COURT FILE NO.: CV-11-426591CP
DATE: 20151123
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
JONATHON BANCROFT-SNELL and 1739793 ONTARIO INC.
Plaintiffs
– and –
VISA CANADA CORPORATION, MASTERCARD INTERNATIONAL INCORPORATED, BANK OF AMERICA CORPORATION, BANK OF MONTREAL, BANK OF NOVA SCOTIA, CANADIAN IMPERIAL BANK OF COMMERCE, CAPITAL ONE FINANCIAL CORPORATION, CITIGROUP INC., FEDERATION DES CAISSES DESJARDINS DU QUÉBEC, NATIONAL BANK OF CANADA TORONTO INC., ROYAL BANK OF CANADA, and -DOMINION BANK
Defendants
Reidar Mogerman and Jen Winstanley for the Plaintiffs
Michael Eizenga and Chris McKenna for the Defendant Bank of America Corporation
Mike Adlem for the Defendant Citigroup Inc.
Markus Kremer for the Defendant Bank of Nova Scotia
Rob Kwinter for the Defendant Visa Canada Corporation
James Musgrove for the Defendant MasterCard International Incorporated
Vincent de l’Ėtoile for the Defendant Federation des caisses Desjardins du Québec
David Rankin for the Defendant Bank of Montreal
Daniel G. Cohen for the Defendant Capital One Corporation
Katherine L. Kay for the Defendant Canadian Imperial Bank of Commerce
Paul J. Martin for the Defendant Royal Bank of Canada
Paul Morrison and Christine Lonsdale for the Defendant Toronto-Dominion Bank
William McNamara for the Defendant National Bank of Canada Inc.
Edward Babin for the Objector, Walmart
Proceeding under the Class Proceedings Act, 1992
HEARD: November 19, 2015
PERELL, J.
REASONS FOR DECISION
A. INTRODUCTION
[1] In this action under the Class Proceedings Act, 1992, S.O. 1992, c. 6, the Plaintiffs Jonathon Bancroft-Snell and 1739793 Ontario Inc. seek: (1) approval of settlements reached with three of twelve Defendants; (2) approval of the fee agreement made between the Plaintiffs and Class Counsel; and (3) approval of Class Counsel’s fees and disbursements of $3,792,071.95, all inclusive.
[2] At the hearing of the motion, I made the following endorsement:
This is a motion for approval of three settlement agreements arising from three partial settlement agreements arising from three partial certifications for settlement purposes of this action under the Class Proceedings Act, 1992, S.O. 1992. The moving parties also seek approval of the Plaintiff’s contingency fee agreements and approval of payment of Class Counsels’ legal fees and disbursements. For written reasons to follow, I approve the settlement agreements and the contingency fee agreements. I have signed the Orders.
I put on the record the Representative Plaintiffs’ and Class Counsels’ confirmation as follows:
We confirm on the record that the Citigroup Agreement, the Capital One Agreement and B of A Agreement do not and were not intended to restrict the ability of any U.S. or other non-Canadian affiliate or related entities or businesses of the Releasors, including Walmart, from pursuing any claims relating to non-Canadian Interchange or other jurisdictions outside Canada, including the U.S.
I reserve judgment on the motion for approval of Class Counsels’ fees and disbursements.
[3] What follows are my reasons for approving the Settlement Agreements and the Contingency Fee Agreements.
[4] What also follows are my reasons for approving Class Counsel’s fees of $3,384,571.95, all inclusive. In this award, I have reduced the amount of the counsel fee awarded from the amount claimed by 10% on account of the Fee Sharing Agreement between Class Counsel and the Merchant Law Group, which Agreement is unapproved and unenforceable under the Class Proceedings Act, 1992 and may be illegal under the common law as champerty and maintenance. I further order that Class Counsel shall not pay the Merchant Law Group any sums from the settlement proceeds or from any other source on account of the unauthorized and possibly illegal Fee Sharing Agreement.
B. FACTUAL AND PROCEDURAL BACKGROUND
[5] Beginning in June 2005, more than 40 proposed class actions were filed by merchants in the United States alleging that there was a conspiracy to fix, maintain, or increase or control Merchant Discount Fees, including Interchange Fees, paid by merchants who accepted payment by Visa or MasterCard credit cards.
[6] The American actions were consolidated under the M.D.L. process together with 19 individual actions in the United States District Court – Eastern District of New York as In Re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, MDL/1710. The co-lead counsel in those proceedings is the law firm of Robins, Kaplan, Miller & Ciresi, LLP, with whom Class Counsel in the immediate class action have a consulting arrangement.
[7] In the case at bar, Class Counsel engaged Robins, Kaplan, Miller & Ciresi, LLP, the U.S. law firm Kirby McInerney, and the Alberta firm of Jensen Shawa Solomon Duguid Hawkes LLP, to provide assistance with specific tasks. These consulting firms charged fees at their usual national class action rates as follows:
Robins, Kaplan, Miller & Ciresi, LLP
$509,828.32
Kirby McInerney
$123,352.52
Jensen Shawa Solomon Duguid Hawkes
$16,827.00
TOTAL
$650.007.84
[8] On May 16, 2011, in Ontario, pursuant to the Class Proceedings Act, 1992, the Plaintiffs commenced a proposed class action against Visa Canada Corporation, MasterCard International Incorporated, Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Capital One Financial Corporation, Citigroup Inc., Federation des caisses Desjardins du Québec, National Bank of Canada Inc., Royal Bank of Canada, and Toronto-Dominion Bank.
[9] The Plaintiffs allege that the Defendants have conspired in Canada since March 2001 to fix, maintain, or increase or control Merchant Discount Fees, including Interchange Fees, paid by merchants who accepted payment by Visa or MasterCard credit cards.
[10] Similar class actions were commenced in British Columbia, Alberta, Saskatchewan, and Québec by parties represented by the same lawyers acting for the Plaintiffs in the Ontario action; namely: (1) Branch MacMaster, LLP; (2) Camp Fiorante Matthews Mogerman LLP; and (3) Consumer Law Group. The other four actions are:
• Coburn and Watson’s Metropolitan Home, dba “Metropolitan Home” (previously, Watson) v. Bank of America Corporation, SCBC No. VLC-S-S-112003 (Vancouver), case managed by Justice Weatherill;
• Macaronies Hair Club and Laser Center Inc., Operating as Fuze Salon v. BofA Canada Bank, Action No. 1203-18531 (Edmonton), case managed by Associate Chief Justice Rooke;
• Hello Baby Equipment Inc. v. BofA Canada Bank, QB No 133 of 2013 (Regina), case managed by Justice Ball; and
• 9085-4886 Québec Inc. v. Visa Canada Corporation, Superior Court of Québec No. 500-06-000549-101 (Montreal), case managed by Justice Corriveau.
[11] Before the commencement of the class actions, on April 15, 2011, the initial plaintiff in the British Columbia action, Mary Watson signed a contingency fee agreement with Branch MacMaster. (The agreement was updated on October 5, 2015 with the current representative plaintiff, Coburn and Watson’s Metropolitan Home, dba “Metropolitan Home”.)
[12] Also on April 15, 2011, the Plaintiffs in the Ontario action signed a contingency fee agreement with Branch MacMaster and Camp Fiorante Matthews Mogerman.
[13] Contingency Fee Agreements were also signed in the other proposed class actions.
[14] The Contingency Fee Agreements for the several class actions each provide for a legal fee of up to 25% of any settlement. The Québec Fee Agreement provides for a legal fee of up to 30% or an amount equal to multiplying the total hours worked by the attorneys in accordance with their hourly rates by a multiplier of 3.5. All the Agreements provide for the payment of disbursements reasonably incurred from any settlement or award.
[15] By agreement of the parties and with the consent of all the case management judges, the British Columbia action became the lead action, and by February 2012, after some preliminary skirmishes, the certification motion was scheduled for April-May 2013.
[16] In July 2012, approximately 15 months after the commencement of the Canadian class actions, two events occurred. First, a $7.25 billion ($US) settlement was announced in the United States proceedings (The settlement in the United States was subsequently approved on December 13, 2013, and is currently under appeal), and second, the Merchant Law Group commenced rival proposed class actions in Alberta and Saskatchewan.
[17] The commencement of the rival actions had no effect on the activity in British Columbia, and over a nine-day period between April 22, 2013 and May 2, 2013, the certification motion was argued in the British Columbia action. Chief Justice Bauman reserved judgment.
[18] Chief Justice Bauman’s judgment was reserved for ten months because of a flurry of new developments in competition law and class action law. The developments led to additional oral and written submissions being made in the British Columbia action, including submissions about: the Supreme Court of Canada’s trilogy of competition law decisions, Pro-Sys Consultants Ltd. v. Microsoft Corp., 2013 SCC 57; Sun-Rype Products Ltd. v. Archer Daniels Midland Company, 2013 SCC 58, and Infineon Technologies AG. v. Option consummateures, 2013 SCC 59; the Supreme Court’s decision in A.I. Enterprises Ltd. v. Bram Enterprises Ltd., 2014 SCC 12; and the British Columbia Court of Appeal’s decision in Wakelam v. Wyeth Consumer Healthcare, 2014 BCCA 36.
[19] While Chief Justice Bauman’s decision was under reserve, the Plaintiffs began settlement negotiations with Bank of America, and a settlement agreement was reached in August 2013. (The agreement was subsequently amended on July 7 and 8, 2014.)
[20] Under the settlement agreement, which was initially signed on August 26, 2013, Bank of America pays $7.75 million and agrees to co-operate in the ongoing prosecution of the Canadian actions in exchange for a release and the dismissal of the action. The co-operation element is a valuable feature of the settlement agreement, and this is particularly so because as revealed below, there is a certified class action against the non-Settling Defendants in British Columbia.
[21] At the time of the settlement with the Bank of America, the Saskatchewan Court had scheduled a carriage motion. The situation was similar in Alberta where the Merchant Law Group took the position that its action should be scheduled for a certification motion. The carriage question was creating an impediment to taking steps for approval of the settlement with the Bank of America that had been reached in the British Columbia action.
[22] Meanwhile, on March 27, 2014, Chief Justice Bauman certified the British Columbia action as a class action pursuant to the Class Proceedings Act, R.S.B.C. 1996, c. 50. Both sides appealed the certification order to the British Columbia Court of Appeal.
[23] With the contested certification under appeal, on July 11, 2014, the British Columbia action was certified for settlement purposes against the Bank of America, but the situation in Alberta and Saskatchewan remained unresolved, and on August 12 and 13, 2014, at the suggestion of Associate Chief Justice Rooke, Class Counsel and the Merchant Law Group attended a two-day Judicial Dispute Resolution Conference presided over by Justice S. Martin.
[24] The Judicial Dispute Resolution Conference was successful in resolving the impasse in Alberta and Saskatchewan, and the Merchant Law Group agreed to stay its rival proposed class actions. The actions were in fact stayed by court orders in both provinces. Under the agreement, Class Counsel assumed the responsibility and the cost of obtaining the stays and they agreed to indemnify the Merchant Law Group for any costs claims in the stayed Alberta and Saskatchewan actions.
[25] The agreement between Class Counsel and the Merchant Law Group - which is a Fee Sharing Agreement - stated:
(Agreement text continues exactly as in the source…)
[26] I will have more to say about this Fee Sharing Agreement in the analysis and discussion below, but I foreshadow to say that in my opinion the agreement is unapproved and unenforceable and may possibly be an illegal agreement.
[27] And I pause here to say that while I was provided with a fact brief of over 1,200 pages, a book of authorities, and a 45-page factum for this motion and while the existence of the Agreement between Class Counsel and the Merchant Law Group was disclosed, the Agreement itself was not produced until I asked that it be produced at the hearing of the motions.
[28] What I knew about the Fee Sharing Agreement before it was provided to me, is set out in Class Counsel’s factum at paras. 23-26, as follows:
(quoted factum text reproduced)
[29] Class Counsel’s arrangements with the consulting law firms (Robins, Kaplan, Miller & Ciresi, LLP, Kirby McInerney, and Jensen Shawa Solomon Duguid Hawkes) were disclosed, and, in my opinion, the Fee Sharing Agreement with the Merchant Law Group ought to also have been fully disclosed to the Court.
[30] As part of its fee approval process, this Court may approve the arrangements with the consulting law firms because these arrangements are, practically speaking, justifiable costs incurred or disbursements incurred by Class Counsel to advance their proposed class action, but the Class Members are also being asked to pay a legal fee to Merchant Law Group, and this demand for legal fees should have been disclosed in a transparent way.
[31] Paragraph 12 of the Fee Sharing Agreement envisions disclosure “where disclosure is required by law or by any of the Courts in the Consortium Credit Card Actions”. I suspect that Justice Martin insisted that this paragraph be included in the Fee Sharing Agreement so that the Agreement would be disclosed. In my opinion, there is and was no excuse for Class Counsel not fully disclosing the Fee Sharing Agreement to the Court.
[32] Returning to the narrative, with the carriage issue having been resolved in Alberta and Saskatchewan, Class Counsel obtained a consent certification for the purposes of the settlement with Bank of America in Alberta on September 19, 2014, in Saskatchewan on September 2, 2014, in Ontario on October 2, 2014, and in Québec on October 14, 2014.
[33] On December 8-10, 2014, the British Columbia Court of Appeal heard argument on the contested certification, and the Court reserved judgment.
[34] On April 1, 2015, the Plaintiffs signed a settlement agreement with Capital One. Under the settlement, Capital One pays $4.25 million and agrees to co-operate in the ongoing prosecution of the Canadian actions in exchange for a release and the dismissal of the action. The co-operation element is a valuable feature of the settlement agreement.
[35] On April 22, 2015, the Plaintiffs signed a settlement agreement with Citigroup. Under the settlement, Citigroup pays $1.63 million and agrees to co-operate in the ongoing prosecution of the Canadian actions in exchange for a release and the dismissal of the action. The co-operation element is a valuable feature of the settlement agreement.
[36] On August 19, 2015, the British Columbia Court of Appeal varied Chief Justice Bauman’s certification judgment and certified several causes of action that he had not been certified. Neither party sought leave to appeal to the Supreme Court of Canada.
[37] With the certified action ongoing in British Columbia, Class Counsel took steps to obtain certifications for settlement purposes with the settling Defendants in all five provinces. Consent certifications were obtained: in British Columbia, on August 14, 2015; in Alberta, on August 18, 2015; in Ontario, on August 6, 2015; in Saskatchewan, on August 21, 2015; and in Québec, on August 27, 2015.
[38] Thus, in the British Columbia action, there is a certified class action against the Defendants and in all the actions, the Plaintiffs have entered into Settlement Agreements with three of the Defendants, as follows:
Defendant
Amount of Settlement
Bank of America
$7,750,000
Citigroup
$1,630,000
Capital One
$4,250,000
Total
$13,630,000
[39] The Plaintiffs seek approval of these settlements.
[40] Class Counsel seeks approval of the Contingency Fee Agreements, and approval of payment of a counsel fee of $3,407,500 and disbursements of $384,571.95.
[41] As of September 30, 2015, the billable time of the Class Counsel was:
• Branch MacMaster, LLP, $1,499,240.50
• Camp Fiorante Matthews Mogerman LLP, $1,595,612.50
• Consumer Law Group $333,587.50
[42] Although there is no plan for a distribution of the settlement funds to Class Members at this time, the Representative Plaintiffs in each jurisdiction approve the payment of Class Counsel’s fees and disbursements.
[43] Walmart initially objected to the Settlement Agreements but withdrew its objection.
[44] There are no other objections to the Settlement Agreements and no objections to the fee requests of Class Counsel. Of course, the Class Members would not have known that their Class Counsel were planning to pay the Merchant Law Group $800,000 plus taxes plus disbursements from the Class Members’ settlement proceeds.
C. SETTLEMENT APPROVAL
[45] Section 29(2) of the Class Proceedings Act 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.
[46] 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.
[47] 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.
[48] The case law establishes that a settlement must fall within a zone of reasonableness.
[49] The design of the approval process requires the court to carefully scrutinize any proposed settlement.
[50] Of these goals of class actions, the most important for the approval process is access to justice.
[51] 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.
[52] In my opinion, having regard to the various factors used to determine whether to approve a settlement, the Settlement Agreements in the case at bar should be approved.
D. APPROVAL OF THE CONTINGENCY FEE AGREEMENT
[53] Section 32 of the Class Proceedings Act, 1992 addresses the matter of counsel fees in class proceedings.
(text of s. 32 reproduced)
[54] The Contingency Fee Agreements between Class Counsel and the respective Representative Plaintiffs are typical or conventional agreements common to class actions. The agreements comply with the formal requirements of the Act, and I approve them.
[55] The Fee Sharing Agreement between Class Counsel and the Merchant Law Group, set out above, is a different matter altogether.
[56] The Fee Sharing Agreement is an agreement respecting fees and disbursements between a solicitor and a representative party under s. 32 of the Act, because it is an agreement about how the fees paid to Class Counsel by the Class Members are to be paid and then shared. This agreement is not enforceable unless approved by the court and for the reasons set out below, I shall not approve the Fee Sharing Agreement.
E. APPROVAL OF CLASS COUNSEL’S FEE
[57] Putting aside for the moment the matter of the Fee Sharing Agreement between Class Counsel and the Merchant Law Group, Class Counsel’s claim for payment of legal fees and disbursements is fair and reasonable.
[58] 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.
[59] 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; (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.
[60] When the five proposed class actions in the case at bar were commenced in 2011… competition law actions were very, very high-risk and complex litigation.
[61] The award of $3,384,571.95 includes full recovery of disbursements, including the expense of the consulting law firms but reduces Class Counsel Fee by 10%.
[62] I appreciate that the claim for remuneration of the consulting law firms is included as part of the claim for counsel fees by Class Counsel but properly it should have been treated in the conventional way as a claim for disbursements incurred by Class Counsel.
[63] I make the 10% discount to the claimed counsel fee… for three reasons.
[64] First, pursuant to the Fee Sharing Agreement a portion of the counsel fee was to be shared with the Merchant Law Group, but… the Fee Sharing Agreement is an unauthorized, unenforceable, and possibly illegal agreement.
[65] Second, Class Counsel did not serve the best interests of Class Members by not disclosing the Fee Sharing Agreement…
[66] Third, for national class actions, it is time to stop blaming the Canadian Constitution…
[67] Addressing the three reasons in more detail…
[68] I do not approve of it… It is not fair and reasonable for a client to pay for legal services that were useless to the client.
[69] In the case at bar, the Merchant Law Group did not make a contribution to the achievement of the settlement agreement and the firm should not share in the recovery.
[70] Rather than agreeing to pay the Merchant Law Group, Class Counsel had the alternatives of pushing on with a carriage motion…
[71] Indeed, if Class Counsel lost the carriage fight, they could fall back on the British Columbia action.
[72] Further, the Fee Sharing Agreement may not be enforceable because of the law against champerty and maintenance…
[73] Up until relatively recently, in Ontario, contingent fee agreements… were once regarded as categorically illegal and unenforceable as champerty.
[74] (quotation from Morden and Perell, The Law of Civil Procedure in Ontario)
[75] In Ontario, the leading case is McIntyre Estate v. Ontario (Attorney General) (2002).
[76] I am not in the position of this fee approval motion to determine whether the Fee Sharing Agreement is illegal as maintenance. All I can say is that it may be.
[77] Moving on to the second reason for discounting Class Counsel’s fee…
[78] I am prepared to accept that Class Counsel genuinely and sincerely thought that it was both necessary and in the best interests of the Class Members…
[79] The merits of the carriage and the stay arguments could not be disregarded…
[80] I say it is the good fight because the integrity of the entrepreneurial model for the class action regime depends on genuine risk and genuine competition…
[81] I do not know what arguments the Merchant Law Group had available…
[82] Whether or not Class Counsel had the better side of a carriage fight…
[83] I repeat that I accept that Class Counsel genuinely believed that they were acting in the best interests of the Class Members…
[84] Moving on to the third reason for a 10% deduction in the counsel fee…
[85] The circumstances of the case at bar can be used to show that the legal tools necessary to manage national class actions are already in place.
[86] Assuming that only the national British Columbia action had been commenced…
[87] I confess that apart from the matter of the Fee Sharing Agreement…
[88] If rival class actions emerged as they did in the case at bar…
[89] If the courts in Saskatchewan or Alberta on a stay motion, agreed with the Defendants or with Class Counsel…
[90] Still using the case at bar to illustrate the last point…
[91] An amendment to the Constitution is not necessary…
F. CONCLUSION
[92] For the above reasons, I approve the three settlements, the contingency fee agreements, and a Class Counsel fee of $3,384,571.95, all inclusive. I find that the Fee Sharing Agreement is unenforceable, and I order Class Counsel not to pay any sums from the settlement proceeds or from any other source now or in the future on account of the unauthorized and possibly illegal Fee Sharing Agreement.
Perell, J.
Released: November 23, 2015
COURT FILE NO.: CV-11-426591CP
DATE: 20151123
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
JONATHON BANCROFT-SNELL and 1739793 ONTARIO INC.
Plaintiffs
– and –
VISA CANADA CORPORATION, MASTERCARD INTERNATIONAL INCORPORATED, BANK OF AMERICA CORPORATION, BANK OF MONTREAL, BANK OF NOVA SCOTIA, CANADIAN IMPERIAL BANK OF COMMERCE, CAPITAL ONE FINANCIAL CORPORATION, CITIGROUP INC., FEDERATION DES CAISSES DESJARDINS DU QUÉBEC, NATIONAL BANK OF CANADA INC., ROYAL BANK OF CANADA, and TORONTO-DOMINION BANK
Defendants
REASONS FOR DECISION
PERELL J.
Released: November 23, 2015