Brown v Canada (AG), 2018 ONSC 3429

Wiyasiwewin Mikiwahp Native Law Centre Case Watch

The Settlement Agreement, other than the legal fees provision, is approved. The $75 million legal fees provision is excessive, unreasonable and is not approved. Class counsel in Brown have agreed to de-link the legal fees provision from the rest of the Settlement Agreement. The Court should be advised when a revised section 11.01 has been agreed to by the parties.

(This is the third of three consecutive Wiyasiwewin Mikiwahp Native Law Centre Case Watch Blog posts regarding the Sixties Scoop Class Action judgements.)

The Sixties Scoop has been nationally acknowledged as a “dark and painful chapter in Canada’s history”, prompting twenty-three actions across the country. The Ontario action, Brown v Canada, was the most advanced. After nine years of litigation, it was Brown that established Canada’s liability in tort to the Sixties Scoop survivors in Ontario. Canada agreed to settle Brown but only if the other actions were included in one nation-wide settlement.

Justice Michel Shore of the Federal Court mediated the national settlement. The parties reached an agreement in principle on August 30, 2017. The national settlement agreement (“the Settlement Agreement”) was formally executed on November 30, 2017. As part of the national settlement, the other actions were consolidated into an omnibus Federal Court action, referred to as the Riddle action. On May 11, 2018 Justice Shore approved the Settlement Agreement for the purposes of the Riddle action as he was satisfied that it was fair, reasonable and in the best interests of the class members. The Settlement Agreement is before this Court for a similar approval in the context of the Brown action. It is clear from the language in the Agreement that the approval of both courts is required and if any part of the Settlement Agreement is declined, then the Agreement will not take effect and Justice Shore’s approval order in Riddle would be rendered null and void.

This Court had two concerns, however, after reviewing the Settlement Agreement. The first concern was the reasonableness of the $25,000 to $50,000 payment as damages for the loss of one’s Indigenous cultural identity given the harm that was sustained by the class members. The Court was satisfied after reviewing all the evidence and potential pitfalls given the risks of further litigation, that the payment, although modest for the loss of one’s Indigenous cultural identity, was ultimately fair, reasonable and should be approved. The second concern involved the $75 million payment to class counsel for legal fees. The Court viewed the $75 million for legal fees as excessive, unreasonable and was not approved. The focus is the global payment of $75 million in legal fees and not the internal divisions agreed to by class counsel.

The two most important factors in determining the reasonableness of legal fees are risk incurred and results achieved. It is the risk incurred that “most justifies” a premium in class proceedings and is primarily the risk of non-payment. In a case where a class action has been settled with a minimal investment of time or effort, the risk of non-payment causing “personal consequences” to class counsel is relatively insignificant. In a case where the settlement has been achieved after many years of effort with an enormous investment of time and money, the risk of non-payment causing “personal consequences” to class counsel can be significant. Windfalls should be avoided because class action litigation is not a lottery and the CPA was not enacted to make lawyers wealthy.

The percentage of the fund approach that bears no relation to the significance of the risk incurred should not be used in a mega-fund settlement. In Cannon, the Court embraced the percentage of the fund approach because almost all of the settlements were under $40 million. The Cannon percentage of the fund approach remains viable but should be limited to settlement amounts that are common-place, that is, under $50 million. Cannon should never be used in the mega-fund case where the settlement or judgment is more than $100 million. If there is evidence before the Court that the requested legal fees are excessive, the class action judge should examine the risk incurred to help decide whether the amount being requested by class counsel is indeed fair and reasonable.

The risk incurred by class counsel in Brown was, in a word, enormous. Bluntly put, it was as close a case of class counsel “betting the firm” as had been seen. The nation-wide settlement with Canada for some 23 actions, was fuelled in large part by what was achieved in the Brown action. It was therefore beyond dispute for the Court that class counsel in Brown deserve a significant premium in the calculation of their legal fees. Compared to Brown, the risks incurred by class counsel in Riddle are at the opposite end of the spectrum and were not significant. The evidence strongly suggested opportunistic filings and that the risks incurred by the Riddle class counsel in their respective actions did not justify a Cannon-type percentage of the fund approach.

Because the $75 million legal fees provision is not approved, the rest of the Settlement Agreement cannot take effect unless the legal fees provision is de-linked from the other settlement provisions that have been approved. Class counsel in Brown have agreed to de-link the $75 million fees provision from the rest of the Settlement Agreement in the interests of their class members. Class counsel in Riddle have not yet agreed to any such de-linking. The Settlement Agreement has gone back to the negotiating table with the focus being the $75 million legal fees provision, at least for class counsel in Brown. The Court commented that it would be beyond tragic if the Sixties Scoop Settlement Agreement was derailed or delayed because of an unseemly squabble among class counsel over legal fees.

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