May 14, 2012

Pharmacists Unsuccessful in enjoining Zellers from transferring patient records to purchaser of pharmacies

Administrative Law
Health Law
Professional Regulation

Guest Blogger: Lonny J. Rosen, C.S.*

* Mr. Rosen is a partner of Rosen Sunshine LLP in Toronto, as well as an Executive Member and Former Chair of the CBA Health Law Section. His full biography can be found here.

Pharmacists work at retail pharmacies located within Zellers’ stores in Ontario (the “Zellers Pharmacies”). The relationship between made headlines in April as they sought injunctive relief in an attempt to prevent Zellers from transferring patients’ pharmacy records to Loblaw and Metro, which had agreed to purchase the Pharmacies. The case of Takhar  et al. v. Zellers Inc. et al., 2012 ONSC 2546, was heard by the Honourable Justice Pattillo on April 27, 2012.

The case turned on the relationship between Zellers and the Pharmacists who operated the Zellers Pharmacies.  Their relationship  was governed by a licence agreement which provided that the Pharmacists would pay rent to Zellers and would operate the Zellers Pharmacies from within Zellers stores. Zellers and the Pharmacists acknowledged that all records relating to customers, including names, addresses, contact information, electronic and hard copies of filled and unfilled prescription orders and other related information (the “Pharmacy Records”) belonged to Zellers.

in January 2011, Zellers agreed to sell the leases to a number of its stores to Target, and to close the Zellers Pharmacies.   Zellers then notified the operators of the Zellers Pharmacies that the licence agreements would be terminated and arranged to sell the assets relating to the Zellers Pharmacies, including patient Pharmacy Records.

The Pharmacists took the position that Zellers’ termination of the licence agreements was improper, and sued Zellers for damages and also sought an interim and permanent injunction restraining Zellers from using, selling or disposing of information pertaining to the Pharmacies or to patients of the Pharmacies.

Zellers, on the other hand, had already notified the Ontario College of Pharmacists (the “College”) of the closure of the Zellers Pharmacies, and of the fact that the Pharmacy Records were being transferred, in compliance with both the College requirements and applicable privacy legislation.

The Pharmacists argued that the sale of Pharmacy Records caused them to breach their professional obligations as well as those under the Personal Health Information Protection Act, 2004, S.O. 2004, c. 3, Sch. A (“PHIPA”).  In that regard, the Pharmacists contended that they were health information custodians (“HICs”) for the purposes of PHIPA and could not permit the transfer of the Pharmacy Records without patient consent.

Zellers, however, took the position that it is the person or organization that operates each of the Zellers Pharmacies, and is therefore the HIC in question. As well, HICs are permitted to transfer patient records to a successor custodian (for example where a pharmacy is sold to another operator), provide they comply with Section 42(2) of PHIPA.

Pattillo J.  found that the Pharmacists were required to satisfy the three-part test established in RJR-MacDonald Inc. v. Canada (Attorney General),[1994] 1 S.C.R. 311 at paragraph 48, in order to obtain the relief sought, by establishing that:

i)                    there is a serious issue to be tried;

ii)                   they would suffer irreparable harm if the injunction is not granted; and

iii)                 the balance of convenience favours granting the injunction.

Pattillo J. found that Zellers was the HIC in respect of the Pharmacy Records, and that there was no validity to the claims that the Pharmacists own the Pharmacy Records.  Pattillo J. also found that the steps taken by Zellers complied with section 42(2) of PHIPA.

The court dismissed the Pharmacists’ motion. While Pattillo J. found that there was a serious issue to be tried, it was limited  to whether the Pharmacists’ obligations under PHIPA override the licence agreements.  He did not find any evidence to support the claim that the Pharmacists’  businesses, livelihoods and reputations would all suffer irreparable harm if the injunction was not granted, or that their patients would suffer irreparable harm by breach of their privacy rights. Finally, Pattillo J. found that the balance of convenience strongly favoured not granting the injunction, as Zellers would suffer greater harm if the injunction were granted than the Pharmacists would suffer if the injunction were not granted. Accordingly, the Pharmacists’ motion was dismissed.

The most important considerations for the Court in this case appeared to be the fact that the licence agreements anticipated the very situation that developed with the sale of the Pharmacy Records, and that Zellers, as HIC, complied with its obligations under PHIPA. Pattillo J. also noted that the patients’ right to access pharmacy services from the pharmacy of their choice was in no way prejudiced by the proposed transfers.

Takhar  et al. v. Zellers Inc. et al., 2012 ONSC 2546.