Introduction

An ice breaker is anything used to relieve inhibitions or acrimony between two parties or is used to open a dialogue. It is also now used to describe settlements by a plaintiff with one defendant ahead of the others in complex multi-party class proceedings. The money paid is often only a small fraction of the total claim and therefore referred to as a token payment. The more significant value to the plaintiff is an agreed-upon term of the settlement that the settling defendant will assist the plaintiff going forward.

Seeking Settlement Approval

In Di Filippo and Caron v. Bank of Nova Scotia, the Ontario Superior Court of Justice (ONSC) was asked to approve such a settlement with one of the defendant banks. There were two such class proceeding actions before the court. The total proposed settlement amount was $5.47 million, split between the two actions. There was an objector to the settlement who wanted class counsel to be paid to date and for the court to reject the settlement as being only a mere token amount. The claims in both actions sought compensation of 1 billion dollars. All of the defendant financial institutions were alleged to be engaged in price-fixing practices in the international gold and silver markets.

The Test

The law was not in dispute. The court must find the settlement to be fair and reasonable and in the best interests of the class. The key question was said to be whether the settlement fell within a zone of reasonableness.

Justification for a Token Settlement

The court was also concerned with the reasonableness of such a small settlement amount. Further material was provided to justify the settlement. The justification was twofold, being the foreign-exchange parallel and the value of an ice-breaker settlement. The first explained that the settlement amount was proportionate to a similar agreement in the U.S. action. The second was that beyond the money, the real benefit of the arrangement was a promise of future co-operation by the settling defendant bank.

The Value of an Ice-Breaker Settlement:

The quote from the decision below explains the value and logic behind such a settlement:

The settlement agreements herein are the first settlements in the gold and silver price-fixing actions. Such settlements are commonly referred to as “ice breaker” settlements. In an “ice breaker” settlement and in particular, in class proceedings alleging secret price-fixing conspiracies, this court has held that the first settling defendant’s agreement to cooperate with class counsel is one of the most significant and valuable features of the settlement. This is because the settlement will: (a) assist in advancing the claims against the non-settling defendants, and (b) encourage settlements with those other defendants. Indeed, this court has noted that the non-monetary benefit of having one alleged conspirator cooperate with the plaintiffs is of “inestimable value” in price-fixing litigation.

This reasoning was supported by past decisions of the court relating to the approval of proposed token settlements within a class proceeding, being Fanshawe v. Sony, and  Ali Holdco Inc. v Archer Daniels Midland Company.

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