COURT FILE NO.: CV-15-22778
DATE: 20180130
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Richard Marchand and Kenneth Mortier
Plaintiffs
– and –
Ford Motor Company and Ford Motor Company of Canada Ltd.
Defendants
John Archibald and Paul Bates, for the Plaintiffs
Hugh DesBrisay, for the Defendants
HEARD: January 19, 2018
Raikes J.
[1] The plaintiffs move for an order, inter alia, adding Mr. Mortier as a representative plaintiff, certifying the action as a class proceeding for settlement purposes, approving the settlement including proposed notices to class members and notice plan, and ancillary relief arising from the certification and settlement approval.
Nature of Action
[2] This action was commenced by statement of claim issued October 5, 2015. The plaintiff, Mr. Marchand, is an Ontario resident and owner of a 2013 Ford Edge. Mr. Marchand commenced the action on his own behalf and on behalf of all putative class members in Canada who purchased or leased one or more of the following Ford vehicle models:
• 2011 – 2015 Ford Explorers; • 2011 – 2013 Ford Edge (3.5L or 3.7TIVCT engine); and • 2011 – 2013 Lincoln MKX (3.5L or 3.7TIVCT engine).
[3] The statement of claim alleges that these vehicles have a dangerous defect that causes exhaust emissions to leak into the vehicles and passenger compartments. The plaintiff asserts claims based on negligent manufacture and design, failure to warn, unjust enrichment and waiver of tort.
[4] The action parallels class proceedings in the United States where a nation-wide settlement was reached on October 11, 2016 after completion of discoveries. The US settlement has been approved. The terms of the US settlement informed the discussions between the parties in this proceeding.
[5] In addition, a similar class proceeding was commenced on November 28, 2016 in Québec Superior Court (Corica v. Ford Motor Company and Ford Motor Company of Canada Ltd. – court file no. 500 – 06 – 000827 – 168). The proposed class definition in the Québec action is “all persons who reside or have resided in Québec who purchased and/or leased one or more of the Ford Explorers, Model Years 2011 – 2015”. The allegations and claims in the Québec action are similar to those in this action.
[6] For ease of reference, I will refer to this action as the Ontario action and to the Corica action as the Québec action in this decision.
[7] I pause to note at the outset that counsel acting for the parties in both actions agreed to the use and application of the CBA protocol for multijurisdictional disputes. As a result, the steps leading to this hearing were coordinated and jointly conducted by teleconference and video conference. Indeed, the hearing on January 19 which gives rise to this decision was conducted by video conference with the Québec action where Mr. Justice Pierre Gagnon of the Québec Superior Court presided.
[8] Proceeding in this manner was both efficient and helpful. During submissions, there were a couple of points of clarification that assisted to ensure that there was no overlapping class definition and that notice to the class was consistent and appropriate for both English and French-speaking residents in Canada.
[9] As is evident, the proposed class definition in the statement of claim in the Ontario action is broader than the proposed Québec class definition in two aspects: geographic scope and the vehicles affected by the alleged defect. Dealing with the latter, the plaintiff seeks on this motion to
• Amend the proposed class definition to exclude the owners of the Ford Edge and Lincoln MKX models (the “Excluded Vehicles”); • Discontinue the claims of Mr. Marchand personally and on behalf of the owners of the Excluded Vehicles without prejudice and without costs; • Add Mr. Mortier, who owns a Ford Explorer, as a representative plaintiff for the class being certified.
The proposed class definition on the certification motion is that contained in the Settlement Agreement and is consistent with relief now sought.
Discontinuance
[10] During settlement negotiations, Ford provided class counsel with an analysis of complaint rates and warranty repair records for Excluded Vehicles. That analysis showed a very low incidence of exhaust odour complaints: only 61 of 717,125 Excluded Vehicles. In addition, Ford’s analysis indicated that repairs performed under a 2014 Technical Service Bulletin (TSB) appeared to have been successful as only one of the 61 vehicles returned for a second repair.
[11] As a result, class counsel concluded that there was a substantial risk that the claims in respect of the Excluded Vehicles would not be successful either at certification or at a trial on the merits. The parties have agreed that the claims of Mr. Marchand and other owners of the Excluded Vehicles should be discontinued on a without prejudice and without costs basis. This means of that the limitation period will no longer be tolled and will recommence running, and individual owners of those vehicles are free to bring an action against the defendants if they have not already done so. There has been no determination on the merits of such claims.
[12] Mr. Marchand owns an excluded vehicle but not a Ford Explorer to which the proposed settlement applies. Accordingly, it is necessary to add Mr. Mortier as a representative plaintiff. I order that Mr. Mortier be added to the statement of claim as a plaintiff in this action.
[13] I am satisfied that it is fair and reasonable and in the best interests of Mr. Marchand and the owners of the Excluded Vehicles that the claims asserted by and on their behalf be discontinued without prejudice and without costs pursuant to s. 29 of the Class Proceedings Act, 1992, S. O. 1992, c. 6 (hereafter “CPA”).
Certification
[14] The requirements for certification are found in section 5(1) of the CPA which may be summarized as follows:
(a) the pleadings disclose a cause of action; (b) there is an identifiable class of two or more persons; (c) the claims or defences of the class members raise common issues; (d) a class proceeding would be the preferable procedure for resolution of the common issues; and (e) there is a representative plaintiff who, (i) would fairly and adequately represent the interests of the class, (ii) has produced a plan for the proceeding that sets out a workable method of advancing the proceeding and of notifying class members of the proceeding, and (iii) does not have, on the common issues, an interest in conflict with the interests of other class members.
[15] The test for certification is relaxed in the context of a settlement approval. The same factors are considered but the test is not as rigorously applied: Currie v. McDonald’s Restaurants of Canada Ltd., 2006 CarswellOnt 1213 (S.C.J.) at para. 18; CSL Equity Investments Ltd. v. Valois, 2007 CarswellOnt 2521 (S.C.J.) at para. 5.
[16] The defendants consent to certification for the purpose of settlement only. If the settlement is not approved in both this action and in the Québec action, the parties will proceed as if this motion and the settlement never occurred.
[17] I am satisfied on my review of the statement of claim and the evidence filed on the motion for certification that:
• the statement of claim discloses a cause of action in negligence • there is an identifiable class of two or more persons • there is a common issue to be certified: did the Class Vehicles, or any of them, contain a defect which caused exhaust odour to enter the passenger compartment? • a class proceeding in this case is a fair, efficient and manageable method of advancing the claim and is preferable to the alternative which would require individual class members to bring individual actions for amounts which are not economically feasible • Mr. Mortier is an appropriate representative plaintiff to represent the class in respect of the common issue and settlement.
[18] With respect to the class definition, the parties have negotiated the following:
All persons resident in a Canadian province or territory, except for persons resident in the province of Québec, who currently own or lease, or who in the past owned or leased, a model year 2011 – 2015 Ford Explorer that was sold or leased in any province or territory of Canada, excluding:
(a) Ford employees, officers, directors, agents, and representatives, and their family members; (b) presiding judges and Class Counsel; (c) all persons who have previously executed and delivered a release or releases in favour of Ford US and/or Ford of Canada of claims relating to the presence of Exhaust Odour in a Class Vehicle; (d) all persons (a) who commenced one or more individual proceedings asserting claims of any nature relating to the alleged presence of Exhaust Odour in a Class Vehicle (including a lawsuit or proceeding under CAMVAP) and (b) who did not or does not voluntarily dismiss or discontinue such proceeding with prejudice prior to the Opt-Out Deadline; and (e) all those otherwise in the National Settlement Class that properly opt out of the National Settlement Class.
[19] This class definition is referred to in the Settlement Agreement as the “National Settlement Class”. It is an appropriate class definition for certification purposes.
[20] There are several defined terms in the Settlement Agreement which are capitalized. I have attempted to capture those defined terms in the same manner in this decision. To be clear, except to the extent modified by the order that is attached to this decision, the definitions set out in the Settlement Agreement apply to and are incorporated into that order.
[21] I turn now to the motion to approve the settlement.
Settlement Approval
[22] Settlement of a class proceeding requires court approval: s. 29 CPA. Once approved, the settlement binds all class members: s. 29(3) CPA.
[23] On a motion for court approval of a settlement of a class proceeding, the applicable test is whether, in all the circumstances, the settlement is fair, reasonable and in the best interests of those affected by it. The following principles apply to the consideration of a proposed settlement:
• the resolution of complex litigation through compromise of claims is encouraged by the courts and is consistent with public policy • a settlement negotiated at arms’ length by experienced counsel is presumptively fair • to reject the terms of the settlement and require that litigation continue, a court must conclude that the settlement does not fall within a range of reasonable outcomes • a court must be assured that the settlement secures appropriate consideration for the class in return for the surrender of litigation rights against the defendants. The court must recognize that there are a number of possible outcomes within a range of reasonableness • it is not the court’s function to substitute its judgment for that of the parties or to attempt to renegotiate a proposed settlement • it is also not the court’s function to litigate the merits of the action or simply rubber stamp a settlement.
(See Dabbs v. Sun Life Assurance Co. of Canada, [1998] O.J. No. 1598 (Ont. C.J. (Gen. Div.)) at para.9; Nunes v. Air Transat AT Inc. (2005), 20 C.P.C. (6th) 93 (Ont. S.C.) at para. 7; Osmun v. Cadbury Adams Canada Inc., 2010 ONSC 2643 at para. 31.)
[24] There are several factors which the courts have considered to assess the reasonableness of a proposed settlement. These factors include:
• the likelihood of recovery or likelihood of success, sometimes referred to as litigation risk • the amount and nature of discovery, evidence or investigation • the proposed settlement terms and conditions • the recommendation and experience of counsel • the likely duration of the litigation • the number of objectors and the nature of the objections • the presence of arms’ length bargaining and the absence of collusion • the positions taken by the parties in the litigation and during negotiations.
(See Marcantonio v. TVI Pacific Inc. (2009), 82 C.P.C. (6th) 305 at para. 12; Parsons v. Canadian Red Cross Society (1999), 40 C.P.C. (4th) 151 at paras. 71 – 73.
[25] The court must be satisfied that there is both substantive and procedural fairness. Procedural fairness deals with the manner in which the settlement has been reached. It requires a consideration of the process followed. Hard-fought arms’ length negotiations go a long way to satisfy the requirement of procedural fairness.
[26] For reasons which follow, I am satisfied that there is both substantive and procedural fairness. I find that the settlement is fair, reasonable and in the best interests of the class. The settlement is approved.
Settlement Terms
[27] The terms of the settlement are summarized at paras. 17 – 27 of the affidavit of Norman Groot filed in support of the motion.
[28] Essentially, the settlement provides partial reimbursement for the cost of repair of the exhaust odour issue. A 2016 Exhaust Odour TSB sets out the steps to address the problem in two distinct phases. The first phase involves sealing and part replacement as well as recalibration of the vehicles’ HVAC system. The second phase involves replacing the exhaust tips and muffler assembly for certain vehicles where the repair steps in phase I did not work.
[29] The settlement distinguishes between non-warranty repair owners and warranty repair owners with respect to the extent of reimbursement. The average cost of a phase I service repair is approximately $800 and for a phase 2 repair, the average cost is $616.
[30] Under the settlement, a non-warranty repair owner would be reimbursed 29% of the average cost of a phase I service repair and 37% of a phase 2 service repair. By contrast, a warranty repair owner would receive reimbursement of 29% of the average cost of a phase I service repair and the full reimbursement of the average cost of a phase 2 repair.
[31] The amounts to be paid by Ford toward these repairs is modest; however, in late 2017, Ford implemented a Customer Service Plan pursuant to which Ford dealers will perform certain of the phase I service repair steps free of charge. As a result, the partial reimbursement for phase I repairs will cover most if not all of the cost of that repair. Ford’s voluntary Customer Service Plan greatly enhances the benefits to the class of the settlement and makes the settlement terms far more attractive.
[32] The Settlement Agreement also provides for an arbitration process where the repairs prove ultimately unsuccessful. In that arbitration process, Ford waives certain defences which is also beneficial to class members.
[33] On the whole, I am satisfied that class members will receive tangible benefits from the settlement that will specifically address the underlying problem which gives rise to this litigation.
Settlement Process
[34] As indicated above, the negotiations to settle this class proceeding have been informed by the negotiations and settlement of the US litigation. Ford has not delivered a defence in this action as is common at this stage in a class proceeding. The parties engaged in arms’-length negotiations. Each side was represented by experienced counsel.
[35] The negotiations took place over a period in excess of one year. Numerous drafts were exchanged. This was not a quick and easy settlement. I am satisfied that there has been no collusion and that the best interests of the class have been taken into account by class counsel. I note that there have been no discussions of any kind to date with respect to the quantum of class counsel fees.
[36] Ford issued two Exhaust Odour TSB’s prior to the 2016 TSB which the plaintiffs allege failed to resolve the exhaust issue. In the course of settlement negotiations, Ford developed, with input from US plaintiffs’ counsel and class counsel, a 2016 Exhaust Odour TSB which Ford issued to its dealers in December 2016. The plaintiffs’ expert, Dr. David Renfroe has considered the 2016 Exhaust Odour TSB and concludes that it is reasonably likely to resolve the issue.
[37] I am satisfied that procedural fairness has been met in the negotiation of the settlement agreement in this case.
Litigation Risk
[38] Ford has not formally admitted the allegations and claims asserted; in fact, if the settlement is not approved, the action will proceed. Ford will deny the defects and any negligence. The action will be vigorously contested. It will require considerable expert evidence and voluminous production of documents. The motion for certification will likely be opposed with the risk that the action might not be certified if contested.
[39] Defective product litigation is inherently risky. It can take many years to get to trial on only the common issues. Individual issues like damages and causation may remain.
[40] The settlement in this case provides vehicle owners with a potential fix for the problem while they still own and use their vehicles and in a timely fashion.
Recommendation of Counsel
[41] It is trite to observe that class counsel recommend the settlement. It is hard to imagine a case where a settlement would be put forward for approval where class counsel did not recommend the settlement.
[42] In this case, class counsel are experienced in these matters. They have drawn upon the expertise and experience of counsel in the US litigation which was settled only after discovery. They have done their due diligence by engaging experts and investigating the problem and the steps for its resolution. The reasons expressed for their recommendation of the settlement make sense in the context of this case and the terms agreed upon.
Objections
[43] Comprehensive notice of the certification and settlement approval hearing was provided through various media across Canada. In addition, class counsel placed the terms of the Settlement Agreement on their website. As a result of that effort, they have received numerous inquiries from class members who almost universally approve of the settlement.
[44] The published notice directed putative class members who objected to the proposed settlement to make a written objection to the Administrator, RicePoint. No one appeared at the hearing in either Ontario or Quebec to object. Only one class member made a written objection to RicePoint. He objected to the settlement on the basis that it did not adequately compensate him and his family for the injury to their health from being exposed to exhaust which may have leaked into his vehicle.
[45] The Settlement Agreement expressly excludes from the release any and all claims for personal injury. Thus, the settlement does not affect a class member’s right to sue individually for personal injury damages.
[46] The draft order provided to the Court for consideration at the approval hearing includes a provision that the action be dismissed without costs and “with prejudice”. For greater certainty and to ensure that the defendants cannot raise the dismissal of this action per se as a bar to a claim for personal injury damages, the draft order has been modified.
[47] I note that class counsel advised that the statement of claim does not include a claim for damages for personal injury although it does allude to the potential for injury or harm as part of the allegations made. Counsel indicates that this was done for technical reasons to ensure recovery for economic loss.
[48] Regardless, I am satisfied that the proposed amended wording for the order dealing with dismissal of the action adequately protects putative class members like the objector who feel they may have a claim for personal injury damages. This should not be taken to mean that such claims have merit or are not otherwise barred. Such issues will be addressed if and when a claim is asserted.
Honoraria for Representative Plaintiffs
[49] The Settlement Agreement provides for payment of an honorarium to each of Mr. Marchand and Mr. Mortier in the amount of $5,000. This payment is subject to court approval. Counsel for the parties agree that I may reduce the amount but I cannot increase it.
[50] The affidavits filed show that both representative plaintiffs have been actively involved with class counsel. They have diligently performed their responsibilities as representative plaintiffs. Neither Mr. Marchand nor Mr. Mortier have previously acted as a representative plaintiff in other class proceedings.
[51] I expressed concern to counsel that I do not wish to encourage the development of professional representative plaintiffs; viz. individuals who repeatedly act as representative plaintiffs in various class proceedings to earn income through the payment of honoraria. I am satisfied that that practice is not at play in this case. The amount of the honoraria proposed is modest. I approve the proposed payment of $5,000 each as honoraria to Mr. Marchand and Mr. Mortier.
Notice Plan
[52] Counsel have provided a notice plan together with a short-form and long-form notice for approval. Changes have been made to the draft notice(s) to address concerns raised during the hearing.
[53] The notice for the certification and settlement approval hearing was widely disseminated by, inter alia, publication in numerous newspapers across Canada. Ford also gave notice to those customers in its NAVIS database.
[54] The notice program for the certification and settlement approval hearing was quite successful. Plaintiffs’ counsel report contact by many putative class members whose contact information they have.
[55] The proposed publication of the settlement approval and of the time-line to opt out of the settlement is far less comprehensive. The parties seek to have the notice published once in each of two newspapers: in English in the Globe & Mail and in French in La Presse. The notice plan contemplates other means of communication including postings on webpages and notice directly to those in the NAVIS database.
[56] The rationale for the reduced notice program at this stage is that such expansive notice is unnecessary. The fact of the class proceeding and its settlement has already been widely advertised. Affected individuals can follow up for the results of the hearing by searching online.
[57] I am satisfied that the proposed notice plan is adequate having regard to the previous notice given. In my view, the notices are likely to come to the attention of putative class members affected by the settlement.
Opt-Out Period and Coupon
[58] The Settlement Agreement provides for the delivery of an opt-out coupon to the Administrator, RicePoint, by April 6, 2018 failing which the owner or lessee of the vehicle is part of the class and bound by its terms.
[59] I find the time frame to opt-out to be adequate in this case. The claim deals with vehicles that are now 3-7 years old. Not all Ford Explorers in these model years have experienced the issue. There has been good response to the notice already provided and the notice plan has a reasonable prospect of coming to the attention of those affected.
[60] The opt-out coupon is satisfactory and is approved.
Conclusion
[61] I conclude as follows:
• Mr. Mortier should be added as a representative plaintiff • The claim by Mr. Marchand and the owners of Excluded Vehicles should be dismissed without prejudice and without cost • The action should be certified as a class proceeding for settlement purposes • The settlement is fair, reasonable and in the best interests of the class • The notice plan and notices proposed are appropriate and approved • The opt-out coupon is satisfactory and is approved • Payment of a $5,000 honoraria to each of Mr. Marchand and Mr. Mortier is approved.
[62] Counsel have provided a draft order, revised to address the concerns raised at the hearing, which is satisfactory. A copy of that order which includes orders ancillary to my findings above is marked as Schedule “A” to this decision and is hereby incorporated into the decision.
[63] The last issue is the process to be followed for the determination and approval of class counsel fees. The settlement agreement contemplates that Ford will pay those fees and disbursement as agreed and approved, or as determined by the court.
[64] Class counsel fees must be approved by the court. Counsel are directed to schedule a case conference by telephone when they are ready to proceed. The process to follow will be addressed then. It is preferable that the issue be brought forward sooner while the case is still fresh in the mind of the court.
Justice R. Raikes
Released: January 30, 2018.
COURT FILE NO.: CV-15-22778
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Richard Marchand and Kenneth Mortier
Plaintiffs
– and –
Ford Motor Company and Ford Motor Company of Canada Ltd.
Defendants
REASONS FOR JUDGMENT
Raikes, J.
SCJ
Released: January 30, 2018