Federal Court Upholds Settlement Privilege as it applies to Settlement Amounts

In Pharmascience Inc. v. Pfizer Canada ULC (2020 FC 1176), the Federal Court dismissed the plaintiff’s motion seeking disclosure of two unredacted settlement agreements. In doing so, the Court reviewed the doctrine of settlement privilege and reaffirmed the narrow circumstances in which production of settlement amounts may be ordered.

Background

This motion arose in the context of an action in which Pharmascience Inc. (“Pharmascience”) claimed damages for lost sales of its pregabalin medication due to a prohibition application commenced by Pfizer Canada ULC (“Pfizer”).

In the motion, Pharmascience sought an Order requiring Pfizer to produce unredacted copies of two settlement agreements between Pfizer and Teva. The redactions at issue concerned the amounts for which the parties agreed to settle. Pfizer asserted that the redacted amounts were subject to settlement privilege.

Federal Court’s Decision

In determining whether Pharmascience’s motion should be granted, the Federal Court highlighted the importance of encouraging settlement and noted that settlement amounts are privileged as they reflect the “admissions, offers, and compromises made in the course of negotiations”. However, an exception to settlement privilege exists when a “superordinate public interest” favours disclosure.

The Court found that Pharmascience failed to establish the settlement amounts fell within this narrow exception. Pharmascience did not require the redacted amounts for the proper disposition of the proceeding nor were the settlement amounts relevant or necessary to calculating damages or determining whether Pfizer acted in good faith.

The Court also found that Pharmascience’s alternative argument, that Pfizer had waived privilege over the redacted amounts by providing partial disclosure of the settlement agreements, was not supported by the evidence. Accordingly, the Court dismissed Pharmascience’s motion.

Authors: Meghan King and Maddie Warren