CITATION: Zwaniga v. Johnvince Foods Distribution L.P., 2017 ONSC 888
COURT FILE NO.: 11-CV-422868CP
DATE: 20170207
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
DAVID ZWANIGA AND JENNIFER ZWANIGA
Plaintiffs
– and –
JOHNVINCE FOODS DISTRIBUTION L.P. AND REVOLUTION FOOD TECHNOLOGIES INC.
Defendants
Stephen Birman, for the Plaintiffs
Jill M. Knudsen for the Defendant Johnvince Foods Distribution L.P.
Sonu Dhanju-Dhillon for the Defendant Revolution Food Technologies Inc.
HEARD: February 7, 2017
REASONS FOR DECISION
PERELL, J.
1. Introduction
[1] In this action under the Class Proceedings Act, 1992, S.O. 1992, c. 6, and in a companion action against the directors of Revolution Food Technologies Inc.; namely Roderick Knight, Edward Valleau, and Dvean Hawbolt (Court File No. 11-CV-435955CP), this is an omnibus motion for: (a) certification; (b) approval of a settlement; (c) approval of Class Counsel fees; and (d) incidental relief.
2. The Class Actions
[2] In 2011 the proposed Representative Plaintiffs, David and Jennifer Zwaniga, commenced a proposed class action under the Class Proceedings Act, 1992, S.O. 1992, c. 6, against Revolution Food Technologies Inc., a vending machine distributor, and Johnvince Foods Distribution L.P., which is a vendor of candies and confections and the distributor of Planters®/MD peanuts in Canada. Pursuant to s. 6 of the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3 (“the Act”), the Zwanigas alleged misrepresentation and claimed damages and rescission of an alleged franchise agreement. They also alleged a breach of the statutory duty of fair dealing under the Act.
[3] Before the certification motion, Johnvince Foods brought a motion for summary judgment to have the action dismissed as against it. I granted the motion. See Zwaniga v. Johnvince Foods Distribution, 2012 ONSC 5234, which judgment was affirmed by the Court of Appeal on April 26, 2013.
[4] After the action was dismissed, Johnvince Foods held in trust Credit Account funds of $62,925.12 net of its counsel's legal fees.
[5] On April 22, 2015, Revolution Food Technologies was dissolved. Its directors have no insurance and no funds to respond to the Plaintiffs' claims in any meaningful way.
3. The Settlement
[6] In the circumstances, the parties decided to settle the proposed class actions. They along with Johnvince Foods signed a Consent Certification and Settlement Agreement under which the $62,925.12, less approved legal fees and the Class Proceedings Fund levy, would be distributed pro rata, based on the number of peanut vending machines purchased, to each Class Member who identifies himself or herself following court approval.
[7] Under the Settlement Agreement, a "Notice", "Claim Form" and "Opt-Out Form" will be provided by Class Counsel to all known Class Members whose telephone numbers have been provided by Revolution Food Technologies (of which there are approximately 342 in total) and who respond based on the following plan; namely, each individual listed in a document provided by Revolution Food Technologies will be contacted by Class Counsel at the telephone numbers provided and asked whether they wish to receive a Notice, Claim Form and Opt-Out Form and, if so, to provide mailing address information. Class Counsel will make up to three attempts to reach each Class Member by telephone, leaving messages where possible.
[8] Class Members will have until May 7, 2017, to either submit a Claim Form for a pro rata share of the Net Settlement Amount or to opt-out of the class proceeding. Class Members who opt-out of the Settlement Agreement will have until July 7, 2017, to continue their own claims against Revolution Food Technologies and/or the directors.
[9] In summary, the Settlement Agreement contains the following provisions:
• Revolution Food Technologies will consent to the certification of this action for settlement purposes.
• The action against the directors will be certified for settlement purposes.
• Johnvince Foods will direct the net funds in the Credit Account of $62,925.12 to Class Counsel to be distributed, less legal fees and the Class Proceedings Fund levy.
• Class Members who submit a Claim Form will receive a pro rata recovery of the Net Settlement Amount based on the number of machines purchased as set out at Exhibit "A" to the Settlement Agreement.
• Class Members will have until May 7, 2017, to either submit a Claim Form for recovery of a pro rata share of the Net Settlement Amount or to opt-out of the Class Proceeding.
• The Notice will remain on Thomson, Rogers' website until July 7, 2017.
[10] The Representative Plaintiffs support the proposed settlement and the payment of legal fees.
4. Class Counsel’s Fee Request
[11] The Retainer Agreement entered into with the Representative Plaintiffs permits Thomson, Rogers, as Class Counsel, to charge a contingency fee of 33%, plus disbursements and HST.
[12] Thomson, Rogers proposes to reduce its legal fees to 15% of the Settlement Amount ($9,438.77), plus HST ($1,227.04), for a total of $10,665.81.
[13] The fee represents a small fraction of the total docketed time and disbursements incurred by Class Counsel in prosecuting the action, the settlement approval, and the claims management process for approximately 342 potential Class Members.
[14] The Class Proceedings Fund is entitled to a levy of 10% of the Net Settlement Amount (after payment of legal fees) and must be reimbursed out of the settlement funds. This required levy is $5,225.93.
5. Certification for Settlement Purposes
[15] The court is required to certify the action as a class proceeding where the following five-part test in s. 5 of the Class Proceedings Act, 1992 is met: (1) the pleadings disclose a cause of action; (2) there is an identifiable class of two or more persons that would be represented by the representative plaintiff; (3) the claims of the class members raise common issues; (4) a class proceeding would be the preferable procedure for the resolution of the common issues; and (5) there is a representative plaintiff who: (a) would fairly and adequately represent the interests of the class; (b) has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and (c) does not have, on the common issues for the class, an interest in conflict with the interests of other class members.
[16] The fact that an action is certified on consent for settlement purposes does not dispense with the need to meet the certification criteria but they may be less rigorously applied in a settlement context: Osmun v. Cadbury Adams Canada Inc., [2009] O.J. No. 5566 (S.C.J.) at para. 21.
[17] Pursuant to s. 5 (1) of the Class Proceedings Act, 1992, I am satisfied that all of the criteria for certification have been satisfied.
6. Settlement Approval
[18] 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.
[19] 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 the 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, supra.
[20] In determining whether to approve a settlement, the court, without making findings of fact 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 CanLII 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.
[21] In the immediate case, having regard to the various factors that the court must consider in approving or rejecting a settlement, I conclude that the settlement is fair, reasonable, and in the best interests of the Class Members. I approve the settlement.
7. Class Counsel Fee
[22] 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 CanLII 22386 (ON SC), [2000] O.J. No. 2374 (S.C.J.) at para. 13; Smith v. National Money Mart, 2010 ONSC 1334 at paras. 19-20, varied 2011 ONCA 233; Fischer v. I.G. Investment Management Ltd., [2010] O.J. No. 5649 (S.C.J.) at para. 25.
[23] 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; Fischer v. I.G. Investment Management Ltd., supra, at para. 28.
[24] In my opinion, having regard to the various factors used to determine whether to approve the fees of class counsel, the fee request in the immediate case should be approved.
8. Conclusion
[25] Orders accordingly.
Perell, J.
Released: February 7, 2017
CITATION: Zwaniga v. Johnvince Foods Distribution L.P., 2017 ONSC 888
COURT FILE NO.: 11-CV-422868CP
DATE: 20170207
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
DAVID ZWANIGA AND JENNIFER ZWANIGA
Plaintiffs
– and –
JOHNVINCE FOODS DISTRIBUTION L.P. AND REVOLUTION FOOD TECHNOLOGIES INC.
Defendants
REASONS FOR DECISION
Perell, J.
Released: February 7, 2017