COURT FILE NO.: CV-13-471782-00CP

DATE: 20131024

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Toronto Transit Commission, Applicant

AND:

Rocco Signorile, Gaetano Franco, Michael Farrell, Pat Daniels and Paul McLaughlin, Respondents

BEFORE: Conway J.

COUNSEL: Alexander Cobb and Carey O’Connor, for the Applicant

Ari Kaplan and James Harnum, for the Respondents

HEARD: October 22, 2013

Proceeding under the Class Proceedings Act, 1992

REASONS FOR DECISION (re: Settlement Approval)

Conway J.

[1] The Toronto Transit Commission (the “TTC”) moves, with the consent of the Respondents, for an order approving a settlement pursuant to s. 29(2) of the Class Proceedings Act, 1992, S.O. 1992, c.6 (the “Act”) and for related orders necessary to implement the settlement.

[2] I signed the order at the conclusion of the hearing. These are my reasons for doing so.

Background and the Settlement

[3] The TTC is the Applicant in this proceeding. The Application raises the issue of the respective entitlement of the TTC and its current and former employees to the Demutualization Proceeds (defined below) held by the TTC.

[4] From January 1, 1988 to December 31, 1997 (the class eligibility period), the TTC made group life insurance coverage available to its eligible employees and retirees. The TTC was the policy holder for three group life insurance policies (the “Policies”). The insurer was Clarica Life Insurance Company, subsequently Sun Life Assurance Company of Canada.

[5] Through a series of transactions in the late 90s, the insurer converted from a mutual insurance company to a corporation with share capital, effective December 29, 1997 (the “Demutualization Date”). As part of this demutualization, the TTC’s ownership interest in the insurer, as a holder of the Policies, was converted into 80,988 shares of the demutualized company.

[6] The TTC later sold these shares. The proceeds of sale, together with dividends and interest (the “Demutualization Proceeds” or “Proceeds”), are held by the TTC and invested in interest bearing instruments. The value of the Demutualization Proceeds as at October 3, 2013 was just over $5.6 million.

[7] Both the TTC and its employees claimed that they were entitled to the Demutualization Proceeds – the TTC based on its ownership of the shares, and the employees based on the premiums they had paid in respect of the Policies. Ultimately it was decided that the TTC should negotiate with a committee established to represent the interests of the TTC employees and retirees (the “Committee”).[1] The Committee included representatives of a cross-section of unionized and non-unionized TTC employees and retirees. The Committee retained Koskie Minsky as its legal counsel to assist in the negotiations and in the evaluation of the TTC’s sharing proposals.

[8] The negotiations culminated in a memorandum of understanding dated April 30, 2013 (the “MOU”).[2] The MOU, signed by the TTC, the Committee and the three TTC unions (the “Unions”),[3] sets out how the Demutualization Proceeds are to be shared as between the TTC and its employees/retirees insured under the Policies on the Demutualization Date.

[9] The MOU provides that:

• the Demutualization Proceeds will be shared, with approximately 60% distributed to eligible employees/retirees and approximately 40% distributed to the TTC. That calculation has now been refined and the current estimate of the distribution split is approximately 62/38;

• the TTC will first deduct the costs of distribution and an amount to be set aside as a contingency reserve. These costs expressly include the TTC’s and the Committee’s legal costs but do not include any internal TTC administrative costs (other than out of pocket costs incurred by the TTC in connection with processing distribution payments or locating affected former employees);

• the TTC will next allocate the balance of each Policy’s Demutualization Proceeds among eligible employees/retirees insured under that Policy on the Demutualization Date. Essentially, the allocation is to be proportional to the level of insurance coverage that the employee/retiree had under the Policy on the Demutualization Date. The MOU contains adjustment provisions for employees who were hired and who retired during the class eligibility period;

• the TTC will then split each of the above allocations as between the TTC and the employees/retirees based on the estimated proportion of premiums paid by the TTC and the eligible employees/retirees under each Policy as of the Demutualization Date.

[10] The MOU further provides that an employee or retiree who was insured under the Policies on the Demutualization Date will only be eligible to receive a distribution if that person is “located” in one of four ways: (a) the employee is on the TTC’s payroll on the settlement approval date; (b) the retiree is receiving a TTC pension on the settlement approval date; (c) the employee/retiree’s valid address and identity are satisfactorily confirmed to the TTC and the Committee in writing by the employee/retiree; or (d) the employee/retiree’s valid address and identity are otherwise known to the TTC.

[11] The MOU provides that a final list of eligible employees/retirees is to be prepared and approved by the TTC in consultation with the Committee, and filed with the court prior to the distribution, under an affidavit describing how the list was prepared and the steps taken to locate the employees/retirees.

[12] On June 19, 2013, I certified the application as a class proceeding for the purpose of implementing the settlement. The class consists of current and former employees of the TTC who were insured under one or more of the Policies on the Demutualization Date. The respondents, the five members of the Committee, were appointed as representative respondents.

[13] Both before and after certification, the parties made extensive efforts to locate eligible employees/retirees so that those individuals could participate in the distribution of the Proceeds. The TTC retained Deloitte LLP and Garda Pre-Employment & HR Solutions to assist in this process. The parties have filed an affidavit describing the efforts made to locate these individuals.

[14] As of the date of the settlement approval hearing, 95% of the 10,591 class members had been located.[4] Rather than finalizing the list by the date of the settlement hearing, the parties have agreed that further efforts will be made to locate class members until November 22, 2013, at which time a final list of eligible recipients for the distribution will be filed with the court.

[15] In addition, the parties carried out a comprehensive notice program as required by the certification order. This included conducting a review of the TTC’s records for current contact information; publishing notices in local and national newspapers and on the TTC and Unions’ websites; sending letters by direct mail;[5] and establishing a hot line and website. Numerous calls and inquiries about the settlement have been received by the parties, counsel and Deloitte.[6] No one has opted out of the proceeding or objected to the settlement.

Settlement Approval

[16] To approve a settlement of a class proceeding, the court must find that in all the circumstances the settlement is fair, reasonable, and in the best interests of those affected by it: Dabbs v. Sun Life Assurance Co. of Canada, (1998) 1998 14855 (ON SC), 40 O.R. (3d) 429 (Gen. Div.), at p. 440-44, aff’d (1998), 1998 7165 (ON CA), 41 O.R. (3d) 97 (C.A.). The factors to be considered in approving a settlement are well-established: see Dabbs, at paras. 30-46; Parsons v. Canadian Red Cross Society, [1999] O.J. No. 3572 (S.C.J.), at paras. 71-72; Bilodeau v. Maple Leaf Foods Inc., 2009 10392 (On. S.C.J.), at paras. 45-46.

[17] Considering those factors, I approve the proposed settlement, on the terms set out in the MOU. It is fair, reasonable and in the best interests of the class members.

[18] The amount of the Demutualization Proceeds is approximately $5.6 million. Protracted litigation will be costly and will only deplete the amount of Proceeds available for distribution to class members.

[19] The 62/38 split in favour of the class is fair, given the risks and delay of litigation. The law on entitlement to demutualization proceeds is unsettled and fact specific.[7] There is no assurance that continued litigation would yield more for the class members than they are receiving under the settlement.

[20] The allocations in the MOU among the class members are fair. They reflect the level of coverage that the member had under each Policy during the class eligibility period. They take into account the proportion of insurance premiums paid by the member. They vary according to the split of premiums paid by the TTC and class members.

[21] The settlement achieves certainty and finality. There will be a defined list of people to whom distributions will be made. The parties have been diligent in their efforts to locate class members and have been very successful (95% located, with additional efforts continuing until November 22, 2013). I see no reason for the parties to delay distribution of the Proceeds or incur additional costs (that will further reduce the Proceeds available to the class) in continuing to locate additional class members beyond that date.

[22] The negotiations resulting in the MOU were conducted at arms’ length. The Committee that conducted the negotiations fairly represented the categories of TTC employees/retirees with an interest in the Proceeds.

[23] The Committee had legal counsel to advise it throughout the negotiations leading up to the signing of the MOU. Class counsel and the representative respondents all support the settlement.

[24] There has been a good level of communication with class members, with information provided through the extensive notice program and inquiries responded to by the parties, their counsel, and Deloitte.

[25] There have been no opt-outs or objections.

[26] I have considered the term of the MOU that the costs of distribution, including the legal fees of the TTC and the Committee, will be deducted from the Demutualization Proceeds before they are distributed. This was a specifically negotiated term of the settlement and, according to the TTC, was an “essential underpinning” to the work taken to resolve this matter. This type of “off the top” fee deduction has previously been approved by this court: see, for example, Montreal Trust Co. of Canada v. Armstrong, [2006] O.J. No. 3951 (S.C.J.), at para. 9; Ontario Hospital Association v. Summers, 2010 ONSC 4497, at para. 17.

[27] The TTC has incurred legal fees of $413,977 in determining what was to be done with the Proceeds; formulating proposals to share the Proceeds; negotiating the MOU; preparing court documents; and working with Deloitte on the notice program. The Committee has incurred legal fees of $134,139 in obtaining a legal opinion on the TTC’s original proposal; negotiating the MOU; preparing court documents; working on the notice program; and handling inquiries from individual class members. The TTC’s estimated legal fees to complete this matter are $80,000 and the Committee’s estimated legal fees are $60,000.

[28] All legal fees have been charged at hourly rates, with no premiums or multipliers. Both sides have reviewed the other’s expenses, without objection. The TTC has been paying class counsel’s fees regularly as the Application progressed. Since the Proceeds are to be shared by the parties after deduction of fees and expenses, each side has an interest in ensuring that the other side’s fees are reasonable.

[29] Deloitte’s fees for the notice program to date are $100,000. Its estimated fees for implementing the distribution are $240,000. Garda’s fees for locating class members are approximately $16,000. The TTC is not charging for any internal administrative costs beyond these out of pocket expenses.

[30] The combined legal and distribution fees and expenses to date are $664,116. The estimated costs to completion are another $410,000. The contingency reserve is $65,000.[8] I reviewed these fees and expenses carefully with counsel at the hearing. Given the amount of work undertaken over many years, the extensive notice program, the efforts to locate class members, the negotiation of these fees and expenses as a term of the settlement and the fact that legal fees are at hourly rates, I approve these fees and expenses as a reasonable term of the settlement. I further approve class counsel’s fees pursuant to s. 32 of the Act. I have provided in the order, however, that no further fees or expenses may be deducted from the Proceeds without court order.

[31] I approve the proposed settlement, on the terms set out in the MOU, as fair, reasonable and in the best interests of the class members.

Ancillary Orders

[32] I grant the order sought by the TTC entitling it to share contact information of the class members with Deloitte, the Committee, the Unions and class counsel for the sole purpose of implementing the MOU and effecting the distribution thereunder. This is consistent with the certification order that permitted the TTC to share this information for purposes of the notice program.

[33] I also grant a sealing order with respect to the final list of eligible class members that will be filed with this court, in light of the personal information contained in the list. Protecting the personal information of an employer’s (in this case the TTC’s) current and former employees is an important public interest. I am satisfied that the salutary effects of this order outweigh any deleterious effects, including the public interest in open and accessible court proceedings: see Sierra Club v. Canada (Minister of Finance), 2002 SCC 41, [2002] 2 S.C.R. 522. It is important to have a public record of who is entitled to receive the Proceeds should anyone wish to challenge the distribution in the future but at the same time to protect the privacy interests of the individuals in question. Redaction is not a suitable alternative as the public file will not preserve the record of which individuals were eligible to receive the distribution. If the distribution is challenged, the parties may apply for an order to unseal the documents to confirm the integrity of the distribution.

Orders

[34] Order accordingly. If the parties require assistance during the course of administering the settlement, I may be spoken to. The order contemplates that the parties will file a joint certificate with the court once the distribution of the Proceeds has been completed.

Conway J.

Date: October 24, 2013

[1] Originally it had been the TTC’s Ancillary Benefits Committee, consisting of TTC and Unions’ representatives, that had considered alternatives for what to do with the Proceeds. It was then decided that a committee should be formed to negotiate with the TTC.

[2] The MOU was originally signed on September 12, 2012 and amended on April 30, 2013. The Amended and Restated Memorandum of Understanding is dated April 30, 2013.

[3] The Unions are the Amalgamated Transit Union, Local 113, the International Association of Machinists & Aerospace Workers, Lodge 235 and the Canadian Union of Public Employees, Local 2.

[4] A total of 9,192 individuals were automatically located by virtue of being a current TTC employee or pensioner. Of the 1,399 other individuals, 829 have been located and 570 have not been located. Garda is attempting to obtain updated address information for 136 individuals. The addresses for the other 434 individuals appear to be correct but those individuals have not yet responded to the TTC’s mailings to confirm their address. The parties decided to extend the cut-off date for the final list until November 22, 2013 to provide more time for Garda to obtain updated address information and for the other individuals to confirm their address.

[5] The certification order required only one letter mailing. That letter was sent on July 4, 2013. The parties did a second letter mailing on September 24, 2013 to seek a response from those who had not responded to the first letter, so that those individuals could be considered “located” for purposes of the distribution.

[6] For example, Deloitte received 175 emails and 791 telephone enquiries. Koskie Minsky received, as of October 3, 2013, 161 calls and emails. Mr. Signorile, one of the representative respondents, has spoken to 50 to 75 class members.

[7] See NAIT Academic Staff Assn v. Northern Alberta Institute of Technology 2004 CarswellAlta 96, at para. 3; Smurfit-Stone Container (Canada) Inc. 2005 NBCA 43.

[8] The MOU provides that any surplus Proceeds remaining after the distribution will be dealt with by the TTC’s Ancillary Benefits Committee, in consultation with the Committee. No further cash distributions will be made to the TTC or the eligible employees/retirees.