A $750,000 Foot Long: Costs Awarded to CBC in Failed Subway Defamation Suit

April 29, 2020

Written By Julia Schatz and Pavan Virdee

Sandwich shop Subway was recently ordered by the Ontario Superior Court to pay the Canadian Broadcasting Corporation (CBC) some $765,000 in costs in respect of a November 2019 decision that dismissed Subway's $210-million defamation lawsuit against the CBC. The broadcaster’s Marketplace show aired and published online an investigative report comparing chicken sandwiches sold by Subway and other fast food chains in Canada. The report stated that, unlike its competitors whose sandwich meats were made nearly entirely of chicken, the meat in Subway’s chicken sandwiches were comprised of “only slightly more than 50% chicken”, with the rest comprised of soy filler. Subway sued CBC for defamation, claiming that the information in the Marketplace report was false and that the airing and publishing of the report caused Subway to suffer business losses and damage to its reputation. Subway also sued Trent University in both negligence and defamation; Trent’s lab conducted independent testing on the chicken content, which was the basis for the Marketplace report.

This is an important decision for food service businesses for several reasons. It shows how Ontario takes consumer protection seriously, that anti-SLAPP motions pack a punch, why brand integrity is critical, and, that food is under the microscope. See the key takeaways section below.

CBC’s Anti-SLAPP Motion

CBC brought an anti-SLAPP (Strategic Litigation Against Public Participation) motion in the proceeding to prevent what CBC said was an unmeritorious lawsuit in respect of its speech on a subject of public interest. In 2015, sections 137.1 to 137.5 of the Courts of Justice Act (CJA) were introduced to reduce SLAPP proceedings and protect free expression in the face of defamation actions aimed at matters of public interest. More specifically, section 137.1 of the CJA provides an expedited summary mechanism, referred to as an anti-SLAPP motion, for defendants in defamation suits to have those actions dismissed in a relatively expedient and less expensive manner.

While there was evidence that material aspects of the CBC report were inaccurate (based on the Trent lab analysis) and harmful, the court found that CBC established a valid defence of "responsible communication", holding that the CBC was reasonably diligent in the steps it took to validate the accuracy of the factual statements in the report. This duty of reasonable diligence was discharged by the CBC selecting a reputable university laboratory to conduct the testing and by offering Subway multiple opportunities to respond to the report before it was aired.

The court ultimately held that dismissing Subway's action against the CBC would achieve the four objectives of section 137.1 of the CJA and would outweigh any potential impact it may have on the private interests of Subway:

1. to encourage individuals to express themselves on matters of public interest;
2. to promote broad participation in debates on matters of public interest;
3. to discourage the use of litigation as a means of unduly limiting expression on matters of public interest; and
4. to reduce the risk that participation by the public in debates on matters of public interest will be hampered by fear of legal action.

Costs in Favour of the CBC

Section 137.1(7) of the CJA provides that a defendant who successfully moves under the anti-SLAPP provisions to dismiss a defamation claim at a preliminary stage is “entitled to costs on the motion and in the proceeding on a full indemnity basis, unless the judge determines that such an award is not appropriate in the circumstances.” CBC sought costs of the motion and the action on a full indemnity basis of some $800,000, inclusive of disbursements and HST. Although the CBC did not bring its motion as early in the proceeding as it might have, Justice Morgan of the Superior Court awarded the CBC costs some $765,000 in fees, disbursements and HST ($500,000 of which was for fees), rounding amounts down from the claimed number only slightly to reflect what had been done on earlier SLAPP motions. The Court recognized that the evidentiary record was very large and that considerable work had been done on both sides.

Subway Awarded Costs of $222,000 from Trent University

Trent, like the CBC, brought an anti-SLAPP motion, but limited its motion to attempting to dismiss Subway’s negligence claim and not its defamation claim. Justice Morgan found this strategic choice to be ill-considered and dismissed Trent’s motion, permitting Subway’s claim against Trent to proceed to trial. The Court concluded that Trent was in effect seeking to advance a Rule 21 motion to dismiss for failing to state a tenable cause of action, while seeking to benefit from the reverse onus under section 137.1 of the CJA. Justice Morgan held: "[I]n the result, Trent brought a motion that raised far more than questions of law; and in doing so, it failed on every aspect of the section 137.1 test. It did not even meet the relatively low threshold of showing that there was any communication on a matter of public interest at stake. Indeed, Trent made no serious argument and led no evidence to show that Subway’s negligence claim against it was actually a SLAPP suit".

Subway’s expert evidence on the motion opined that the tests conducted by Trent were inaccurate and inconsistent with the standards of practice in the food science industry. According to Subway’s experts, Trent’s lab could not have accurately determined the amount of animal versus plant DNA in Subway’s products.

Section 137.1(8) of the CJA provides: “If a judge does not dismiss a proceeding under this section, the responding party is not entitled to costs on the motion, unless the judge determines that such an award is appropriate in the circumstances.” Here, however, the Court concluded that Trent’s motion had little to do with the public interest expression objectives underlying the anti-SLAPP provisions. Accordingly, the Court awarded Subway $222,000 in all-inclusive costs against Trent, relating to Trent’s failed motion.

Takeaways for the Food Service Industry

This is an important decision for food service businesses for several reasons.

• Ontario takes consumer protection seriously: The decision illustrates how Ontario courts view issues related to food product ingredients and the truthful labelling of food products. The Court identified these issues as "consumer protection issue(s) of the highest order". Food services businesses must be as accountable as ever to their consumers, but they must also remain vigilant in protecting the integrity of their brands and ensuring accurate product testing, reporting, and labelling.
• Anti-SLAPP motions pack a punch: There are strong and varied defences available to defendants in defamation actions, and defendants are increasingly able to successfully defend their actions through the rise of anti-SLAPP motions. It illustrates the Courts’ consumer-focused approach to defamation actions concerning issues of public interest—the objectives of section 137.1 of the CJA appear paramount.
• Brand integrity is critical: While the media will continue to fulfil its important public function in investigation and reporting, where such investigation and reporting implicates a consumer goods business, it remains as important as ever to maintain brand integrity. Even where it appears that testing and reports are inaccurate, or where a plaintiff can establish a temporal connection between the publication and financial losses, a plaintiff still faces significant hurdles to overcome the responsible communication defence that defendants acting with appropriate diligence and reporting in the public interest may raise in bringing SLAPP motions to dismiss defamation claims.
• Food is under the microscope: Consumers are highly demanding when it comes to knowing what is in the food they eat. Information is everywhere and it travels quickly. Food services businesses need to be ready at any moment to respond to consumer or media inquiries on the contents of their products and how they are handled and prepared.

The decision striking the action against the CBC is under appeal. The full Superior Court's costs endorsement is available here.

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