COURT FILE NO.: CV-16-564517-CP
DATE: 20201223
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
UDO RENK
Plaintiff
- and -
AUDI CANADA INC., AUDI AKTIENGESELLSCHAFT, AUDI OF AMERICA INC., VW CREDIT CANADA INC., BENTLEY MOTORS CANADA LTD., PORSCHE CARS CANADA LTD., VOLKSWAGEN GROUP CANADA INC., and VOLKSWAGEN AKTIENGESELLSCHAFT
Defendants
Proceeding under the Class Proceeding Act, 1992
BEFORE: Justice Edward P. Belobaba
COUNSEL: David O’Connor, Adam Dewar, James Sayce and Aryan Ziaie for the Plaintiff
Cheryl Woodin, Glenn Zakaib and Ranjan Agarwal for the Defendants
HEARD: December 14, 2020
Settlement and Fees Approval
[1] This class action alleges that the defendant automobile companies misrepresented vehicle fuel economy ratings. The class action was settled in the U.S. and shortly thereafter in Canada. Class counsel in the two Canadian class actions, one in Ontario and the other in Quebec, now ask their respective courts to approve the $4.95 million Canadian settlement and class counsel’s legal fees.
[2] The Ontario action was commenced in November 2016 and was certified for settlement purposes in September 2020.[^1] The certified class includes persons resident in Canada, outside of Quebec, who purchased or leased one of the Audi, Bentley, Porsche or VW gasoline-powered vehicles listed in the attached Appendix. The total number of vehicles covered by the two Canadian class actions is just under 10,000 – with about 20 per cent in Quebec and 80 per cent in the rest of Canada.
[3] The core allegation is that the defendants equipped these vehicles with a transmission software that resulted in a better fuel economy when the vehicles were being tested than when they were being driven. The settlement is designed to compensate class members for the 2 to 4.5 percent differential in fuel costs.
Analysis
(1) Settlement approval
[4] Class counsel’s initial presentation as to why the $4.95 million settlement was fair and reasonable was, in my view, untenable. I adjourned the hearing to allow class counsel to reformulate their submissions and, to class counsel’s credit, they quickly did so.
[5] The initial presentation was untenable for the following reason. Class counsel’s basic proposition, based on their calculations, was that the overall class loss was about $7.6 million. And further that class member payouts of $500 to $1500, depending on the vehicle engine, model and year, would follow. So far so good. But class counsel then tried to argue that the much lower $4.95 million settlement amount should nonetheless be approved based on the expected take-up.
[6] The take-up in the U.S. settlement was about 30 per cent. Class counsel expected the same take-up in Canada. However, even assuming a take-up of up to 41 per cent, argued class counsel, the $4.95 million settlement would still generate the above-noted $500 to $1500 range of payouts. Of course, if the Canadian take-up turned out to be higher than the 41 per cent projected by class counsel, then the payouts would be reduced pro rata.
[7] I advised class counsel that I could not approve a settlement amount based on a take-up analysis. Using take-up as a measure in settlement approval would seriously distort the extent of the defendant’s accountability for the harm that they arguably caused. Class action settlement amounts should be measured against the total class-wide loss that can reasonably be attributed to the defendant and proved at trial, and not against a portion of that loss as measured by an estimated take-up rate. Take-up rates may well be relevant when approving class counsel’s legal fees[^2] but they are irrelevant to the settlement approval analysis.
[8] I advised class counsel that if $4.95 million was indeed the settlement amount, they would have to explain why this amount was fair and reasonable and in the best interests of the entire class (and not just a portion of the class) – and they would have to do so without referring to expected take-up. To their credit, class counsel returned several days later with a detailed written submission that accomplished this objective.
[9] The additional written submission noted that because of the differences between the U.S. and Canada in measuring fuel consumption (litres, gallons, rounding and not rounding decimals) only Canadian data had been used to determine the per-vehicle loss. The total top-line amount was $7.6 million, which in turn generated the above-noted range of payouts. The $7.6 million amount was calculated assuming the following inputs:
Price of gas: $1.35/litre
Mileage per year: 20,000 kms/year
Inconvenience/goodwill: 15%
Maximum years: 8
[10] As negotiations progressed and more data was reviewed, class counsel realized that the $7.6 million amount was not reasonably recoverable at trial and had to be adjusted for the following reasons:
• According to Statistics Canada, the average price per litre over the time period in question was $1.30/litre not $1.35/litre.
• According to Transport Canada data, the average annual mileage was 15,400 kms not 20,000 kms.
• It would be difficult to convince a judge at trial that a small decrease in the fuel economy rating (2 to 4.5 per cent) warranted a 15 per cent or indeed any level of legally compensable inconvenience.
• It would also be difficult to convince a judge that an 8-year time period for the payment of damages was appropriate given the shorter retention and turnover rate for the affected high-end vehicles.
[11] Class counsel determined, based on these adjusted inputs, that the most that could be recovered at trial was $4.76 million.[^3] Consequently, argued class counsel, the $4.95 million settlement amount is fair and reasonable and in the best interests of the class.
[12] I agree.
[13] I also note that only one class member filed an objection while 16 class members took the initiative to forward statements of support.
[14] The proposed $4.95 million settlement is approved.
(2) Honorarium approval
[15] Class counsel also ask for court approval of a $5000 honorarium for the representative plaintiff.
[16] Normally, representative plaintiffs do not receive additional compensation for simply doing their job as class representatives. However, where the representative plaintiff can demonstrate a level of involvement and effort that goes beyond what is normally expected and is demonstrably extraordinary, or where there is evidence that they were financially harmed because they agreed to serve as the class representative, the payment of an honorarium may well be justified.[^4]
[17] Here there is nothing in the record that would justify the payment of a $5000 honorarium. However, class counsel was strongly of the view that Mr. Renk’s contribution was indeed significant and should be recognized in some measure.
[18] I will yield to class counsel’s impassioned submission and approve an honorarium in the amount of $3000.
(3) Legal fees approval
[19] Based on the retainer agreement, class counsel is entitled to a 33 per cent contingency fee plus disbursements and taxes. The actual fee will be based on the percentage of the settlement fund attributable to non-Quebec class members.
[20] As discussed in Cannon,[^5] and as further refined in Brown,[^6] this contingency fee is presumptively valid and reasonable on the facts herein and should be approved.
[21] This court also approves the 10 per cent levy payable to the Class Proceedings Fund.
Disposition
[22] The proposed settlement, the modified honorarium, class counsel’s legal fees, the CPF levy and all related appointments and procedural requests are approved.
[23] Orders to go as per the draft Orders signed by me today.
Signed: Justice Edward P. Belobaba
Notwithstanding Rule 59.05, this Judgment [Order] is effective from the date it is made, and is enforceable without any need for entry and filing. In accordance with Rules 77.07(6) and 1.04, no formal Judgment [Order] need be entered and filed unless an appeal or a motion for leave to appeal is brought to an appellate court. Any party to this Judgment [Order] may nonetheless submit a formal Judgment [Order] for original signing, entry and filing when the Court returns to regular operations.
Date: December 23,2020
Appendix attached.
Appendix: The Affected Vehicles
Make
Model
Engine
Model Year
Audi
A8L
6.3L
2013
Audi
A8L
6.3L
2015
Audi
A8L
6.3L
2016
Audi
RS7
4L
2014
Audi
RS7
4L
2015
Audi
RS7
4L
2016
Audi
S8
4L
2013
Audi
S8
4L
2014
Audi
S8
4L
2016
Bentley
Continental GT
4L
2013
Bentley
Continental GT
4L
2014
Bentley
Continental GT
4L
2015
Bentley
Continental GT
4L
2016
Bentley
Continental GT
4L
2017
Bentley
Continental GTC
4L
2013
Bentley
Continental GTC
4L
2014
Bentley
Continental GT Convertible
4L
2015
Bentley
Continental GT Convertible
4L
2016
Bentley
Continental GT Convertible
4L
2017
Bentley
Flying Spur
6L
2014
Bentley
Flying Spur
6L
2015
Bentley
Flying Spur
4L
2015
Bentley
Flying Spur
6L
2016
Bentley
Flying Spur
4L
2016
Porsche
Cayenne
3.6L
2013
Porsche
Cayenne
3.6L
2014
Porsche
Cayenne
3.6L
2016
Porsche
Cayenne GTS
4.8L
2013
Porsche
Cayenne GTS
4.8L
2014
Porsche
Cayenne GTS
3.6L
2016
Porsche
Cayenne S
4.8L
2013
Porsche
Cayenne S
4.8L
2014
Porsche
Cayenne S
3.6L
2015
Porsche
Cayenne S
3.6L
2016
Porsche
Cayenne Turbo S
4.8L
2014
Volkswagen
Touareg
3.6L
2013
Volkswagen
Touareg
3.6L
2014
Volkswagen
Touareg
3.6L
2015
Volkswagen
Touareg
3.6L
2016
[^1]: The parallel action in Quebec is Stéphane Gagnon et al. v. Audi Canada Inc. et al., Superior Court of Québec, Court File No. 500-06-000828-166.
[^2]: If class counsel filed a class action knowing that the take-up would be minimal and that most of the recovery would have to go cy-pres, the court would be justified in correlating class counsel’s legal fees to actual class member take-up. Class actions are designed to provide compensation for harm caused to class members not to generate additional sources of funding for charities and non-profit organizations, however deserving they may be.
[^3]: Class counsel’s additional written submissions contained detailed calculations explaining each of the adjusted inputs.
[^4]: Aps v. Flight Centre Travel Group, 2020 ONSC 6779 at para. 43
[^5]: Cannon v. Funds for Canada Foundation, 2013 ONSC 7686.
[^6]: Brown v. Canada (Attorney General), 2018 ONSC 3429.