Class action proceedings, in which a representative plaintiff to bring a claim on behalf of a larger group (the “class”), are intended to improve access to justice. For example, it may be challenging for one person to find the time and resources needed to start a legal claim to obtain compensation for their losses. However, when a group of people who have been through a similar situation join together and a class action is certified on their behalf, they can collectively pursue claims that would otherwise be prohibitive.

Many class proceedings settle before a court is required to issue a decision on the matter. Leading up to and throughout the trial process, the parties may negotiate potential settlements which will allow them to find a mutually agreeable resolution and put an end to the litigation. However, any class settlement must be approved by the court before it can be finalized. Before approving a proposed settlement, a court must be satisfied that it is “fair, reasonable and in the best interests of the class”. While courts encourage settlements, to save costs for the plaintiffs and resolve matters quickly, a court might reject a settlement if it does not meet this standard. Below, we look at some examples of courts that questioned the fairness of a class settlement.

A Settlement is Insufficient Based on the Original Claim

In a 2020 decision called Aps v. Flight Centre Travel Group, Justice Belobaba noted that “[i]t is widely recognized that the approval of class action settlements remains the most difficult and problematic area of class action practice”. In highlighting this problematic issue, the Judge noted that some lawyers are tempted by a substantial contingency fee in a settlement that is otherwise lacking in terms of remedies for the plaintiffs. In other cases, an offer to settle might provide a substantial amount to the representative plaintiff, causing them to compromise their duty to the remaining class members.

In that case, there were approximately 10,000 plaintiffs who brought a claim relating to unpaid overtime. The original claim was for $100 million, covering a period of ten years. The proposed settlement amounted to $7 million, causing the Judge to question whether it was sound. Counsel was able to allay the Judge’s concerns by presenting supporting evidence consisting of:

• proof that the size of the class was much smaller than initially thought (the settlement occurred prior to certification of the class);
• the size of the settlement was comparable to similar overtime actions;
• there was a pending threat to the litigation due to the unknown impact of the Covid-19 pandemic on the defendant’s financial situation; and
• affidavit evidence demonstrating support for the settlement from a large portion of the class members.

Given the evidence, the Judge concluded that the proposed settlement was fair and granted approval.

The Proposed Settlement is Unreasonable for the Class

In a recent class proceeding called Grann et al. v. HMQ in Right of the Province of Ontario, the plaintiff class consisted of former Crown wards who had been removed from their homes due to neglect or abuse. The class alleged the Crown had failed in its duty to the class, allowing them to be subjected to mistreatment, humiliation, and abuse while in Crown custody. The original claim totalled $100 million, plus an additional $10 million in punitive damages.

In January of this year, the parties entered into a settlement agreement containing the following terms:

• a lump sum settlement fund of $10 million;
• honoraria for current and former representative class plaintiffs;
• aggregate [or basic] compensation for each eligible Class Member of up to $3,600;
• notification of the settlement to all Class Members;
• the ability of Class Members to start individual actions for compensation from individuals or institutions that harmed them based on a limited release that allows Class Members to pursue tortfeasors or to make other claims;
• a simplified, paper-based claims process that avoids cross-examination;
• assurance from the Province that it will not claw back settlement funds from Class Members receiving provincial social assistance; and
• payment of Class Counsel’s fees, disbursements and payment of the costs of notice and administration of the settlement.

60 members of the class objected to the proposal, claiming it was unreasonable. The Court agreed, finding that not meaningful when compared to the history of abuse faced by the class. Further, the option for each class member to pursue their own claim was unfair, considering the time and expense that would be demanded of each person to do so. The Court ultimately held that “the proposed settlement does not fall within the range of reasonable outcomes; nor is it in the best interests of the class” and declined approval.

Seek Advice From Experienced Class Action Counsel

Issues relating to litigation, particularly class proceedings, can become extremely complicated. It is always best to ensure that you have representation who can provide you or your business with experienced and knowledgeable guidance through all aspects of the class action process.

Contact Milosevic & Associates in Toronto for unparalleled representation in even the most complex corporate and commercial disputes. Over the years, our team of exceptional litigators has seen it all and has successfully fought for our clients’ rights. Our impressive track record speaks for itself. Call us at 416-916-1387 or contact us online for a consultation.