When loss on a mass scale occurs, class proceedings are sure to follow. If more than one action is commenced by multiple plaintiffs, the representative plaintiffs and their counsel must either agree to work together on one action or move in competition to one another on a carriage motion. The winner of the motion is allowed to proceed with their action, representing all members of the class, while the unsuccessful counsel’s action is stayed.
Factors in Awarding Carriage
The objectives of a class proceeding under the Class Proceedings Act (CPA) are access to and administration of justice, behaviour modification, and judicial economy for the parties. Therefore, a court’s objective in awarding carriage of competing class proceedings is to make a selection that is in the best interests of the class while being fair to the defendant(s) and still achieving the objectives set out in the CPA.
To achieve this result on a carriage motion, the emerging case law has developed a non-exhaustive list of factors to be considered. They are as follows:
- The nature and scope of the causes of action advanced;
- The theories advanced by counsel as being supportive of the claims advanced;
- The state of each class action, including preparation;
- the number, size and extent of involvement of the proposed representative plaintiffs;
- The relative priority of commencing the class actions;
- The resources and experience of counsel;
- The presence of any conflicts of interest;
- The funding available;
- The proposed definition of class membership;
- The proposed definition of the class period;
- The joinder of defendants;
- The plaintiff and defendant correlation;
- The prospects of certification;
- The third-party funding of expenses; and
- The proposed fee arrangement for class counsel.
The analysis is not a matter of walking through the factors in a checklist fashion and awarding carriage to the firm with the most points. This is due to the fact that each action is different. A determinative factor in one proceeding may have little importance in another. The court is therefore compelled to search for the determinative factor or factors and in doing so, decide which action is in the best interests of the class as a whole.
The Carriage Dilemna
These factors are well known to experienced class action counsel. As a result, all counsel proposing to represent a class in a proceeding will do all they can to fit themselves into as many of the factor boxes as possible. In other words, it is more likely than not that each proposed class action will be equally well-presented in a very competitive motion. How then does the court decide on which action is best for the class?
The Fees to be Charged
Recently, the Ontario Superior Court had to resolve such a dilemma. In Chu v. Parwell Investments Inc., two competing class actions were formed. Each proposed to represent the residents of a set of apartment buildings that were badly damaged in a fire, leaving hundreds of people without a home, some with physical injuries sustained in the blaze. The two proposed actions were closely competitive. The deciding factor, the only objective difference, was the percentage to be charged by each action’s counsel. Here, the lower fee arrangement was the winner. As stated by the court:
The fees arrangement. The analysis here involves a comparison of what SC and LMK would charge the class in fees and other costs if they were to prevail as carriage counsel. The lower the legal and administrative costs, the higher the recovery for the class. The pricing comparison requires the court to consider and compare the fees and funding arrangements advanced by SC and LMK in their retainer agreements and any related funding agreements.
I am satisfied that a fair-minded comparison of the fees and funding factor results in the following objectively measurable differentiation: SC will charge at most 25 percent; LMK will charge at least 33 percent. This difference will have a significant multi-million-dollar impact on the actual damages that will be paid out to the class members.
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