Urlin Rent a Car v. Furukawa Electric, 2016 ONSC 7965
CITATION: Urlin Rent a Car v. Furukawa Electric, 2016 ONSC 7965
DATE: 20161229
Court File No. CV-12-446737-CP
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
URLIN RENT A CAR LTD. and FADY SAMAHA
Plaintiffs
- and -
FURUKAWA ELECTRIC CO. LTD., AMERICAN FURUKAWA INC., FUJIKURA LTD., FUJIKURA AMERICA INC., FUJIKURA AUTOMOTIVE AMERICA LLC, LEONI AG, LEONI KABEL GMBH, LEONI WIRING SYSTEMS, INC., LEONISCHE HOLDING, INC., LEONI WIRE INC., LEONI ELOCAB LTD., LEONI BORDNETZ-SYSTEME GMBH, SUMITOMO ELECTRIC INDUSTRIES, LTD., SEWS CANADA LTD., SUMITOMO WIRING SYSTEMS, LTD., SUMITOMO ELECTRIC WIRING SYSTEMS, INC., SUMITOMO WIRING SYSTEMS (U.S.A.), INC., YAZAKI CORPORATION, YAZAKI NORTH AMERICA, INC., S-Y SYSTEMS TECHNOLOGIES EUROPE, GMBH, G.S. ELECTECH, INC., G.S.W. MANUFACTURING, INC., and G.S. WIRING SYSTEMS INC.
Defendants
Proceeding under the Class Proceedings Act, 1992
Court File No. CV-13-482967-CP
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
SHERIDAN CHEVROLET CADILLAC LTD., THE PICKERING AUTO MALL LTD., and FADY SAMAHA
Plaintiffs
- and -
SUMITOMO ELECTRIC INDUSTRIES, LTD., SEWS CANADA LTD., SUMITOMO WIRING SYSTEMS, LTD., SUMITOMO ELECTRIC WIRING SYSTEMS, INC., SUMITOMO WIRING SYSTEMS (U.S.A.), INC., DENSO CORPORATION, DENSO INTERNATIONAL AMERICA, INC., DENSO MANUFACTURING CANADA, INC., DENSO SALES CANADA, INC., MITSUBISHI ELECTRIC CORPORATION, MITSUBISHI ELECTRIC AUTOMOTIVE AMERICA, INC., MITSUBISHI ELECTRIC SALES CANADA INC., HITACHI, LTD., HITACHI AUTOMOTIVE SYSTEMS, LTD. and HITACHI AUTOMOTIVE SYSTEMS AMERICAS, INC.
Defendants
Proceeding under the Class Proceedings Act, 1992
Court File No. CV-12-449233-CP
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
SHERIDAN CHEVROLET CADILLAC LTD., PICKERING AUTO MALL LTD., and FADY SAMAHA
Plaintiffs
- and -
DENSO CORPORATION, DENSO INTERNATIONAL AMERICA INC., DENSO MANUFACTURING CANADA, INC., DENSO SALES CANADA, INC., TOKAI RIKA CO., LTD., TRAM, INC., TRMI, INC., TRIN, INC., CALSONIC KANSEI CORPORATION, CALSONIC KANSEI NORTH AMERICA, INC., SUMITOMO ELECTRIC INDUSTRIES LTD., SUMITOMO WIRING SYSTEMS LTD., SUMITOMO ELECTRIC WIRING SYSTEMS INC., SUMITOMO ELECTRIC WINTEC AMERICA, INC., SUMITOMO WIRING SYSTEMS (U.S.A.) INC., K&S WIRING SYSTEMS, INC., ALPS ELECTRIC CO., LTD., ALPS ELECTRIC (NORTH AMERICA), INC., and ALPS AUTOMOTIVE INC.
Defendants
Proceeding under the Class Proceedings Act, 1992
BEFORE: Justice Edward P. Belobaba
COUNSEL: Charles M. Wright and Jean M. LeClerc for Plaintiffs Neil Campbell and Lindsay Lorimer for Sumitomo Defendants Paul J. Martin for G.S. Electech Defendants Kevin Wright for Furukawa Defendants Katherine L. Kay and Mel Hogg for SY Systems Defendants Kelly Friedman for Hitachi Defendants Chantelle Spagnola for Denso Defendants Donald Houston for Alps Defendants James Gotowiec for Leoni and Mitsubishi Defendants David Klein and Angela Bespflug for four out-of-province objectors
HEARD: December 19, 2016
Auto Parts Class Actions – AWHS, ECU and HCP
Sumitomo and GS Electech Settlements and Fees Approval
Background
[1] I am case-managing some 30 class actions alleging price-fixing in the auto parts industry. The actions are at various stages of litigation and involve a variety of auto parts including automotive wire harness systems (“AWHS”), electronic control units (“ECU”) and heating control panels (“HCP”).
[2] The class actions materialized in the aftermath of high-profile criminal and regulatory investigations and prosecutions in the United States, Canada and Europe. Several international auto parts suppliers pleaded guilty to the charges against them and agreed to pay hefty fines, some in the hundreds of millions of dollars. In the U.S. prosecutions, 31 executives have been sentenced to significant prison terms and another 30 have been indicted. The class actions in the U.S. and Canada have been brought on behalf of direct purchasers, automobile dealers and/or end-payors.
Sumitomo and GS Electech
[3] The class actions against the Sumitomo and GS Electech defendants were certified for settlement purposes on November, 2, 2016 and the required notices were posted.
[4] Class counsel now advise that settlements have been reached with these two groups of defendants with respect to the AWHS, ECU and HCP components. The action against Sumitomo has settled for $11 million ($10.7 for AWHS, $150,000 for ECU and $150,000 for HCP.) The action against GS Electech has settled for $120.000 (for AWHS.) The settlements also contain the usual bar orders, broad releases and promises of continuing co-operation on the part of the defendants.
Settlement approval
[5] The applicable law is well known. The court must be satisfied that the proposed settlement is fair and reasonable and in the best interests of the class.[^1] In making this determination, the court must look beyond the self-serving “boiler plate” that still pervades the typical settlement approval factum (“we’re experienced class counsel - we know what we’re doing – trust us”) and look for objective evidence that the proposed settlement is indeed in the best interests of the class. As I noted in Sheridan Chevrolet:[^2]
If class action judges are to do their job (and be more than rubber-stamps) in the settlement approval process, and ensure that the settlement amount is indeed fair and reasonable and in the best interests of the class (and not just class counsel) then at the very least class counsel should provide affidavit evidence explaining why the actual settlement amount is fair and reasonable or more specifically, clear reasons why the settlement amount is in the “zone of reasonableness.”[^3]
[6] In this case, class counsel took my admonition to heart and provided the court with focused affidavit evidence, explaining why the Sumitomo and GS Electech settlements fall within a zone of reasonableness and are in the best interests of the class.
Sumitomo AWHS settlement
[7] I begin with the largest settlement. I am satisfied, for the reasons set out below, that the Sumitomo AWHS $10.7 million settlement falls within a zone or reasonableness.
[8] Sumitomo was primarily involved in unlawful activity in respect of RFQs for AWHS sold to Honda and Toyota. Honda and Toyota have opted out of the Ontario AWHS Action. As such, the class in Canada is primarily made up of indirect purchasers.
[9] Sumitomo settled with the indirect purchaser class in the U.S. (i.e. the equivalent of the Canadian class) for US$47,127,920. This sum includes amounts paid for ECU claims since there is no separate ECU case in the U.S. Given that the U.S. comparator is often used as one measure of the zone of reasonableness, it would follow that any Canadian settlement over and above $4.7 million would fall within said zone. The $10.7 million settlement herein is more than two times larger. This is certainly evidence that the settlement is fair and reasonable.
[10] There is also intangible but real value in the fact that Sumitomo was one of the key participants in the AWHS conspiracy and was the first co-conspirator to co-operate with authorities. This co-operation likely facilitated timely settlements and the payment of significant compensation to settlement class members and others.
Sumitomo ECU and HCP settlements
[11] The Sumitomo ECU and HCP settlements are quite small - $150,000 in each case. But here again, I am satisfied that the settlements fall within a zone of reasonableness.
[12] Sumitomo had very little in the way of direct ECU sales in Canada and a significant portion of the parts sold here were exported to the U.S. Sumitomo provided volume of commerce data with respect to several RFQs. If one applies the assumptions relied on by this court previously in the Furukawa and Fujikura settlements[^4] the total amount of potential damages justify a payment of no more than $150,000.
[13] As for HCP, the evidence is that there were no direct HCP sales into Canada. Sumitomo has also agreed to provide cooperation in respect of the HCP and ECU proceedings involving the other defendants. Here again a $150,000 settlement is not unreasonable.
[14] In short, I am satisfied on the evidence that the relatively modest $150,000 amounts agreed to in the Sumitomo ECU and HCP settlements were fair and reasonable.
GS Electech AWHS Settlement
[15] GS Electech has agreed to pay $120,000 in settlement of the AWHS claim. This is a modest settlement amount but it is an amount that makes sense given the following.
[16] GS Electech was a minor player in the AWHS market with a likely market share of less than one per cent during the class period. It was only fined $2.75 million (all numbers in U.S. dollars) by the U.S. Department of Justice. This fine is small compared to other defendants. The stipulated global volume of commerce in GS Electech’s guilty plea was only $11 million. If one applies the usual one-tenth proportion between Canada and the U.S., the total Canadian VOC would have been $1.1 million. Applying the price-fixing expert’s damage estimate methodology, this would translate into a potential damages estimate of only $55,000. Seen in this light, the $120,000 settlement (in Canadian funds) is certainly reasonable.
[17] In sum, I am satisfied that the Sumitomo and GS Electech settlements should be approved as fair and reasonable and in the best interests of the class.
The Klein objections
[18] The Klein law firm (“Klein”) is counsel to four individuals who have commenced two proposed class actions in the spring of this year - one in Manitoba and the other in Saskatchewan - alleging price-fixing in auto-parts, including AWHS and HCP. The two actions have not yet been certified as class proceedings.
[19] Klein advanced two objections at the hearing, one jurisdictional and the other about the reasonableness of the Sumitomo AWHS settlement. (Klein was not concerned with the modest ECU and HCP settlements.)
[20] Class counsel and Sumitomo agreed with Klein that this court does not have the jurisdiction to dismiss actions commenced outside of Ontario such as the two just noted. The impugned provision in the settlement agreement has now been corrected to reflect this obvious point. As to the objection about the reasonableness of the $10.7 million settlement, Klein could not point to any aspect of the settlement that was unfair or unreasonable or outside “the zone or reasonableness.” In its final written submission, Klein, to its credit, made clear that it was taking “no position as to the reasonableness of the settlement.”
[21] In a post-hearing written submission, Klein suggested that its four clients may want to opt out of the Sumitomo AWHS settlement. Class counsel responded with the reminder that all class members in the AWHS Action were given the opportunity to opt out of the AWHS Action in 2014 when the action against the Lear defendants was settled. Indeed, the applicable court-approved notice clearly stated that “[t]his is your only chance to exclude yourself or opt out of the Automotive Wire Harness Systems Action.”
[22] The opt-out deadline has long passed. It follows that Klein’s clients, all of whom are class members in the AWHS Action and eligible for compensation under the settlement herein, can no longer opt out of the AWHS Action or the Sumitomo settlement. The case law in Ontario on this point is clear and was succinctly summarized in the Winkler and Perell text as follows:
The case law establishes that where there are progressive or partial certifications of a class action, a class member will only have one opportunity to opt out of the action. Practically speaking, this means that once an action has been certified against any of the multiple defendants and a settlement is subsequently reached with some but not all of the defendants, the class member may not opt out of the settlement … [^5]
[23] After reviewing the Lear certification order and long-form notice, Klein advised the court that it would not be advancing the opt-out position.
Legal fees approval
[24] Based on the retainer agreements, class counsel are entitled to a 25 per cent contingency plus disbursements and taxes. As discussed in Cannon,[^6] this contingency amount is presumptively valid and on the facts herein should be approved. Class counsel are thus entitled to their requested legal fees in the amount of $2,579,840, disbursements in the amount of $52,102 and applicable taxes.
Disposition
[25] The Sumitomo and GS Electech settlements, totalling $11 million and $120,000 respectively, are approved. In my view, the settlements are fair and reasonable and in the best interests of the class. Class counsels’ legal fees are also approved.
[26] Orders to go as per the draft Orders that were signed by me at the conclusion of the hearing on December 19, 2016 and the draft Order that was signed today.
Belobaba J.
Date: December 29, 2016
[^1]: Dobbs v. Sun Life Assurance, (1998) 1998 14855 (ON SC), 40 O.R. (3d) 429 (Gen. Div.), aff’d (1998) 1998 7165 (ON CA), 41 O.R. (3d) 97 (C.A.), leave to appeal to S.C.C. refused Oct. 22, 1998. [^2]: Sheridan Chevrolet v. Furukawa Electric et al, 2016 ONSC 729. Also see the discussion in Leslie v. Agnico-Eagle Mines, 2016 ONSC 532 and Rosen v. BMO Nesbitt Burns Inc., 2016 ONSC 4752. [^3]: Supra, note 2, at para. 12. [^4]: Urlin Rent A Car v. Furukawa Electric et al, 2016 ONSC 5736. [^5]: Winkler, Perell, Kalajdzic and Warner, The Law of Class Actions in Canada, (2014) at 315. [^6]: Cannon v. Funds for Canada Foundation, 2013 ONSC 7686.