Court File and Parties
COURT FILE NO.: CV-16-564080-CP DATE: 20190610 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Leonid Kaplan, Ronald Goodfellow, Jennifer Alton, Thomas Champagne and Cheryl Jane Mizzi Plaintiffs
and
Casino Rama Services Inc., CHC Casinos Canada Limited, Penn National Gaming Inc. and Ontario Lottery and Gaming Corporation Defendants
Proceeding under the Class Proceedings Act, 1992
BEFORE: Justice Edward P. Belobaba
COUNSEL: Theodore P. Charney, Tina Q. Yang and David Robins for the Plaintiffs Catherine Beagan Flood, Nicole Henderson, Jessica Lam and Christopher DiMatteo for the Defendants
HEARD: November 7 and 8, 2018 and March 28, 2019
Costs Award
1In a decision released on May 7, 2019 I dismissed the plaintiffs’ motion for certification. See Kaplan v. Casino Rama, 2019 ONSC 2025. I found that the proposed class action “collapsed in its entirety” at the common issues stage. I found no basis in fact that any of the proposed common issues actually existed and/or could be resolved on a class-wide basis.
2I asked counsel to forward their costs submissions.
3The successful defendants seek $255,707.13 in costs (for fees, disbursements and taxes) on a partial indemnity scale. The plaintiffs submit that no costs be awarded because the proposed class action raised novel legal issues and was in the public interest. Alternatively, if costs are award, $75,000 all-inclusive is a fair and reasonable amount.
4In my view, as I explain below, neither the public interest nor the novelty submission succeeds. The normal costs rules should apply.
No public interest dimension
5The very basis for this class action was questionable. When the cyber-hack was discovered, the defendant Casino reacted quickly in a reasonable and responsible fashion. No losses were sustained by any of the 10,000 or so proposed class members that had their private information posted online. The most that they could recovered under a somewhat tenuous breach of contract claim were nominal damages. A nominal damages award (of say $1 per claimant, resulting in a total award of about $10,000) would not have justified this proposed class action on any of the traditional rationales – access to justice, judicial economy or behaviour modification. On the behavior medication point, I note that the Casino took steps to augment the firewall and anti-hack features of its computer system on its own accord without the prompt of a class action.
6As I noted in my decision dismissing the motion for certification:
The Casino contacted all appropriate authorities, took steps to close down the two websites that contained the stolen information, notified the thousands of customers, employees and suppliers potentially affected by the security breach and offered free credit monitoring services for one-year to many of them.
Fortunately, some two and half years later, there is no evidence that anyone has experienced fraud or identity theft as a result of the cyber-attack. There is no evidence that anyone has sustained any compensable financial or psychological loss.
Nonetheless, the plaintiffs insist on exercising their right to propose a class action. Class counsel candidly concedes that the most likely outcome, if they are successful, is the recovery of nominal damages for breach of contract – that is breach of certain alleged privacy agreements.
7I am therefore not persuaded that this proposed class action raised any public interest dimension.
No novel issues
8Simply because the action involves a criminal hacker accessing a company’s computer system and publishing the stolen information online does not make it novel. Sadly, the last decade has seen many similar incidents both here and in the U.S., almost all of them triggering class actions with numerous judicial decisions.
9Nor are the legal issues particularly unique or original. Here the plaintiffs pleaded every cause of action remotely available, from contract and tort, to intrusion upon seclusion, breach of confidence and ‘publicity given to private life’ – resulting in what I described as a “a very convoluted class action”. Kaplan v. Casino Rama, 2019 ONSC 2025, at paras. 2-4. As I noted in my decision dismissing the motion for certification:
The fact that there are no provable losses and that the primary culprit, the hacker, is not sued as a defendant makes for a very convoluted class action. Class counsel find themselves trying to force square (breach of privacy) pegs into round (tort and contract) holes. Kaplan v. Casino Rama, 2019 ONSC 2025, at para. 14.
10In short, I am not persuaded by the “novel legal issues” submission.
Costs should be awarded
11In my view, this is a case for costs. The question is quantum.
12My approach to costs awards on certification motions was set out in five decisions that were released in 2013: Dugal v Manulife Financial, 2013 ONSC 4083; Rosen v BMO Nesbitt Burns, 2013 ONSC 2144; Crisante v DePuy Orthopaedics, 2013 ONSC 5186; Brown v. Canada (Attorney General) 2013 ONSC 5637; and Sankar v Bell Mobility, 2013 ONSC 5916. I said this:
In an effort to further the ‘access to justice’ objective and make my own decision-making process more transparent and predictable, I will adopt the following procedure in deciding costs awards in conventional certification motions …
I will generally be content with costs outlines certified by counsel. I will not require either side to submit actual dockets. If they wish to do so, that is up to them.
I will (briefly) review the certified costs outlines to ensure that the hourly rates being charged by counsel fall within the range set out by the Rules Committee in its Information to the Profession.
I will also review the costs outline for any obvious excesses in fees or disbursements. Apart from any obvious excesses, I will accept the costs outline as is. I will not drill down into any of the detail.
If the unsuccessful party wants to argue unreasonableness (beyond hourly-rate compliance or obvious excesses) it should submit its own certified costs outline showing what it actually spent (on a partial indemnity scale) on the certification motion. If a parallel costs outline is not submitted by the unsuccessful party (and none is required) I will probably conclude that the amount being requested by the successful party is not unreasonable.
I will consider seriously historical costs awards in similar cases.
As I conclude my costs review, I will stand back and reassess the amount that is before me (after the reductions or removals of any excesses.) I will again review the factors set out in Rule 57.01(1) of the Rules of Civil Procedure, the admonitions of the Court of Appeal, and the historical costs awards data as set out above, and come to a final amount that, in my view, is fair and reasonable to both sides, always remembering that the fundamental objective of the Class Proceedings Act is access to justice.
13My first task is to ensure that the hourly rates in the defendant’s costs outline are Grid-compliant. The defendant says the Grid, which imposes a $350 maximum hourly rate, is out of date and the proper measure is 60 per cent of one’s actual hourly rate. The defendant points to the decisions of the Court of Appeal in Inter-Leasing Inc. v. Ontario (Revenue), 2014 ONCA 683 and Bain v. UBS Securities Canada Inc., 2018 ONCA 190 to support this submission.
14In Inter-Leasing Inc. v. Ontario (Revenue), 2014 ONCA 683, followed in Bain v. UBS Securities Canada Inc., 2018 ONCA 190, the Court of Appeal noted that the Grid rates were outdated and that 55 to 60 per cent of “a reasonable actual rate” (Inter-Leasing Inc. v. Ontario (Revenue), 2014 ONCA 683, at para. 5. Also see Bain v. UBS Securities Canada Inc., 2018 ONCA 190, at para. 32) would be a more appropriate approach.
15I discussed the calculation of what constitutes “a reasonable actual rate” in Mask v. Silvercorp Metals Inc., 2015 ONSC 7780, at paras. 7-9:
I do not accept the defendants’ submission that the time has come to update the Grid and allow recovery of 60 per cent of actual fees. I know that some judges have suggested that the $350 maximum set out in the Grid, indeed the entire Grid, is out of date. For my part, I do not agree. But even if this were so, this should be a matter for the careful review of the Civil Rules Committee rather than ad hoc judicial comment. As I noted in Goldsmith v. National Bank of Canada, 2015 ONSC 4581:
[T]he objective of the costs award is to fix an amount that is “fair and reasonable” to the unsuccessful party “ rather than an amount fixed by the actual costs incurred by the successful litigant.” Actual legal costs incurred are irrelevant and all the more so in an era where the legal profession continues to enjoy protection from market forces and where access to justice for most litigants remains illusory mainly because of the high hourly rates charged by lawyers. The Grid coupled with the judicial admonition in Boucher may be the only way to signal to the legal profession and its self-regulator what “reasonable” legal fees should look like. (Goldsmith v. National Bank of Canada, 2015 ONSC 4581, at para. 8.)
In Inter-Leasing Inc. v. Ontario (Revenue) Inc. v. Ontario, a panel of the Court of Appeal recently noted that the Grid rates were out of date and suggested that 55 to 60 per cent of “a reasonable actual rate” (Inter-Leasing Inc. v. Ontario (Revenue), 2014 ONCA 683, at para. 5. Also see Bain v. UBS Securities Canada Inc., 2018 ONCA 190, at para. 32) might more appropriately reflect partial indemnity. In my view, as I said in Goldsmith v. National Bank of Canada, 2015 ONSC 4581, this was a sensible suggestion: 60 per cent of a “ reasonable actual rate.” I continued:
But what is a reasonable actual hourly rate for a senior Toronto litigator. It is certainly not $900 or $1000 per hour. This is obviously not market-pricing. What about $500 to $600? Is this more reasonable? No doubt - but if so, the Grid rates i.e. the $350 maximum is pretty much in line with the Court of Appeal’s suggested 60 per cent measure. (Goldsmith v. National Bank of Canada, 2015 ONSC 4581, at para. 9.)
All of this is a long way of saying to the successful defendants herein that their suggestion that 60 per cent of actual hourly rates (which in Toronto BigLaw firms are now in the range of $800 to $1000 for a senior litigator) is a reasonable partial indemnity rate is completely unacceptable. I will stick with the Grid. (Mask v. Silvercorp Metals Inc., 2015 ONSC 7780, at paras. 7-9.)
16I added the following comment in Goldsmith v. National Bank of Canada, 2015 ONSC 4581, at paras. 10-11:
The real question is this: how does one go about deciding what constitutes a “reasonable actual rate” in the context of a self-regulated profession that continues to enjoy the benefits of a monopoly, including monopoly-pricing? That is why the Rules Committee (or someone even more objective) should continue to set the Grid rates and should do so with one eye always on the public interest.
In any event, I will continue to apply the current Grid until it is changed (by the Rules Committee.) And I will apply the revised rates thereafter but only if they are “fair and reasonable” not just for lawyers but for the public they serve.
17The defendant has advised that a Grid-compliant costs outline results in about $151,122 for fees, and a total amount, including disbursements and taxes, of about $176,459. Class counsel say that their costs outline would have been about $184,000 on a partial indemnity basis, excluding taxes. Therefore, the defendant’s revised amount of $176,459, including taxes, is neither unreasonable nor excessive. For ease of calculation, I will round this figure to $175,000.
18I next consider the costs that have been awarded to defendants on similar motions in the past and I note that about $150,000 is the historical average. (See the five decisions listed in paragraph [12] above).
19Both sides advance detailed arguments justifying, from their perspective, a higher or lower costs award. The plaintiffs point to the additional costs that were incurred following the November 8, 2018 adjournment and the defendant’s need to file the second Drake affidavit. The defendant points to the actions of the plaintiffs that added to the defendant’s costs - the numerous amendments to the statement of claim that affected the causes of action, the class definition, the proposed common issues and the proposed representative plaintiffs. The plaintiffs respond that these amendments were prompted by the additional evidence filed by the defendant after the November 8 adjournment, and in any event, are appropriate and expected as any proposed class action evolves.
20The plaintiffs ask for a reduction of 30 per cent in the defendant’s costs request to reflect the additional work that they were required to do post-adjournment that they say should be attributed to the defendant. In my view, a 30 per cent reduction is too drastic on the facts herein but a 10 per cent reduction, overall, can be justified. Using the defendant’s $175,000 as a reasonable threshold measure, I find that a costs award in the range of $157,500 ($175,000 minus 10 per cent) could well be appropriate.
21Standing back and reassessing the overall costs amount, the historical average, and reviewing the factors set out in Rule 57.01(1) of the Rules of Civil Procedure, I find that an all-inclusive costs award of $160,000 is fair and reasonable. Costs are therefore fixed in this amount, to be paid forthwith by the plaintiffs to the defendant.
22Order to go accordingly.
Justice Edward P. Belobaba
Date: June 10, 2019