Robinson et al. v. Medtronic, Inc. et al.
[Indexed as: Robinson v. Medtronic, Inc.]
Ontario Reports Ontario Superior Court of Justice Glustein J. March 19, 2020 150 O.R. (3d) 328 | 2020 ONSC 1688
Case Summary
Civil procedure — Class proceedings — Fees — Counsel fee — Parties settling class action based on defective components of implants for cardiac patients — Counsel seeking 30 per cent of recovery of class, based on contingency fee agreements with representative plaintiffs — No basis to rebut strong presumption of validity of contingency fee agreement — Request for fees approved as fair and reasonable.
Civil procedure — Class proceedings — Settlement — Approval — Parties settling class action based on defective components of implants for cardiac patients — Four objectors to settlement raising no valid reasons to vitiate settlement agreement — Representative plaintiffs not showing exceptional circumstances to justify payment of honoraria to them — Settlement approved as falling within zone of reasonableness and being in best interests of class.
Professions — Barristers and solicitors — Fees — Contingency fees — Parties settling class action based on defective components of implants for cardiac patients — Counsel seeking 30 per cent of recovery of class, based on contingency fee agreements with representative plaintiffs — No basis to rebut strong presumption of validity of contingency fee agreement — Request for fees approved as fair and reasonable.
The defendants produced leads to connect an implantable cardioverter defibrillator to the heart muscle for the purpose of detecting and correcting abnormal heart rhythm. The four representative plaintiffs were two patients who had been implanted with the defendants' leads, plus their spouses. Their class proceeding alleged that the leads contained a defect making them susceptible to fracturing, thereby threatening either not to deliver required therapy or to deliver unintended and unnecessary electrical shocks. Although worldwide distribution of the models of the leads at issue was suspended in 2007 at about the same time the action was commenced, the defendants maintained that the failure or fracture rate was comparable to other leads that they and other companies manufactured and sold, and denied all liability. Mediations occurred in 2011 and 2018. Class counsel entered into complex and lengthy negotiations with public health insurers relating to the quantum of their recovery and the release language to be incorporated into a settlement agreement. The parties executed a settlement agreement in April 2019 in the amount of $26,000,000 to class members who could prove that they suffered unintended shocks and/or had their leads explanted or replaced prematurely as a result of fracture or impending fracture. All public health insurers provided their consents by October 2019. The retainer agreements of three of the four representative plaintiffs provided for a fee of 30 per cent of the recovery to the class, which is what class counsel sought to approve. The two plaintiff patients each sought approval of an honorarium for their involvement in the litigation. There were four written objections to the proposed settlement. One objector was a doctor who had experienced shocks with a different device but never experienced a shock again after being implanted with one of the defendants' leads. He and another objector proposed a separate category of claimants who suffered only emotional and psychological loss. A third objector believed that all class members should be entitled to a minimum level [page329] of compensation. A fourth stated that she had not yet experienced any problem with her leads and was objecting to protect her future interests in the event of a failure. The plaintiffs moved for an order to approve the settlement.
Held, the motion should be allowed.
The settlement agreement and the payment of fees and disbursements for class counsel were approved, but the payment of honoraria was not. The nature of the litigation and related settlement negotiations were highly adversarial, evidencing arm's-length bargaining and absence of collusion. In addition to substantial investigation, research and documentary discovery, class counsel engaged in a large-scale effort to determine the scope and breadth of class member injuries, enabling them to assess the relative liability positions of the parties and to determine that settlement was the preferable course. When set against the challenges of assessing damages and the litigation risks and unpredictability in this area of the law, the settlement agreement reflected a comprehensive approach benefiting all class members in an expedient way through a streamlined claims process and fell within the zone of reasonableness. Class counsel recommended approval on the grounds that it was fair and reasonable and in the best interests of the class. The settlement agreement had the support of the representative plaintiffs and its terms were supported by the parties' experienced mediator. It was reasonable to exclude a group with only psychological and emotional damages of the risk of future shocks since any such damages would be individual in nature, difficult to establish and possibly affecting only a limited group of people. A minimum amount for all individuals would not be based on the merit of any claim and would be unfair to those claimants objectively suffering damage. Objecting to obtain compensation in the event of a subsequent shock was hypothetical and not a basis for vitiating the settlement.
There was no basis to rebut the strong presumption of validity of the contingency fee arrangement. Having regard to various factors, including the risk assumed by class counsel and the complexities of the proceeding, the request for legal fees was fair and reasonable.
Regarding the payment of honoraria to the plaintiff patients, there was no evidence of unusual or rare circumstances, let alone exposure to costs or evidence that the action could not have been brought without them. They were involved in the litigation and stayed informed about it, but there was no evidence of any exceptional time spent on it.
Cases Cited:
Cass v. WesternOne Inc., [2018] O.J. No. 4165, 2018 ONSC 4794 (S.C.J.), apldAndersen v. St. Jude Medical Inc., [2012] O.J. No. 2921, 2012 ONSC 3660 (S.C.J.)Burnett Estate v. St. Jude Medical, Inc., [2009] B.C.J. No. 133, 2009 BCSC 82Burnett Estate v. St Jude Medical, Inc., [2009] B.C.J. No. 2403, 2009 BCSC 1651, 183 A.C.W.S. (3d) 39Cannon v. Funds for Canada Foundation, [2013] O.J. No. 5825, 2013 ONSC 7686 (S.C.J.)Dabbs v. Sun Life Assurance Co. of Canada, [1998] O.J. No. 1598 (Gen. Div.)Dabbs v. Sun Life Assurance Co. of Canada (1998), 40 O.R. (3d) 429, [1998] O.J. No. 2811, 5 C.C.L.I. (3d) 18, 22 C.P.C. (4th) 381, [1998] I.L.R. I-3575, 80 A.C.W.S. (3d) 956 (Gen. Div.)Endean v. Canadian Red Cross Society, [2000] B.C.J. No. 1254, 2000 BCSC 971, [2000] 8 W.W.R. 294, 78 B.C.L.R. (3d) 28, 45 C.P.C. (4th) 39, 97 A.C.W.S. (3d) 550Gagne v. Silcorp Ltd. (1998), 41 O.R. (3d) 417, [1998] O.J. No. 4182, 167 D.L.R. (4th) 325, 113 O.A.C. 299, 39 C.C.E.L. (2d) 253, 27 C.P.C. (4th) 114, 83 A.C.W.S. (3d) 125 (C.A.)Green v. Canadian Imperial Bank of Commerce, [2016] O.J. No. 3039, 2016 ONSC 3829 (S.C.J.)Hodge v. Neinstein, [2019] O.J. No. 209, 2019 ONSC 439 (S.C.J.)Hoy v. Medtronic, Inc., [2001] B.C.J. No. 1968, 2001 BCSC 1343, 94 B.C.L.R. (3d) 169, 12 C.P.C. (5th) 370, 108 A.C.W.S. (3d) 434Mustapha v. Culligan of Canada Ltd., [2008] 2 S.C.R. 114, [2008] S.C.J. No. 27, 2008 SCC 27, 293 D.L.R. (4th) 29, 375 N.R. 81, J.E. 2008-1083, 238 O.A.C. 130, 55 C.C.L.T. (3d) 36, [2008] I.L.R. para. G-2223, 165 A.C.W.S. (3d) 954, EYB 2008-133554, 2008 CCLG para. 24-937Nantais v. TPLC Proprietary (Canada) Limited, Judgment of Mr. Justice Brockenshire dated October 3, 1997 (unreported)Nunes v. Air Transat A.T. Inc., [2005] O.J. No. 2527, 20 C.P.C. (6th) 93, 140 A.C.W.S. (3d) 25, 2005 CarswellOnt 2503 (S.C.J.)Osmun v. Cadbury Adams Canada Inc., [2010] O.J. No. 1877, 2010 ONSC 2643, 5 C.P.C. (7th) 341, 188 A.C.W.S. (3d) 1001 (S.C.J.)Park v. Nongshim Co., [2019] O.J. No. 1568, 2019 ONSC 1997 (S.C.J.)Parsons v. Canadian Red Cross Society, [1999] O.J. No. 3572, 103 O.T.C. 161, 40 C.P.C. (4th) 151, 91 A.C.W.S. (3d) 351 (S.C.J.)Thibault v. St. Jude Medical Inc., Judgment of Mr. Justice André Roy, dated April 1, 2010Waldman v. Thomson Reuters Canada Ltd. (2016), 131 O.R. (3d) 367, [2016] O.J. No. 2207, 2016 ONSC 2622, 348 O.A.C. 210, 266 A.C.W.S. (3d) 335 (Div. Ct.)Windisman v. Toronto College Park Ltd., [1996] O.J. No. 2897, 10 O.T.C. 375, 3 C.P.C. (4th) 369, 65 A.C.W.S. (3d) 207 (Gen. Div.)
Statutes Referred To:
Class Proceedings Act 1992, S.O. 1992, c. 6Family Law Act, R.S.O. 1990, c. F.3, s. 61[as am.]Hospitals Act, R.S.A. 2000, c. H-12, s. 62[rep.]
Authorities Referred To:
- Adair, Elaine, and Jill Yates, "Your Class Action Has Been Certified — Now What?" Case Note (2006), prepared for Canadian Institute's "Managing Complex Litigation Conference", April 24-25, 2006
MOTION for an order to approve a class settlement.
Counsel:
Won J. Kim, Megan B. McPhee and Joel Rochon, for plaintiffs. Danielle Royal, for defendants.
GLUSTEIN J.: —
Nature of Motion and Overview
[1] The plaintiffs bring this motion pursuant to the Class Proceedings Act 1992, S.O. 1992, c. 6 (the "CPA") for an order (along with ancillary relief) to
(i) on consent, approve the settlement of the actions (the "Settlement") in accordance with the terms of the settlement agreement executed on April 24, 2019 (the "Settlement Agreement");
(ii) approve the payment of fees and disbursements for Class Counsel (Rochon Genova LLP and Kim Spencer McPhee Barristers P.C.); and
(iii) approve the payment of a $10,000 honorarium to each of the representative plaintiffs, Sherry Marie Robinson ("Sherry") and Dan Austen ("Dan"). [page331]
[2] A similar motion was brought in Court File No. 05-CV-295910CP (the "Peter Action"). I release reasons concurrently in both motions and rely on the present reasons to set out the applicable law in both motions.
[3] At the hearing, by endorsement, I granted the relief sought approving the Settlement Agreement, payment of Class Counsel fees and disbursements, as well as the ancillary relief sought, subject to some minor modifications to the draft order provided at court. I dismissed the request for the payment of the honoraria.
[4] I signed an order at the hearing with reasons to follow. I now set out my reasons below.
Facts
(a) Review of the litigation
[5] The action is a national class proceeding certified on behalf of Canadians surgically implanted with Medtronic Sprint Fidelis leads with the model numbers 6949, 6948, 6931 and 6930 (the "Leads"), which were recalled in October 2007.
[6] The plaintiffs allege that the Leads (complex insulated wires connecting an Implantable Cardioverter Defibrillator ("ICD") to the heart muscle) were prone to fracture causing injury. They claim damages as a result of the defendants' alleged negligence in the design, development, testing, manufacturing, licensing, assembly, distribution, marketing and sale of the Leads.
[7] The primary function of ICDs is to deliver an electrical shock to the heart when the heart develops a life-threatening rhythm in order to terminate the abnormal rhythm and return the heart rhythm to normal. The Leads are small insulated wires that connect ICDs (and CRT-Ds) to the heart and their dual function is to sense the heart's rhythm, by carrying information about the heart's electrical activity back to the defibrillator and, if the defibrillator detects an abnormal heart rhythm, the lead carries high voltage electrical energy from the defibrillator back to the heart, in the form or either pacing stimuli or shocks.
[8] Leads must be extremely flexible and durable in order to withstand the bending and twisting caused by the various structures, movements and contractile functions that are located or take place in close proximity (i.e., respirations, contractions of the heart muscle, movements of components of the chest wall and nearby anatomy such as the shoulder).
[9] The plaintiffs allege that the Leads contain a defect that makes them susceptible to fracturing, thereby threatening to [page332] either not deliver needed defibrillator therapy or to deliver unintended electrical shocks when no such therapy is required. When a lead fractures, it will typically be removed/ replaced, unless the decision is made that the defibrillator function is no longer required (such as in elderly or otherwise frail patients who cannot physically withstand a further surgery), in which case the therapy may be turned off.
[10] Although worldwide distribution of the Leads was ultimately suspended in October of 2007 and the plaintiffs have filed evidence suggesting a higher than normal failure rate, the defendants maintain that the failure rate/rate of fracture for the Leads was comparable to other leads that they and other companies manufactured and sold, and they deny all liability in the action.
[11] This litigation was commenced by Sherry and her spouse, Gregory Robert Horning ("Greg") on October 15, 2007, after Sherry experienced several episodes of unintended shock from her Lead and underwent emergency replacement surgery in January 2007. As this replacement surgery occurred prior to the recall of the Leads, Sherry was implanted with the same Lead model number and had to live with the defective Lead until 2011 when it was safe to undergo another lead replacement procedure.
[12] On April 2, 2008, the court issued an order permitting the Statement of Claim to be amended to add Dan and his wife Glenda Austen ("Glenda") to the action as proposed representative plaintiffs. Dan was implanted with one of the Leads in July of 2007 and underwent replacement surgery with ensuing complications in November of that year.
[13] The Statement of Defence was delivered on November 22, 2010.
[14] The certification motion was heard by Perell J. on September 30 and October 1 and 2, 2009. By order dated October 2, 2009, the action was conditionally certified as a class proceeding on behalf of the following classes (collectively, the "Class" or "Class Members"):
(a) "Implant Class":
All persons implanted in Canada with one or more of the Leads.
(b) "Family Law Class":
All family members of the Implant Class who are entitled to assert a derivative claim for damages under s. 61 of the Family Law Act, R.S.O. 1990, c. F.3, as amended, or other similar provincial legislation. [page333]
(c) "Health Insurer Class":
All provincial or territorial health insurers who are entitled to assert a claim pursuant to the Alberta Hospitals Act, R.S.A. 2000, c. H-12, s. 62 and related provincial and territorial legislation.
[15] There were appeals following the decision on certification relating to, inter alia, the claim based on allegations of conspiracy and the issue of bifurcating discovery and the trial of certain common issues. In addition, there were multiple orders sought and granted allowing Class Counsel to obtain further information and records related to Class Members.
(b) The settlement process
[16] A two-day mediation took place before Strathy J. (as he then was) in January 2011. Although the mediation was unsuccessful in achieving a resolution at that time, it set the groundwork for the narrowing of certain issues, and the advancement of the litigation into the documentary discovery phase.
[17] Following further meetings with counsel for the defendants, it was determined that the only path forward from a resolution perspective was to understand the population of Class Members who suffered injuries (confirmed by actual review of medical records for each individual forming part of the group), namely, those individuals who had experienced unnecessary shocks, had premature explants, or had complications during the course of or following their premature explant surgery.
[18] Consequently, Class Counsel undertook comprehensive class-wide direct mailing to over 6,000 Class Members beginning in July 2014, using addresses provided from Medtronic. That process was followed up with individual telephone calls to confirm addresses and medical circumstances. If letters were returned, skip-tracing was undertaken, in order to contact as many of the Class Members as possible.
[19] In addition, several court orders were obtained in various jurisdictions across Canada to permit Class Counsel to obtain information about Class Members' circumstances from the defendants as well as to obtain Class Member medical records from certain hospitals who were otherwise reluctant to provide medical records in the absence of signed consent forms.
[20] As a result of these efforts, approximately 3,500 Class Members were contacted by Class Counsel, and the medical records of more than 2,000 Class Members were reviewed. Of these, more than 700 were delivered to counsel for the defendants in tranches, beginning April 16, 2015, pursuant to an agreement to provide records for the purposes of facilitating settlement discussions. [page334]
[21] A further mediation then proceeded in January 2018 with the Honourable Mr. Frank Iacobucci. The parties were able to reach an agreement on the basic terms of a proposed settlement, after which the process of drafting the settlement documents (including eligibility criteria, compensation terms, administration and notice protocols) began.
[22] At the same time, Class Counsel entered into complex and lengthy negotiations with public health insurers ("PHI") relating to the quantum of their recovery and the release language to be incorporated into the Settlement Agreement. Although significant work on the PHI side of the case had been undertaken prior to the 2018 mediation, there remained a divergence of views as to the appropriate quantum for the resolution of their claims. Agreement with PHIs was reached, allowing for the Settlement to proceed toward court approval.
[23] In March 2019, the defendants communicated an interest in funding the Settlement before their year-end -- April 26 -- which required that the Settlement Agreement be signed by that date. The parties expedited efforts to finalize the language of the Settlement Agreement and executed the Settlement Agreement on April 24, 2019, subject to obtaining the written consents of the PHIs.
[24] The Settlement Amount of $26 million, previously being held in trust by counsel for the defendants, was deposited into a daily interest GIC on August 26, 2019, pending receipt of all PHI consents. By October 25, 2019, all PHIs had provided their executed consents.
[25] On December 19, 2019, I approved the form and substance of the Approval Hearing Notice and scheduled this settlement approval hearing. Once the issued and entered Approval Hearing Notice Order was received from the court on January 8, 2020, the parties and the claims administrator moved quickly to complete and execute the Escrow Agreement, 1 attended to transferring the Settlement Amount to the escrow account and finalized the applicable components of the Notice Plan which were implemented beginning on January 15, 2020.
(c) The Settlement Agreement
[26] The Settlement is national in scope and seeks to resolve all past and future claims in Canada relating to the alleged defects in the Leads. The following are the key terms of the Settlement Agreement. [page335]
1. The settlement benefits
[27] Pursuant to the Settlement Agreement, the defendants have paid the Settlement Amount of CDN $26 million which, with accrued interest of $150,586.86, was transferred to RicePoint Administration, Inc. ("RicePoint") as Escrow Agent and Claims Administrator on January 10, 2020. It will be used to fund the payment of Approved Claims, the payment to the PHIs, the costs of notice and the claims administration and court-approved Class Counsel fees, disbursements and applicable taxes.
[28] Class Members will be entitled to submit claims in accordance with the eligibility criteria contained in the Claims Eligibility Criteria. Compensation is available to Class Members (i) whose Leads fractured, or (ii) were at risk of an impending fracture and as a result suffered from unintentional shocks and/or had their Lead(s) prematurely explanted/replaced.
[29] In order to be eligible for benefits under the Settlement Agreement, Class Members will need to (i) establish that they were implanted with one or more of the Leads, and (ii) provide medical records reflecting that they suffered unintended shocks and/or had their Leads explanted/replaced prematurely as a result of a fracture or impending fractures.
[30] Class Members will need to provide either medical records that contain a contemporaneous medical opinion stating that they suffered unintended shocks and/or underwent surgery to explant/replace their Lead(s) as a result of a fracture or impending fracture in the Lead(s). If no such record exists, they can file a Physician Declaration (included in the Claim Package) wherein their treating physician can attest to the fact that a fracture or impending fracture in the Class Member's Lead was the principal reason for the explant/ replacement of the Lead(s) and/or the cause of the unintended shock(s) experienced by the Class Member.
[31] The base compensation payable for an uncomplicated premature explant or unintended shocks caused by a fracture is $25,000, inclusive of all claims of Family Class Members. Additional payments may be made to Class Members who establish through medical records that they suffered excessive unintended shocks and/or sustained certain surgical complications at or immediately following their explant/replacement surgery. The qualifying complications are set out in detail in the Claims Eligibility Criteria and are reproduced in the Claim Package for Claimants' ease of reference. Finally, if, after all Claims have been finally adjudicated, there remains a residue, any such amount will be redistributed among Class Members with Approved Claims, to be distributed pari passu. [page336]
[32] Class Members who submit approved claims for excessive unintended shocks and/or surgical complications are also entitled to seek compensation for out-of-pocket expenses and/or income loss claims pursuant to the Settlement Agreement.
[33] Further, the Settlement Agreement allows for the over-subscription or under-subscription by Class Members. If a higher than expected number of Class Members advance Approved Claims, the value of all Approved Claims will be proportionately reduced and if a lower than expected number of Class Members advance Approved Claims, all payments to Class Members for Approved Claims will be proportionally increased.
[34] The Settlement Agreement also provides for the payment of $4 million to the PHIs, to be distributed among them according to a population distribution metric, in full and final satisfaction of all subrogated and/or direct claims arising from the action. All PHIs have executed copies of the Consent/Release confirming that they have consented to the compromise of their claims through the Settlement Agreement in accordance with the terms of the applicable release language set out in the Settlement Agreement.
2. Notice
[35] The Settlement Agreement provides for a robust Notice Plan aimed at advising Class Members of the terms of the Settlement Agreement as well as providing information about this motion and the approval of the Settlement.
[36] The Notice Plan required that, prior to the within motion, notice of the Approval Hearing would be disseminated through a substantial direct mailing program both to Class Members and to cardiologists and electrophysiologists across Canada. In addition, the Approval Hearing Notice was to be published in national and regional newspapers in English and French, along with a digital media presence via Google Ads and press releases in both English and French.
[37] Direct mail notice was disseminated in accordance with the Notice Plan beginning on January 15, 2020. The settlement website, www.medtronicleadsettlement.com, went live on that date as well. In addition, the newspaper notices for the present hearing were disseminated in leading newspapers throughout Canada between January 11 and 18, 2020.
[38] The press releases in English and French were disseminated via Canada News Wire on January 18, 2020, in accordance with the Notice Plan. In addition, the Approval Hearing Notice was posted on Class Counsel's websites starting on January 15, 2020. [page337]
[39] Upon approval of the Settlement Agreement, a further notice will be disseminated to advise Class Members. Specifically, the Settlement Approval Notice will be directly mailed (either electronically or by regular mail) to Class Members and to Canadian cardiologists and electrophysiologists.
[40] Finally, the Settlement Approval Notice will be posted on the settlement website and Class Counsel's websites. Class Counsel will issue press releases in English and French via Canada News Wire to inform Class Members of the Settlement's approval.
3. The Claims Administrator
[41] Pursuant to the order of this court dated December 19, 2019, RicePoint was appointed the Claims Administrator for various pre-settlement purposes, including the direct mail and settlement website components of the Notice Plan, and for the purpose of receiving any objections to the Settlement Agreement and delivering same to counsel for the parties and the court.
[42] This motion also seeks to have RicePoint appointed as the Claims Administrator for the processing and adjudication of Claims under the Settlement. RicePoint has extensive expertise in administering national class action settlements in Canada, including settlements dealing with pharmaceutical and medical device cases and the related personal injury aspects of such cases.
[43] RicePoint provided Class Counsel with a comprehensive settlement administration proposal setting out costings for all aspects of the administration services it would provide, including assuming the various financial responsibilities attendant upon being the Escrow Agent and Claims Administrator, providing all services in both official languages, attending to the direct mail aspects of the Notice Plan, setting up and maintaining the settlement website and toll-free call centre, responding to Class Member inquiries both by telephone and e-mail, and sending out Claim Packages upon request. The total fee for RicePoint's work in implementing the Notice Plan and in administering the Settlement is $131,097 plus applicable taxes.
[44] Upon approval of the Settlement, RicePoint will continue many of these tasks. It will also review and adjudicate all claims submitted by or on behalf of Class Members, send all requisite administrator correspondence and deliver all payments to Class Members with Approved Claims.
4. The claims process [page338]
[45] Under the claims process, Class Members need only establish that they (i) had an implant with one or more of the Leads (in many cases, this will simply require either confirming that they received a Certification Notice or providing a copy of their device implant card), and (ii) suffered unintended shocks and/or had their Leads explanted as a result of a fracture or impending fracture of their Lead(s).
[46] The deadline for filing claims will be 180 days following court approval, which will be posted on the settlement website and Class Counsel's websites, included in the Approval Notice sent to Class Members and cardiologists and set out in the press releases.
[47] RicePoint will adjudicate the claims of Class Members on the basis of the records submitted and the objective eligibility criteria. Under the Settlement Agreement, RicePoint will not need to consider subjective eligibility criteria in adjudicating claims.
[48] While Class Counsel will oversee the process, there is no appeal from the determination(s) of RicePoint, because of the objective nature of the eligibility criteria. This approach provides for more efficient processing and payment of claims, and results in more of the Settlement Amount being available to pay Class Members' claims rather than the fees charged by an outside adjudicator.
5. Class Member response
[49] Subsequent to the dissemination of the notice of the Settlement Approval Hearing, RicePoint received 320 telephone inquiries and 48 e-mail inquiries, sent out 50 requested Claim Packages and received 18 completed Claim Packages as of February 18, 2020. Four objections were received, as I discuss below.
(d) The retainer agreements
[50] The retainer agreements with the representative plaintiffs all provided that Class Counsel would carry all expenses and disbursements during the course of the litigation, and would only be paid in the event of success, whether through a settlement or following a trial on the merits. Sherry, Greg and Glenda's retainers authorize payment of a legal fee in the amount of 30 per cent of the recovery to the class. Dan's retainer provides for payment on the basis of either 25 per cent of the recovery to the class or on the basis of a three-times multiplier on Class Counsel's base time whichever is higher.
(e) Time spent and expenses incurred in the action [page339]
[51] Class Counsel's docketed time in prosecuting the action, as of February 19, 2020, is $6,645,176 (plus HST of $863,872.88), representing thousands of hours of lawyer and legal support staff time over more than 12 years.
[52] Class Counsel incurred disbursements in the amount of $520,919.07.
[53] In addition to the work done to advance the litigation and secure the benefits contained in the Settlement Agreement, Class Counsel will be responsible for significant future work upon approval of the Settlement Agreement, including coordinating with RicePoint, responding to Class Member inquiries, formalizing the Settlement Order, updating Class Counsel's websites, monitoring the implementation of the Settlement Agreement, addressing any questions or issues raised by Class Members or RicePoint and attending this court to report on the administration of the Settlement Agreement as it progresses.
(f) The involvement of the representative plaintiffs
[54] The relevant evidence is set out in affidavits from counsel as well as Sherry and Dan. Counsel states in his affidavit that:
It is proposed that [Sherry and Dan] be paid honoraria in recognition of the contributions they made in advancing this case towards settlement for the benefit of all Class Members. In this regard, it is proposed that each receive $10,000.
All Representative Plaintiffs were required to make themselves available to assist with the various stages of the litigation, made significant contributions of time and effort in advancing the Action and no progress would have been made without their contributions which inured to the general benefit of all Class members and which should be recognized.
[55] Both representative plaintiffs swore similar affidavits setting out evidence relevant to their role in the litigation. In brief, each of them stated:
(i) They had been "involved in and have helped with moving the litigation forward for almost" 12-13 years;
(ii) "I have spoken with and been in written communication with my lawyers on numerous occasions to stay informed about the litigation and to advise my lawyers about my circumstances";
(iii) They engaged in "reviewing various pleadings, affidavits and providing information and documents for my lawyers to review and build this case up as best they could";
(iv) "I assisted with drafting and swore this affidavit and my prior affidavit in support of certification"; and [page340]
(v) "I also expressed my opinion on and provided instructions to my lawyers to agree to the Settlement Agreement".
(g) Objectors to the proposed settlement
[56] There were four written objections to the proposed settlement, including one from Dr. Kasra Khorasani, who made oral submissions to the court setting out his objection.
[57] Dr. Khorasani advised the court that he had a prior ICD implanted in 2005, which resulted in 49 shocks in the spring of 2007. Each shock was 800 volts, causing him to be thrown to the ground with severe pain and in great distress.
[58] He then received a Medtronic "Sprint Fidelis" Lead, and never experienced a shock again.
[59] Dr. Khorasani later learned of the recall of the Lead. It was not medically advisable for Dr. Khorasani to replace the Lead or insert a new lead. Consequently, he was required to keep the Lead. Since that time, Dr. Khorasani's evidence was that (i) "[t]he anxiety about the lead's functioning is still present to this day as it continues to be connected to my present ICD" and (ii) he has been provided with a "donut shaped magnet" (which he brought to court) to address any inappropriate shock if it were to occur. Dr. Khorasani advised that carrying the magnet (i) causes him stress because of fears that he will forget the magnet, and (ii) affects his daily life in travel through airports and by interference with electronic devices.
[60] Dr. Khorasani believes that a separate category of claimants who only suffered emotional and psychological loss should receive compensation.
[61] Finally, Dr. Khorasani claims not to have received the certification notice.
[62] I summarize the remaining written objections as follows:
(i) John Hawley claims that he suffered "depression" and "high anxiety" since he also could not change the Lead, resulting in "almost 10 years of worry". As with Dr. Khorasani, Mr. Hawley believes that a separate category of claimants who only suffered emotional and psychological loss should receive compensation;
(ii) Denis Larouche believes that all class members should be entitled to minimum compensation since they all suffered psychological consequences which require some base level of compensation; and
(iii) Lauren Philion advises that "I have not had [an] episode yet or problem with my leads, so I'm hoping that by objecting if I do [page341] have a problem down the road I will be able to be compensated".
Analysis
(a) Issue 1: Approval of the Settlement Agreement
1. The applicable law
[63] In deciding whether to approve a proposed settlement, the court must determine whether the settlement is fair, reasonable, and in the best interests of the class. Consideration must be given to the totality of the circumstances, including the factual context and the prevailing legal issues (see Dabbs v. Sun Life Assurance Co. of Canada, [1998] O.J. No. 1598 (Gen. Div.), at para. 9 ("Dabbs II"); Parsons v. Canadian Red Cross Society, [1999] O.J. No. 3572, 103 O.T.C. 161 (S.C.J.), at paras. 68-73 ("Parsons I"); and Waldman v. Thomson Reuters Canada Ltd. (2016), 131 O.R. (3d) 367, [2016] O.J. No. 2207, 2016 ONSC 2622 (Div. Ct.), at para. 21 ("Waldman")).
[64] In undertaking this analysis, the following principles are to be used as a guide (see Nunes v. Air Transat A.T. Inc., [2005] O.J. No. 2527, 2005 CarswellOnt 2503 (S.C.J.), at para. 7; and Osmun v. Cadbury Adams Canada Inc., [2010] O.J. No. 1877, 2010 ONSC 2643, 5 C.P.C. (7th) 341 (S.C.J.), at paras. 31 and 34 ("Osmun")):
(i) the resolution of complex litigation through the compromise of claims is encouraged by the courts and favoured by public policy;
(ii) there is a strong initial presumption of fairness when a proposed settlement, which was negotiated at arm's-length by counsel for the class, is presented for court approval;
(iii) to reject the terms of the settlement and require the litigation to continue, a court must conclude that the settlement does not fall within a zone of reasonableness;
(iv) a court must be assured that the settlement secures appropriate consideration for the class in return for the surrender of litigation rights against the defendants. However, the court must balance the need to scrutinize the settlement against the recognition that there may be a number of possible outcomes within a zone or range of reasonableness. All settlements are the product of compromise and a process of give and take, and settlements rarely give all parties exactly what they want. Fairness is not a standard of perfection. Reasonableness allows for a range of possible resolutions. A less than perfect settlement may be in the best interests of those affected by it when compared to the alternative of the risks and costs [page342] obligation;
(v) it is not the court's function to substitute its judgment for that of the parties or to attempt to renegotiate a proposed settlement. Nor is it the court's function to litigate the merits of the action or to simply rubber-stamp a proposal;
(vi) the burden of satisfying the court that a settlement should be approved is on the party seeking approval; and
(vii) the court cannot modify the terms of a proposed settlement. The court can approve or reject the settlement. In deciding whether to reject a settlement, the court should consider whether doing so would derail the settlement. The parties are not obligated to resume discussions and it is possible that the parties have reached their limits in negotiations and will backtrack from their positions or abandon the effort. This result would be contrary to the widely held view that the resolution of complex litigation through settlement is encouraged by the courts and favoured by public policy.
[65] The court may also weigh the following factors, keeping in mind that they are not to be applied mechanically and that in any given case, some factors will have greater significance than others (Dabbs II, at para. 13; Osmun, at paras. 32-33; and Waldman, at para. 22):
(i) the presence of arm's-length bargaining and the absence of collusion;
(ii) the proposed settlement terms and conditions;
(iii) the number of objectors and nature of objections;
(iv) the amount and nature of discovery, evidence or investigation;
(v) the likelihood of recovery or likelihood of success;
(vi) the recommendations and experience of counsel:
(vii) the future expense and likely duration of litigation;
(viii) information conveying to the court the dynamics of and the positions taken by the parties during the negotiations;
(ix) the recommendation of neutral parties, if any; and
(x) the degree and nature of communications by counsel and the representative plaintiff with class members during the litigation. [page343]
[66] Of the guiding principles, one of the most significant is whether "the settlement falls within a zone of reasonableness" (Dabbs II, at para. 30).
[67] The court must balance the need to scrutinize the settlement against the recognition that there may be a number of possible outcomes within the range of reasonableness.
[68] The parties have an obligation to provide sufficient information to allow the court to exercise its function of independent approval, although it is not necessary that discovery be complete at the time of settlement (Dabbs v. Sun Life Assurance Co. of Canada (1998), 40 O.R. (3d) 429, [1998] O.J. No. 2811 (Gen. Div.), at para. 40 ("Dabbs I")).
[69] I now review the above factors based on the evidence on this motion.
2. Application of the law to the evidence
i. Presence of arm's-length bargaining and absence of collusion
[70] As set out above, the nature of this litigation and related settlement negotiations were highly adversarial. The parties underwent two separate mediations, several years apart, before reaching an agreement in principle.
ii. Amount of evidence, discovery, and investigation
[71] In addition to substantial investigation and research conducted since the outset of the action and the documentary discovery conducted, Class Counsel engaged in a large scale effort to determine the scope and breadth of Class Member injuries, which enabled them to assess the relative liability positions of the parties and to determine that the Settlement was the preferable course of action.
iii. Zone of reasonableness and likelihood of success
[72] The terms of the Settlement Agreement fall within the zone of reasonableness, having regard to all of the circumstances, particularly in view of the litigation risks at stake in this case. The action had potential weaknesses, including conflicting rates of Lead failure which may have resulted in the action being unsuccessful if tried on the merits on a class-wide basis.
[73] Challenges would have remained for Class Members in pursuing their individual damages after the common issues trial, particularly given the demographics of the Class, and the length of time that would have passed by then.
[74] The base compensation proposed is $25,000 for Class Members who experienced a fractured Lead and who had to undergo a [page344] premature explant and/or who suffered unintended shocks caused by the fracture. Additional compensation is available to eligible claimants who suffered complications at or following their premature explant procedures and/or who suffered from excessive unintended shocks. These claimants are also able to advance claims for income loss and out of pocket expenses. In the event that there is a lower than anticipated participation under the Settlement, eligible claimants' compensation will be proportionately increased.
[75] The assessment of damages in such cases is a challenging exercise, both because of the limited comparators available and because of the variability that results from the unique litigation risks involved in each case. For example, in the case of Nantais v. TPLC Proprietary (Canada) Limited, Judgment of Mr. Justice Brockenshire dated October 3, 1997 (unreported) ("Nantais"), which related to allegedly defective pacemaker leads, there were multiple categories of compensation ranging from $1,500-$15,000 (approximately $2,282-$22,825 in current values), with the alternative available for class members to have damages assessed by a special referee.
[76] In the case of Hoy v. Medtronic, Inc., [2001] B.C.J. No. 1968, 2001 BCSC 1343 ("Hoy"), a proposed class proceeding which involved alleged electrical conduction problems in pacemaker leads, the settlement amount was $1.5 million, inclusive of notice and counsel fees in relation to a class estimated to include 12,000 individuals. It is understood that there were ultimately 282 claimants who were paid an average of $5,300 (inclusive of the claims of PHIs and class counsel fees, approximately $6,885 at current values) (see Elaine Adair and Jill Yates, "Your Class Action Has Been Certified -- Now What?" Case Note (2006), prepared for Canadian Institute's "Managing Complex Litigation Conference", April 24-25, 2006).
[77] The litigation risks and unpredictability in this area of law is demonstrated by a series of parallel cases brought against St. Jude Medical Inc. Three different class proceedings were brought in Canada -- one in Ontario, one in Quebec and one in British Columbia -- all related to the use of a silver-titanium alloy ("Silzone") in the manufacture of the cuffs of certain mechanical heart valves. It was alleged that Silzone was inherently unsuited for this application and that, by impairing tissue regrowth following implantation, patients were exposed to significant risks of implant failure and other heart injuries (see Burnett v. St. Jude Medical, Inc., [2009] B.C.J. No. 133, 2009 BCSC 82, at para. 67 ("Burnett I")). [page345]
[78] In the class proceedings brought in British Columbia and Quebec, the plaintiffs secured settlements by largely limiting their claims to a specific complication known as a paravalvular leak ("PVL") -- the loss of blood through an incompletely sealed valve cuff. The Ontario proceeding did not settle, but instead proceeded to a 138-day common issues trial after which the action was dismissed, yielding no compensation for any class member. Thus, in litigation relating to the same product, there were different outcomes (see Burnett Estate v. St. Jude Medical, Inc., [2009] B.C.J. No. 2403, 2009 BCSC 1651; Thibault v. St. Jude Medical Inc., Judgment of Mr. Justice André Roy, dated April 1, 2010; see, also, Notice of Approval of the Settlement Agreement Concerning the Class Action Regarding Silzone Products (Thibault v. St. Jude Medical English-Language Settlement Notice); and Andersen v. St. Jude Medical Inc., [2012] O.J. No. 2921, 2012 ONSC 3660 (S.C.J.)))).
[79] The Settlement Agreement reflects a comprehensive approach to the settlement of the claims in the action. This settlement structure will provide benefits to Class Members in an expedient way through a straightforward and streamlined claims process.
[80] These considerations and risk factors guided the parties through the negotiation process to achieve a reasonable resolution of the litigation. The Settlement Agreement benefits the Class as a whole by removing the litigation risks and enabling recovery by Class Members during their lifetime. In all the circumstances, the compensation available to Class Members with compensable injuries is well within the reasonable range.
iv. Recommendation of Class Counsel
[81] Class Counsel recommends the approval of the Settlement Agreement on the grounds that it is fair and reasonable and in the best interests of the class. Class Counsel's experience and recommendation carries significant weight.
v. Support of the representative plaintiffs, neutral party and objections
[82] The Settlement Agreement has the support of the representative plaintiffs and its terms were supported by the parties' experienced mediator and a leading jurist, the Honourable Mr. Frank Iacobucci.
[83] With respect to Dr. Khorasani's objections, he eloquently explained his concerns about how the risk of shocks from the Lead have affected his emotional and psychological health. However, as acknowledged by Dr. Khorasani, he suffered no physical harm from [page346] the Leads and has not replaced the Leads. His claim is for psychological and emotional harm since he had previously endured 49 shocks from leads from a different manufacturer. Consequently, he would only be able to claim damages against the defendants if he could establish, on an individual basis, that a person of "ordinary fortitude" would have suffered such damages, and that his situation was not "highly unusual" and "very individual" (Mustapha v. Culligan of Canada Ltd., [2008] 2 S.C.R. 114, [2008] S.C.J. No. 27, 2008 SCC 27, at para. 18).
[84] Dr. Khorasani acknowledged that his case was unusual, and that not many individuals who would have been advised of the risk of shock (and been unable to change the Lead) would have had a similar reaction. The court expressed sympathy for the distress suffered by Dr. Khorasani. However, I accept the plaintiffs' submission that it was reasonable to exclude a group with only psychological and emotional damages of the risk of future shocks (without actual shock or a change in Leads), since any damages incurred by such a proposed group would be individual in nature, difficult to establish, and may only affect a very limited group of people. While the facts of Dr. Khorasani's case engenders the sympathy of the court and those who attended the hearing, payment for pure psychological damages in the class action would not be reasonable on the basis of the above.
[85] Also, while Dr. Khorasani expressed concern that he did not receive a certification notice, I am satisfied that Class Counsel complied with the robust notice plan set out by Perell J. In any event, Dr. Khorasani advised the court that since the medical devices "saved my life", he would not have brought an action for damages.
[86] With respect to the remaining objectors, I do not accept that the objections they raise should vitiate the Settlement Agreement. A "minimum amount" for all individuals with the Leads (as suggested by Mr. Larouche) would not be based on the merit of any claim, and would be unfair to those claimants who objectively suffered damage. Other objections relating to the inability to claim for emotional and psychological loss without objective factors raise the same concerns as Dr. Khorasani's position. Objecting in order to obtain future compensation in the event of a subsequent shock (as suggested by Philion) is hypothetical, and not a basis to vitiate a settlement.
vi. Conclusion
[87] The Settlement is fair and reasonable and in the best interests of the Class Members. The process by which the Settlement was achieved was at all times arm's-length and adversarial in [page347] nature. At various times, the parties took conflicting views which, had they not resolved, would have resulted in termination of the negotiations. The Settlement fulfills all of the objectives of the CPA, and provides immediate, direct benefits to Class Members with eligible claims, while protecting them from serious risks of litigation.
(b) Issue 2: Approval of class counsel fees and disbursements
[88] Class Counsel are seeking approval for the payment of legal fees in the amount of $6,645,176 (plus applicable HST in the amount of $863,872.88), representing 30 per cent of $22 million, being the Settlement Amount of $26 million plus accrued interest of $150,586.86, less the $4 million payment to the PHIs. Class Counsel are also seeking approval for payment of $520,919.07, inclusive of applicable taxes in relation to disbursements that have been incurred for the benefit of the Class, for a total of $8,029,967.95.
1. The applicable law
[89] In assessing the risks assumed by Class Counsel, risk is to be measured from the commencement of the action (Gagne v. Silcorp Ltd. (1998), 41 O.R. (3d) 417, [1998] O.J. No. 4182 (C.A.) ("Gagne"), at para. 16). These risks include liability risk, recovery risk, and the risk that the action will not be certified as a class proceeding (Gagne, at para. 17; Endean v. Canadian Red Cross Society, [2000] B.C.J. No. 1254, 2000 BCSC 971, at paras. 28 and 35) as well as the risk involved in all contingency fee cases of receiving no compensation for the time invested (Green v. Canadian Imperial Bank of Commerce, [2016] O.J. No. 3039, 2016 ONSC 3829 (S.C.J.), at para. 14). In a complex product liability case, proceeding as a single party claim would not be financially viable and in the absence of the possibility of a class proceeding, it is unlikely that such a claim would be successfully pursued.
[90] I reviewed the applicable law for approval of class counsel fees and disbursements in Cass v. WesternOne Inc., [2018] O.J. No. 4165, 2018 ONSC 4794 (S.C.J.), at paras. 117-126:
Class counsel fees are to be approved on the basis of whether they are "fair and reasonable" in all of the circumstances (Parsons v. Canadian Red Cross Society (2000), 49 O.R. (3d) 281 (S.C.J.) ("Parsons 2"), at para. 13-14 and 56; Lefrancois v. Guidant, 2014 ONSC 1956 ("Lefrancois"), at para. 52).
The courts in Lefrancois (at para. 52) and in Silver (at para. 41) set out the following factors which may be considered by the court when determining whether class counsel's fees are fair and reasonable:
(i) the factual and legal complexities of the matters, [page348]
(ii) the risks assumed in pursuing the litigation, including the risk that the matter might not be certified, and the risk of loss at trial,
(iii) the opportunity cost to class counsel in the expenditure of time in pursuit of the litigation and settlement,
(iv) the amount in issue,
(v) the result achieved,
(vi) the importance of the matter to the class members and to the public,
(vii) the degree of responsibility assumed and the skill and competence demonstrated by class counsel,
(viii) the ability of the class to pay, and
(ix) the expectations of the representative plaintiffs, the class and class counsel as to the basis for calculating fees and the amount of fees.
An agreement to make a contingent payment, on the basis of a percentage of a settlement or recovery, is contemplated by the word "otherwise" in s. 32(1)(c) of the CPA, and has often been awarded (Nantais v. Telectronics Proprietary (Canada) Ltd. (1996), 28 O.R. (3d) 523 (Gen. Div.) at pp. 528-29; Crown Bay Hotel Ltd. Partnership v. Zurich Indemnity Co. of Canada (1998), 40 O.R. (3d) 83 (Gen. Div.) ("Crown Bay"), at 86).
Contingency fee arrangements are an "important means" to provide "enhanced access to justice to those with claims that would not otherwise be brought because to do so as individual proceedings would be prohibitively uneconomic or inefficient". Similar to a multiplier, a contingency fee retainer "gives the lawyer the necessary economic incentive to take the case in the first place and to do it well" and, as such, "that opportunity must not be a false hope" (Gagne v. Silcorp Limited (1998), 41 O.R. (3rd) 417 (C.A.), at 422-23).
The policy of the CPA is to provide an incentive to class counsel to pursue class actions in order to increase access to justice. Class counsel fees have been awarded and are intended to compensate law firms for the risk that they may never be paid for their time or reimbursed for their disbursements. In Parsons 2, Justice Winkler (as he was then) stated (at para. 56; see also para. 14):
[...] The legislature has not seen fit to limit the amount of fees awarded in a class proceeding by incorporating a restrictive provision in the CPA. On the contrary, the policy of the CPA, as stated in Gagne, is to provide an incentive to counsel to pursue class proceedings where absent such incentive the rights of victims would not be pursued. It has long been recognized that substantial counsel fees may accompany a class proceeding. [...]
In Crown Bay, Winkler J. commented on the benefits of a contingency fee in class actions to encourage settlement (at 88):
[...] On the other hand, where a percentage fee, or some other arrangement such as that in Nantais, is in place, such a fee arrangement encourages rather than discourages settlement [...] Fee arrangements which reward efficiency and results should not be discouraged.
Similarly, in Osmun v. Cadbury Adams Canada Inc., 2010 ONSC 2752, Strathy J. (as he then was) endorsed contingency fee arrangements in class [page349] actions. He held (at paras. 21 and 22):
There is much to be said in favour of contingent fee arrangements. Litigants like them. They provide access to justice by permitting the lawyer, not the client, to finance the litigation. They encourage efficiency. They reward success. They fairly reflect the considerable risks and costs undertaken by class counsel, including the risk that they will never be paid for their work, the risk that their compensation may come only after years of unpaid work and expense, and the risk that they will be exposed to substantial cost awards if the action fails. Effective class actions simply would not be possible without contingent fees. Contingent fee awards serve as an incentive to counsel to take on difficult but important class action litigation.
[...] in my respectful view, courts should not be too quick to disallow a fee based on a percentage simply because it is a multiple -- sometimes even a large multiple -- of the mathematical calculation of hours docketed times the hourly rate.
In Abdulrahim v. Air France, 2011 ONSC 512, Strathy J. (as he then was) approved a "one-third" contingency fee, referring to it as "standard in class action litigation". He held (at para. 13):
A contingency fee of one-third is standard in class action litigation and has been common place in personal injury litigation in this province for many years. It has come to be regarded by lawyers, clients and the courts as a fair arrangement between lawyers and their clients, taking into account the risks and rewards of such litigation. Fees have been awarded based on such a percentage in a number of class action cases.
In, Justice Belobaba also approved a one-third contingency fee and held that there was a presumption that such arrangements are valid and enforceable provided that they are "fully understood and accepted by the representative plaintiffs". He held (Cannon, at para. 8):
What I suggest is this: contingency fee arrangements that are fully understood and accepted by the representative plaintiffs should be presumptively valid and enforceable, whatever the amounts involved. Judicial approval will, of course, be required but the presumption of validity should only be rebutted in clear cases based on principled reasons.
In Cannon, Justice Belobaba provided "examples of clear cases where the presumption of validity could be rebutted" which included (Cannon, at para. 9):
(i) "Where there is a lack of full understanding or true acceptance on the part of the representative",
(ii) "Where the agreed-to contingency amount is excessive", and
(iii) "Where the application of the presumptively valid one-third contingency fee results in a legal fees award that is so large as to be unseemly or otherwise unreasonable".
[91] I apply the above principles to the present case.
2. Application of the law to the facts of this case [page350]
[92] I find that there is no basis to rebut the "strong presumption of validity" of the contingency fee arrangement (Cannon [Cannon v. Funds for Canada Foundation, [2013] O.J. No. 5825, 2013 ONSC 7686 (S.C.J.)], at para. 9).
[93] I rely on the following factors:
(i) the retainer agreements with the representative plaintiffs all provided that Class Counsel would carry all expenses and disbursements during the course of the litigation and would only be paid in the event of success, whether through a settlement or following a trial on the merits;
(ii) Sherry, Greg and Glenda's retainers authorize payment of a legal fee in the amount of 30 per cent of the recovery to the class, and Dan's retainer provides for payment on the basis of either 25 per cent of the recovery to the class or on the basis of a three-times multiplier on Class Counsel's base time whichever is higher. As such, all retainers allow for the fee being requested;
(iii) Class Counsel's docketed time in prosecuting the action, as of February 19, 2020 is $6,469,363.28, representing thousands of hours of lawyer and legal support staff time over the course of over 12 years. The total fee requested in this case reflects a multiplier of 1.027 on the base time incurred by Class Counsel;
(iv) Class Counsel undertook extensive work in bringing these cases forward and incurred disbursements in the amount of $520,919.07 (as of February 19, 2020);
(v) in addition to the work done in advancing the litigation and securing the benefits contained in the Settlement Agreement, Class Counsel will be responsible for significant future work upon approval of the Settlement Agreement, including coordinating with RicePoint, responding to Class Member inquiries, formalizing the Settlement Order, updating Class Counsel's websites, monitoring the implementation of the Settlement Agreement and addressing any questions or issues raised by Class Members or RicePoint and attending this court to report on the administration of the Settlement Agreement as it progresses;
(vi) this litigation has been ongoing for over 12 years and has involved issues of considerable legal and medical complexity. Class Counsel conducted extensive legal and factual research in support of the claim and worked closely with an expert in preparing for certification, in attending on the contested certification and pleadings motions and all resulting appeals and [page351] in conducting the multiple settlement negotiations that ultimately resulted in the Settlement Agreement;
(vii) Class Counsel assumed the risk that the negotiations would not be successful and that the time spent and expense incurred in that process could be wasted and would be added to the time and expenses already incurred in prosecuting the action;
(viii) the financial burden of litigating this case, both in terms of disbursements and the lost opportunity costs associated with diverting time and other resources away from other files, has been significant, as reflected in the quantum of Class Counsel's base time and disbursements incurred;
(ix) financial risk to Class Counsel also arose from the indemnities provided to the representative plaintiffs to protect against any possible adverse cost awards, particularly since there was no application made to the Ontario Class Proceedings Fund or any private third-party funder to protect against such cost awards;
(x) the Settlement Agreement provides benefits to the Class Members which are both monetary and intangible. The value of the total benefits to Class Members amounts to $26 million (plus accrued interest) and there are no reversionary rights to the defendants;
(xi) the monetary value of the benefits negotiated on behalf of the Class Members mitigates the risks involved in proceeding to a common issues trial, which would extend both the litigation risks and the duration of the action. Further, the qualifying criteria and other features of the Settlement Agreement are fair and will provide appropriate benefits to Class Members in a streamlined and expeditious process;
(xii) the anticipated average settlement value in this case will be $25,000 for Class Members who experienced unintended shocks and/or had their Lead(s) replaced prematurely because of a fracture or impending fracture. Additional payments may be made to Class Members who suffered complications during or shortly following their replacement surgery;
(xiii) a further feature of the Settlement Agreement is that the process for determining the entitlements of the PHIs has already been resolved, such that no separate settlement needs to be negotiated on behalf of individual Class Members and the PHIs have no interest in any potential residue; and [page352]
(xiv) in the absence of a class proceeding, it is unlikely that the representative plaintiffs would have commenced litigation against the defendants due to concerns regarding the expense associated with such complex litigation.
[94] Having regard to the factors identified above, including the risk assumed by Class Counsel, as well as the complexities of the proceeding, Class Counsel's request for legal fees is fair and reasonable.
[95] For the above reasons, I approve the fees, disbursements and taxes sought by Class Counsel, in the total amount of $8,029,967.95, comprised of $6,645,176 for fees, plus applicable HST of $863,872.88 and disbursements (inclusive of applicable taxes) of $520,919.07.
(c) Issue 3: Approval of honoraria for Sherry and Dan
1. The applicable law
[96] Perell J. reviewed the relevant principles governing the award of an honorarium to a representative plaintiff in Hodge v. Neinstein, [2019] O.J. No. 209, 2019 ONSC 439 (S.C.J.), at paras. 48-50:
(i) a representative plaintiff may receive an honorarium, on a quantum meruit basis, where he or she "rendered active and necessary assistance in the preparation or presentation of the case and . . . such assistance resulted in monetary success for the class";
(ii) such an award of compensation is "rare", upon evidence of an "exceptional contribution that has resulted in success for the class"; and
(iii) when determining whether to award an honorarium and the amount of such an honorarium, the court may consider, amongst other factors: "(a) active involvement in the initiation of the litigation and retainer of counsel, (b) exposure to a real risk of costs, (c) significant personal hardship or inconvenience in connection with the prosecution of the litigation, (d) time spent and activities undertaken in advancing the litigation, (e) communication and interaction with other class members, and (f) participation at various stages in the litigation, including discovery, settlement negotiations and trial".
[97] In Park v. Nongshim Co., [2019] O.J. No. 1568, 2019 ONSC 1997 (S.C.J.) ("Park"), I reviewed the law governing the approval [page353] of honorarium for class members. I set out that law below (Park, at paras. 84-86):
The payment of honorarium to representative plaintiffs in Ontario for class actions is "exceptional and rarely done". In Baker Estate v. Sony BMG Music (Canada) Inc., 2011 ONSC 7105, Strathy J. (as he then was) conducted a thorough review of the case law and held, at paras. 93-95:
The payment of compensation to a representative plaintiff is exceptional and rarely done: McCarthy v. Canadian Red Cross Society [2007] O.J. No. 2314 (S.C.J.) at para. 20; Windisman v. Toronto College Park Ltd., [1996] O.J. No. 2897 (Gen. Div.); Sutherland v. Boots Pharmaceutical plc, [2002] O.J. No. 1361 (S.C.J.); Bellaire v. Daya [2007] O.J. No. 4819 (S.C.J.) at para. 71. It should not be done as a matter of course. Any proposed payment should be closely examined because it will result in the representative plaintiff receiving an amount that is in excess of what will be received by any other member of the class he or she has been appointed to represent: McCutcheon v. Cash Store Inc. [2008] O.J. No. 5241 (S.C.J.) at para. 12. That said, where a representative plaintiff can show that he or she rendered active and necessary assistance in the preparation or presentation of the case and that such assistance resulted in monetary success for the class, it may be appropriate to award some compensation: Windisman v. Toronto College Park Ltd., [1996] O.J. No. 2897 (Gen. Div.) at para. 28.
The Court of Appeal has recently indicated in Smith Estate v. National Money Mart Co., 2011 ONCA 233, 106 O.R. (3d) 37 at paras. 134-135 that any compensation paid to the representative plaintiff should normally be paid out of the settlement fund and not out of Class Counsel's fee, to avoid concerns with respect to fee-splitting.
It is interesting to note that on certification motions, the Court is often concerned to ensure that the representative plaintiff is truly engaged in the litigation and is not a mere "bench-warmer" or a "straw man" recruited by Class Counsel. Courts have frequently commented on the need to have an active and involved plaintiff who will be familiar with the proceedings, instruct counsel, monitor settlement discussions and generally act as any private client would in supervising his or her own litigation. A private client will normally receive indirect compensation for such efforts out of the proceeds of settlement or judgment. A representative plaintiff normally will not. That being said, these are contributions the Court expects a representative plaintiff to make and I respectfully agree with the observation of Hoy J. in Bellaire v. Daya, above, at para. 71 that compensation should not be awarded simply because the representative plaintiff has done what is expected of him or her. It should be reserved for cases, like Garland v. Enbridge Gas Distribution Inc., [2006] O.J. No. 4907 (S.C.J.) where the contribution of the representative plaintiff has gone well above and beyond the call of duty.
In Robinson v. Rochester Financial Ltd., 2012 ONSC 911, Strathy J. again refused to order an honorarium. He summarized the factors for the court to consider, at para. 43:
In this particular case, while I acknowledge the contribution made by Kathryn Robinson and by Rick Robinson, and commend them on the work they have done to bring this matter to a successful conclusion [page354] on behalf of their fellow class members, I am not prepared to award such compensation. In my respectful view, requests for compensation for the representative plaintiff are becoming routine, as Sharpe J. anticipated in Windisman, above. I agree with those who have expressed the opinion that compensation should be reserved to those cases where, considering all the circumstances, the contribution of the plaintiff has been exceptional. The factors that might be appropriate for consideration could include:
(a) active involvement in the initiation of the litigation and retainer of counsel;
(b) exposure to a real risk of costs;
(c) significant personal hardship or inconvenience in connection with the prosecution of the litigation;
(d) time spent and activities undertaken in advancing the litigation;
(e) communication and interaction with other class members; and
(f) participation at various stages in the litigation, including discovery, settlement negotiations and trial.
The exceptional nature of an honorarium is even more circumscribed in a cy-près settlement where there is no monetary success for the class. Winkler J. (as he then was) held in Sutherland v. Boots Pharmaceutical PLC, [2002] O.J. No. 1361, at para. 22:
While the work of the Representative Plaintiffs is commendable, to compensate them for their work when the settlement funds for the entire class are being donated to research without a single penny finding its way into the hands of a class member would be contrary to the precept of a Cy-pres distribution in particular and to a class proceeding generally. Compensation for representative plaintiffs must be awarded sparingly. The operative word is that the functions undertaken by the Representative Plaintiffs must be "necessary", such assistance must result in monetary success for the class and in any event, if granted, should not be in excess of an amount that would be purely compensatory on a quantum meruit basis. Otherwise, where a representative plaintiff benefits from the class proceeding to a greater extent than the class members, and such benefit is as a result of the extraneous compensation paid to the representative plaintiff rather than the damages suffered by him or her, there is an appearance of a conflict of interest between the representative plaintiff and the class members. A class proceeding cannot be seen to be a method by which persons can seek to receive personal gain over and above any damages or other remedy to which they would otherwise be entitled on the merits of their claims. This request is denied.
[98] Sherry and Dan rely on the decision in Windisman v. Toronto College Park Ltd., [1996] O.J. No. 2897, 3 C.P.C. (4th) 369 (Gen. Div.) ("Windisman"). However, Sharpe J. (as he then was) did not conclude that honoraria should be paid in the ordinary course. Rather, he held that such an award "should not be seen [page355] as routine", and that "evidence" would be required to demonstrate that the representative plaintiff took a "very active part at all stages" of the action. Sharpe J. ordered the payment since the representative plaintiff "assumed the risk of costs" and "kept careful records of her time and effort" (at para. 28).
2. Application of the law to the evidence
[99] I find that the evidence does not support the "exceptional" order of the payment of an honorarium to either Sherry or Dan, based on the factors discussed above.
[100] There is no evidence of unusual or rare circumstances, let alone exposure to costs or evidence that the action could not have been brought without them. There is no evidence as to any exceptional time spent on the case (let alone records or other evidence as to the amount of time as was before the court in Windisman or Robinson). The essence of the evidence filed on the present motion is that the representative plaintiffs were "involved" in the litigation, stayed "informed about the litigation", and reviewed pleadings and provided information, opinions and instructions to counsel, which was the work any representative plaintiff would be required to do. Without any unique factors to warrant an honorarium, I am not prepared to grant it.
Order
[101] For the above reasons, I grant the relief as set out in the order signed on March 2, 2020.
Motion allowed.
Notes
1 All capitalized terms, unless otherwise defined, are as defined in the Settlement Agreement.