COURT FILE NO.: 59044CP DATE: 20210106 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

The Fanshawe College of Applied Arts and Technology, Plaintiff

AND:

Hitachi, Ltd., Hitachi Asia, Ltd., Hitachi America, Ltd., Hitachi Displays Ltd., Hitachi Electronic Devices (USA), Shenzhen Seg Hitachi Color Display Devices Ltd., Hitachi Canada, Ltd., Irico Group Corporation, Irico Group Electronics Co. Ltd., Irico Display Devices Co., Ltd., LG Electronics, Inc., LG Electronics Taiwan Taipei Co. Ltd., LG Electronics USA, Inc., LG Electronics Canada, Panasonic Corporation F/K/A Matsushita Electric Industrial Co. Ltd., Panasonic Corporation of North America, Panasonic Canada Inc., Koninklijke Philips Electronics N.V., Philips Electronics Industries (Taiwan) Ltd., Philips Da Amazonia Industria Electronica Ltda, Philips Electronics North America Corporation, Philips Electronics Ltd., Samsung Electronics Co. Ltd., Samsung Electronics America Inc., Samsung Electronics Canada Inc., Samsung SDI Co., Ltd. (f/k/a Samsung Display Device Co.), Samsung SDI Brasil Ltda, Samsung SDI America, Inc., Samsung SDI Mexico S.A. De C.V., Shenzhen Samsung SDI Co. Ltd., Tianjin Samsung SDI Co., Ltd., Toshiba Corporation, Toshiba America Electronic Components Inc., Toshiba America Information Systems Inc., Toshiba of Canada Limited, Beijing Matsushita Color CRT Company, Ltd., Samtel Color, Ltd and MT Picture Display Co., Ltd., Defendants

Counsel:

C. Wright and B. Moran, for the Plaintiff C. Adamson and P. Ramirez, for the Class Action Capital Recovery LLC I. Laird for Crowell & Moring LLP A. Basmadjian for Financial Recovery Strategies M. Binetti for Kent Recovery Services

HEARD: September 23, 2020 (by Zoom)

Grace J.

A. Introduction

[1] Over time, settlements of the various claims asserted in this cathode ray tubes (“CRT”) class action were achieved and sanctioned by the court. [1] A protocol for the distribution of the amount remaining after deduction of approved fees and expenses was also approved (the “Distribution Protocol”). The Distribution Protocol contains a detailed claims process.

[2] Claimants were permitted to utilize the services of third-parties to submit claims on their behalf. [2] Class Action Capital Recovery LLC (“CAC”), Crowell & Moring LLP (“Crowell”), Financial Recovery Strategies (“FRS”) and Kent Recovery Services (“Kent”) acted in that capacity.

[3] CAC, Crowell, FRS and Kent represent clients who allege they are entitled to receive a portion of the net settlement proceeds because they purchased CRT products during the period beginning March 1, 1995 and ending November 25, 2007 (the “class period”). [3]

[4] RicePoint Administration Inc. was appointed claims administrator (“RicePoint” or “Claims Administrator”). After reviewing the various submissions, RicePoint delivered decision notices (“Decision Notices”) advising the third-party filers and their clients that all or some portion of their claims had been rejected. CAC, Crowell, FRS and Kent appeal on behalf of clients whose claim was denied in whole or in part.

B. The Distribution Protocol

[5] Several provisions within the Distribution Protocol that pertain to the claims and appeal process are relevant. I start there.

[6] The Distribution Protocol uses the phrase Settlement Class Members to refer to persons seeking a share of the net settlement proceeds.

[7] Each claimant was required to submit a Claims Form containing certain information including details of the Settlement Class Member’s CRT purchases and a declaration that the contents were true and correct. [4]

[8] The claim could include up to two undocumented purchases, provided the declaration attested to the purchase(s) and the type of CRT product(s) acquired. [5]

[9] If the records of a defendant included purchase information concerning a claimant, the Settlement Class Member could adopt it. [6] Otherwise, the Settlement Class Member was required to provide a declaration of its purchases during the class period. [7]

[10] If the claim related to items acquired over several years, the claimant was permitted to extrapolate its purchases if in possession of purchase records for at least two years within the class period. [8]

[11] At this initial stage, the Settlement Class Member was not required to provide the Claims Administrator with supporting documentation. However, the requirements changed if the claim was selected for audit.

[12] Paragraphs 39 through 42 of the Distribution Protocol deals with that topic. An audit of the largest claims was mandatory. [9] The Claims Administrator was given the discretion to require a close examination of other claims if RicePoint was of the view that insufficient or false information had been provided. [10] The Claims Administrator decided to audit all claims submitted by third-party filers. [11]

[13] Those asserting claims that were the subject of an audit were required to submit documentary proof of their purchases. Three subparagraphs within para. 41 of the Distribution Protocol listed acceptable documents.

[14] The first subparagraph identified six permissible items including invoices, delivery slips and historical accounting records. The second and third subparagraphs required the Settlement Class Member to provide a declaration together with something more. Four items were mentioned in the second subparagraph including credit card statements, bank statements and cancelled cheques. Proof of product registration and warranty documents were two of the five documents mentioned in the third subparagraph.

[15] Notably, the words “or comparable verification that is acceptable to the Claims Administrator” appeared immediately following the specific listing in each subparagraph. [12]

[16] The final subparagraph of para. 41 dealt with those who had used data in certain years to estimate their purchases during another portion of the class period. If audited, the Settlement Class Member was required to provide a declaration explaining the extrapolation exercise that had been undertaken.

[17] The Distribution Protocol dealt next with “deficiencies”. If identified by RicePoint, the Claims Administrator was permitted to reject the claim if a deficiency still existed after the Settlement Class Member had been given notice and a time limited opportunity to address the concern.

[18] Ultimately, the Claims Administrator was required to determine the validity, value and categorization of each request for payment. [13] Its decision was to be communicated by way of a Decision Notice. [14] Paragraph 46 of the Distribution Protocol provides in part:

Where the Claims Administrator has rejected all or part of a claim (or recategorized any purchases), the Claims Administrator shall include in the Decision Notice its grounds for rejecting or recategorizing all or part of the claim. [Emphasis added]

[19] In certain circumstances, a Settlement Class Member was permitted to challenge the decision of RicePoint. A time limited right of appeal to this court or its designate was conferred provided the value of the disputed entitlement exceeded $100,000. [15]

[20] The Distribution Protocol provides that the record on appeal is to consist of (i) the documents submitted by the Settlement Class Member as part of the claims process; [16] (ii) the Decision Notice; [17] and (iii) insofar as the Claims Administrator is concerned, “any other information that might be reasonably useful in the determination of the appeal”. [18] However, according to para. 52 of the Distribution Protocol:

Settlement Class Members are not permitted to provide any new documentation as part of the appeal.

[21] Argument is to take the form of written submissions from the appellant(s) and Claims Administrator, [19] unless the court also asks for oral argument. [20]

[22] Paragraph 55 of the Distribution Protocol provides that:

The decision on appeal is final and binding and shall not be subject to any further appeal or review whatsoever.

C. The Decision Notices

[23] The Decision Notices utilized by RicePoint follow a template.

[24] If the claim was rejected in its entirety, the Claims Administrator utilized the form of Decision Notice that advised the claimant:

We are rejecting your claim because you failed to provide adequate proof of purchase.

[25] That was provided if the Settlement Claim Member failed to deliver documents of a kind specifically mentioned in para. 41(a), (b) or (c) of the Distribution Protocol.

[26] If the Claims Administrator was of the view that some of the claim was adequately supported, the modified Decision Notice informed the recipient that:

A portion of your claimed CRT Purchases were [ sic ] not adequately supported by proof of purchase. Accordingly, we adjusted the value of your CRT Purchases.

D. The Appeals/Motion for Directions

[27] The appeals filed on behalf of 258 Settlement Class Members represented by CAC, Crowell, FRS and Kent have been brought before the court by way of a motion by Fanshawe seeking an order for directions. [21]

[28] The third-party filers seek an order allowing the appeals and remanding the various claims to the Claims Administrator for further consideration.

[29] In the event of that disposition, all parties agree the court should provide additional guidance to RicePoint, although some of the terms are in dispute.

[30] A sizable and comprehensive evidentiary record was compiled for the court. The documents were well organized; sorted by third-party filer and then subdivided to include the documents filed with the Claims Administrator by each represented Settlement Class Member and the Decision Notice(s) they received.

[31] Two aspects of the appeals warrant some initial commentary.

[32] First, some of the appeals involve claims that are below the $100,000 monetary threshold set forth in the Distribution Protocol.

[33] Second, the record on appeal includes documents that were not in RicePoint’s hands at the time it issued a Decision Notice, notwithstanding the fact the Distribution Protocol prohibited Settlement Class Members from filing “any new documentation as part of the appeal.” [22]

[34] The court was advised that RicePoint and Class Counsel had agreed to these deviations pursuant to para. 44 of the Distribution Protocol. [23] Appearing under the heading “Adjustments to Claims Process and Extension of the Claims Filing Deadline”, that paragraph permitted the Claims Administrator and Class Counsel to:

…adjust the claims process if, in their opinions, doing so will not adversely affect the fair and efficient administration of the Net Settlement Funds and it is in the best interests of the Settlement Class Members to do so. [Emphasis added]

[35] Although I will respect their agreement on this occasion, I offer the following comments and direction with an eye to the future.

[36] Paras. 48 – 55 appear underneath the heading “Appeal of the Claims Administrator’s Decision”. As noted, unless otherwise designated, the appeal is to be heard by the Superior Court according to the procedure that is outlined there. The provisions relating to the minimum monetary requirement and record on appeal appear in that part of the Distribution Protocol. [24]

[37] In my view, Class Counsel and the Claims Administrator’s agreement does not relate to the “claims process” mentioned in para. 44 but to the appeal process. The latter is within the control of the court or its designate. Consequently, any contemplated change involving the procedure on appeal must receive prior court approval. No matter how well-intentioned, Class Counsel and RicePoint do not have the authority to amend the procedure on appeal in any respect, even if the proposed changes are agreeable to the affected Settlement Class Members. Going forward, that limitation should be borne in mind.

E. The Alleged Deficiencies in the Claims subject to Appeal

[38] The Decision Notices to which I have referred contain the same generic ground for denying a claim in whole or in part. They are not very revealing. Fortunately, the record compiled for the purposes of the appeal provides a much clearer picture.

[39] Class Counsel readily concedes that the appealing Settlement Class Members purchased CRT products during the March 1, 1995 to November 25, 2007 class period. [25]

[40] The problem RicePoint encountered was described in these terms:

…the difficulty is arriving at an appropriate valuation of those purchases. The declarations filed contain various unsubstantiated statements and assumptions, which are difficult for the Claims Administrator to verify.

[41] As law clerk Jennifer Bald explained in an April 20, 2020 affidavit:

Many of the declarations filed rely on third-party reports or information in support of their assumptions, often without attaching a copy of the third-party report. [26]

[42] Given the passage of time, most Settlement Class Members had understandable difficulty locating source documents of the kinds listed in the Distribution Protocol. As John J. Thomas of CAC explained:

Most of our clients are large institutional clients with corporate document retention and destruction policies that resulted in records that were 12-20 years old being unavailable. [27]

[43] Consequently, the third-party filers improvised.

[44] In its responding submissions, Class Counsel provided a description of and some commentary concerning the claims submitted by each third-party filer. Crowell received the most favourable review because its declarations were “generally better substantiated” than those delivered by FRS, Kent and CAC. [28] Class Counsel explained:

Crowell’s declarations follow a similar format. To estimate the number of monitors purchased, the declarations rely on, among other things, the number of employees, the percentage…expected to use a monitor, and the expected refresh rate…To estimate the number of televisions purchased, the declarations rely on the number of retail locations (or hotel rooms, etc., as applicable) and the expected refresh rate…

The declarations attempt to verify the information…by citing… (and appending) additional documentation… [29]

[45] As well, Crowell was the only third-party filer who consistently factored into its analysis the decline in sales of CRT products that resulted from the introduction of flat-panel technology. [30]

[46] The declarations filed by CAC referred to but did not attach reports and third-party information. [31] Mr. Thomas explained the approach that third-party filer adopted:

In order to address…concerns about a lack of purchase records…we consulted with our clients and identified industry research to supplement various client class period data in order to substantiate our clients’ claims. In order to meet the requirements of the Distribution Protocol, we submitted declarations…with our clients’ claim forms…[T]he Declarations explain in detail certain class period data referenced for each client…Additionally, we applied U.S. governmental research specific to each industry type to extrapolate and confirmed this process in the Declaration…

[47] Most of the claims submitted by Kent and FRS did not include any supporting documentation. Sometimes a declaration provided by Kent referred to a document that was to have been but was not attached. [32]

[48] Kent argued that RicePoint should have concluded that the contents of the affidavits it provided satisfied the “comparable verification” option set forth in para. 41 of the Distribution Protocol.

[49] In its initial submission, FRS maintained it had consistently provided information that was “verifiable by the Claims Administrator…either from the class member or independently”.

F. Analysis and Decision

[50] Within reason, the benefits of the settlement achieved should be distributed to as many deserving claimants as possible. Consequently, the Distribution Protocol should be interpreted and applied in a functional, rather than unduly technical, manner.

[51] It is clear from the Distribution Protocol that each Settlement Class Member had to file a claim in order to share in the net settlement proceeds. As well, the claimant had the burden of proving the purchase of CRT Product during the class period and the quantity, value and type.

[52] The steps that had to be taken during the claims process were not onerous. However, if subject to audit, claimants were required to meet a higher standard. In that event, “documentary proof” was required. [33]

[53] Options were given to the claimant. Short lists of suitable documents were set forth in three subparagraphs. Any one or combination of them was acceptable. A final, flexible alternative was also available. The Settlement Class Member was authorized to provide “comparable verification” that was acceptable to the Claims Administrator.

[54] Two of the subparagraphs required a declaration to be delivered “together with” a document of the kind just described. When required, the declaration was to attest to the purchase(s). [34]

[55] Importantly, however, it is clear from the protocol that a declaration was never enough on its own. RicePoint’s decision to deny claims that either did not refer to or referred to but failed to attach documentary proof was correct.

[56] However, the Claims Administrator should not have rejected out of hand claims that consisted of a declaration that referred to and appended additional documentation delivered before the Decision Notice was generated.

[57] The documents tendered by the Settlement Class Member as “proof” need not be of a type, be generated by a particular source or even bear a particular date. The issue is whether and to what extent the declaration and supporting documents substantiate the Settlement Class Member’s assertion concerning the existence, value and categorization of CRT Purchases. Oversight is not provided by the Claims Administrator on an all or nothing basis. All, some or none of a claim may be accepted or recategorized.

[58] That brings me to the period following the issuance of the Decision Notices in December 2019. In its interim administration report dated April 22, 2020, RicePoint noted that class counsel and the Claims Administrator had agreed to permit claimants to provide additional documentation as part of the appeal. [35] The report continued:

To the extent that additional information was provided, RicePoint reviewed the information to determine whether the proof requirements of the Distribution Protocol were satisfied.

[59] CAC availed itself of that opportunity. Seemingly, the other third-party filers did not.

[60] If a declaration still did not refer to or referred to but failed to attach documentary proof, RicePoint’s decision to deny the claim was correct.

[61] If, however, the declaration was amended during the agreed upon time period so that it referred to and appended additional documentation, the merits of the claim should have been considered.

[62] In the Joint Reply Submissions of CAC, FRS and Kent dated July 8, 2020, FRS expressed an intention to submit supplemental declarations. [36] FRS maintained that it did not learn of the basis of the concerns of class counsel until May. I presume that statement reflected the time of receipt of Class Counsel’s responding submissions dated April 28, 2020.

[63] Shortly before the hearing of this motion, FRS delivered ten supplementary declarations. By November 6, 2020 the number had grown to twenty-four. [37] Class counsel maintained that FRS’s additional efforts are simply too late.

[64] If, as class counsel alleges, all four third-party filers received the same opportunity to supplement the documentary record in the first part of 2020, I agree. In the absence of an agreement, a right to further supplement the record did not arise following receipt of class counsel’s responding submissions. In that event, FRS’s effort to do so in September and beyond was not timely and should not be considered.

[65] If, however, FRS did not receive an opportunity that was extended to one or more of the other third-party filers, then FRS should have been given the same chance and RicePoint should critically review the additional declarations it provided. [38]

[66] That brings me to the forms of Decision Notice used in December 2019. Their content reflects a comment made at the outset of class counsel’s oral submissions. He suggested that in reviewing and assessing the claims of the Settlement Class Members, RicePoint is performing a function that is tantamount to bookkeeping. I disagree.

[67] A significant amount of money is to be distributed. It is dwarfed by the aggregate amount of the purchases made by Settlement Class Members. The amount in issue in these appeals is very substantial too.

[68] The role RicePoint accepted carries with it substantial responsibility. The Claims Administrator must fairly and diligently consider, analyze and assess each claim in order to determine whether the Settlement Class Member is eligible to share in the distribution at all. If so, the claim must be valued and categorized.

[69] However, there are limits to the task RicePoint must undertake. Based on the Distribution Protocol, it has no obligation to go outside the four corners of the documentation delivered by a Settlement Class Member. Any suggestion that the Claims Administrator must track down research, data or other information referenced in but not attached to a declaration is wide of the mark.

[70] Once a conclusion has been reached, the Claims Administrator is obligated to deliver a Decision Notice. Grounds must be provided if a claim is rejected or recategorized in whole or in part. To date, RicePoint has used templates that adopt brief, generic and largely uninformative language.

[71] Paragraph 50 of the Distribution Protocol lists three circumstances that do not constitute grounds for appeal. A Settlement Class Member would have no idea if RicePoint’s decision was based on one of those grounds based on the forms of Decision Notice utilized so far. The claimant would also be unaware that the Claims Administrator considered the effect of technological innovation on consumption patterns to be important. Clearly, something more is required.

[72] While the grounds need not be stated at great length, they must be fact specific and instructive. Class Counsel’s written submissions distinguish between the third-party filers and provides an analysis of certain claims that explain the alleged deficiency. None of that was contained in or is apparent from the Decision Notices.

[73] Admittedly, the lengthy analysis provided by Class Counsel in their written submissions exceeds the required standard. Nonetheless, that content is much closer to the mark than what was delivered in December 2019. The Settlement Class Member and the court or its designate should be able to understand in what respect and why the “proof” offered was found to be entirely or partially insufficient.

G. Conclusion and Disposition

[74] In the circumstances, the appeals are allowed in respect of every Settlement Class Member represented by CAC, Crowell, FRS or Kent who delivered to the Claims Administrator (i) a declaration attesting to the purchase(s) of CRT Product together with; (ii) supporting documentation the Settlement Class Member has referred to and attached to verify their claim, whether of a kind specifically mentioned in para. 41 of the Distribution Protocol or not, provided such declaration and supporting documentation was delivered to the Claims Administrator either before the applicable Decision Notice was sent or within the extension of time Class Counsel and RicePoint agreed [39] or should have agreed [40] to extend (collectively the “allowed appeals”).

[75] The allowed appeals are remitted to RicePoint for reconsideration and decision in accordance with paras. 45 through 47 of the Distribution Protocol and these reasons.

[76] The appeals of all other Settlement Class Members are dismissed.

[77] If the parties wish to make cost submissions, arrangements may be made through the trial coordinator for a brief teleconference to discuss process and a timetable.

“Justice A.D. Grace”

Justice A.D. Grace

Released: January 6, 2021

Footnotes

[1] The aggregate gross amount of the settlements was approximately $49.8 million. [2] Para. 30. [3] Para. 25. [4] Para. 21 (f). [5] Para. 28. [6] Paras. 21(b), 23 and 24. [7] Para. 25. [8] Paras. 26 and 41 (d) [9] Para. 40 provided for a random selection of at least 10% of the claims and a mandatory audit of the top 15% of claims. [10] Para. 42. [11] See para. 11 of the affidavit of Jennifer Bald sworn April 28, 2020 (the “Bald affidavit”). [12] Para. 41 (a), (b) and (c). [13] Para. 45. [14] Para. 46. [15] Paras. 48 and 51. [16] Para. 52, [17] Para. 53. [18] Ibid. [19] Paras. 52 and 53. [20] Para. 54. [21] The notional entitlement of those claims is almost $600 million. [22] According to p.8 of RicePoint’s interim administration report dated April 22, 2020 additional proof was provided by CAC, Crowell and Kent on behalf of 62, 6 and 1 Settlement Class Members respectively. [23] This was also explained in RicePoint’s interim administration report dated April 22, 2020 at pp. 7 and 8. [24] See paras. 48 (monetary limit), 52 and 53 (documents to be provided to the court). [25] That is acknowledged in para. 4 of Class Counsel’s responding submissions. [26] At para. 18. [27] The excerpt is taken from para. 5 of Mr. Thomas’ February 7, 2020 affidavit. [28] That excerpt is taken from para. 69 of Class Counsel’s responding submissions. [29] Class counsel’s responding submissions at paras. 70 and 71. [30] Class counsel’s responding submissions at paras. 11 and 73. According to para. 56, that issue was considered in two of the declarations filed by Kent. [31] Class counsel’s responding submissions at para. 39. [32] Class counsel’s responding submissions at para. 54. [33] That phrase is found in the preamble to para. 41. [34] Para. 41(b) also required that the declaration attest to the value of the purchase(s). [35] At p. 7. [36] At para. 47. [37] On November 6, 2020 the court was advised that fourteen more had been provided. [38] In his submissions, counsel for FRS maintained that CAC was given an opportunity his client was not. If there is a factual dispute on that point, I cannot resolve it on this record. [39] See para. 58 above. [40] See para. 65 above.