COURT FILE NO.: 11-CV-426377CP DATE: 20180808 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
JEFF ROTHMAN and MOSHE ROTHMAN Plaintiffs – and – KABA ILCO CORP., KABA CORPORATION, KABA FINANCE CORPORATION, KABA BENZING AMERICA INC., KABA U.S. HOLDING LTD., KABA DELAWARE, LLC, and KABA ILCO INC. Defendants
Aris Gyamfi and Gigi van Leeuwen for the Plaintiffs Angus T. McKinnon for the Defendants
Proceeding under the Class Proceedings Act, 1992
HEARD: August 7, 2018
PERELL, J.
Reasons for Decision
A. Introduction
[1] This action is a proposed class action under the Class Proceedings Act, 1992. The Plaintiffs, Jeff Rothman and Moshe Rothman, move for: (a) certification of the action for settlement purposes; (b) approval of the settlement; and (c) approval of Class Counsel’s fees.
[2] For the reasons that follow, the Rothmans’ motion is granted.
B. Facts
[3] Jeff Rothman, who lives with his family in Thornhill, is an Orthodox Rabbi employed by the Thornhill Community Shul. His son, Moshe Rothman, who also lives in Thornhill with his family, is a chartered accountant. The Rothman’s each purchased a Simplex 7100 Series Lock for use at their respective residences.
[4] The Simplex 7100 Series Lock is one of the locks manufactured by the Defendants, who will be collectively referred to as Kaba. The Defendants are: (a) Kaba Ilco Corp., a corporation under the laws of the State of North Carolina; (b) Kaba Corporation, a corporation under the laws of the State of Connecticut, and the parent corporation of Kaba Ilco Corp.; (c) Kaba Finance Corporation, a corporation under the laws of Delaware; (d) Kaba Workforce Solutions LLC (formerly Kaba Benzing America Inc.), a corporation under the laws of the State of Florida; (e) Kaba US Holding Ltd., a corporation under the laws of the United Kingdom; (f) Kaba Delaware, LLC, a corporation under the laws of the State of Delaware, and (g) Kaba Ilco Inc., a corporation under the laws of Canada.
[5] The locks at issue in this litigation consist of the following models: Simplex® or UnicanTM Model/Series 1000, L1000, 2000, 3000, 6200, 7000, 7100, 8000 or File Guard mechanical pushbutton lock manufactured before January 1, 2011.
[6] The Kaba locks are mechanical pushbutton locks that operate without a key. The locks are opened by inputting a numeric combination. The locks do not require keys, cards, or electric power. The Kaba mechanical locks are particularly popular with Orthodox Jews because the use of keys is prohibited on the sabbath.
[7] In 2010, it was discovered that the Kaba locks have a design defect. It was discovered that through the use of magnets, the internal mechanism of the lock could be manipulated to unlock the lock.
[8] Kaba admitted, among other things, that: (a) some of the locks manufactured before January 1, 2011 can be opened using rare earth magnets; (b) it knew no later than August 2010, that some of the locks manufactured before mid to late August 2010 could be opened using rare earth magnets; (c) Kaba did not issue a recall; (d) Kaba continued to distribute its defective locks in late August 2010 through January 1, 2011; (e) before mid to late August 2010, KABA did not test the locks to determine whether they could be opened or bypassed through the use of a rare-earth magnet; and (f) Kaba knew that the 6200 and 7100 Series Locks were marketed or sold by some distributors as being appropriate for keyless entrance for religious beliefs or purposes.
[9] Despite the defect in the locks and public knowledge of it, there are no reported incidents of a break and enter having occurred in houses equipped with the locks.
[10] On May 12, 2011, the Rothmans commenced a proposed class action against Kaba. The action was brought on behalf of a class defined as follows:
All residents of Canada, with the exception of Quebec who use or own a Simplex ® or Unican TM Model/Series 1000, L1000, 2000, 3000, 6200, 7000, 7100, 8000 or File Guard mechanical pushbutton lock manufactured before January 1, 2011 (“End Users”) or who purchased such a lock for re-sale (“Locksmiths”).
[11] The Rothmans delivered an Amended Statement of Claim on October 5, 2012.
[12] Kaba defended and does not admit liability.
[13] The Plaintiffs pleaded that Kaba owed a duty of care to the Plaintiffs and other Class Members and was negligent in the design, testing, manufacturing, marketing, distributing and selling of the locks. The Plaintiffs pleaded that Kaba knew about the defect but failed to disclose it or to recall the product and instead misrepresented the safety, security, and convenience of the locks.
[14] The Statement of Claim advances claims in negligence, negligent misrepresentation, breach of duty to warn, breach of express and implied warranty, and breach of s.52 of the Competition Act, R.S.C. 1985, c. C-34.
[15] For the purposes of settlement, the Plaintiffs propose the following common issue:
Is KABA liable to the Class for the negligent design, testing, development, manufacture, assembly, inspection, promotion, marketing, distribution and sale, in Canada, of certain defective pushbutton locks?
[16] There were also lawsuits against Kaba in Québec and in the United States, and in 2015 the Multi-District Litigation in the United States arising from the same defect settled.
[17] On November 22, 2016, the action in Québec settled and the Superior Court of Québec approved the settlement.
[18] After the settlement in the United States, settlement negotiations began in Canada and continued over the course of two years.
[19] In March 2017, the parties reached an agreement in principle to settle the action, on the same terms as the settlement reached in the parallel Quebec action.
[20] On May 18, 2018, the parties signed the formal Settlement Agreement. The major terms of the Settlement Agreement are as follows:
- The benefits available to Class Members vary depending upon the model/series of lock and whether the Class Member is a Locksmith or an End-User.
- Ricepoint Administration Inc. is appointed the administrator to administer claims under the settlement.
- All costs associated with notices and claims administration are borne solely by Kaba.
- All End-User Settlement Class Members are entitled to receive one DIY Upgrade Kit for each Lock in the Class Member’s possession.
- The cost of the DIY Upgrade Kits and the shipping costs will not be deducted from the Reserved Amount.
- In the alternative, End-User Settlement Class Members who purchased their lock(s) after January 1, 2001 and make a timely claim, will have the ability to elect from the following alternatives to receiving a DIY Upgrade Kit:
- End-User Settlement Class Members who purchased Simplex 1000, 6000, 7000, and/or 8100 series locks may elect to receive a protective metal shield to be installed outside the locks to deter magnetic manipulation of the locks (“DIY Shield”); or
- End-User Settlement Class Members may elect to have Kaba arrange for installation of a DIY Upgrade Kit at Kaba’s expense.
- The Settlement Agreement provides for the establishment of a Maximum Installation and Shield Costs fund of $320,000 reserved by Kaba to cover full or partial installation costs as well as Shields.
- For each Shield elected, $10 will be deducted from the Reserved Amount. If an End-User Settlement Class Member elects to have KABA arrange for installation of a DIY Upgrade Kit, the installation costs will also be deducted from the Reserved Amount.
- End-User Settlement Class Members will indicate which Settlement Benefit they elect using a simplified Claim Form, which does not require proof of purchase unless a Settlement Class Member files a claim for more than five locks.
- There is no cap to the number of locks that Settlement Class Members may claim for under the Settlement Agreement.
- Locksmith Settlement Class Members are eligible, within the Claims Period, to exchange unsold inventory of locks for new and identical product that has been upgraded to deter against magnetic manipulation. These new locks are complete with all parts and are in their original factory package in a resaleable condition.
- To obtain the new inventory, Locksmith Settlement Class Members are only required to contact Kaba by phone or in writing. No claim form is required.
- All costs associated with the exchange of inventory, including shipping, will be borne by Kaba.
- Class Counsel will seek court approval for the payment of a $2,500 honorarium to each of Jeff and Moshe Rothman.
- Kaba agrees to pay $296,460.17 plus HST Tax ($335,000) to Class Counsel for legal fees, disbursements, and other expenses as approved by this Court.
[21] A notice of the proposed settlement was disseminated by Ricepoint Administration Inc. by way of a ¼ page advertisement in the national editions of the Globe & Mail and the Canadian Jewish News. The notice was also posted on a Settlement Website. There were no objectors to the settlement.
[22] If approved by the Court, Ricepoint Administration Inc. will disseminate the Notice of Certification and Settlement Approval using the same publications. The opt-out deadline proposed is 45 days after the date of the first publication of Notice.
[23] Class Counsel recommends this Settlement Agreement as fair, reasonable and in the best interests of Class Members.
C. Certification
[24] Pursuant to s. 5(1) of the Class Proceedings Act, 1992, the court shall certify a proceeding as a class proceeding if: (1) the pleadings disclose a cause of action; (2) there is an identifiable class; (3) the claims or defences of the class members raise common issues of fact or law; (4) a class proceeding would be the preferable procedure; and (5) there is a representative plaintiff or defendant who would adequately represent the interests of the class without conflict of interest and there is a workable litigation plan.
[25] 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 at para. 21 (S.C.J.).
[26] I am satisfied that all the criteria for certification are satisfied in the immediate case.
[27] The certification motion is granted.
D. Settlement Approval
[28] Section 29 of the Class Proceedings Act, 1992 requires court approval for the discontinuance, abandonment, or settlement of a class action. Section 29 states:
Discontinuance, abandonment and settlement
- (1) A proceeding commenced under this Act and a proceeding certified as a class proceeding under this Act may be discontinued or abandoned only with the approval of the court, on such terms as the court considers appropriate.
Settlement without court approval not binding
(2) A settlement of a class proceeding is not binding unless approved by the court.
Effect of settlement
(3) A settlement of a class proceeding that is approved by the court binds all class members.
Notice: dismissal, discontinuance, abandonment or settlement
(4) In dismissing a proceeding for delay or in approving a discontinuance, abandonment or settlement, the court shall consider whether notice should be given under section 19 and whether any notice should include,
(a) an account of the conduct of the proceeding; (b) a statement of the result of the proceeding; and (c) a description of any plan for distributing settlement funds.
[29] 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. Kidd v. Canada Life Assurance Company, 2013 ONSC 1868; Farkas v. Sunnybrook and Women’s Health Sciences Centre, [2009] O.J. No. 3533 (S.C.J.) at para. 43; Fantl v. Transamerica Life Canada, [2009] O.J. No. 3366 (S.C.J.) at para. 57.
[30] 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. Kidd v. Canada Life Assurance Company, 2013 ONSC 1868; Farkas v. Sunnybrook and Women’s Health Sciences Centre, [2009] O.J. No. 3533 (S.C.J.) at para. 45; Fantl v. Transamerica Life Canada, [2009] O.J. No. 3366 (S.C.J.) at para. 59; Corless v. KPMG LLP, [2008] O.J. No. 3092 (S.C.J.) at para. 58; Dabbs v. Sun Life Assurance Co. of Canada.
[31] In determining whether to approve a settlement, the court, without making findings of fact about 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) 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.
[32] 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 (1998). A settlement does not have to be perfect, nor is it necessary for a settlement to treat everybody equally. Fraser v. Falconbridge Ltd., [2002] O.J. No. 2383 (S.C.J.) at para. 13; McCarthy v. Canadian Red Cross Society (2007), 158 ACWS (3d) 12 (Ont. S.C.J.) at para. 17.
[33] In my opinion, having regard to the various factors used to determine whether to approve a settlement, the settlement in the immediate case should be approved.
[34] In my opinion, it is a good settlement. The terms of the Settlement Agreement provide full recovery to Class Members by rectifying the defect that gave rise to the claims in this action. The Settlement Benefits put Class Members in a position that is equal to what they would have been in if there was no defect in the locks they purchased and provides benefits even to those who did not purchase the locks but inherited them from the acquisition of property in which they were installed.
E. Fee Approval
[35] 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. 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; Parsons v. Canadian Red Cross Society at para. 13.
[36] 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, 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. 28.
[37] In my opinion, having regard to the various factors used to determine whether to approve Class Counsel’s fee request, the request in the immediate case should be approved.
[38] Further, in my opinion, this is an appropriate case to approve the honorariums.
F. Conclusion
[39] For the above reasons, the Rothmans’ motion is granted.
Perell, J.