Introduction
The carriage of class proceedings is fraught with risk. It requires a significant commitment of resources of both labour and financing. These actions are defended strenuously. The reward, if the case is settled or won, are the legal fees. The fees requested often represent a significant percentage of the overall settlement or damage award. The presiding justice must approve both the amount of the award and the legal fees.
Factors in Assessing Fees
The Ontario Court of Appeal (ONCA) in Smith Estate v. National Money Mart Co. set out the factors the approving judge must consider when calculating legal costs. They are:
(a) the factual and legal complexities of the matters dealt with;
(b) the risk undertaken, including the risk that the matter might not be certified;
(c) the degree of responsibility assumed by class counsel;
(d) the monetary value of the matters in issue;
(e) the importance of the matter to the class;
(f) the degree of skill and competence demonstrated by class counsel;
(g) the results achieved;
(h) the ability of the class to pay;
(i) the expectations of the class as to the amount of the fees;
(j) the opportunity cost to class counsel in the expenditure of time in pursuit of the litigation and settlement.
A Non-Adversarial Process
The ONCA in Smith Estate was as concerned as the motions judge with the fact that the fee approval process was ex parte, or completed without all interested parties before the court.
Our system of justice is based on the basic tenet that the court will be able to reach the most informed, considered, impartial and wise decision after presiding over the confrontation between opposing parties, in which each side can identify issues, lead evidence, cite law, discuss policy considerations and seek to undermine the position of the other. Motions for the approval of settlements and class counsel fees in class proceeding depart from this basic tenet as a matter of routine. They usually proceed unopposed in large part because individual class members often have too small a stake to be compelled to participate.
As a result, such ex parte hearings require full and frank disclosure by the lawyers seeking approval.
….a class proceeding by its very nature involves the issuance of orders or judgments that affect persons who are not before the Court. These absent class members are dependent on the Court to protect their interests. In order to do so, the Court must have all of the available information that has some bearing on the issues, whether favourable or unfavourable to the moving party. It is the obligation of counsel to provide that information in a manner that is consonant with the duty to make full and frank disclosure. Moreover, that information must be provided in a manner that is not misleading or even potentially misleading. In most class proceedings, voluminous records develop as a consequence of the complexity of the litigation. The Court is not equipped, nor should it be required, to engage in a forensic investigation into the material or to mine the record to inform itself. Counsel must direct the Court to all relevant information that would impact on the Court’s determination. This is especially important where the motion is for the approval of settlement agreements, class counsel fees or consent certifications for the purpose of settlement.
Equally, the approval process puts lawyers in an awkward, inherently conflicted, position.
Lawyers are expected to be zealous but personally disinterested advocates of their clients’ positions. On an uncontested motion for fees, the lawyer represents the class whose interest is in maintaining the maximum settlement amount possible for distribution among class members. The lawyer, on the other hand, seeks fees that will diminish the amount of the settlement available for distribution. The lawyer’s interests appear to be pitted against those of the client. In appropriate cases, class counsel may, on their own initiative, seek to reduce the awkwardness of this position by arranging for independent counsel to advise the representative plaintiff in relation to class counsel’s application for fees. Class counsel have taken this action in at least one reported Canadian case.
The ONCA then examined possible solutions including the appointment of an amicus, a monitor, a guardian ad litem or independent counsel for the class. All of these options have been largely the product of American jurisprudence. The ONCA made it clear that courts, in considering the fees issue, should not be reticent to use any of these methods where appropriate. It is not a default position, but at the same time……
It seems to me that counsel who bring and proceed with a motion without ensuring that an independent perspective is put forward have little cause for complaint if the court departs from the passive role it traditionally plays by raising new issues, dealing with arguments not advanced and actively challenging the uncontradicted evidence. A court, though, should not appear confrontational. The line between a sceptical and confrontational approach may be difficult to navigate for a court that bears the full responsibility for testing the merits of the position put forward by counsel in order to fulfill its responsibility to protect members of the class. Courts should not be reticent in resorting to one of the strategies discussed above when they consider that confrontation of counsel’s unopposed position would be helpful and reasonably warranted in the circumstances. Such resort is, of course, discretionary. Appointment of amicus or a guardian is neither necessary nor desirable in every case.
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