ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 10-CV-403667CP
DATE: 20140304
BETWEEN:
LORNE WALDMAN
Plaintiff
– and –
THOMSON REUTERS CANADA LIMITED
Defendant
Jordan Goldblatt and M. Edwardh, for the Plaintiff
Andrew Bernstein, for the Defendant
Proceeding under the Class Proceedings Act, 1992
HEARD: February 19, 2014
PERELL, J.
REASONS FOR DECISION
A. INTRODUCTION
[1] In this certified class action under the Class Proceedings Act, 1992, S.O. 1992, c. C.6, the Representative Plaintiff, Lorne Waldman, moves for approval of a settlement of a copyright infringement class action against Thomson Reuters Canada Limited (“Thomson”).
[2] The action was commenced because Thomson, through its legal publishing branch known as Carswell, makes available court documents authored by the lawyers who constitute the Class Members. Carswell copies documents from public court files, replicates them on an electronic database and search and retrieval service known as “Litigator”, and makes the copies available to subscribers. Documents authored by Mr. Waldman, who is a lawyer, were included in Litigator without his permission.
[3] In the class action, Mr. Waldman alleges that Thomson infringes the copyright of the Class Members under the Canadian Copyright Act, R.S.C. 1985, c. C‑42 by making available, without permission and for a fee, copies of court documents authored by Class Members and their law firms.
[4] Subject to court approval, Mr. Waldman and Thomson have signed a Settlement Agreement. Under the Agreement, Thomson settles a $350,000 cy‑près trust fund to support public interest litigation. Thomson also agrees to make changes to the copyright notices on Litigator and to the terms of its contract with subscribers. The individual Class Members, who may opt‑out, receive no monetary award under the Settlement Agreement, and they sign a release and grant a non‑exclusive licence of their copyrights in the court documents to Thomson.
[5] Class Counsel, Sack Goldblatt Mitchell LLP, which was assisted by Deeth Williams Wall LLP in regard to copyright law, moves for approval of its contingent fee agreement with Mr. Waldman and for court approval of counsel fees of $825,000.00, all inclusive. Class Counsel’s fee is paid as a term of the proposed Settlement Agreement.
[6] The proposed settlement is supported by, among others, Mr. Waldman, Class Counsel, a blue‑ribbon group of lawyers who are prepared to be trustees for the cy‑près trust fund, several Canadian law schools, the Canadian Bar Association, the Canadian Civil Liberties Association, and the British Columbia Civil Liberties Association.
[7] After a thorough notice program, the Settlement Agreement is opposed by seven Class Members.
[8] For the reasons that follow, I conclude that the proposed Settlement is not fair, reasonable, and in the best interests of the Class Members. I, therefore, dismiss the motions for settlement and fee approval.
B. EVIDENTIARY BACKGROUND
[9] The motions for settlement approval and for fee approval were supported by the following evidence:
• An affidavit from Louis Sokolov, who until April 1, 2013, was co‑lead counsel for Class Counsel. Mr. Sokolov has an extensive background in class action litigation, and he and Jordan Goldblatt of Sack Goldblatt Mitchell LLP were involved in the settlement negotiations.
• An affidavit from Mr. Waldman, who supports the Settlement Agreement and who describes and explains the $350,000 cy‑près trust.
• An affidavit from Tricia Brioux, a law clerk at Sack Goldblatt Mitchell LLP who deposed about the notice plan for the settlement approval hearing and about communications to and from Class Members.
• Two affidavits from Jilean Bell, a lawyer and the Director of the Legal and Regulatory Strategic Market Group at Carswell. Her first affidavit was originally delivered for the certification motion. Her second affidavit is for the approval motion.
• An affidavit from Ronald Slaght, a leader of the litigation bar. His affidavit was originally delivered for the certification motion.
C. FACTUAL AND PROCEDURAL BACKGROUND
1. Carswell, Litigator, and the Court Document Collection Service
[10] Thomson operates a legal publishing division known as Carswell that publishes law reports, legal textbooks, loose‑leaf services, and annotated statutes. Its offerings include an internet database service known as “Litigator,” which, in turn, includes the “Court Document Collection,” which offers subscribers the means to examine documents copied from court files. The subscriber may download, edit, and print the court documents. The text, or more likely portions of the text, can be incorporated into the subscriber’s own court documents.
[11] Carswell obtains copies of the documents from court files from across the country. Lawyers and legal scholars and the editors of several of Carswell’s case reporting services select the files, i.e. the actions and applications from which court documents will be extracted for the Litigator service. The documents are from significant cases in the Provincial, Superior, and Appellate Courts, the Federal Court, and the Supreme Court of Canada. The Litigator’s court documents include pleadings, notices of motion, affidavits, and factums.
[12] There are approximately 100,000 documents that have been selected for inclusion in Litigator. There are approximately 12,000 to 13,000 different lawyers’ names on the court documents in Litigator. There are approximately 6,500 different firm names listed.
[13] Carswell does not ask the lawyers or the law firms for permission to place the documents on Litigator.
[14] There are approximately 1,300 subscribers to Litigator, including sole practitioners, law firms, in‑house law departments, government lawyers, and law schools across Canada.
[15] Subscribers to Litigator must sign a Licence Agreement. Under the agreement, subscribers are limited to use in “the regular course of legal and other research related work and study.” The subscribers may only copy “insubstantial portions” of court documents to “give to a judge or other presiding officer … in making filings or submissions and filing court documents … in judicial or quasi‑judicial or parliamentary proceedings.”
[16] The Licence Agreement expressly permits copying but requires the subscriber to acknowledge the intellectual property rights of “Carswell or its suppliers and licensors”
[17] When a subscriber uses Litigator, a copyright notice appears by the subscriber selecting “copyright” from the “What’s in Litigator” page, which includes the following language:
….Each reproduction (as permitted and/or required by the Licence Agreement for Westlaw Canada) of a portion of Westlaw Canada (specifically other than court documents) must contain notice of copyright as follows:
Copyright © CARSWELL, a division of Thomson Reuters Canada Limited, or its licensors. All rights reserved….
[18] Every download of a court document occurs by way of telecommunication over the internet. A subscriber may save a downloaded document onto his or her own computer, or else download the document in Microsoft Word, WordPerfect, HTML, plain text format, .pdf format or rich text format.
[19] Thomson denies that its service constitutes copyright infringement. Its position is that: (a) the use of the documents by lawyers is “fair dealing” under the Copyright Act; (b) lawyers preparing court documents do so not as “authors” but as officers of the court; and (c) it is incompatible with the open court principle to assert copyright on court documents.
[20] There has been no case in Canada that has considered whether lawyers and paralegals own copyright in legal works.
2. Mr. Waldman and the Arar Factum
[21] Mr. Waldman is a lawyer who practices immigration and refugee law in Toronto. Mr. Waldman was counsel to Maher Arar, who was an intervenor in a proceeding before the Court of Appeal.
[22] Mr. Waldman drafted a factum that was filed with the court in Toronto. To be more precise, the Arar Factum was filed for Bouzari v. Islamic Republic of Iran, which was a claim for damages for acts of torture. Bouzari is an important constitutional law case.
[23] Mr. Waldman registered a claim with the Canadian Intellectual Property Office for the copyright in his factum.
[24] Without Mr. Waldman’s permission, Carswell copied the factum from Bouzari v. Islamic Republic of Iran and made it available as part of the Litigator service.
3. Mr. Slaght’s Expert Evidence
[25] In response to the certification motion, Thomson delivered an affidavit from Mr. Ronald Slaght, a leader of the Canadian litigation bar, who provided unchallenged expert evidence for the certification motion.
[26] Mr. Slaght testified about the creation of court documents by lawyers and law firms. He deposed that there may be one or more authors for any legal document, and that the author or authors are not necessarily the lawyers whose names are on the document. The signing of a court document does not necessarily indicate authorship.
[27] Mr. Slaght deposed that not all the work in a court document is original, because lawyers frequently use precedents, pleadings, evidence (affidavits, exhibits, and transcripts), secondary sources, and reasons for decision in their court documents.
[28] Mr. Slaght deposed that clients often provide comments and revisions and may make a substantial contribution to the authorship of some documents. In terms of client involvement, Mr. Slaght deposed that affidavits are somewhat different from other court documents because there is a significant role for the affiant, who often will be a client. Affidavits are mostly prepared from information conveyed by the affiant. Affiants may write substantial portions of their own affidavits.
[29] Mr. Slaght also deposed that it is normal for lawyers to request copies of factums about an interesting case directly from one of the lawyers involved or to obtain copies from other sources, including hiring process servers and paying them to attend at the court office and make a copy of court documents filed by other lawyers.
[30] Mr. Slaght deposed that lawyers commonly provide precedents to their colleagues as a matter of professional courtesy, legal education, and collegiality.
[31] He testified that lawyers typically collect precedents without seeking permission from the lawyer or law firm from which the document originated. It was his opinion that lawyers know that once filed, court documents become part of the administration of justice and anyone can obtain a copy of them and use them.
4. Procedural Background
[32] On May 25, 2010, Mr. Waldman commenced this action against Thomson. He claimed that Thomson had infringed his copyright in his court documents and similarly infringed the copyright of Class Members.
[33] On December 20, 2011, Thomson delivered its Statement of Defence. Thomson asserted numerous defences to this action, including fair dealing, and relies on the constitutionally mandated "open court" principle.
[34] Thomson retained Torys LLP as its lawyer of record. Wendy Matheson, now Justice Matheson, and Andrew Bernstein, had carriage of the file.
[35] On January 6, 2012, Mr. Waldman delivered a Reply.
[36] After the commencement of the action, Thomson modified its copyright notice to make it clear that it was not claiming copyright in individual court documents. The copyright notice now reads:
© Thomson Reuters Canada Limited or its Licensors (excluding individual court documents). All rights reserved.
[37] In addition, Thomson added a specific statement demarcating the start of the court document to distinguish the court document from Carswell’s enhancements. It also altered its Westlaw Canada Copyright Statement to clarify that court documents can be reproduced without appending the Thomson copyright notice.
[38] In his action, Mr. Waldman claims damages, statutory damages, injunctive relief, and an accounting of profits from the defendant arising from alleged copyright infringement under the Canadian Copyright Act.
[39] On February 21, 2012, after a contested hearing, I certified the action as a class proceeding. See Waldman v. Thomson Reuters Corporation, 2012 ONSC 1138.
[40] The class definition (which is proposed to be amended as part of the Settlement Agreement) is:
All lawyers and paralegals in private practice and licensed to practice law in Canada, who: (a) are the authors of the original legal documents filed in court that Thomson Reuters Canada Limited has copied, used, or otherwise dealt with in connection with its Litigator service, including pleadings, affidavits, facta, notices of motion and other legal documents filed in court, or (b) are the owners of the copyright in the original legal documents filed in court that Thomson Reuters Canada Limited has copied, used, or otherwise dealt with in connection with its Litigator service, including pleadings, affidavits, facta, notices of motion and other legal documents filed in court.
[41] In my Reasons for Decision, I indicated that for individual issues trials to determine whether there had been a copyright infringement, it would be necessary for Class Members to obtain waivers of solicitor and client privilege after insisting that the clients obtain independent legal advice.
[42] On June 11, 2011, Thomson’s motion for leave to appeal the certification decision was dismissed.
[43] On March 5, 2012, Mr. Waldman served a notice of motion seeking summary judgment, and at case conference on August 16, 2012, I set a timetable for the hearing of the motion in June 2013.
[44] The motion for summary judgment was designed to determine the common issue of whether Thomson’s use of the court documents was fair dealing under the Copyright Act.
5. Negotiation of the Settlement Agreement
[45] On July 12, 2012 the Supreme Court of Canada released five decisions that clarified the scope of the fair dealing defence to copyright infringement, potentially impacting the claims made and the defences asserted in this action.
[46] Class Counsel were of the view that the Supreme Court’s decisions, particularly the decisions in Society of Composers, Authors and Music Publishers of Canada v. Bell Canada, 2012 SCC 36 and Alberta (Education) v. Canadian Copyright Licensing Agency (Access Copyright), 2012 SCC 37 substantially increased the litigation risk for the Class Members, particularly with respect to Thomson’s fair dealing defence and the irrelevancy of its profit motive.
[47] Following the Supreme Court’s decisions and the August 2012 case conference, the parties entered into settlement discussions and the negotiations continued from September 2012 to February 2013.
[48] The negotiations were adversarial, arm’s length, and intensive. During the negotiations, Mr. Waldman insisted that there be a cy‑près trust to provide value to the Class Members. He did not propose any payment to Class Members since individual losses could not be established.
[49] Thomson insisted that a copyright licence from Class Members be a term of the settlement.
[50] The Class Counsel fee was negotiated as a separate item from the amount of the cy‑près trust.
[51] On February 15, 2013, the parties signed a Settlement Agreement.
[52] On September 13, 2013, there was a case conference after which the parties re‑negotiated the Settlement Agreement to provide for direct mailing of notice to the Class Members.
[53] On October 4, 2013, I approved a notice plan to give notice of the Settlement Agreement and the approval hearing.
[54] The notice of the settlement was sent to every law firm, organization or professional corporation listed in Litigator, accompanied by a cover letter that listed the counsel whose names appeared in Litigator. In addition, notice of the settlement was provided through publication in legal magazines, a legal newswire, on the class action website, on carswell.com and on class counsel’s website.
[55] As described below, seven Class Members objected to the proposed settlement.
6. The Settlement Agreement
[56] Under the Settlement Agreement, Thomson makes no admission of liability and continues to deny the claims advanced by Mr. Waldman, but it agrees in all the circumstances to settle the litigation.
[57] The design of the Settlement Agreement is that Thomson’s Litigator service will continue but that subscribers will be cautioned in respect of copyright infringement. Under the Settlement Agreement new works (court documents) will not be included in Litigator without the explicit knowledge of the individuals who drafted the documents. In addition, Thomson will fund a $350,000 trust for public interest litigation.
[58] The major terms of the Settlement Agreement are as follows:
• Thomson will include in its agreement with its subscribers an acknowledgement from the users that certain material available in the Litigator database may be subject to third party copyright.
• Thomson will include in its agreement with its users of WestLaw Canada, carswell.com, and westlawcanada.com, a promise from the subscribers to abide by the Copyright Act in their use of materials.
• Thomson promises to amend the copyright notices on Litigator to exempt court‑filed documents from any claims of copyright ownership by Thomson or its affiliates.
• Thomson promises that for a ten‑year period, it shall send a notice to lawyers or paralegals named as counsel on a court document it proposes to include in Litigator and advise of its intention to make that court document available and, if an objection to the use is received, Thomson agrees that it will not make that document available on Litigator.
• Thomson may bring a motion on notice to Class Counsel to vary its obligation to give notice to authors. The variance shall be granted if: (a) legal developments in copyright law, (b) the availability of other services for making publicly‑filed court documents available, or (c) other good reasons render it no longer commercially reasonable for Thomson to carry out its obligations.
• Thomson shall pay $350,000 to to settle a cy‑près trust fund to support public interest litigation. The purpose of the fund is to increase access to justice, provide financial assistance to class members, promote legal education, and enhance the development of the law.
• As a condition of receiving a grant, a recipient of funding from the trust fund must agree to be assisted in the public interest litigation by a law student.
• The Faculties of Law at the University of Ottawa, Osgoode Hall Law School at York University, the University of Victoria, Dalhousie Law School, and likely the University of Toronto, have agreed, at their own expense, to establish public interest litigation seminar courses and students enrolled in these courses will become “eligible students” under the cy‑près fund, who can assist a practitioner at the time that he or she makes application to the trust fund.
• Class Members grant to Thomson a non‑exclusive licence in respect of their court documents on Litigator. The terms of the license are as follows:
The Licence is a worldwide, perpetual, irrevocable and assignable licence that permits TRCL and its affiliates to make available the Class Members' Publicly‑Filed Court Documents in Litigator and/or other Electronic Media, including but not limited to the reproduction, distribution, enhancement and translation of those documents, to communicate the Class Members' Publicly‑Filed Court Documents to the public by telecommunication, or to authorize others to do so. The Licence will be valid as of the date of creation of the Works. TRCL acknowledges that the Licence is non‑exclusive and that the Settlement Agreement does not assign or in any way affect any Class Members' ownership of copyright or moral rights in the Works.
• Class Members grant a release of the claims advanced in the class action.
• The Class definition is amended to increase the size of the Class as follows:
All lawyers and paralegals currently or formerly in private practice and licensed to practice law in Canada, law firms (including limited liability partnerships) and lawyers’ professional corporations who are the authors or copyright owners of the original legal documents filed in court that Thomson Reuters Canada Limited has copied, used, or otherwise dealt with in connection with its Litigator service, including pleadings, affidavits, facta, notices of motion and other legal documents filed in court, on or before the date of this order.
• Class Members may opt‑out of the settlement.
• Thomson may terminate the Settlement Agreement, notwithstanding court approval, by giving written notice to Class Counsel within 25 days of the Opt Out Deadline, if Class Members named in more than 10% of the court documents in the Litigator database have opted out.
• If the Settlement Agreement is not cancelled, Thomson will pay $825,000 to Class Counsel as Costs.
• Class Counsel agree that they will not seek any further compensation in respect of Class Counsel Fees.
• Thomson agrees they will not oppose an order permitting Class Counsel to receive its fees.
• In the event the Court does not approve this Settlement Agreement, or refuses to grant any order implementing the Settlement Agreement or any part of the Settlement Agreement, the Settlement Agreement shall have no force and effect, shall not be binding on the settling parties and shall not be used as evidence or otherwise in this action or any other litigation.
[59] The trust fund will be administered by a volunteer Board of Trustees. In addition to Mr. Waldman, six senior members of the legal profession have indicated an interest in volunteering to be trustees. The potential trustees include The Honourable Mr. Ian Binnie, Anne‑Marie Boisvert, Marlys Edwardh, Richard C.C. Peck, and Wylie Spicer.
[60] The trust fund is intended to be a long‑term project with the fund growing by investments and fund‑raising. It is intended that the Trust Fund will fill a void in the support of public interest litigation that has occurred after the Government of Canada ended its support for the Court Challenges Program of Canada. It is also intended that the trust fund will benefit law students who will have an opportunity to participate in public interest litigation.
[61] Class Counsel submits that the provisions in the Settlement Agreement that require Thomson to no longer assert copyright over court documents and that require Thomson to notify authors to object to their documents being included in Litigator address the core issues in the litigation.
D. SETTLEMENT APPROVAL
1. The Criteria for Settlement Approval
[80] Settlement approval is the most important and difficult task for a judge under all class action regimes, including Ontario’s Class Proceedings Act, 1992. Since most class actions settle, the integrity and the legitimacy of class actions as a means to secure access to justice largely depends upon the court properly exercising its role in the settlement approval process. In scrutinizing a settlement, the court is called on to protect the interests of the class members who are to be bound by the outcome and who will be compelled to release their claims against the defendant in exchange for their participation in the class action settlement.
[81] The design of the approval process requires the court to carefully scrutinize any proposed settlement. The design of the approval process: (a) requires the proponents of the settlement to justify it; (b) provides an opportunity for those affected by the settlement to be heard; and (c) requires the court to evaluate the settlement and make a formal order. This design is meant both to deter bad settlements and also to ensure good ones that achieve the goals of the class action regime; namely: access to justice, behaviour modification, and judicial economy.
[82] Of these goals of class actions, the most important for the approval process is access to justice, because a settlement always achieves judicial economy, and a settlement may sometimes not achieve behaviour modification yet still be a good settlement. However, a settlement will be a bad settlement if it does not achieve procedural and substantive access to justice. The court’s job is to review a proposed settlement to ensure that the class members have achieved access to justice through a representative action.
[83] Recently, in AIC Limited v. Fischer, 2013 SCC 6 at paras. 24‑34, the Supreme Court of Canada emphasized that access to justice must contain both a procedural and a substantive component. In other words, the justness and fairness of the substantive outcome of the class action for class members genuinely matters.
[84] 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 the class members.
[85] A reasonable and fair settlement is inherently a compromise and a reasonable and fair settlement will not be and need not be perfect from the perspective of the aspirations of the parties.
[86] In determining whether to approve a settlement, the court, without making findings of facts on the merits of the litigation, examines the fairness and reasonableness of the proposed settlement and whether it is in the best interests of the class as a whole having regard to the claims and defences in the litigation and any objections raised to the settlement.
[87] When considering the approval of negotiated settlements, the court may consider numerous factors including likelihood of success, settlement terms, experience of counsel, risk and duration of litigation, objections, and whether negotiations were conducted in good faith and at arm’s length.
[88] The court should also examine circumstantial fairness, institutional fairness, and the broader goals of access to justice.
[89] Institutional fairness protects the integrity of class actions within the administration of justice and ensures courts do not rubber stamp settlements that primarily serve counsel or defendants.
2. Analysis and Discussion
(a) Is the Settlement Agreement Fair, Reasonable, and in the Best Interests of Class Members?
[90] For the reasons that follow, I do not approve the Settlement Agreement, because I do not find it to be fair, reasonable, and in the best interests of the Class Members.
[91] I begin by saying that the Settlement is fair and reasonable for the immediate parties to the Settlement; that is, Mr. Waldman, Class Counsel, and Thomson.
[92] In light of recent Supreme Court of Canada copyright law jurisprudence, there was a substantial likelihood of the action being dismissed.
[93] Approving the settlement would also be an excellent result for Thomson, which would obtain approximately 13,000 non‑exclusive copyright licences and releases while continuing its business practices.
[94] However, a class action settlement must be fair to class members, not merely advantageous to counsel or the defendant.
[95] I do not find that the Settlement Agreement is substantively, circumstantially, or institutionally fair to Class Members. The settlement appears more beneficial to Class Counsel than to the Class Members and effectively expropriates the Class Members’ property rights in exchange for a charitable donation.
[96] Unlike Robertson v. Thomson Canada Ltd., where class members received compensation for licences, here they receive none.
[97] The class members only receive the satisfaction of knowing that Thomson paid $350,000 to a cy‑près fund and $850,000 to Class Counsel.
[98] Moreover, the action was about principle rather than compensation.
[99] The settlement gives Thomson something it could not have obtained even by successful litigation: licences and releases from class members whose intent was to prevent infringement.
[100] Although the cy‑près trust fund is a public good, it does not justify approving the settlement.
[101] There is no meaningful substantive justice for class members.
[102] Thomson will continue business largely as before.
[103] Ironically, the behaviour modification occurs primarily on the part of the class members who grant licences.
[104] It is also unrealistic to argue that class members can opt out and litigate individually.
[105] From an institutional perspective, the optics of the settlement are problematic because class counsel receive $825,000 while class members receive only a notional benefit.
[106] Even reversing the amounts would not cure the underlying unfairness because class members must grant licences.
[107] A more reasonable resolution might have been to discontinue the action with a cy‑près payment and reasonable counsel fee but without granting licences.
[108] Other alternatives might have included discontinuance or decertification.
[109] These possibilities demonstrate that the settlement was not the only available resolution.
[110] In any event, the proposed Settlement is not fair, reasonable, and in the best interests of Class Members, and I therefore do not approve it.
E. FEE APPROVAL
[111] Because I am not approving the Settlement, the question of Class Counsel fee approval is moot.
[112] However, class counsel argued that fees should not be considered when assessing settlement fairness.
[113] That submission is incorrect because the payment of counsel fees is a term of the settlement.
[114] When counsel fees are part of the settlement, they must be considered in evaluating fairness.
[115] Making the payment of counsel fees effectively a pre‑condition to settlement approval is improper.
[116] Courts must consider the relationship between benefits to class members and benefits to counsel.
[117] The Court of Appeal has emphasized that disproportionate fees relative to class benefit are improper.
[118] Ideally, courts should have the option to reduce counsel fees or reallocate funds to increase class benefits.
[119] That option was not available here.
[120] In any event, I would not have approved the fee as proposed.
F. CONCLUSION
[121] For the above reasons, I dismiss the motions. There shall be no order as to costs.
Perell, J.
Released: March 4, 2014
COURT FILE NO.: 10‑CV‑403667CP
DATE: 20140304
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
LORNE WALDMAN
Plaintiff
‑ and ‑
THOMSON REUTERS CANADA LIMITED
Defendant
Proceeding under the Class Proceedings Act, 1992
REASONS FOR DECISION
Perell, J.
Released: March 4, 2014