditized business work that has for decades been the bread and butter of national full-service firms. Litigation, however, is another matter entirely, he notes.
“There’s no move to in-source litigation,” he says. “So I think that’s true when you’re talking about transactions and corporate-commercial work. The big-box firms have always had a relatively small percentage of their fee earners in litigation. They have not been set up like a Lenczner Slaght or other litigation shops.”
Generally speaking, however, Stock says Canadian firms are more protected than their American peers, given that the most vulnerable corporate-commercial work is contained in Toronto. Law departments here, meanwhile, are much smaller in than those in the U.S., and so less capable of in-sourcing the really big projects.
“We can't forget that in Canada, compared to the United States, 50 per cent of corporate law departments have fewer than five lawyers. And another 25 per cent have fewer than 10 lawyers. You're not going to do a big transaction with just that.”
Despite intense competitive pressures, Altman Weil’s report finds that law firm partnerships suffer from cultural inertia, if not outright apathy. In one remarkable statistic, nearly one-third of law firm leaders believed that the partners in their firms would rather make less money than lose the ability to manage their own affairs.
“In other words,” as the report puts it, “they would actually pay to be left alone.”
This demand for independence and autonomy is what puts the collective law firm at risk from team-oriented corporations and accountancies. Stock says this kind of “ostrich behaviour” won’t last for long.
“If you’ve got some sense of trying to run a business — and this is a Deloitte quote from 25 years ago — you cannot save your way to prosperity. To reduce your expense structure, redesign your compensation structure — it’s always too little. All that buys you is a few years.”
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