ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 04-CV-269702CP
COURT FILE NO.: 04-CV-267728CP
DATE: 20140909
BETWEEN:
MICHAEL DAVID HORGAN
Plaintiff
– and –
LAKERIDGE HEALTH CORPORATION, DAVID J. ROSS and HAK MING CHIU
Defendants
AND BETWEEN:
GARRETT JOSEPH HEALEY
Plaintiff
– and –
LAKERIDGE HEALTH CORPORATION and DAVID J. ROSS
Defendants
Jonathan Ptak and Jody Brown, for the Plaintiff
Barry Glaspell, for the Defendant Lakeridge Health Corporation
Mary Thomson and Belinda Bain, for the Defendants David J. Ross and Hak Ming Chiu
HEARD: September 9, 2014
PERELL, J.
REASONS FOR DECISION
A. INTRODUCTION
[1] Horgan v. Lakeridge and Healey v. Lakeridge are class actions that were commenced ten years ago.
[2] Pursuant to the Class Proceedings Act, 1992, S.O. 1992, c. 6, this is a motion for approval of settlements in both actions and for approval of Class Counsel’s fees in both actions.
[3] For the reasons that follow, the motions are granted.
B. FACTUAL AND PROCEDURAL BACKGROUND
1. The Tuberculosis Scare and the Class Actions
[4] In 2003-2004, two patients at the Defendant Lakeridge Health Corporation (“Lakeridge”), a public hospital with sites in Oshawa, Bowmanville, Port Perry, and Whitby, were diagnosed with tuberculosis (“TB”), a contagious disease.
[5] Lakeridge, as it was obliged to do under the Health Protection and Promotion Act, R.S.O. 1990, c. H.7, notified Durham Public Health, which, in turn, notified 4,402 persons, who had come into contact with the two infected patients, described as the “index patients,” and Durham Public Health recommended to those notified that they be tested for TB.
[6] The Plaintiffs Michael Horgan and Garrett Healey were among those who received notices, and unfortunately they tested positive for TB. They subsequently brought proposed class actions. They alleged that they were infected because of their exposure to the index patients. They alleged that their infection was caused by the negligence of the Defendants. The Defendants denied any negligence, and they denied that if Class Members were infected by TB that it was not caused by any of their acts or omissions.
[7] In 2004, Messrs. Horgan and Healey began class actions against Lakeridge and against the Defendant doctors, David Ross, a respirologist who treated the index patients AB and BC, and Hak Ming Chiu, whose specialty is haematology and who treated index patient BC.
[8] The actions were certified as class proceedings by Justice Cullity in 2006 and 2007. Healey was certified on December 8, 2006, after a contested certification hearing. See Healey v. Lakeridge Health Corp., [2006] O.J. No. 4277 (S.C.J.).
[9] Given the similar issues, Horgan was certified on November 21, 2007, on consent of Dr. Ross and Dr. Chiu and unopposed by Lakeridge.
[10] The class actions were certified on behalf of three classes of persons: (1) the Infected Class; (2) the Uninfected Class; and (3) derivative claimants under the Family Law Act, R.S.O. 1990, c. F.3, s. 61. It was alleged that the Defendants failed to properly diagnose active TB and failed to take precautions to prevent the spread of infection and risk of harm.
[11] In 2010, Messrs. Horgan and Healey brought motions for partial summary judgments on behalf of the Uninfected Class for damages for psychological harm. Lakeridge brought a cross-motion for a partial summary judgment dismissing those claims. The argument of the summary judgment motion consumed four days, and there were 40 volumes of motion material.
[12] In a decision that was affirmed by the Court of Appeal, I granted summary judgment to Lakeridge. See Healey v. Lakeridge Health Corporation, 2010 ONSC 725, affd. 2011 ONCA 55.
[13] With the dismissal of the claims of the Uninfected Class, the claims of the Infected Class members remained. Both Horgan and Healey are scheduled to proceed to a joint common issues trial, commencing on February 17, 2015, but they have now signed a Settlement Agreement.
[14] There is little doubt that Class Counsel and the Representative Plaintiffs are knowledgeable about the strengths and weaknesses of their case. The parties conducted a total of 12 days of discovery for both actions including a discovery of a non-party, the Region of Durham. An enormous amount of evidence was gathered by the summary judgment process and by the examinations for discovery. The Plaintiffs retained four experts who produced 12 expert reports. The Defendants retained four experts who produced ten expert reports. Class counsel consulted more than a dozen other experts on various issues.
[15] In terms of evaluating litigation risk, the prospects of success, and the merits of the settlement, one of the more significant factors is the issue of causation. In Healey, the majority of Class Members were patients in the emergency department who had been exposed to the index patient who had attended appointments with the Defendant Dr. Ross over an eight month period between February and October, 2003. In Horgan the index patient was receiving blood transfusions at the haematology/oncology medical day unit at Lakeridge and the Class Members were exposed to the index patient for three months between February and April, 2004. Between the two actions, 410 people tested positive for TB, an 11.5% positivity rate for the population tested. The positivity rate is significant to the motions now before the court because it reveals the difficulties and the risks confronted by the Representative Plaintiffs in advancing their own claims and in advancing the claims of the infected class.
[16] The major problems for the Representative Plaintiffs were that causation was not certified as a common issue and individual proof of causation was going to be difficult. TB is an infection that is transmitted through the air and can remain dormant or it can become active. Latent TB has no signs or symptoms, and in Canada the positivity rate of latent TB is generally 10%. Proximity to an index patient is a factor in determining causation. The further away and less time exposed to an index Patient, the less likely transmission of TB. With a positivity norm of 10%, an 11.5% positivity rate meant that proving individual causation was going to be an imposing task.
[17] The only way to confirm transmission of TB from one person to another with complete accuracy is to compare strains of active TB. This however, requires two active cases. In both class actions, there were no active cases amongst the Class Members, so there was no way to compare the TB strain to the index patient and confirm with complete accuracy that transmission occurred in any individual person.
2. Settlement Negotiations
[18] The parties attended the first mediation with Justice Murray on May 7-8, 2012. No settlement was reached at this mediation.
[19] The parties attended a pre-trial conference with Justice Sanderson on March 7, 2014. A settlement was reached on April 15, 2014, shortly after the pre-trial conference.
[20] The mediations involved a complex review of the cases and included extensive briefs on the law and facts, along with the exchange of numerous expert reports. Once again, there is little doubt that the Representative Plaintiffs and Class Counsel are very well informed about the strengths and weaknesses of their cases.
3. The Scheme and Terms of the Settlement Agreement
[21] The Settlement Agreement provides for payment by the Defendants of $1.7 million.
[22] The net recovery for the Class Members after payment of the Class Counsel Fee, disbursements, subrogated (OHIP) claims, expenses, and honorariums is $715,876.95 as detailed below.
[23] The compensation scheme provides for a payment of up to $27,500 for the category of Class Members who have the best chance at establishing causation (meaning actual transmission of TB from the index patient) based on expert opinions (the “Category 1 Claimants”).
[24] Category 1 Claimants are: (a) Class Members who “seroconverted”, meaning they had two TB skin tests, with the first being negative and the second positive; and (b) Class Members who could demonstrate they were in close contact with one of the index patients, meaning they either live with the index patient or regularly share breathing space.
[25] A second category of claimants can receive up to $6,000 (the “Category 2 Claimants”). These Class Members have significantly weaker claims on causation.
[26] Category 2 Claimants tested positive for TB, but were not seroconversions or close contacts.
[27] The administration of the claims process will be undertaken by Class Counsel based primarily on the supporting data provided by Durham Region.
[28] The compensation awards are for personal injury and not subject to tax.
[29] The application process for participation in the settlement is simple, paper-based, and the process does not require Class Members to testify or appear in person. It also does not require individuals to provide further medical documentation. In most circumstances, the records of Durham Public Health from the TB investigations will be relied upon.
[30] Class Members who are considered seroconverts or close contacts are eligible for a base payment of $20,000, plus $2,500-$7,500 if they experienced side effects as a result of taking prophylactic medication after their positive TB test (Category 1 Claimants).
[31] Class Members who tested positive, but are not a Category 1 Claimant are eligible to receive a base payment of $1,500, and if funds remain after all base payments are made and payments for side effects are made, these claimants are eligible to receive additional compensation based on three further causation factors up to an additional $4,500 (“Category 2 Claimants”).
[32] The Settlement Fund is non-reversionary, and the Settlement Agreement includes an ultimate pro rata distribution to Class Members if funds remain after the required payments to Category 1 and Category 2 Claimants are made.
[33] Class Counsel has calculated that there are no more than a total of 369 potential claimants in both actions, with an absolute maximum of 44 potential Category 1 Claimants.
[34] Class Counsel is requesting that their fee, taxes, disbursements and other amounts be deducted from the Settlement Fund.
[35] An accounting of the net Settlement Fund after all deductions is set out below in the following chart:
EXPENSE CATEGORY
AMOUNT
Settlement Amount
$1,700,000
Contingency Fee of 30%
-$510,000
HST on $510,000
-$71,400
CPC Disbursements
-$259,328.16
Class Counsel Disbursements
-$25,421,37
OHIP Claims
-$16,638.30
Honorariums
-$20,000
Anticipated Notice Costs for Newspaper Publication
-$1,830.60
SUBTOTAL
$795,418.94
Statutory CPC Levy of 10%
-$79,541.99
NET SETTLEMENT FUND
$715,876.95
[36] It is anticipated that, after deduction of all fees and disbursements, the net Settlement Fund will provide the base payments for all of the eligible Class Members who claim, and very likely, the Settlement Fund will provide for the additional payments or further pro rata distribution.
[37] The Representative Plaintiffs, Mr. Horgan and Mr. Healey, have been exemplary representatives for the class. They have devoted countless hours to this case over the last ten years. They subjected their personal medical condition and personal history to the public record on behalf of the class. They have remained closely dedicated to these cases for over ten years.
[38] The Representative Plaintiffs approve the terms of the Settlement Agreement.
[39] There are no objectors to the settlement.
4. Fee Approval
[40] The Representative Plaintiffs each signed a Retainer Agreement with Class Counsel setting out the terms and conditions of their retainer and the fees to be sought by Class Counsel.The Retainer Agreements provide for full reimbursement of disbursements and that fees shall be the product of a “Base Fee” and a “Multiplier” of four, or a contingency of 30% if the action is settled after the commencement of discoveries, whichever is greater.
[41] Class Counsel seek approval of a contingency fee of 30% on the settlement; i.e. $510,000.
[42] Class Counsel are also requesting an honorarium for the Representative Plaintiffs in the amount of $10,000 each.
[43] The contingency fee is less than 25% of the value of time invested by Class Counsel, which is approximately $2.5 million.
[44] As of August 19, 2014, Class Counsel has incurred $317,509.85 in disbursements (including taxes) since the commencement of these actions. The Defendants contributed to the costs of notice in the amount of $17,228.34 in Horgan and $15,531.98 in Healey. The Class Proceedings Fund approved these actions for funding, and the approval included the potential funding of disbursements to prosecute the action. Class Counsel was required to cover all disbursements and then request reimbursement form the Fund. The Fund reimbursed Class Counsel for $138,591.06 of disbursements in Healey and $120,737.10 of disbursements in Horgan. Considering notice cost contributions from the Defendants and the Fund reimbursements, Class Counsel is left carrying $25,421.37 in disbursements, as of August 19, 2014.
[45] Class Counsel has agreed to perform and assume all further costs of the administration of the settlement. Class Counsel estimates they will devote additional time with a value of approximately $100,000 - $150,000 during the post settlement implementation phase.
[46] The Representative Plaintiffs recommend approval of the Class Counsel Fee.
[47] There were no objectors to the proposed Class Counsel Fee.
C. DISCUSSION AND ANALYSIS
1. Settlement Approval
[48] Section 29(2) of the Class Proceedings Act, 1992 provides that a settlement of a class proceeding is not binding unless approved by the court. 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: Fantl v. Transamerica Life Canada, [2009] O.J. No. 3366 (S.C.J.) at para. 57; Farkas v. Sunnybrook and Women’s Health Sciences Centre, [2009] O.J. No. 3533 (S.C.J.) at para. 43; Kidd v. Canada Life Assurance Company, 2013 ONSC 1868.
[49] In determining whether a settlement is reasonable and in the best interests of the class, the following factors may be considered: (a) the likelihood of recovery or likelihood of success; (b) the amount and nature of discovery, evidence or investigation; (c) the proposed settlement terms and conditions; (d) the recommendation and experience of counsel; (e) the future expense and likely duration of litigation; (f) the number of objectors and nature of objections; (g) the presence of good faith, arm’s-length bargaining and the absence of collusion; (h) the information conveying to the court the dynamics of, and the positions taken by, the parties during the negotiations; and, (i) the nature of communications by counsel and the representative plaintiff with class members during the litigation. See: Fantl v. Transamerica Life Canada, supra at para. 59; Corless v. KPMG LLP, [2008] O.J. No. 3092 (S.C.J.) at para. 38; Farkas v. Sunnybrook and Women’s Health Sciences Centre, supra, at para. 45; Kidd v. Canada Life Assurance Company, 2013 ONSC 1868.
[50] 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: Baxter v. Canada (Attorney General) (2006), 2006 41673 (ON SC), 83 O.R. (3d) 481 (S.C.J.) at para. 10. An objective and rational assessment of the pros and cons of the settlement is required: Al-Harazi v. Quizno’s Canada Restaurant Corp. (2007), 49 C.P.C. (6th) 191 (Ont. S.C.J.) at para. 23.
[51] The case law establishes that a settlement must fall within a zone of reasonableness. Reasonableness allows for a range of possible resolutions and is an objective standard that allows for variation depending upon the subject matter of the litigation and the nature of the damages for which the settlement is to provide compensation: Parsons v. Canadian Red Cross Society, [1999] O.J. No. 3572 (S.C.J.) at para. 70; Dabbs v. Sun Life Assurance Company of Canada, supra. A settlement does not have to be perfect, nor is it necessary for a settlement to treat everybody equally: Fraser v. Falconbridge Ltd. (2002), 24 CPC (5th) 396 at para. 13; McCarthy v. Canadian Red Cross Society (2007), 158 ACWS (3d) 12 (Ont. S.C.J.) at para. 17.
[52] In my opinion, having regard to the various factors used to determine whether to approve a settlement, the Settlement Agreement in the immediate case should be approved.
[53] My view is that the settlement is an excellent result in a very difficult and very risky class action. Indeed, it became a very-very risky class action after the summary judgment motion effectively reduced the class size to 10% of the class that included the Uninfected Class.
2. Fee Approval
[54] The fairness and reasonableness of the fee awarded in respect of class proceedings is to be determined in light of the risk undertaken by the lawyer in conducting the litigation and the degree of success or result achieved: Parsons v. Canadian Red Cross Society, 2000 22386 (ON SC), [2000] O.J. No. 2374 (S.C.J.) at para. 13; Smith v. National Money Mart, 2010 ONSC 1334, [2010] O.J. No. 873 (S.C.J.), at paras. 19-20; Fischer v. I.G. Investment Management Ltd., [2010] O.J. No. 5649 (S.C.J.), at para 25.
[55] Factors relevant in assessing the reasonableness of the fees of class counsel include: (a) the factual and legal complexities of the matters dealt with; (b) the risk undertaken, including the risk that the matter might not be certified; (c) the degree of responsibility assumed by class counsel; (d) the monetary value of the matters in issue; (e) the importance of the matter to the class; (f) the degree of skill and competence demonstrated by class counsel; (g) the results achieved; (h) the ability of the class to pay; (i) the expectations of the class as to the amount of the fees; and (j) the opportunity cost to class counsel in the expenditure of time in pursuit of the litigation and settlement: Smith v. National Money Mart, supra, at paras. 19-20; Fischer v. I.G. Investment Management Ltd., supra, at para. 28.
[56] Having regard to the factors relevant in assessing the reasonableness of the fees of Class Counsel, I am satisfied that their fee request should be approved.
[57] I am also satisfied that the honorariums are appropriate and they should be approved.
D. CONCLUSION
[58] For the above reasons, I approve the settlement, and I approve Class Counsel’s fee.
Perell, J.
Released: September 9, 2014
COURT FILE NO.: 04-CV-269702CP
COURT FILE NO.: 04-CV-267728CP
DATE: 20140909
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
MICHAEL DAVID HORGAN
Plaintiff
– and –
LAKERIDGE HEALTH CORPORATION, DAVID J. ROSS and HAK MING CHIU
Defendants
AND BETWEEN:
GARRETT JOSEPH HEALEY
Plaintiff
-and-
LAKERIDGE HEALTH CORPORATION and DAVID J. ROSS
Defendants
REASONS FOR DECISION
PERELL J.
Released: September 9, 2014