Docket: T-1664-19
Citation: 2024 FC 225
Montréal, Quebec, February 9, 2024
PRESENT: Mr. Justice Gascon
PROPOSED CLASS PROCEEDING |
BETWEEN: |
IRENE BRECKON and GREGORY SILLS |
Plaintiffs |
and |
CERMAQ CANADA LTD., CERMAQ GROUP AS, CERMAQ NORWAY AS, CERMAQ US LLC, GRIEG SEAFOOD ASA, GRIEG SEAFOOD B.C. LTD., LERØY SEAFOOD GROUP ASA, LERØY SEAFOOD USA, INC., MARINE HARVEST ATLANTIC CANADA INC., MOWI ASA, MOWI CANADA WEST INC., MOWI DUCKTRAP, LLC, MOWI USA, LLC, NOVA SEA AS, OCEAN QUALITY AS, OCEAN QUALITY NORTH AMERICA INCORPORATED, OCEAN QUALITY PREMIUM BRANDS, INC., OCEAN QUALITY USA INC., and SALMAR ASA
|
Defendants |
ORDER AND REASONS
I. Overview
[1] The plaintiffs, Mr. Gregory Sills and Ms. Irene Breckon [Plaintiffs], bring two separate motions under sections 334.29 and 334.4 of the Federal Courts Rules, SOR/98-106 [Rules]. The first motion seeks the judicial approval of a class action settlement [Settlement Agreement] while the second one asks the Court to approve the payment of three related expenses, namely: i) the legal fees and disbursements sought by class counsel Koskie Minsky LLP, Sotos LLP, and Siskinds LLP [Class Counsel Fees]; ii) the commission of a litigation funder [Commission] under a Litigation Advance Agreement [LAA]; and iii) an honorarium to each of the two representative Plaintiffs [Honorarium].
[2] The Settlement Agreement, a copy of which is attached as Annex “A” to this Order, was executed on September 22, 2023, between the Plaintiffs and the defendants, Cermaq Canada Ltd., Cermaq Group AS, Cermaq Norway AS, Cermaq US LLC, Grieg Seafood ASA, Grieg Seafood BC Ltd., Grieg Seafood Sales North America Incorporated (formerly known as Ocean Quality North America Inc.), Grieg Seafood Sales Premium Brands, Inc. (formerly known as Ocean Quality Premium Brands Inc.), and Grieg Seafood Sales USA Inc. (formerly known as Ocean Quality USA Inc.), Lerøy Seafood AS, Lerøy Seafood USA Inc., Marine Harvest Atlantic Canada Inc., Mowi ASA, Mowi Canada West Inc., Mowi Ducktrap, LLC, Mowi USA, LLC, Nova Sea AS, SalMar ASA, and Sjór AS (formerly known as Ocean Quality AS) [together, the Defendants]. The proposed settlement was reached in the context of a class action proceeding [Class Action] filed by the Plaintiffs in relation to an alleged conspiracy between the Defendants to fix, maintain, increase, or control the price of farmed Atlantic salmon, contrary to Part VI of the Competition Act, RSC 1985, c C-34 [Competition Act].
[3] For the reasons that follow, I will approve the Settlement Agreement, I will approve in part the proposed Class Counsel Fees, and I will decline to approve the LAA and the Honorarium.
II. Background
[4] The Class Action was initiated by a statement of claim filed on October 11, 2019, in Court file no. T-1664-19 [Statement of Claim]. A second statement of claim was filed on January 3, 2020, in file no. T-8-20. The two claims were subsequently consolidated on April 26, 2021, by order of this Court, under file no. T-1664-19.
[5] The Statement of Claim arises from allegations of price-fixing in the market for farmed Atlantic salmon. In essence, the Plaintiffs allege that the Defendants conspired to increase the spot market for farmed Atlantic salmon in Oslo, Norway with the intention of increasing prices in North America and elsewhere. They maintain that the Defendants’ unlawful conspiracy constitutes offences under Part VI of the Competition Act, in particular sections 45 and 46, and they seek damages pursuant to subsection 36(1) of the Competition Act.
[6] In the consolidated Statement of Claim, the class is defined as follows: “[a]ll persons in Canada who purchased [farmed Atlantic salmon and products containing or derived from farmed Atlantic salmon purchased or sold in Canada] from April 10, 2013 to [February 20, 2019]”
[Class]. The Class therefore includes both direct and indirect purchasers of farmed Atlantic salmon.
[7] The Class Action was commenced following an investigation into the pricing of farmed Atlantic salmon by the European Commission. In February 2019, the European Commission announced in a press release that it had carried out unannounced inspections at the premises of several salmon companies, which were unnamed, based on concerns that the inspected companies may have violated the European Union [EU] competition rules prohibiting cartels and restrictive business practices. A few months later, in November 2019, the Antitrust Division of the United States Department of Justice [US DOJ] opened its own criminal investigation into allegations of collusion between the Defendants. The Defendants Mowi ASA, SalMar ASA, Lerøy Seafood Group ASA, and Grieg Seafood ASA each filed notices with the Oslo Børs — the Oslo Stock Exchange — disclosing that they or their subsidiaries had received, or were advised they would receive, subpoenas from the US DOJ.
[8] In addition to this Class Action, parallel class action proceedings have been commenced in British Columbia and Quebec in relation to the same alleged conspiracy. Counsel in the three Canadian class actions are working on a coordinated basis, with this Class Action being the “lead action.”
These parallel proceedings are Chin v Cermaq Canada Ltd et al (Supreme Court of British Columbia Vancouver, Registry No. 211995) [BC Action] and Langis et al v Grieg Seafood ASA et al (Cour Supérieure du Québec, District de Québec No. 200-06-000245-202) [Quebec Action].
[9] Similar class proceedings have also been commenced in the United States in the following matters: In Re: Farm-Raised Salmon and Salmon Products Antitrust Litigation (United States District Court Southern District of Florida Miami Division, File No. 19-21551-CV-Altonaga) [US Direct Purchaser Action] and Wood Mountain Fish LLC et al v Mowi et al, (United States District Court Southern District of Florida Fort Lauderdale Division, File No. 19-22128-CIV-Smith/Louis) [US Indirect Purchaser Action].
[10] The US Direct Purchaser Action was settled in May 2022 for USD$85 million and was approved by the US courts in September 2022. The US Indirect Purchaser Action was also settled a few months later, in December 2022, for an amount of USD$33 million, and was approved by the US courts at the end of February 2023.
[11] On October 6, 2023, this Court rendered an order certifying the Class Action for settlement purposes only [October 6 Order]. The October 6 Order further approved the Notice of Certification and Settlement Approval Hearing [Notice] as well as the plan to disseminate the Notice [Notice Plan] to the members of the Class [Class Members].
[12] The motions for approval of the Settlement Agreement and for the approval of related payments were heard together by the Court on November 20, 2023.
[13] The parties entered into the Settlement Agreement on September 22, 2023, subject to this Court’s approval. The Plaintiffs’ legal counsel, Koskie Minsky LLP, Sotos LLP, and Siskinds LLP [together, Class Counsel], have concluded that the Settlement Agreement is fair, reasonable, and in the best interests of the Plaintiffs and the Class Members.
[14] The material terms of the Settlement Agreement include the following:
The settlement is valued at $5,250,000 [Settlement Amount], which will be paid into a settlement fund [Settlement Fund]. Class Counsel have prepared a protocol for the distribution of the Settlement Fund, after deducting administration expenses, Class Counsel Fees, disbursements, and amounts owing to the litigation funder under the LAA [Funding Fees].
The Settlement Agreement defines the class for the purposes of the settlement [Settlement Class] as follows: “all Persons in Canada who purchased farmed Atlantic salmon and products containing or derived from farmed Atlantic salmon purchased or sold in Canada from April 10, 2013 to the date of this Order, except the Excluded Persons and any Opt-Out”
[Settlement Class Members]. This Settlement Class definition is nearly identical to the definition of the Class in the Statement of Claim.
The Settlement Fund will be distributed to eligible Settlement Class Members with purchases totaling at least $1 million of farmed Atlantic salmon between April 10, 2013 (the start of the class period), and February 28, 2019 (the date of the European Commission’s raids on the Defendants’ premises) [Qualifying Settlement Class Members].
To account for consumer and other claims that will not qualify for the $1 million threshold, the distribution protocol proposes a cy‑près payment in the amount of $250,000 to Food Banks Canada [Cy‑près Payment]. For the Quebec portion, the Cy‑près Payment shall be lowered by any amounts payable to the Fonds d’aide aux actions collectives [Fonds d’aide], pursuant to section 42 of the Act respecting the Fonds d’aide aux actions collectives, CQLR, c F-3.2.0.1.1 and calculated in accordance with Article 1. (2°) of the Regulation respecting the percentage withheld by the Fonds d’aide aux actions collectives, RSQ, c F-3.2.0.1.1, r 2. For the purposes of calculating the amount payable to the Fonds d’aide, 23% of the Cy‑près Payment will be notionally allocated to Quebec.
The direct settlement benefits will be distributed to Qualifying Settlement Class Members on a pro rata basis (i.e., proportionally), based on the volume of the Qualifying Settlement Class Member’s salmon purchases as against the total volume of all Qualifying Settlement Class Members’ salmon purchases. The amount of Qualifying Settlement Class Members’ salmon purchases will be finally determined by Class Counsel, with no right of appeal or review, based on purchase information submitted by the Qualifying Settlement Class Member, or where available, sales data provided by the Defendants pursuant to the terms of the Settlement Agreement.
The Settlement Agreement is an all-party settlement agreement and would resolve the litigation in its entirety. This includes the discontinuance of the BC Action and the Quebec Action.
[15] With respect to Class Counsel Fees, Section 11.1 of the Settlement Agreement provides that Class Counsel may seek approval of the Court for the payment of Class Counsel Fees contemporaneously with seeking approval of the Settlement Agreement. In June 2020, Class Counsel had entered into a fee agreement with the Plaintiffs, which provides for a contingency fee not exceeding 33% of the total amounts recovered by the Class, plus any amounts awarded by the Court in respect of costs, as well as disbursements and applicable taxes [Retainer Agreement].
[16] Class Counsel have prepared a protocol for the distribution of the “net”
settlement funds that will remain in the Settlement Fund after deducting administration expenses, Class Counsel Fees, disbursements, and Funding Fees.
[17] Class Counsel estimates that, subject to this Court’s approval, after deductions of $1,483,125 for Class Counsel Fees representing 25% of the Settlement Fund plus applicable taxes, $144,231.64 (inclusive of taxes) for disbursements, $1,000 for Honorarium payments, and $1,250,000 for the Funding Fees, there would be approximately $2,362,643 left for distribution. Once the Cy‑près Payment in the amount of $250,000 is made to Food Banks Canada, there will be $2,112,643 left in the Settlement Fund, which will be distributed to Qualifying Settlement Class Members proportionally.
[18] Furthermore, Food Banks Canada has proposed to share the cy‑près funds proportionally with their provincial associations for the purchase of food for food banks in their communities. In the event the net Settlement Fund is not paid out completely, either due to uncashed cheques, residual interest or other reasons, a further donation will be made to Food Banks Canada if the amount is less than $20,000. In the event the residual amount is greater than $20,000, further direction will be sought from the Court.
[19] As far as the Honorarium is concerned, the Settlement Agreement provides that Class Counsel may ask the Court for the approval of an Honorarium of $500 to each of Mr. Sills and Ms. Breckon, totalling $1,000.
[20] I pause to observe that, in section 3.1, the Settlement Agreement provides that the “Settlement Amount represents the full amount to be paid pursuant to this Settlement Agreement and shall be all-inclusive of all amounts, including without limitation, Class Counsel Fees, Class Counsel Disbursements, any honoraria for the Plaintiffs, any distributed amounts to the Settlement Class, any cy pres donations, and Administration Expenses,”
and thus contains no direct reference to the Funding Fees or to the LAA. It is only in the draft Notice attached as a schedule to the Settlement Agreement that the litigation funder and the LAA are specifically mentioned.
[21] The Defendants do not oppose the terms of the Settlement Agreement relating to Class Counsel Fees nor the request made for an honorarium to the Plaintiffs. They have also agreed to pay the Class Counsel Fees, the Honorarium, and applicable taxes that are approved by the Court. As indicated above, all of these amounts will be deducted from the Settlement Amount.
[22] On October 18, 2023, in accordance with the Notice Plan and the October 6 Order, Class Counsel commenced the distribution of notices via social media (Facebook and Instagram). As of November 16, 2023 (one day prior to the end of the two-month social media campaign), the number of impressions received from the social media notices was 2,827,272.
[23] Furthermore, in accordance with the Notice Plan and the October 6 Order, Class Counsel emailed the Notice to the direct purchaser customers of the Defendants based on the mailing list provided by them to Class Counsel. While most of the Defendants provided a list of emails, one did not. For that Defendant, Class Counsel mailed copies of the Notice to all of its customers. Subsequently, Class Counsel received emails for that Defendant’s customers. Emails were then sent. A number of email bounce backs were received. Class Counsel conducted searches to try to find updated contacts for those customers, failing which it followed up with defence counsel. They advised that some clients may be past clients, given the class period. The implication is that some may no longer be in business. Ultimately, there were only four customers with email bounce backs that could not be contacted through alternative backup emails. For those customers, letters attaching the Notice were mailed on October 25, 2023.
[24] Additionally, in accordance with the Notice Plan and the October 6 Order, Class Counsel mailed out the Notice to the 1,067 companies identified in the mailing list from Data Axle. Class Counsel also emailed the Notice to their respective mailing lists of individuals who have registered with Class Counsel to receive updates on the status of the litigation and to the following industry associations, requesting distribution to their membership: Canadian Federation of Independent Grocers, Food, Health and Consumer Products of Canada, Restaurants Canada, and Food Processors of Canada.
[25] Finally, the press release jointly drafted and agreed to by the parties was distributed to media outlets and publications through publication on Canadian Newswire on October 30, 2023.
III. Analysis
[26] The motions are seeking the Court’s approval for the Settlement Agreement, Class Counsel Fees, the LAA, and the Plaintiffs’ Honorarium. Each of these requests will be dealt with in turn. In conducting its assessment, the Court must first determine whether the Settlement Agreement should be approved. In the affirmative, the Court must then determine whether to approve the Class Counsel Fees, the LAA, and the Honorarium.
[27] Rule 334.29 provides that a class proceeding settlement must be approved by the Court. The legal test to be applied is whether the proposed settlement is “fair, reasonable and in the best interests of the class as a whole”
(Lin v Airbnb, Inc, 2021 FC 1260 at para 21 [Lin]; Bernlohr v Former Employees of Aveos Fleet Performance Inc, 2021 FC 113 at para 12 [Bernlohr]; Wenham v Canada (Attorney General), 2020 FC 588 at para 48 [Wenham]; McLean v Canada, 2019 FC 1075 at paras 64–65 [McLean]).
[28] The factors to be considered in the analysis have been reiterated by the Court on several occasions (Moushoom v Canada (Attorney General), 2023 FC 1739 at para 83 [Moushoom]; Lin at para 22; Bernlohr at para 13; Wenham at para 50; McLean at paras 64–66; Condon v Canada, 2018 FC 522 at para 19 [Condon]). They are similar to the factors retained by the courts across Canada. These factors are non‑exhaustive, and their weight will vary according to the circumstances and to the factual matrix of each proceeding. They can be summarized as follows:
The terms and conditions of the settlement;
The likelihood of recovery or success;
The expressions of support, and the number and nature of objections;
The degree and nature of communications between class counsel and class members;
The amount and nature of pre-trial activities including investigation, assessment of evidence, and discovery;
The future expense and likely duration of litigation;
The presence of arm’s length bargaining between the parties and the absence of collusion during negotiations;
The recommendation and experience of class counsel; and,
Any other relevant factor or circumstance.
[29] A proposed settlement must be considered as a whole and in context. Settlements require trade‑offs on both sides and are rarely perfect, but they must nevertheless fall within a “zone or range of reasonableness”
(Lin at para 23; Bernlohr at para 14; McLean at para 76; Condon at para 18). Reasonableness allows for a spectrum of possible resolutions and is an objective standard that can vary depending upon the subject matter of the litigation and the nature of the damages for which the settlement is to provide compensation to class members. However, not every disposition of a proposed settlement agreement must be reasonable, and it is not open to the Court to rewrite the substantive terms of a proposed agreement (Wenham at para 51). The function of the Court in reviewing a proposed class action settlement is not to reopen and enter into negotiations with litigants in the hope of improving the terms of the agreement (Condon at para 44). In the end, the proposed settlement is a “take it or leave it”
proposition (Moushoom at para 57; McLean v Canada (Attorney General), 2023 FC 1093 at para 37; Lin at para 23).
[30] In mandating that both the class action settlements and the payment of class counsel fees be subject to the Court’s approval (i.e., Rules 334.29 and 334.4), the Rules place an onerous responsibility on the Court to ensure that the class members’ interests are not being sacrificed to the interests of class counsel, who have typically taken on a substantial risk and who have a great deal to gain not only in removing that risk but in recovering a significant reward from their contingency fee arrangement (Lin at para 24, citing Shah v LG Chem, Ltd, 2021 ONSC 396 at para 40 [Shah]). The incentives and the interests of class counsel may not always align with the best interests of the class members. It thus falls on the Court to scrutinize both the proposed settlement agreement and the proposed class counsel fees and administrative expenses, as they will typically be interrelated (Lin at para 24). I pause to observe that the Court has a similar responsibility with respect to litigation funding agreements entered into by the plaintiffs in relation to proposed class proceedings (Ingarra et al v Dye & Durham Limited et al, 2024 FC 152 at para 23 [Ingarra]; Difederico v Amazon.com Inc, 2021 FC 311 at para 29 [Difederico]).
[31] This is especially important where, as is the case here, the net amount that will remain in the Settlement Fund for Qualifying Settlement Class Members is markedly lower than the Settlement Amount after deduction of the Class Counsel Fees and other expenses such as the Funding Fees.
(2) Application to this case
[32] Under the terms and conditions of the Settlement Agreement, the question to be determined is whether the proposed Settlement Agreement, when considered in its overall context, provides significant advantages to the Class Members, compared to what would have been an expected result of litigation on the merits (Lin at para 25).
[33] The key terms of the Settlement Agreement, as seen by the parties, revolve around a Settlement Amount valued at $5,250,000, which includes payment of the following elements: compensation to Qualifying Settlement Class Members; the Cy‑près Payment of $250,000; Class Counsel Fees and disbursements; Funding Fees; administration expenses; and the Honorarium payments. Furthermore, the Settlement Agreement’s release clause [Release Clause] provides that the Defendants will be forever and absolutely released from any claims in relation to the present action or to any claims related in any way to the released claims, and that the release shall remain in effect notwithstanding the discovery or existence of additional or different facts and evidence. The Release Clause applies to all Class Members, and not only to the Qualifying Settlement Class Members.
[34] As discussed at the hearing before the Court, three major issues arise in relation to the terms and conditions of the Settlement Agreement. First, the scope and extent of the Release Clause, which requires all Class Members to waive their rights — despite the limited benefits provided by the settlement — and indemnifies the Defendants for any future claims regardless of what new evidence or information might be discovered. Second, the fact that the Settlement Agreement, when considered in its overall context, provides minimal advantages to the Class Members as a whole — especially the indirect purchasers —, compared to a reasonably expected result of following through with the litigation on the merits. Third, the consideration of the Cy‑près Payment as a benefit to the Class Members other than the Qualifying Settlement Class Members.
[35] Pursuant to the Release Clause, the Defendants will receive a full and final release in relation to the subject matter of the Class Action, namely, allegations of price-fixing amongst the Defendants resulting in purchasers of farmed Atlantic salmon allegedly paying supra-competitive prices.
[36] The Release Clause raises some concerns for numerous reasons. First, based on the wording of the Release Clause, any future actions “related in any way to Released Claims”
are barred from being raised. Given that the Class definition includes every Canadian consumer, this Release Clause will bar all future action from anyone who purchased farmed Atlantic salmon from the Defendants for any possible similar future case. As such, the scope of the Release Clause is very broad.
[37] Indeed, upon encountering a similar release clause in 2038724 Ontario Ltd v Quizno’s Canada Restaurant Corporation, 2014 ONSC 5812 [Quizno’s], Justice Perell highlighted the following problems with such a clause, at paragraphs 55 and 56 of his decision:
[55] The scope of the release is too broad. In my opinion, it is fair to have Class Members release their existing claims against the Defendants. And it would have been fair to bar claims that are a continuation of the particular existing claims. However, in my opinion, it is unfair to categorically bar all future claims of the types identified in the Statement of Claim, which is a possible interpretation of the proposed release.
[56] Interpreting how the release would apply in the future is, of course, speculative at best because the factual nexus for the application of release is unknown. However, by way of analogy, if the Plaintiffs’ current claim against the Defendants was a nuisance claim, it would be fair to bar future claims based on the existing nuisance or it might be fair to bar future claims based on a continuation of the existing nuisance, but, in my opinion, it would not be fair or reasonable to bar all future claims based on presently unknown new nuisances perpetrated by the Defendants in the future.
[38] Given that the Release Clause in this case explicitly requires the Class Members to “agree and covenant not to sue any of the Releasees on the basis of any Released Claims or to assist any third party in commencing or maintaining any suit against any Releasees related in any way to Released Claims”
[emphasis added], it would appear that the Release Clause is overly broad in the same sense as the release clause in Quizno’s.
[39] Second, the Release Clause requires all Class Members to waive their rights of action, despite the fact that the consumer members of the Class will only receive the indirect benefit of a cy‑près donation from the Settlement Fund, and no direct individual benefit.
[40] In Quizno’s, Justice Perell singled out this problem as well, in the following terms: “[i]t is one thing for Class Members to not have gained anything by a class action, it is another thing to give up rights as the price for settling the Class Action, and such a settlement would not be in the Class Members’ best interests”
(Quizno’s at para 61, citing Waldman v Thomson Reuters Canada Limited, 2014 ONSC 1288 [Waldman]). Indeed, in Waldman, the court was seized of a situation similar to the case at bar, where a cy‑près trust would be established in lieu of the class members receiving an individual benefit. In that case, Justice Perell concluded that, “I, however, do not find that the Settlement Agreement is substantively, circumstantially, or institutionally fair to Class Members. In this regard, I agree with the general sentiment of the objectors to the Settlement that the Settlement Agreement brings the administration of justice and class actions into disrepute because: (a) the Settlement is more beneficial to Class Counsel than it is to the Class Members; and (b) in its practical effect, the Settlement expropriates the Class Members’ property rights in exchange for a charitable donation from Thomson”
[emphasis added] (Waldman at para 95). Ultimately, Justice Perell’s decision in Waldman was overturned by the Divisional Court for mischaracterizing the licenses as an expropriation of a property right (Waldman v Thomson Reuters Canada Limited, 2016 ONSC 2622 (Div Ct) at para 18).
[41] In their supplementary submissions filed after the hearing at the request of the Court, the Plaintiffs emphasized that the Release Clause is appropriately circumscribed and remains limited to the allegations raised in the Statement of Claim, and that the language used was modelled on similar releases approved by various Canadian courts in “auto parts”
price-fixing class actions. In addition, the Plaintiffs claimed that the Quizno’s precedent could be distinguished on the basis that the release clause in that case sought to release all future claims in relation to conduct that was not a continuation of the conduct covered by the underlying claim (Quizno’s at para 55). The concerns with future problems with the Release Clause do not arise in this case, say the Plaintiffs.
[42] The Plaintiffs also pointed to other court decisions where settlement agreements were approved with release clauses even in cases where the class members only received indirect benefits provided through a proposed cy‑près distribution (Loewenthal v Sirius XM Holdings, Inc, 2021 ONSC 4482 at para 39 [Loewenthal]). In approving the proposed settlement in that case, the Ontario court explicitly addressed a concern raised by an objector, who argued that the release in the settlement was too broad given that the class was being asked to give up something of value in exchange for indirect benefits provided through the proposed cy‑près distribution. The court reviewed the terms of the release and was satisfied that the release was not overbroad, and ultimately noted that settlements are a compromise (Loewenthal at para 39).
[43] The Release Clause contained in the Settlement Agreement certainly raises some concerns, as it is broadly drafted and could be interpreted to bar future claims against any form of anticompetitive conduct committed by the Defendants, even though it does not purport to release claims involving negligence, personal injury, failure to deliver goods, damaged or delayed goods, product defects, securities, or other similar claims. That said, after carefully considering the arguments raised by the Plaintiffs and the authorities they cited, I am ready to accept that the Release Clause does not fit among those release clauses that the Court should be reluctant to approve, and I am satisfied that the Defendants do not unfairly obtain an overbroad release in the circumstances.
[44] Turning to the benefits provided by the Settlement Agreement, one cannot help but note that the Statement of Claim in this case alleged damages of up to $1 billion. Therefore, the Settlement Amount represents a tiny fraction — merely 0.525% — of that claim, and can certainly be qualified as extremely modest. While litigation conditions can change and parties can settle at varying amounts based on the strength of their claims, the Settlement Amount in this case is a far cry from the initially alleged damages, to the point where one might question the acceptability of such a marginal recovery. This is particularly true given the present context, where the Settlement Amount is so low that the vast majority of Class Members (who likely would have anticipated receiving something from the settlement) will not receive anything from the settlement, apart from the moral satisfaction of making the Cy‑près Payment to Food Banks Canada.
[45] Indeed, based solely on the Class definition, which describes the class as all persons in Canada who purchased farmed Atlantic salmon and products containing or derived from farmed Atlantic salmon purchased or sold in Canada from April 10, 2013 to February 20, 2019, it would be fair to assume that all Class Members, particularly the indirect consumer purchasers, were intended to participate in a possible settlement. The two Plaintiffs are themselves regular consumers and indirect purchasers of farmed Atlantic salmon from the Defendants.
[46] However, the Settlement Agreement does not offer any benefit for its consumer members, outside of the cy‑près contribution. This raises concerns, given the fact that the consumer Class Members are likely the smaller purchasers of farmed Atlantic salmon and thus arguably those who are most reliant on the class action procedural vehicle to advance their claims. Conversely, the Qualifying Settlement Class Members — being large direct purchasers with more than $1 million in annual salmon purchases — arguably possess the requisite resources to lodge their own individual claims against the Defendants, whereas this is likely the only reasonable option for the consumer Class Members to advance their claims.
[47] In short, it appears that, further to the Settlement Agreement, it is the consumer Class Members who are being deprived of access to the Settlement Fund, while the Qualifying Settlement Class Members will divide up the benefits that remain after deductions. In other words, when considered in its overall context, the Settlement Agreement provides extremely timid advantages to the Class Members as a whole — especially the indirect purchasers, compared to a potential reasonably expected result of following through with the litigation on the merits.
[48] In their supplementary submissions, the Plaintiffs indicated that many precedents exist where settlement agreements in the class action context result in differentiated treatment of class members at the distribution stage. Furthermore, they observed that, while the proposed Settlement Agreement is certainly modest, there is no realistic alternative for a satisfactory resolution of the Class Action for the Class Members. I acknowledge these points, but the fact remains that the limited actual benefits to the Class Members are a negative factor undermining the approval of the Settlement Agreement.
(iii) Cy‑près distribution
[49] A key term of the Settlement Agreement is the Cy‑près Payment, as it represents the sole benefit of the agreement for indirect purchasers. The Plaintiffs contend that Class Members who do not qualify for direct compensation will receive indirect benefits, through this cy‑près donation to Food Banks Canada in the amount of $250,000. They submit that in Sun‑Rype Products Ltd v Archer Daniels Midland Company, 2013 SCC 58 [Sun‑Rype], the Supreme Court of Canada held that “the precedent for cy‑près distribution is well established”
and is “a method the courts have used in indirect purchaser price-fixing cases”
(Sun-Rype at paras 25–26).
[50] It is worth noting that the Supreme Court itself highlighted that a cy‑près distribution by “its very name, meaning ‘as near as possible’, implie[s] that it is not the ideal mode of distribution, [but] it allows the court to distribute the money to an appropriate substitute for the class members themselves”
[emphasis added] (Sun‑Rype at para 26).
[51] I recognize that Sun‑Rype is a helpful precedent in the current matter. However, in Sun‑Rype, the Supreme Court was contemplating the compensation of an unidentifiable class of indirect purchasers for a claim arising under British Columbia’s Class Proceedings Act, RSBC 1996, c 50 [CPA]. These facts do not entirely align with the facts in the present matter. First, this Class Action is not subject to British Columbia’s CPA, where subsection 34(1) expressly contemplates the possibility of cy‑près distributions. Moreover, Class Counsel have identified no cases from this Court having specifically considered cy‑près payments. It is also worth noting that Sun‑Rype was a case dealing with class certification, not with the approval of a settlement agreement.
[52] The Waldman case discussed above dealt with the approval of a settlement agreement and a cy‑près distribution, and it determined that the cy‑près distribution did not justify the approval of the proposed settlement agreement (Waldman at para 100). Indeed, according to Waldman, which was rendered after the Supreme Court had issued its judgment in Sun‑Rype (Waldman at paras 100–101):
[100] The cy‑près trust fund is a public good, but it does not justify approving the Settlement Agreement. Many, but not necessarily all, Class Members as members of the legal profession may be pleased to see the establishment of a trust to support public interest litigation and the training of law students, but the purpose of class actions is not to fund worthy projects but to provide procedural and substantive access to justice to Class Members.
[101] In my opinion, in the case at bar, there is no access to substantive justice for the claims of Class Members and no meaningful behaviour modification for Thomson.
[Emphasis added.]
[53] However, as pointed out by the Plaintiffs, it is well accepted that, in some cases, receiving indirect cy‑près compensation instead of direct monetary compensation can nevertheless meet the objectives of class proceedings, namely, access to justice and behaviour modification (Harper v American Medical Systems Canada Inc, 2019 ONSC 5723 at para 47; Sorenson v easyhome Ltd, 2013 ONSC 4017 at para 28). In other words, in circumstances where an aggregate settlement recovery cannot be economically distributed to individual class members, the Court can approve a cy‑près distribution to credible organizations or institutions that will indirectly benefit class members. In their supplementary submissions, the Plaintiffs referred the Court to several class action proceedings where courts have approved settlements involving cy‑près distributions for certain class members or all class members who would not receive direct compensation (see, for example, Emond v Google LLC, 2021 ONSC 302 at para 37 and Alfresh Beverages Canada Corp v Hoechst AG, [2002] OTC 19, [2002] OJ No 79 (QL) (SC) at para 16).
[54] Here, further to my analysis and after consideration of the Plaintiffs’ submissions and materials, I am satisfied that, while not being ideal, the cy‑près distribution is appropriate given the small magnitude of the Settlement Amount and the practical and economic difficulties to provide direct compensation to all Class Members. It certainly does not alleviate the fact that the Settlement Agreement offers strictly no financial gains for the vast majority of Class Members, but it is not enough to justify refusing the approval of the Settlement Agreement.
(iv) Conclusion on the terms and conditions
[55] In light of the foregoing, I am satisfied that, when considered in their overall context and taking the agreement as a whole, the terms and conditions of the Settlement Agreement can be considered fair, reasonable, and in the best interests of the Class Members. I accept, with some reserve, that they provide advantages to the Class Members, which might not have been achieved with the continued litigation, and are a positive factor supporting the approval of the Settlement Agreement.
[56] The next factor to consider is the likelihood of recovery or success. This factor refers to the likelihood of success of the Plaintiffs’ Class Action if it were to proceed on the merits. It must be assessed at the time when the parties choose between proceeding with the litigation and settling the matter. Under this factor, the Court must determine whether the proposed Settlement Agreement is an attractive viable alternative to continued litigation (Lin at para 39).
[57] Here, the Plaintiffs put forward many risk factors related to proceeding with the litigation that, in their view, limit the likelihood of recovery or success altogether. Notably, the Plaintiffs identify the risk that this Court might determine that the pleadings do not disclose a “sufficient description of the formation of an unlawful conspiracy”
and therefore do not disclose a reasonable cause of action. Indeed, citing Jensen v Samsung Electronics Co Ltd, 2021 FC 1185 [Jensen], conf’d 2023 FCA 89, leave to appeal to the Supreme Court dismissed, Chelsea Jensen, et al v Samsung Electronics Co Ltd, et al, 2024 CanLII 543 (SCC)), the Plaintiffs indicate that, because of this recent development in the jurisprudence, there is now a much higher risk that the Court might find no basis for the alleged conspiracy. They also note that the discontinuance of the US DOJ’s investigation and the subsequent absence of guilty pleas render the contested prosecution of this Class Action more difficult from a pragmatic standpoint. Moreover, the Plaintiffs submit that the Defendants asserted that the expert economic evidence they put forward does not provide a workable methodology for establishing harm on a class-wide basis. The Court has not yet tested the expert evidence and there is no way of knowing how a trier of fact would weigh this evidence. Finally, as was the case in Lin, the Plaintiffs also identify the risk with having to enforce a judgment against non-Canadian defendants, as is the case for many of the Defendants (Lin at para 44).
[58] I accept that there are increased risks with proceeding with litigation at a merits trial, and that there does not appear to be a high likelihood of success in this case. All of these observations reflect the fact that the Plaintiffs’ likelihood of success at the common issues trial, or even at certification, remains uncertain and difficult to predict. I am therefore satisfied that the Settlement Agreement is a reasonable and attractive viable alternative to litigation for the Plaintiffs and the Class, because litigating the Class Action could have led to unforeseen conclusions.
[59] In sum, when the parties decided to conclude the Settlement Agreement, it was uncertain and questionable whether the Plaintiffs’ Class Action could be litigated successfully on the merits, given the state of the law, the expert evidence, and the recent jurisprudence of the Court. These factors are still relevant today. This is a positive factor supporting the approval of the Settlement Agreement.
[60] The deadline for opting out of the Class Action was November 30, 2023. As of November 23, 2023, 12 requests to opt out have been received, all on behalf of individual consumers. Additionally, only one objection was received by the deadline of November 20, 2023. The objector is a direct purchaser customer of several of the Defendants [Objector]. The Objector confirmed purchases of several million dollars from the Defendants, and is therefore a Qualifying Settlement Class Member.
[61] The Objector objected to the quantum of the settlement, suggesting that the overcharge should be 5% of the Defendants’ net sales to Canada. They attached an analysis of sales reported by the Defendants to conclude that a 5% overcharge should result in total damages of over $50 million. Moreover, the Objector referred to having records that detailed the existence of a cartel and its practices.
[62] In response, Class Counsel advised the Objector that they agreed the proposed settlement was not ideal or perfect, and that the settlement proceeds were modest, compared to what Class Counsel hoped to achieve when the case was started. Class Counsel further advised the Objector that the 5% overcharge he suggested was not unreasonable. However, Class Counsel advised that the difficulty did not lie in estimating an overcharge; the difficulty was in proving the existence of a conspiracy, and the risk that the EU investigation — now some four years old — would result in no charges, or charges that would not be contrary to Canadian competition laws. As a result, rather than obtaining nothing, a modest settlement was reached with the Defendants, which Class Counsel states is approximately 6.2% of the settlement in the US Direct Purchaser Action, ignoring currency conversion issues.
[63] After discussing the issues with the Objector for approximately 30 minutes, the Objector explained that they now better understood the rationale for the Settlement Agreement and asked that their objection be withdrawn. The Objector was concerned, since they were the only objector to the Settlement Agreement, that the Defendants would treat them unfairly in the future, as the Objector continues to purchase millions of dollars’ worth of farmed Atlantic salmon from them. The Objector agreed to a compromise, whereby their concerns and the subsequent discussions would be shared with the Court, without identifying the Objector in any manner whatsoever.
[64] Concerning the opt-outs, the number of opt-outs in this case is small compared to the size of the Class. However, it is noteworthy that the only opt-outs received were all on behalf of individual consumers. This seems to indicate that, as was mentioned above, the Settlement Agreement provides limited benefits to the consumer Class Members.
[65] Turning to the objections, there is technically none, given the withdrawal of the sole objection voiced by the Objector. However, it remains important to consider that one of the Qualifying Settlement Class Members disagreed with the quantum of the Settlement Agreement.
[66] Here, the few opt-outs and lack of formal objections support a finding that the Settlement Agreement should be approved (Lin at para 48). It must be underlined that the Class Members were given an opportunity to voice their concerns and object to the Settlement Agreement, and very few did so. Having considered the objection received — and its withdrawal —, I am of the view that this is not sufficient to conclude that the Settlement Agreement should not be approved. The fact that a settlement is less than ideal for any particular class member is not a bar to approval for the Class as a whole (Condon at para 69).
[67] The degree and nature of communications between Class Counsel and Class Members is another important factor to consider for the approval of the Settlement Agreement.
[68] In this case, there is no doubt that Class Counsel and the Plaintiffs have communicated well. With regard to the communications between Class Counsel and Class Members more generally, since the commencement of this Class Action, Class Counsel has maintained and updated a website to publish basic information regarding the case, including a mailing list that allows interested individuals to subscribe for updates.
[69] Turning to the Notice and the Notice Plan, the Notice was materially improved in the October 6 Order, further to the Court’s comments regarding the contents of the Notice. The Notice Plan of the Settlement Agreement was robust and comprised two separate phases: direct notice and indirect notice. In the context of the direct notice phase, Class Counsel sent individual notices either through email or direct mail to the following stakeholders:
the direct purchaser customers of the Defendants, to the extent such information was provided to Class Counsel in accordance with the terms of the Settlement Agreement;
anyone who had registered with Class Counsel to receive updates on the status of the litigation; and,
1,067 companies located in Canada and identified by Data Axle as having corporate locations with 50 or more employees and/or individual locations with 100 or more employees and operating in the following business sectors: fish smoking & curing (manufacturers), fish packers (manufacturers), food-canned (manufacturers), canned & cured fish & seafoods (manufacturers), seafood packers (manufacturers), seafood – wholesale, fish and seafood brokers (wholesalers), food service distributors (wholesalers), foods – carryout, restaurants, caterers, restaurant management, and grocers (retail), but excluding irrelevant categories such as pizza chains, bars or pubs, fast food chains, etc.
[70] Class Counsel subsequently endeavoured to track any returned undeliverable emails or mail and promptly re-mail with a forwarded address.
[71] In the context of the indirect notice, the parties jointly drafted publications sent to nationwide media outlets through publication on Canada Newswire and IntraFish. Class Counsel also published the Notice on their respective websites and social media, and provided a copy to the following industry associations for distribution to their membership: Canadian Federation of Independent Grocers, Food, Health and Consumer Products of Canada, Restaurants Canada, and Food Processors of Canada. As noted above, as of November 16, 2023 (one day prior to the end of the two-month social media campaign), the number of impressions received from the social media notices was 2,827,272.
[72] Furthermore, unlike in Lin, where various important elements had not been disclosed in the notice to class members, such as the quantum of the total settlement amount, the precise list of deductions from the total settlement amount (including class counsel fees or administration expenses) when these impacted the net settlement amount to be received by the class members, the quantum of these various deductions (including the quantum of the class counsel fees), and the percentage of the total settlement amount to be received by class counsel as legal fees, these elements were all disclosed and explained in the Notice approved by the Court in the October 6 Order (Lin at para 55).
[73] Consequently, the degree and nature of communications between Class Counsel and Class Members is a positive factor supporting the approval of the Settlement Agreement.
(e) Amount and nature of pre-trial activities including investigation, assessment of evidence, and discovery
[74] At the time the Settlement Agreement was executed, very limited investigation, discovery, evidence gathering, and pre-hearing work had been completed by the parties. In fact, as the Plaintiffs noted in their submissions, there has been no assessment of evidence nor discovery whatsoever and they have no knowledge of the merits of the alleged conspiracy claim. In addition, limited progress was made on the certification motion itself, in light of the settlement discussions between the parties. Consequently, the amount and nature of pre-trial activities necessary to take the case to trial remains high. Furthermore, the Plaintiffs themselves note that, because the US class action cases have fully resolved, this Class Action could not obtain the fruits of the US plaintiffs’ investigatory work, which would have involved reviewing and translating hundreds of thousands of foreign-language documents. This is but a small part of the activities that would be required if the trial were to continue until its completion.
[75] Therefore, an important amount of necessary pre-trial work still has to be completed, and the evidence indicates that the parties had a good sense of the extent of this significant remaining pre-trial work. In the circumstances, the parties were properly positioned to understand the amount and nature of pre-trial activities linked to continued litigation at the time of choosing to settle. This factor thus supports the approval of the Settlement Agreement.
[76] Courts have recognized that an immediate payment to class members through a settlement agreement is a factor in support of a proposed settlement. In this case, if there is no settlement now, counsel for the parties anticipate that a long time will be needed for a trial on the merits and for potential appeals, with the need for expert evidence.
[77] Given that the proposed Class Action is in its early stages, this factor militates in favour of settlement approval. The proposed Settlement Agreement provides for compensation now, as opposed to years down the road.
[78] Furthermore, the Plaintiffs submit that continuing the litigation would result in substantial delays, prolonging the time before Class Members might receive any compensation, if at all. Assuming the proposed Class Action is certified — a possibility that remains uncertain —, the earliest start date for the common issues trial, based on their estimations, would be August 2026.
[79] I am satisfied that this is another factor militating in favour of finding that the proposed Settlement Agreement is fair and reasonable and in the best interests of the Class, and should be approved.
(g) Arm’s length bargaining between the parties and the absence of collusion during negotiations
[80] There is a strong presumption of fairness when a proposed class action settlement, which was negotiated at arm’s length by experienced counsel for the class, is presented for Court approval (Lin at para 60).
[81] The Plaintiffs argue that this Settlement Agreement was the culmination of nearly a year of arm’s length discussions between Class Counsel and counsel for the Defendants. Throughout this period, despite being engaged in settlement talks, both parties prepared for the certification motion, thereby maintaining the pressure to resolve the dispute, with both parties facing risks at certification. This Court has held that arm’s length settlements negotiated in good faith should “not be too readily rejected”
as the parties are best placed to assess the risks and costs associated with complex class litigation, and the rejection of a settlement carries the risk that the process of negotiation will unravel and the spirit of compromise will be lost (Manuge v Canada, 2013 FC 341 at para 6 [Manuge]).
[82] In sum, I am satisfied that the negotiations leading to the Settlement Agreement were arm’s length and adversarial in nature between Class Counsel and counsel for the Defendants, spanning almost a year. This, again, supports the approval of the Settlement Agreement.
[83] Finally, Class Counsel are of the view that the proposed Settlement Agreement is fair, reasonable, and in the best interests of the Class Members. They recommend approval by the Court.
[84] Class Counsel and their firms are experienced, well-regarded plaintiffs’ class action counsel. They have a wealth of experience in a substantial number of class actions to draw upon. Class counsel’s recommendations are significant and are given substantial weight in the process of approving a class action settlement (Lin at para 62; Condon at para 76). This is the case here.
[85] In light of the foregoing, and despite the fact that the proposed Settlement Agreement is far from ideal and provides very limited benefits to the Class Members, several of the factors recognized by the courts militate towards approving the Settlement Agreement.
[86] Ultimately, it is the role of the Court to protect the interests of the Class Members. Here, it is true that the Settlement Agreement does not bear all the hallmarks of an acceptable Settlement Agreement. In fact, it bears some marked resemblance to other settlement agreements that have been rejected by some Canadian courts. Seized with similar terms in settlement agreements, the Ontario Superior Court of Justice in Quizno’s and Waldman determined that the respective settlement agreements were not fair, reasonable, or in the best interests of the class members.
[87] There are certainly some important flaws in this Settlement Agreement that raise issues regarding the reasonableness of the proposed Settlement Agreement for the Class Members — and particularly the consumer Class Members who represent, numbers wise, the vast majority of the Class Members. Furthermore, the quantum of the Settlement Agreement is not even remotely reflective of the Statement of Claim. It is somehow ironic that the proposed Settlement Agreement in this matter ends up only rewarding, in monetary terms, the subset of Class Members that, arguably, is less likely to require the class action procedural vehicle to access justice and defend their rights. In other words, the only Class Members who stand to directly benefit from the Settlement Agreement will be the largest purchasers of farmed Atlantic salmon, along with Class Counsel and the litigation funder, who have taken on a risk and have a great deal to gain not only in removing that risk but in recovering a significant reward from their contingency fee arrangement (Lin at para 24; Shah at para 40).
[88] But the fact that a settlement is less than ideal for any particular class member is not a bar to approval for the Class as a whole (Condon at para 69). In the end, I am satisfied that I was presented with sufficient evidence to allow me to make an objective, impartial, and independent assessment of the fairness and reasonableness of the proposed Settlement Agreement (Condon at para 38). A settlement is never perfect, and the Court needs to keep in mind that a settlement is always the result of a compromise, but that it puts an end to the dispute between the parties and provides certainty and finality. Taking a holistic view of the matter, I am therefore satisfied that, in the context of the entirety of the factors, this Settlement Agreement ought to be approved, as it represents a fair and reasonable settlement that, in the circumstances, is in the best interests of the Class as a whole.
[89] I now turn to the Class Counsel Fees and other payments sought by the Plaintiffs in their second motion.
[90] Pursuant to the terms of the Retainer Agreement, Class Counsel are entitled to fees equal to 33% of the Settlement Amount. However, partly because of the LAA and the Commission to be paid to the litigation funder, Class Counsel is only requesting a fee of 25% of the Settlement Amount and the reimbursement of its disbursements. This would amount to an award of $1,312,500 for Class Counsel Fees, plus applicable taxes and disbursements, to be paid from the Settlement Amount. Furthermore, there will be no separate fee approval applications in the BC or the Quebec Actions. Counsel in those actions will be paid from the fees awarded in this case.
[91] In light of the impact of the LAA on the fees sought by Class Counsel, I first need to deal with the Plaintiffs’ request for approval of the LAA and the payment of the Funding Fees, before addressing the Class Counsel Fees.
(1) The LAA and the Funding Fees
[92] Under the auspices of requesting the Court to approve Class Counsel Fees, the Plaintiffs also request that the Court approve the LAA in relation to the prosecution of this Class Action and order that the amounts due to the litigation funder be paid out of the Settlement Amount. At the outset, I underline that it seems somewhat counterintuitive to request the approval of the LAA ex post facto the conclusion of a Settlement Agreement and at a point where Class Counsel has already entered into the agreement and has effectively drawn funds from the LAA.
[93] More specifically, Class Counsel request the Court’s approval to deduct from the Settlement Amount the $500,000 in disbursements already advanced by Claims Funding Australia Pty Ltd [Funder] under the LAA as well as an additional $750,000 for the Commission payable to the Funder. Although the Funder would be entitled to a Commission of $812,500 under the LAA, the Funder has agreed to reduce the amount payable to $750,000.
(a) The test for the approval of litigation funding agreements
[94] In Difederico, Chief Justice Crampton outlined the general test for the approval of litigation funding agreements, drawing from pan-Canadian jurisprudence as well as case law from this Court in laying out this framework. The crux of the test stems from the principle that a litigation funding agreement “should not be champertous or illegal and […] must be a fair and reasonable agreement that facilitates access to justice while protecting the interests of the defendants”
(Difederico at para 34, citing Houle v St Jude Medical Inc, 2017 ONSC 5129 at para 71 [Houle]).
[95] Accordingly, Chief Justice Crampton enumerates the following factors that must be considered by the Court in approving a litigation funding agreement (Difederico at para 36, citing Jensen v Samsung, (Court file no. T-809-18, February 7, 2019) at para 6; Houle at paras 73–88; Flying E Ranche Ltd v Canada (Attorney General), 2020 ONSC 8076 at paras 28–34; JB & M Walker Ltd v TDL Group Corp, 2019 ONSC 999 at para 6; Drynan v Bausch Health Companies Inc, 2020 ONSC 4379 at para 17; Dugal v Manulife Financial Corporation, 2011 ONSC 1785 at para 33; Stanway v Wyeth Canada Inc, 2013 BCSC 1585 at para 15; David v Loblaw, 2018 ONSC 6469 at para 12):
Have the basic procedural and evidentiary requirements for the Court’s consideration of the litigation funding agreement been satisfied?
Is third party funding necessary to facilitate meaningful access to justice?
Is the litigation funding agreement champertous?
Is the litigation funding agreement fair and reasonable to current and prospective class members as a group?
Will the litigation funding agreement make a meaningful contribution to deterring wrongdoing?
Does the litigation funding agreement interfere with the solicitor-client relationship, counsel’s duty to the class members, or the carriage of the proceeding?
Does the litigation funding agreement protect relevant legal privileges and the confidentiality of the parties’ information?
Does the litigation funding agreement protect the legitimate interests of the defendants?
[96] A negative response to any of the questions above can be fatal to the approval of a litigation funding agreement (Difederico at para 37; Eaton v Teva Canada Limited, 2021 FC 968 at para 21 [Eaton]). As such, each criteria must be assessed independently. At the end of the day, the Court must be satisfied that “it is in the best interest of justice to approve the [litigation funding agreement]”
(Difederico at para 35).
[97] As Chief Justice Crampton also pointed out, and at the risk of repeating myself, it is important to underline that the Court is vested with a general supervisory role in class proceedings that requires it to be mindful of the best interests of class members as a whole (Difederico at para 29, citing Frame v Riddle, 2018 FCA 204 at para 24 and Ottawa v McLean, 2019 FCA 309 at para 13). This includes the best interests of prospective class members, whose interests may not be entirely aligned with those of the representative plaintiffs, class counsel, or third parties who are prepared to fund all or part of the proceeding (Houle v St Jude Medical Inc, 2018 ONSC 6352 at paras 22, 41). Accordingly, litigation funding agreements entered into in relation to proposed class proceedings before the Court must be approved by the Court, even when they have been executed by the representative plaintiffs after having received the advice of independent legal counsel (Difederico at para 29; Houle at paras 63–70).
(b) Application to this case
[98] Turning to the case at bar, I find that the LAA fails to meet two crucial components of the test articulated in Difederico. I accept that the LAA satisfies the requirements of some factors listed above. This is the case for the following: 1) the fact that the LAA does not interfere with the solicitor-client relationship, Class Counsel’s duty to the Class Members, or the carriage of the proceeding; 2) the protection of relevant legal privileges and of the confidentiality of the parties’ information; and 3) the protection of the legitimate interests of the Defendants.
[99] However, I conclude that the LAA fails to meet the basic procedural requirements for its approval by the Court, and that it is neither fair nor reasonable to current and prospective Class Members since it offers highly disproportionate benefits to the Funder. This is amply sufficient to deny the approval of the LAA and to refuse that amounts owed to the Funder be deducted from the Settlement Amount.
(i) The basic procedural and evidentiary requirements for the Court’s consideration of the LAA are not satisfied
[100] The basic procedural and evidentiary requirements for the approval of a litigation funding agreement require that: a) the plaintiffs have received independent legal advice prior to entering into the funding agreement; b) the retainer and the funding agreement have been disclosed to the Court; c) a prompt request for approval of the funding agreement has been made to the Court; d) reasonable notice has been provided to the parties; e) the retainer and funding agreement have been disclosed to the Defendants with appropriate redactions; and f) evidence of the relevant background circumstances has been proffered (Difederico at para 38; Houle at para 74).
[101] Here, the LAA misses the mark on most of those fronts. With respect to a), a typical litigation funding agreement is made between a representative plaintiff and the litigation funder. By contrast, this LAA was concluded between Class Counsel and the Funder. Therefore, no independent legal advice was obtained.
[102] With respect to b) and c), it is clear that the LAA was not promptly disclosed to the Court. Class Counsel erroneously believed that because the contract was between the Funder and Class Counsel, Court approval was not required in the same way that Court approval would not be required if Class Counsel obtained a bank loan or line of credit to fund the case. However, Class Counsel acknowledge that the Court’s approval is now required, since Class Counsel seek to deduct the amounts owing pursuant to the LAA from the proposed Settlement Amount.
[103] Regarding the promptness of the disclosure of the LAA, one cannot help but remark that the approval of this LAA — from which Class Counsel has already drawn funds — has come to the Court at the eleventh hour. Many words could describe this timeline; however, “prompt”
is certainly not one of them.
[104] In their submissions, Class Counsel referred to Justice Perell’s qualification of “prompt disclosure”
in Fehr v Sun Life Assurance Company of Canada, 2012 ONSC 2715 [Fehr], where it was stated that “the court’s jurisdiction over the management and administration of proposed and certified class actions entails that a third party funding agreement must be promptly disclosed to the court and the agreement cannot come into force without court approval. Third party funding of a class proceeding must be transparent and it must be reviewed in order to ensure that there are no abuses or interference with the administration of justice”
[emphasis added] (Fehr at para 89). Here, it is undisputed that the LAA has not only come into force without the Court’s approval, but the Court’s approval is only being sought at the very last moment possible.
[105] In sum, the first step of the test set out in Difederico for the approval of litigation funding agreements is clearly not met. Class Counsel have not satisfied the basic procedural and evidentiary requirements for the Court’s consideration of the LAA. The failure to satisfy the first step of the test is a strong factor weighing against approving the LAA, and is likely fatal, in and of itself, to its approval.
(ii) The LAA is unfair and unreasonable to current and prospective Class Members
[106] But there is much more. In my view, the commission regime found in the LAA and agreed to by Class Counsel is unfair and unreasonable when juxtaposed with the Settlement Amount, the standard profit sharing regime found in the Ontario Class Proceedings Fund [Ontario CP Fund] — which caps the return on advanced funds to 10% of total proceeds —, and legal precedents having approved litigation funding agreements. Furthermore, the terms and conditions contained in the LAA yield disproportionate returns to the Funder.
[107] The Plaintiffs submit that, while Class Counsel may be faulted for not having sought pre-approval of the LAA, an unintended benefit is that Class Counsel are able to make modifications to their fee arrangement, knowing the actual amount of settlement proceeds, with a view to blunting the impact of the Funder’s Commission on the Class Members. In this respect, Class Counsel submit that they have reduced their requested fees by $420,000 (from 33% to 25% of the Settlement Amount), and are assuming responsibility for administering the distribution of the Settlement Funds, rather than incurring the expense of a third party administrator, involving estimated fees of approximately $100,000. According to the Plaintiffs, taking into account these $520,000 “offsets”
results in a total net commission to the Funder of approximately $230,000, which represents approximately 4.3% of the total Settlement Amount.
[108] I am not convinced by the Plaintiffs’ arguments.
[109] In order to determine whether the Court can approve the LAA, the agreement has to be assessed as it reads, before the indirect adjustment made to it by Class Counsel through the reduction of Class Counsel Fees. The determination of what is a fair and reasonable litigation funding agreement is highly contextual (Ingarra at para 31; Difederico at para 57, citing Houle at para 81), and the LAA presented to the Court by the Plaintiffs fails to meet any of the benchmarks laid out in the jurisprudence.
[110] Leaving aside the “offsets”
referred to above, at the end of the day, the Funder stands to receive 14.3% of the Settlement Amount for its contemplated Commission of $750,000, and nearly a quarter of the Settlement Amount for the combination of the reimbursement of its advanced funds and its Commission. These percentages are high when contrasted with percentages approved in other litigation funding agreement cases. For example, the Ontario CP Fund proceeds distribution matrix provides for 10% of the recovery to be given to the litigation funder in most scenarios. In fact, in Difederico and Eaton, the Ontario CP Fund was considered for benchmarking purposes. In Difederico, the litigation funder would not receive more than the 10% levy generally obtained by the Ontario CP Fund in 90% of possible scenarios going from a complete victory for the plaintiffs (in that case, a recovery of $12 billion) to a complete failure of the class proceeding (i.e., a zero recovery) (Difederico at para 61). Similarly, in Eaton, the funding fees in that case were equal to 10% of the claim proceeds and were indeed within the range of similar fees that have been approved by Canadian courts (Eaton at para 30). The funding fees were well below 10% of total proceeds for more than 80% of potential outcomes in that proposed class proceeding, ranging between complete success (a recovery of $2.75 billion) and complete failure (a zero recovery).
[111] In the current case, the situation is materially different. This is not a case where the terms of the LAA are more favourable to the Class Members than the terms that would be applicable should the proceeding be funded by the Ontario CP Fund (Eaton at para 41). It is the reverse. Given that the Funder’s recovery in this case exceeds what has been considered fair and reasonable in Difederico and Eaton, this factors negatively towards the approval of the LAA.
[112] The LAA also raises major concerns from two other perspectives. The jurisprudence has established a “presumptive range of validity”
of 30% to 35% of the recovery proceeds, for a combined return to the litigation funder and class counsel (Ingarra at para 41; Difederico at para 65; Eaton at para 44). In both Difederico and Eaton, the proposed litigation funding agreement indeed fell well within that presumptive range of validity. In the current case, at $2,062,500 (namely, $1,312,500 for the reduced Class Counsel Fees and $750,000 for the Funder’s Commission), the contemplated combined return of the Funder and Class Counsel would exceed 39% of the Settlement Amount, over the upper limit of this presumptive range of validity. This again defies the rules of fairness and reasonableness to the Class Members.
[113] Finally, another metric to be considered is the actual return to the Funder for its financing support. The contemplated $750,000 Commission for the Funder on its funding of $500,000 for disbursements would translate into a return on investment of 150% over a maximum period of about two years (based on the information on the record, it would appear that the $500,000 was not advanced before the second half of 2021 by the Funder, to cover expert fees incurred by the Plaintiffs).
[114] This, in my view, would grant an unreasonable, exorbitant, and highly questionable rate of return to the Funder. I pause to underscore that, contrary to typical litigation funding agreements, this LAA does not modulate the rate of return to the Funder in relation to the actual proceeds resulting from the Class Action. It instead provides for a Commission expressed as a multiplier of the amounts advanced, which increases with the duration of the loan. This reflects the pure financing nature of the LAA. In other words, the consideration to be paid to the Funder for providing disbursements funding is a rate of return entirely independent from the actual results of the Class Action. Ironically, in their submissions to the Court, Class Counsel stated that they erroneously believed that the LAA was not subject to the Court’s approval in the same way that Court approval would not be required if Class Counsel obtained a bank loan or line of credit to fund the case. In light of the rate of return to be received by the Funder (namely, an annual rate of some 75%), had the LAA funding arrangement been a financing vehicle offered in the form of a bank loan with interest, it could have been considered an illegal rate of interest under the Criminal Code, RSC 1985, c C-46, which prohibits annual rates of interest exceeding 60%. Put differently, the terms of the LAA, which the Plaintiffs ask the Court to approve, bear many attributes of what could otherwise be qualified as a predatory lending practice or a loan shark agreement. The Court cannot accept that.
[115] For all forms of financing or investment, the rate of return sought by an investor or a lender is a reflection of the expected level of risk and the ability of the borrowers to meet their financial obligations in time and in full. It may be that, for a litigation funder, the risk undertaken in financing certain class action disbursements is so high and the risk of default so great that it requires exorbitant or predatory rates of return to justify advancing the money. But, if the risk of a contemplated class action not being successful is so high that litigation funding can only be available at a cost bordering extortion, approving such litigation funding agreements certainly does not serve the interests of justice.
[116] In light of the foregoing, I conclude that the LAA cannot be considered fair nor reasonable to current and prospective Class Members and that the Funder would be significantly overcompensated for assuming the risk of financing the proposed class proceeding. In sum, no matter what metric is used to satisfy the fair and reasonable test, the proposed LAA does not meet any.
(iii) The LAA is champertous
[117] In light of the foregoing, I also must conclude that the LAA is champertous.
[118] In Difederico, the Court determined that the assessment of this factor should address two considerations. The first is whether there is any evidence of any actual improper motive, as opposed to one that may be deemed to be improper based on the quantum of the return contemplated by the litigation funding agreement. The second consideration is whether the fees set forth in the litigation funding agreement exceed the outer limit of what might possibly be considered reasonable, fair, or proportionate (Difederico at paras 54–55; Eaton at paras 29–30). Accordingly, this second consideration overlaps with the requirement that the LAA be fair and reasonable to current and prospective Class Members.
[119] I acknowledge that there is no evidence of any improper motive by the Funder in this case. The LAA appears to be purely of a financial nature. The mere fact that a funder may unreasonably profit from a funding agreement is not sufficient, in and of itself, to support a finding of improper motive or officious meddling (McIntyre Estate v Ontario (Attorney General) (2002), 61 OR (3d) 257 (Ont CA) at paras 26–28).
[120] However, the same cannot be said about the reasonableness, fairness, and proportionality of the profits to be received by the Funder in the overall distribution of proceeds from the Settlement Agreement. As discussed in the previous section, there is no doubt that the LAA in the present matter is therefore champertous.
(iv) The LAA is not necessary to facilitate meaningful access to justice and makes no meaningful contribution to deterring wrongdoing
[121] I do not dispute that, in certain circumstances, litigation funding agreements can facilitate access to justice or assist in deterring wrongdoing by allowing plaintiffs to advance their claims against alleged wrongdoers. For example, the Court noted in Difederico that, to the extent that class actions are successful, either by obtaining a favourable judgment or award or by reaching a settlement that reflects a sound claim, other firms could likely be deterred from engaging in behaviour similar to the alleged anticompetitive conduct (Difederico at para 79).
[122] However, in this case, I find no evidence that the LAA was necessary to give access to justice to the Plaintiffs nor that the actual Settlement Agreement contains any indication of a deterrent effect on the Defendants. Consequently, I am not persuaded that these two elements support the approval of the LAA.
(c) Conclusion on the LAA
[123] The LAA has failed to satisfy the basic procedural and evidentiary requirements for the Court’s consideration. Notably, the LAA should have been brought to the Court’s attention at the earliest conjecture, rather than at the last minute, after the agreement with the Funder has been concluded, and after Class Counsel has already drawn funds from the LAA. The LAA is also manifestly unfair and unreasonable to current and prospective Class Members, due to the Funder’s recovery being significantly more than what has been deemed reasonable by this Court for litigation funding agreements, and largely exceeding any acceptable rate of return.
[124] I must once again underline that Class Counsel are asking the Court not only to approve the LAA but also to deduct the Funder Fees from the Settlement Amount ultimately available to the Class Members. It would be unfair and unreasonable to ask the Class Members to bear the burden of such an unreasonable funding agreement. I would further add that, in the Retainer Agreement, no mention was made of fees or commission to be paid to a litigation funder in the fee calculation example used to illustrate the effect of the contingency fee payment on the proceeds actually left to the Class Members. True, there was a provision in the Retainer Agreement (section 8) alluding to the possibility of a third-party litigation funder who “might be entitled to a percentage of recovery obtained on behalf of the Class, and/or a payment of interest calculated on the basis on the amount of funds advanced,”
with no more details. There was also, in the Notice approved in the October 6 Order, a reference to the actual monetary amount to be paid to the Funder. But nowhere was it explained to the Class Members that they were paying to the Funder a rate of return of about 150% over two years for its funding of disbursements, regardless of the outcome of the Class Action.
[125] For those reasons, I will not approve the LAA nor order that amounts owed to the Funder under that agreement be paid out of the Settlement Amount. This refusal will be a factor to take into account in the assessment of the Class Counsel Fees, which I will now discuss.
(2) Class Counsel Fees
[126] Rule 334.4 provides that all payments to counsel flowing from a class proceeding must be approved by the Court. The overarching test applicable to class counsel fees is that they have to be “fair and reasonable in all of the circumstances”
(Lin at para 70; Condon at para 81; Manuge at para 28).
[127] The Court has established a non-exhaustive list of factors to assist in the determination of whether the class counsel fees are fair and reasonable (Moushoom at para 83; Lin at para 71; Wenham v Canada (Attorney General), 2020 FC 590 [Wenham 2] at para 33; McLean v Canada, 2019 FC 1077 [McLean 2] at para 25; McCrea v Canada, 2019 FC 122 at para 98; Condon at para 82; Manuge at para 28). Again, these factors are similar to the factors retained by the courts across Canada. They include the following elements:
The risk undertaken by class counsel;
The results achieved;
The time and effort expended by class counsel;
The complexity and difficulty of the matter;
The degree of responsibility assumed by class counsel;
The fees in similar cases;
The expectations of the class;
The experience and expertise of class counsel;
The ability of the class to pay; and
The importance of the litigation to the plaintiff.
[128] In situations where, as is the case here, class counsel benefit from litigation funding support, such funding is an additional element that, in my view, the Court needs to consider in determining whether the class counsel fees are fair and reasonable, as such litigation funding support obviously alleviates the risk undertaken by class counsel, and typically impacts the residual amount available to class members.
[129] As is the case for the factors governing the approval of settlement agreements, these factors are non-exhaustive, and their weight will vary according to the particular circumstances of each class action (Lin at para 72). However, the risk that class counsel undertook in conducting the litigation and the degree of success or results achieved for the class members through the proposed settlement remain the two critical factors in assessing the fairness and reasonableness of a contingency fee request by class counsel (Moushoom at para 84; Condon at para 83). The risk undertaken by class counsel includes the risk of non-payment but also the risk of facing a contentious case and a difficult opposing party (Wenham 2 at para 34).
[130] It has long been recognized by the courts that, for class proceedings legislation to achieve its policy goals, class counsel must be well rewarded for their efforts, and the contingency agreements they negotiate with plaintiffs should generally be respected. The percentage-based fee contained in a retainer agreement is presumed to be fair and should only be rebutted or reduced “in clear cases based on principled reasons”
(Condon at para 85, citing Cannon v Funds for Canada Foundation, 2013 ONSC 7686 at para 8).
[131] That being said, it is important to underline, once again, the Court’s role to protect the class, and there may be circumstances where the Court has to substitute its view for that of class counsel, in the interest of the class. The Court must consider all the relevant factors and then ask, as a matter of judgment, whether the class counsel fees fixed by the proposed agreement or asked by counsel are fair and reasonable and maintain the integrity of the profession (Shah at para 46). This is especially true where, as in this case, the amount of class counsel fees comes out of the global settlement amount available to class members. Here, it is clear that the net settlement funds available for distribution to Class Members represents the difference between the Settlement Amount and the sum of Administration Expenses, Class Counsel Fees, Funder Fees, Honorarium, and applicable taxes.
[132] In the same vein, where the fee arrangement with class counsel is part of the settlement agreement, the Court must decide on the fairness and reasonableness of the proposed fee arrangements in light of what class counsel has actually accomplished for the benefit of the class members. The class counsel fees must not leave the impression or bring about conditions of settlement that appear to be in the interests of the lawyers, but not in the best interests of the class members as a whole. Stated differently, there has to be some proportionality between the fees awarded to class counsel and the degree of success obtained for the class members (Lin at para 75).
[133] The risk factor refers to the risk undertaken by class counsel when the class proceeding is commenced. It is measured from the commencement of the action, not with the benefit of hindsight when the result looks inevitable. This risk includes all of the risks facing class counsel, such as the liability risk, recovery risk, and the risk that the action will not be certified as a class action or will not succeed on the merits (Condon at para 83). The litigation risk assumed by class counsel is a function of the probability of success, the complexity of the proceedings, and the time and resources expended to pursue the litigation (Lin at para 77).
[134] These risks were addressed above in the likelihood of recovery subsection when dealing with the approval of the Settlement Agreement. Notably, there were risks involved with whether or not the case would be certified in light of the Jensen decision. Furthermore, there were risks arising from the termination of the US DOJ’s investigation.
[135] Unlike in Lin, however, Class Counsel here relied on the LAA to cover some of their disbursements. Therefore, they did not bear the risks entirely themselves. This will be discussed in more detail below. Despite the LAA, there were still significant risks taken in this case, which is a positive factor supporting the approval of the Class Counsel Fees.
(ii) Results achieved
[136] It is worth noting that the success or result achieved in any class action settlement is not an absolute figure but rather a relative one. The assessment of the results achieved asks what was the client’s claim “worth”
and what did they get for it; in asking this question, courts must have regard for the complexity and difficulty of the case (Ainsley v Afexa Life Sciences Inc, 2010 ONSC 4294 at para 40). In other words, the success or result achieved in any class action settlement needs to be assessed in relation to what the anticipated full recovery of the damages alleged to have been suffered by the class members in the class action was. This is an important element assisting the Court in its effort to measure the fairness and reasonableness of the expected compensation brought about to class counsel by a settlement agreement. Broadly speaking, the Court always needs to know what would have been the estimated full recovery of a class action in order to assess the recovery rate of a proposed settlement and to figure out the relative success achieved by the settlement. In this case, the benchmark available to the Court is the $1 billion in damages referred to by the Plaintiffs in the Statement of Claim. The Settlement Amount of $5,250,000 thus represents an abysmally low recovery rate for the Class Members, and what is ultimately contemplated for the Class Members themselves (namely, a little more than $2,360,000) is an even lower one.
[137] The results achieved are therefore more than modest, and lie at the low end of the spectrum for Class Members. In fact, the parties who will benefit the most from the results achieved are Class Counsel, the Funder, and the largest Qualifying Settlement Class Members. The smaller Qualifying Settlement Class Members stand to gain very little from this agreement given the pro rata distribution protocol, and the consumer Class Members receive no direct material benefit — with the exception of the negligible cy‑près contribution of $250,000.
[138] The results achieved are well less than exemplary. Class Counsel acknowledges as much in their submissions, where they state that “the settlement is not ideal or perfect”.
However, they submit that “it represents a reasonable compromise to achieve a reasonable level of compensation to direct purchasers, compared to nothing”
. This conclusion is questionable. A success in class action proceedings cannot boil down to achieving anything better than nothing.
[139] In light of the foregoing, the results achieved in this Settlement Agreement are nowhere near a level at which they would be a positive factor for the approval of Class Counsel Fees. In fact, the results achieved are quite the contrary, and represent a negative factor militating against the approval of Class Counsel Fees. When the results achieved in a given case are so low, it calls into question whether class counsel should be entitled to a full recovery of their requested legal fees.
(iii) The impact of litigation funding fees
[140] In my view, it goes without saying that the existence of third-party funding is an additional relevant factor in analyzing the risks incurred and the fees requested by class counsel, and in determining whether the overall amount is fair, reasonable, and proportionate in any given case (Baroch v Canada Cartage, 2021 ONSC 7376 at paras 31–32 [Baroch]; MacDonald at al v BMO Trust Company et al, 2021 ONSC 3726 at paras 43–44 [BMO Trust]). In other words, litigation funding and class counsel fees are not separate and independent compartments, since the financial support obtained from litigation funding agreements lowers the degree of risk assumed by class counsel in taking up class actions on a contingency basis and in providing representation.
[141] It is not a question of penalizing class counsel for seeking out the contribution of litigation funders. But third party funding is certainly a factor that comes into the equation when assessing the reasonableness of class counsel fees. More specifically, the courts need to look at the combined impact of both class counsel fees and litigation funding fees, and it is not for class members to absorb those additional financing costs — which contribute to lower the risk faced by class counsel — when the overall amount of counsel fees and funding fees exceed certain limits.
[142] In their further submissions, the Plaintiffs acknowledged that courts in Ontario have determined that “it should be “self-evident … that third-party funding should be a relevant factor in the ‘risks incurred’ analysis’”
(Baroch at para 31, citing BMO Trust). Indeed, as the court noted in that case, the amended Ontario Class Proceedings Act, SO 1992, c 6 [OCPA] now expressly requires the consideration of funding arrangements that affected the degree of risk assumed in providing representation (OCPA at subsection 32(2.2)).
[143] The LAA in this case definitely affected the level of risk undertaken by Class Counsel. However, since I do not approve the LAA, this will not be a negative factor in determining the quantum of Class Counsel Fees.
[144] The time expended by class counsel can also be a helpful factor in the approval of class counsel fees, even in cases where the class counsel fees are contingency fees.
[145] Over the years, the courts have expressed a preference for utilizing percentage-based fees in class actions (see, for example, Mancinelli v Royal Bank of Canada, 2017 ONSC 2324 at para 52). A percentage-based fee is paid based on a percentage of the amounts recovered and should be awarded at a level that appropriately incentivizes and rewards class counsel (Condon at para 84). Contingency fees help to promote access to justice in that they allow class counsel, rather than the plaintiff, to finance the litigation. Contingency fees also promote judicial economy, encourage efficiency in the litigation, discourage unnecessary work that might otherwise be done simply to increase the lawyers’ fees based on time incurred, properly emphasize the quality of the representation and the results achieved, ensure that counsel are not penalized for efficiency, and reflect the considerable costs and risks undertaken by class counsel (Condon at paras 90–91). This Court and courts across Canada have recognized that the viability of class actions depends on entrepreneurial lawyers who are willing to take on these cases, and that class counsel’s compensation consequently must reflect this reality (Condon at paras 90–91).
[146] However, situations where the class counsel fees are not commensurate with the gains of class members or are not aligned with the terms of the underlying retainer agreement with the representative plaintiff qualify as “principled reasons”
where the courts may be justified in revisiting a percentage-based contingency fee agreement (Lin at para 95). Importantly, the proposed class counsel fees need to be considered in relation to the actual result achieved for the class members, especially when the retainer agreement provides for the possibility of a range or margin of appreciation for the effective percentage-based fees to be paid.
[147] I pause to make one remark. While the courts have acknowledged the need to recognize entrepreneurial lawyers who are willing to take some risks in class actin proceedings and deserve to be rewarded accordingly, risk-taking has its limits. A distinction needs to be made between situations where taking measured risks reflects an entrepreneurial spirit and others where the chances of success are so low and so remote, and the risks so high, that a proposed class action falls into speculative territory. The class action regime was not created to reward the latter.
[148] Here, the evidence makes it clear that Class Counsel have done extensive work in this matter. According to the affidavits filed, as of November 17, 2023, lawyers, students, and clerks from Class Counsel had collectively devoted 2,296.88 hours to this matter, with a fee value of $1,297,421. Consequently, I am satisfied that the time and effort expended by Class Counsel is a positive factor supporting the approval of Class Counsel Fees.
[149] For the reasons discussed above, this Class Action proceeding raised complex and difficult issues surrounding Part VI of the Competition Act that multiple major global competition law regulators have been investigating. This is a positive factor for the approval of Class Counsel Fees.
[150] Class Counsel, consisting of three firms, took on a lot of the responsibility for the management of this Class Action, and they are also assuming the responsibility for administering the disbursement protocol. However, unlike in Lin, these firms were doing so with the backing of the LAA. Despite the LAA funding, I am satisfied that Class Counsel still did significant work managing the file. As such, this is a positive factor in the assessment of Class Counsel Fees.
[151] Looking at the issue of fees in comparable cases, the reduced 25% contingency fee seems to fit in to the mid-to-high range of fees sought by class counsel. Indeed, in Lin, this Court reified a finding of the British Columbia Supreme Court, that the typical range for contingency fees has been recently described as being “15% to 33% of the award or settlement”
in British Columbia (Lin at para 102, citing Kett v Kobe Steel, Ltd, 2020 BCSC 1977 at para 54 [Kobe Steel]). Furthermore, the Court pointed to multiple instances where this Court has determined that a 30% contingency fee was within the “top range”
of what might be reasonable (Lin at para 102, citing Condon at paras 92, 111). I add that, in the settlement of both the US Direct Purchaser Action and the US Indirect Purchaser Action, class counsel received a 30% contingency fee.
[152] The issue to be determined is whether the requested Class Counsel Fees are fair and reasonable in the circumstances (Lin at para 103). In this case, the Settlement Agreement brings about a very limited success for the Class Members, and Class Counsel themselves acknowledged the “modest”
outcome when they reduced their contingency from 33% to 25% (taking into account the Funder Fees). Given the quantum is so low that the majority of Class Members will not be able to access the Settlement Fund — save for the Cy‑près Payment —, it appears difficult to justify a high percentage-based contingency fee which would reside at the high end of the spectrum observed in comparable cases.
[153] Furthermore, based on what is being presented to the Court, once Class Counsel have recuperated their fees and disbursements, and the LAA Funder is paid, there would be less than half of the Settlement Amount left for the Class Members, more specifically 45%. In those circumstances, it does not seem reasonable to award such a large proportion of the Settlement Amount to Class Counsel. Seeking a contingency fee in the mid-to-high range of typical fee awards is therefore a negative factor in assessing the fairness and reasonableness of the Class Counsel Fees.
(viii) Expectations of the class
[154] Another factor to consider is the expectation of the Class Members as to the amount of counsel fees (Lin at para 104). As pointed out by the Plaintiffs, the Notice included the precise amount of fees requested by counsel and the amounts due. The Notices were directly distributed by email or letter mail to all eligible direct purchaser Class Members, and indirectly distributed to all indirect Class Members. Class Counsel further note that there were no objections to the fees claimed or to the amounts due to the litigation Funder. In light of the foregoing, this is a positive factor in assessing the Class Counsel Fees.
[155] As was stated in Lin, in situations where the likely or expected recovery to class members is limited and resides at the low end of the spectrum, notices to class members should clearly set out the total amount of the class counsel fees and the percentage that class counsel are seeking to receive from a settlement agreement, so that class members can have a full understanding of the agreement presented to them for approval. Communications between class counsel and class members need to be transparent, so that class members can be in a position to make a well-informed decision on their approval and support of both the proposed settlement agreement and class counsel fees. Especially in situations where, as here, Class Counsel Fees eat up an important portion of the net Settlement Funds available to Class Members. This was the case here and, even though they were well informed of the legal fees to be paid, Class Members did not voice objections to the proposed Class Counsel Fees. This is a positive factor in assessing the fairness and reasonableness of the Class Counsel Fees.
[156] There is, however, one important caveat, again related to the LAA and the Funder Fees. As discussed above, I find no compelling evidence in this case that the Class Members were fully informed of the terms and conditions agreed to by Class Counsel in the LAA and underlying the payment of the Funder Fees. I am therefore not persuaded that, in the circumstances, the Class Members can be deemed to have expected that the Funder Fees and the “payment of interest”
referred to in the Retainer Agreement could be of the excessive magnitude agreed to by Class Counsel in the LAA to obtain disbursements funding. This is a negative factor in the determination of the overall fairness and reasonableness of the Class Counsel Fees.
[157] There is no doubt as to Class Counsel’s standing in the class action legal community and in the areas of law relevant to this litigation. Evidence was provided that Class Counsel have practised in class actions for many years. They have a breadth of experience in litigating class actions and have collectively negotiated settlements of several class actions. This is, of course, a positive factor favouring the approval of the Class Counsel Fees.
[158] While it is obvious that the consumer Class Members did not and do not have the ability to pay for the services of Class Counsel, the same may not be as clear for many of the Qualifying Settlement Class Members — who are the only members of the Class that stand to receive any direct financial benefit from the Settlement Agreement. This is therefore a neutral factor in the Court’s assessment of the Class Counsel Fees.
[159] Finally, as was the case in Lin, this Class Action is of limited importance to the Plaintiffs, Mr. Sills and Ms. Breckon, and is therefore a neutral factor in the determination of the fairness and reasonableness of Class Counsel Fees. This case is of no outstanding importance to the Class Members, in the sense that it does not involve human rights violations or personal injury. It has an impact for consumer protection and the deterrence of potential anti-competitive behaviour, but nothing allows the Court to conclude that this matter would qualify as being a “litigation of importance”
(Lin at para 110).
[160] Looking at all the above-mentioned factors cumulatively, I have to determine whether the Class Counsel Fees requested to be approved in this case can be qualified as fair and reasonable in the circumstances. Two important points must be emphasized: the very modest results achieved for the Class Members — particularly the consumer Class Members —, and the substantial portion of the Settlement Amount earmarked for the Funder on top of Class Counsel Fees, leaving very little for the Class Members under the current proposal. Indeed, if the Court were to approve the distribution presented by the Plaintiffs, the Class Members would end up receiving a meagre 45% of the Settlement Amount. Ultimately, with Class Counsel’s current proposal, more than half of the Settlement Amount would be gone before any Class Member even has an opportunity to access the Settlement Fund. Put differently, while the success achieved for Class Members is very modest at best, the fees and expenses effectively requested by Class Counsel are anything but modest.
[161] This is unjustifiable. In my view, what is being presented to the Court in terms of counsel fee approval does not fit the definition of being “fair and reasonable in the circumstances”
. By comparison, in Lin, the Court ultimately approved a total amount of expenses deducted from the settlement proceeds that still left 60% of the recovery proceeds for the class members.
[162] As the Court noted in Lin, there is no magic formula to determine what should be the appropriate percentage-based fees of class counsel in a class action settlement (Lin at para 115). It is a matter of judgment, based on the particular circumstances of any given case and the interests of the class (Lin at para 115). Here, Class Counsel did not bear the risk of this Class Action fully, having relied on the LAA. However, Class Counsel entered into an LAA that the Court had not approved, and does not approve, and which contains terms and conditions clearly detrimental to the interests of Class Members. Class Counsel took the risk of agreeing to this LAA without the Court’s approval. It was a choice made by experienced counsel, and they have to bear the burden of that risk. Furthermore, the results of their work were incredibly modest, with most Class Members not gaining anything from the Settlement Fund. Finally, the 25% to 33% contingency fee contemplated by Class Counsel remains within the mid-to-top range of most retainer fees, despite the fact that Class Counsel did not deliver a mid-to-top range Settlement Agreement.
[163] These are all important “principled reasons”
for revisiting the Class Counsel Fees being claimed. As was explained in Lin, at paragraph 116,
As the British Columbia Supreme Court recently stated in Kobe Steel, “[t]he integrity of the profession is a consideration when approving legal fees in the class action context” (Kobe Steel at para 58, referring to Plimmer v Google, Inc, 2013 BCSC 681 and Endean v The Canadian Red Cross Society; Mitchell v CRCS, 2000 BCSC 971, aff’d 2000 BCCA 638, leave to appeal dismissed, [2001] SCCA No 27 [QL]). Sometimes, substantial rewards to class counsel can create the wrong impression or perception that the ultimate beneficiaries of class actions are class counsel, rather than the class members. Where, as here, the settlement amount likely or expected to be received by class members is minimal – and in fact abysmal when compared to the legal fees claimed by Class Counsel –, there could be such a perception. In such cases, it is the Court’s duty to attempt to rectify this perception and to ensure that counsel do not leave the impression that the class action process serves “to obtain a result in which [class counsel] are the only or major beneficiaries” (Pro-Sys Consultants Ltd v Microsoft Corporation, 2018 BCSC 2091 at para 53). As the court reminded in Kobe Steel, “[t]he ultimate purpose of the class action vehicle is to benefit the class, not their lawyers”
[Emphasis added.]
[164] That being said, I am also mindful of the fact that, since I do not approve the LAA, Class Counsel will have to pay the amount of $750,000 currently owed to the Funder out of their own pockets. I also note that Class Counsel have incurred actual fees of nearly $1,300,000 in this Class Action, and that they have paid substantial disbursements. Consequently, and taking all these factors into consideration, I am of the view that Class Counsel Fees of $1,575,000 representing 30% of the Settlement Amount, plus applicable taxes, are a fair and reasonable amount to be awarded to Class Counsel in the circumstances. To that must be added disbursements in the total amount of $644,231.64 (representing $144,231.64 plus the $500,000 payment made by the Funder), inclusive of taxes. I also agree to add an amount of $75,000 to Class Counsel Fees to cover in part the fees to be incurred for the distribution of the Settlement Funds that Class Counsel have accepted to absorb. This will mean that a total of approximately $2,741,269 (namely, $5,250,000 minus about $1,864,500 for Class Counsel Fees inclusive of taxes and $644,231.64 for disbursements inclusive of taxes) will be left for distribution to Class Members, representing a more acceptable proportion of 52.2% of the Settlement Amount.
[165] I underline that, at $1,575,000 plus $75,000, the Class Counsel Fees exceed the actual amount of time spent by class counsel in litigating this Class Action so far, based on the evidence presented by the Plaintiffs in their motion materials. This represents a modest multiplier of approximately 1.2, in line with the modesty of the actual settlement. Of course, a non-negligible portion of the total amount granted by the Court for Class Counsel Fees will effectively be reduced for Class Counsel because of the Commission that will have to be paid to the Funder under the LAA. But the decision to enter into this agreement was made by Class Counsel, independently of the Court and of the Class Members, and the Class Members should not have to pay the price of what were unacceptable and unreasonable terms and conditions for a financing agreement divorced from the results of this Class Action.
[166] Finally, Class Counsel request that the Court award a $500 honorarium to each of Mr. Sills and Ms. Breckon, the Plaintiffs, for a total of $1,000. This Honorarium would be paid from the Settlement Amount. The Defendants have indicated that they are prepared to make that payment if ordered by the Court.
[167] According to Class Counsel, both Mr. Sills and Ms. Breckon have meaningfully contributed to the Class Members’ pursuit of access to justice by stepping forward to fill the role of representative plaintiffs. In so doing, it is argued, they have also expended substantial amounts of time to become familiar with all aspects of the litigation to effectively instruct Class Counsel and act in the best interests of the Class. Mr. Sills has sacrificed much of his personal time to be involved in the litigation, including taking time out of his workday occasionally to engage with the litigation. In a similar vein, Ms. Breckon has given up her personal time to be involved in the litigation. Both representative Plaintiffs were also instrumental in insisting that the Cy‑près Payment should be increased to $250,000.
[168] As was noted by the Court in Lin, no specific Rule provides for the payment of an honorarium to a representative plaintiff in class actions. However, this Court has the discretion to award honoraria to representative plaintiffs, and it has indeed done so on numerous occasions (see for example, Lin; Wenham; McLean 2; Condon; Manuge). Furthermore, this Court has reiterated that honoraria to representative plaintiffs are to be awarded sparingly, “as representative plaintiffs are not to benefit from the class proceeding more than other class members”
(McLean 2 at para 57, referring to Eidoo v Infineon Technologies AG, 2015 ONSC 2675 at paras 13–22). To be awarded, it “requires an exceptional contribution that has resulted in success for the class”
(Lin at para 118). In other words, an honorarium is not to be awarded as a routine matter but is rather “a recognition that the representative plaintiffs meaningfully contributed to the class members’ pursuit of access to justice”
(Lin at para 119, citing Condon at para 115).
[169] In determining whether the circumstances are exceptional, the Court may consider several factors, including: i) active involvement in the initiation of the litigation and retainer of counsel; ii) exposure to a real risk of costs; iii) significant personal hardship or inconvenience in connection with the prosecution of the litigation; iv) time spent and activities undertaken in advancing the litigation; v) communication and interaction with other class members; and vi) participation at various stages in the litigation, including discovery, settlement negotiations and trial (Shah at para 50). A review of the case law also indicates that the courts have approved the payment of an honorarium to a representative plaintiff when he or she rendered active and necessary assistance in the preparation or presentation of the case, and such assistance resulted in monetary success for the class. The Court must also ensure that any separate payment to a representative plaintiff must not be disproportionate to the benefit derived by the class members.
[170] For the reasons that follow, I am not persuaded that the payment of the requested $500 Honorarium to Mr. Sills and Ms. Breckon is justified in this case.
[171] There are two reasons for that. First, there is no exceptional contribution here. Second, in light of the highly modest benefits provided by the Settlement Agreement, granting an Honorarium would grant an unjustified advantage to the representative plaintiffs.
[172] While the affidavits of Mr. Sills and Ms. Breckon mention they both spent many hours discussing the case with Class Counsel and voicing their opinions to Class Counsel, I am not satisfied that they demonstrate an “exceptional contribution that has resulted in success for the class”
(Lin at para 118). As was the case in Lin, Mr. Sills and Ms. Breckon were not intimately involved in the Class Action. Indeed, like in Lin, this case is not a high profile litigation nor a situation where Mr. Sills and Ms. Breckon’s names were widely publicized, where they had exposure to the media, or where their privacy was invaded through the recitation of their personal story to advance the case (Lin at para 125). There is also no evidence of any community outreach nor of public representations made by Mr. Sills or Ms. Breckon about the case; and, Mr. Sills and Ms. Breckon did not have to prepare for nor attend a cross-examination on their affidavits filed in support of any of the motions in this Class Action.
[173] It is not sufficient for Class Counsel to argue the exceptional work done by the Plaintiffs. There needs to be evidence, from the representative plaintiffs, at a convincing level of particularity, allowing the Court to assess and measure the nature and the involvement of the class representatives. No matter how eloquent arguments from counsel may be, they cannot replace the need for the representative plaintiffs to provide clear, convincing, and non-speculative evidence supporting the extent and exceptional nature of their involvement. I find no such evidence in this case.
[174] To avoid any misunderstanding, Mr. Sills’ and Ms. Breckon’s contribution or commitment to the Class Action are not in question, and they both certainly deserve acknowledgement for their role in the conduct of the proceeding. However, representative plaintiffs do not receive additional compensation for simply doing their job as class representatives (Lin at para 126).
[175] Furthermore, it bears reminding that “representative plaintiffs are not to benefit from the class proceeding more than other class members”
(McLean 2 at para 57). Mr. Sills and Ms. Breckon are not direct purchasers, and therefore would not themselves be eligible to access the Settlement Fund as Qualifying Settlement Class Members, and would simply have the indirect benefit of the Cy‑Près Payment. Consequently, if an Honorarium were allowed, Mr. Sills and Ms. Breckon would benefit from the class proceeding more than other similarly placed Class Members.
[176] In this case, as discussed above, the indirect purchaser Class Members will receive no direct financial benefit from the Settlement Agreement, and I see no reason why, through an Honorarium, the representative plaintiffs should be entitled to one. It would be manifestly disproportionate to the lack of financial benefit derived by the vast majority of Class Members.
[177] Finally, I pause to note the recent conclusions of Justice Perell in the matter of Doucet v The Royal Winnipeg Ballet, 2022 ONSC 976 [Doucet], where the request for an honorarium caused the court to reconsider the matter of the court’s extraordinary discretion to pay a litigant a stipend for prosecuting a civil claim. Justice Perell outlines nine reasons culminating in the conclusion that, as a matter of legal principle, honorariums should no longer be granted in class proceedings (Doucet at para 58):
1. Awarding a litigant on a quantum meruit basis for active and necessary assistance in the preparation or presentation of a case is contrary to the policy of the administration of justice that represented litigants are not paid for providing legal services. Lawyers not litigants are paid for providing legal services.
2. A fortiori awarding a represented litigant on a quantum meruit basis for active and necessary assistance in the preparation or presentation of a case is contrary to the policy of the administration of justice that self-represented litigants are not paid for providing legal services. Lawyers not litigants are paid for providing legal services.
3. Awarding a litigant for such matters as being a witness on examinations for discovery or for trial is for obvious reasons contrary to the administration of justice.
4. In a class action regime based on entrepreneurial Class Counsel, the major responsibility of a Representative Plaintiff is to oversee and instruct Class Counsel on such matters as settling the action. The court relies on the Representative Plaintiff to give instructions that are not tainted by the self-interest of the Representative Plaintiff receiving benefits not received by the Class Members he or she represents.
5. Awarding a Representative Plaintiff a portion of the funds that belong to the Class Members creates a conflict of interest. Class Members should have no reason to believe that their representative may be motivated by self-interest and personal gain in giving instructions to Class Counsel to negotiate and reach a settlement.
6. Practically speaking, there is no means to testing the genuineness and the value of the Representative Plaintiff’s or Class Member’s contribution. Class Counsel have no reason not to ask for the stipend for their client being paid by the class members. The affidavits in support of the request have become pro forma. There is no cross-examination. There is no one to test the truth of the praise of the Representative Plaintiff. Class Members may not wish to appear to be ungrateful and ungenerous and it is disturbing and sometimes a revictimization for the court to scrutinize and doubt the evidence of the apparently brave and resolute Representative Plaintiff.
7. The practice of awarding an honourarium for being a Representative Plaintiff in a class action is tawdry. Using the immediate case as an example, awarding Class Counsel $2.25 million of the class member’s compensation for prosecuting the action, makes repugnant awarding Ms. Doucet $30,000 of the class member’s compensation for her contribution to prosecuting the action. The tawdriness of the practice of awarding a honourarium dishonours more than honours the bravery and contribution of the Representative Plaintiff.
8. As revealed by the unprecedented request made in the immediate case, the practice of awarding a honourarium to a Representative Plaintiff in one case is to create a repugnant competition and grading of the contribution of the Representative Plaintiff in other class actions.
9. The practice of awarding a honourarium in one case may be an insult to Representative Plaintiffs in other cases where lesser awards were made. For instance, in the immediate case, I cannot rationalize awarding Ms. Doucet $30,000 for her inestimably valuable contribution to this institutional abuse class action with the $10,000 that was awarded to the Representative Plaintiffs who brought access to justice to inmates in federal penitentiaries and who themselves experienced the torture of solitary confinement. I cannot rationalize awarding any honourarium at all when I recall that the Representative Plaintiff in the Indian Residential Schools institutional abuse class action did not ask for a honourarium and he did not even make a personal claim to the settlement fund. Having to put a price tag to be paid by class members on heroism is repugnant.
[Doucet at para 61.]
[178] I agree with those comments and with this jurisprudence surrounding the practice of awarding honoraria in class actions. This militates against awarding the Honorarium in this case.
[179] Considering that representative plaintiffs should not receive additional compensation for simply doing their job as class representatives, that representative plaintiffs are not to benefit from the class proceeding more than other class members, and in light of the conclusions of Justice Perell above, the requested Honorarium is unreasonable and unjustified in the circumstances. No Honorarium will therefore be awarded in this Class Action.
IV. Conclusion
[180] For the above-mentioned reasons, the Settlement Agreement is approved as I find it fair, reasonable, and in the best interests of the class as a whole.
[181] However, I find that the requested Class Counsel Fees and Funder Fees are not fair and reasonable, that no Funder Fees shall be specifically granted by the Court, and that Class Counsel Fees shall be fixed at a total of $1,650,000 plus applicable taxes (representing 30% of the Settlement Amount plus $75,000), with an additional amount of $644,231.64 for disbursements (inclusive of taxes). Any Commission to be paid by Class Counsel to the Funder pursuant to the LAA shall be made separately by Class Counsel.
[182] With respect to the LAA, considering that it has not been brought to the Court’s attention on a timely basis and that it provides for disproportionate returns to the Funder, it is not approved.
[183] Finally, regarding the Honorarium, in light of the jurisprudence and the roles played by Mr. Sills and Ms. Breckon in this Class Action, which do not extend beyond simply doing their job as class representatives, no Honorarium will be awarded.
[184] An order will issue giving effect to these findings and substantially incorporating the language proposed by both parties in the draft orders submitted to the Court as part of the motion materials.
[185] No costs will be awarded.
Email this Content