Court File and Parties
COURT FILE NO.: 1899/15CP DATE: 20210315 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Sean Allott, Plaintiff AND: Panasonic Corporation; Panasonic Corporation of North America; Panasonic Canada Inc.; KOA Corporation; KOA Speer Electronics, Inc.; ROHM Co. Ltd.; ROHM Semiconductor U.S.A., LLC.; Vishay Intertechnology, Inc.; Hokuriku Electric Industry Co.; HDK America Inc.; Kamaya Electric Co., Ltd.; Kamaya, Inc.; ALPS Electric (North America), Inc.; Midori Precisions Co., Ltd.; Midori America Corporation; Susumu Co., Ltd.; Susumu International (USA) Inc.; Tokyo Cosmos Electric Co.; and Tocos America, Inc., Defendants
BEFORE: Justice R. Raikes
COUNSEL: Jonathan Foreman, Linda Visser, Jean-Marc Metrailler, Sarah Bowden, Anne Legate-Wolfe, Kristen King - Counsel, for the Plaintiff Emrys Davis and John Rook, Counsel, for the Panasonic Defendants Katherine Kay and Sinziana Hennig, Counsel for the KOA Defendants Paul Martin, Counsel for the ROHM Defendants Donald Houston and Gillian Kerr, Counsel for the Vishay Defendants Paul Wearing and Robert Tighe, Counsel for the Hokuriku Defendants Sandra Forbes and Maura O’Sullivan, Counsel for the Kamaya Defendants Kyle Taylor, James Orr, and Annie Tayyab, Counsel for the Alps Defendants Tetsuya Takahashi and Arwin Ataee, Counsel for the Midori Defendants Kevin Wright, Todd Shikaze, and Wendy Sun, Counsel for the Susumu Defendants David Kent and Samantha Gordon, Counsel for the Tokyo Cosmos and Tocos Defendants
HEARD: February 2, 2021
Endorsement
Background
[1] This is a price fixing conspiracy action in which the plaintiff alleges that the defendants participated in an unlawful conspiracy to fix, raise, maintain, or stabilize the price of linear resistors in Canada with the intent to raise prices of linear resistors and products containing linear resistors.
[2] There are parallel class proceedings in Quebec and British Columbia. Counsel for the plaintiffs in the three actions are working cooperatively to advance the claims made.
[3] The Ontario action is now more than five years old yet remains in its procedural infancy. The plaintiff served his certification motion materials in June 2020. The defendants have not filed their responding materials. Jurisdiction motions are contemplated. The date for argument of the contested certification motion and jurisdiction motions has not been set.
[4] In the meantime, the plaintiffs in the three actions entered into a settlement agreement with the Panasonic defendants pursuant to which the said defendants agreed to pay $2,350,000 and to provide cooperation in the ongoing prosecution of the action. The settlement must be approved by all three courts to be effective. The Quebec court has approved the settlement, and I approved it in the Ontario action.
[5] The settlement with the Panasonic defendants is the first settlement in this litigation.
Nature of Motion
[6] Class counsel move to approve the retainer agreement in this action and payment of fees and disbursements to which they say they are entitled pursuant to the retainer agreement as a result of the settlement with the Panasonic defendants. The fee and disbursement request is made jointly and is, again, subject to approval by all three courts.
[7] Counsel seek 25% of the settlement amount and HST for fees. In addition, they seek reimbursement of disbursements of $158,379.05 inclusive of interest, and applicable taxes. The total amount requested is $822,254 comprised as follows:
Fees at 25% $587,500 HST on fees $76,375 Disbursements $147,796 Interest $10,582.*
(* Ontario class counsel seeks interest on class disbursements at the pre-judgment interest rate calculated in accordance with s. 33(7)(c) of the CPA.)
[8] The draft order provided by counsel indicates that there are applicable taxes on disbursements but neither the order provided nor the affidavit in support of the motion specify the amount for those taxes.
Retainer Agreement
[9] Contingency agreements are expressly permitted in s. 33(1) of the Class Proceedings Act, 1992, S.O. 1992, c. 6, as amended (“CPA”).
[10] In this action, Mr. Allott executed two retainer agreements – the first with Harrison Pensa LLP (“HP”) and the second with Foreman & Company. Mr. Foreman and his team were at HP and transitioned to their own firm in 2020. The two retainer agreements mirror one another.
[11] A preliminary concern arises from the terms of the two agreements. I observe that the retainer with HP contains the following provision:
- If I wish to change solicitors (or otherwise end HP's retainer), I agree that in the event the action is ultimately successful, HP will be entitled to seek a court approved fee and recovery of disbursements based on a reasonable percentage of the result obtained or calculated on the basis of a reasonable multiplier relative to the time accrued and disbursements incurred up to the termination of the retainer.
The Foreman & Company retainer contains the same provision.
[12] The affidavits filed on this motion do not address whether Foreman & Company have taken an assignment of the HP retainer agreement or whether there is some arrangement by which HP’s rights and entitlements under its retainer agreement have been addressed.
[13] Why is that important? Plaintiff’s counsel appear to be seeking recovery of the cost disbursements incurred and fees for work, some of which occurred during the time period when the plaintiff was represented by HP. Paragraph 24 of the HP retainer agreement contemplates that if HP is no longer counsel of record for the plaintiff, it may seek recovery of legal fees and disbursements “in the event the action is ultimately successful”. Can HP make a claim in addition to what Foreman & Company are seeking at some future date?
[14] In fairness to counsel, this is an issue that was not raised in oral submissions and arises from my review of the retainer agreements. I strongly suspect that there is some arrangement that will prevent any overlapping claims for fees and disbursements; the plaintiff will not be paying twice for the same work and disbursements. I invite plaintiff’s counsel to file a further affidavit addressing this concern within 10 days of the release of this decision.
[15] I turn now to the statutory requirements for a retainer agreement in a class proceeding.
[16] Section 32 of the CPA governs the minimum requirements for a retainer agreement in a class proceeding. It states:
32(1) An agreement respecting fees and disbursements between a solicitor and a representative party shall be in writing and shall,
(a) state the terms under which fees and disbursements shall be paid; (b) give an estimate of the expected fee, whether contingent on success in the class proceeding or not; and (c) state the method by which payment is to be made, whether by lump sum, salary or otherwise.
[17] Subsection 32(2) of the CPA provides that the retainer agreement between the representative plaintiff and solicitor is not enforceable unless approved by the court.
[18] I find that the retainer agreements in the Ontario action meet the requirements in s. 32(1) of the CPA in that:
a. They are in writing; b. Both state the terms under which fees and disbursements shall be paid; c. They provide an estimate of the expected fee, whether contingent on success in the class proceeding or not; and d. They state the method by which payment is to be made - a lump-sum percentage subject to approval of the court.
[19] The retainer agreements comply with the requirements of the Act and are appropriate to this litigation. “Success” in the action is defined. Counsel only get paid for disbursements and/or fees in the event of success. Counsel take the risk of failure. Counsel bear the risk of adverse costs awards. The amount paid to counsel is expressly subject to court approval. The agreement contains an example of how fees are calculated that is readily understandable. The agreement allows for recovery of up to 30% of monies recovered for the plaintiff class which is a standard percentage used in similar cases.
[20] Therefore, the retainer agreements are approved subject to receiving clarification as requested above and any concerns that might arise from the information provided.
Reasonableness of Fees Requested
[21] In determining the reasonableness of class counsel fees, courts have traditionally considered the following factors:
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 fees; and j. the opportunity cost to class counsel in the expenditure of time in pursuit of the litigation and settlement.
(See Osmun, para. 23; Abdulrahim v. Air France, 2011 ONSC 512 at para. 8.)
[22] The settlement here is with some but not all defendants. Approval of payments to counsel as and when partial settlements are achieved benefit the class and counsel. First, the payment incentivizes counsel to take on complex claims with multiple defendants. Second, the payment provides counsel with monies needed to continue the litigation with the remaining defendants. Third, it signals to the remaining defendants and their counsel that plaintiff’s counsel have the means to continue to vigorously pursue the claim.
[23] This action is complex litigation. The defendants are large, international corporations with significant resources with which to litigate. The balance of the action could well take years to play out. The cost of the litigation could be enormous. Disbursements alone could be a significant financial burden, one borne exclusively by counsel. Staff need to be paid; the landlord needs to be paid to mention but two of many operating costs. The risks and expense of this type of litigation are not for the faint of heart. It is important that counsel be remunerated as and when they achieve success.
[24] Having regard to the above factors, I find that:
a) The fee requested does not provide any premium on the docketed time expended to date. Counsel have expended significant time despite the lack of progress in the action. That is to be expected to some degree when the nature of the claim, the parties involved, and the broader factual matrix is considered; b) As indicated, this is complex litigation; c) Counsel have assumed significant responsibility for this action; d) The monetary recovery is modest to this point but the added benefit of Panasonic’s cooperation was a significant consideration in the approval of the settlement; e) The matter is important to class members; f) Counsel are very experienced class action litigators. This is not their “first rodeo”. They have a track record of success. The settlement achieved reflects skill and competence; g) The results obtained by the settlement are a material benefit to the class. Like the draft pick added to a trade, the benefits of cooperation by Panasonic may not be realized for some time but could be significant; h) The amount requested is consistent with Mr. Allott’s fee expectations. He supports the payment requested. There were no objectors to the fees requested; i) Counsel has taken on significant risk from the outset. When they started this action, counsel could not have known whether any settlement would be achieved. The outcome of this litigation remains unknown. This may well be a long and expensive road ahead; and j) Counsel have not only taken on the risk that they will not be paid, but they have agreed that the representative plaintiff will not bear any adverse cost risk. No evidence was provided to indicate that a third party is backstopping that indemnity. If not, counsel risks not being paid for their time and for disbursements and having to pay costs awarded against the plaintiff to multiple defendants. As I indicated, this litigation is not for the faint of heart.
[25] I am satisfied that the 25% requested is fair and reasonable. It is consistent with similar approvals on partial settlements in other cases.
[26] Therefore, I approve payment of counsel fees of $587,500 plus HST to be paid from the monies received and held in trust from the settlement.
Disbursements
[27] Counsel have provided a breakdown of disbursements incurred. The breakdown of disbursements shows that the lion’s share of disbursements have been incurred and paid in the Ontario action. Those disbursements total $134,607. Counsel in the British Columbia action have incurred $10,915, and in the Quebec action, counsel have paid $2,274.
[28] I will deal only with approval of the Ontario disbursements. I am aware that the Quebec court has already approved the fee request and approved the disbursements in that action. I expect that the British Columbia Court will do likewise for the disbursements in that action.
[29] A breakdown of disbursements totalling $147,796.66 is found at para. 28 of Mr. Metrailler’s affidavit. That total includes all disbursements in all three actions. There is no separation of those in the Ontario action.
[30] The largest disbursement is for expert’s fees incurred. That expense is related to the certification motion yet to be argued. If successful, that expense may be offset wholly or in part by a costs award.
[31] In any event, the disbursements appear appropriate and in line with out-of-pocket expenses that I would expect to see in this litigation.
[32] I note that counsel seeks applicable taxes but has not set out what those taxes are. In future, that information should be provided.
[33] Finally, counsel also seeks $10,582 for interest on the disbursements paid. No calculation is provided. Is the interest calculated on only the Ontario disbursements or on all disbursements?
[34] Paragraph 15 of the retainer agreements states:
- In addition to the percentage fee, HP [F & C] will seek reimbursement for disbursements plus a reasonable rate of interest on such disbursements in the event of success.
[35] The retainer agreement is silent as to the applicable interest rate – only that it will be a reasonable rate. Section 33(7)(c) states that the court
shall determine the amount of disbursements to which the solicitor is entitled, including interest calculated on the disbursements incurred, as totalled at the end of each six-month period following the date of the agreement.
[36] Thus, the Act contemplates interest being charged on disbursements and specifies how that calculation is to be done. It does not specify the interest rate applicable.
[37] I decline to approve the request for payment of interest on disbursements incurred at this stage. I do so without prejudice to counsel seeking recovery of same at a later date when the outcome of the litigation is better known. I am troubled by the lack of a specified interest rate in the agreement but note that counsel propose using the applicable prejudgment interest rate. I also have some concern about the fairness of that charge. That issue is better examined in light of the aggregate fees and disbursements approved as the action proceeds.
[38] Therefore, I approve payment of disbursements in the Ontario action of $134,607 plus applicable taxes from the settlement monies held in trust. For clarity, whatever disbursements are approved by the courts in Quebec and British Columbia should likewise be paid from the settlement monies held in trust.
Conclusion
[39] I order as follows:
- Plaintiff’s counsel will provide clarification within 10 days hereof with respect to the status of the retainer agreement with Harrison Pensa LLP and any entitlement by Harrison Pensa LLP to claim fees and disbursements.
- Subject to a satisfactory response to (1) above, the retainer agreements entered into with the representative plaintiff, Sean Allott, are hereby approved pursuant to s. 32(2) of the Class Proceedings Act, 1992.
- Upon unconditional approval of the retainer agreements, legal fees of $587,500 plus applicable taxes and disbursements of $134,607 plus applicable taxes are awarded to Class Counsel with respect to the settlement agreement entered into with the Panasonic defendants dated July 7, 2020.
- The request for payment of interest on disbursements is declined at this stage without prejudice to Class Counsel seeking same at a later date when the outcome of the litigation is better known.
- The fees and disbursements (and applicable taxes) in (3) above together with any disbursement amounts and applicable taxes approved in the Quebec and British Columbia parallel actions shall be paid from the settlement funds, pursuant to the Panasonic Settlement Agreement.
- This order is contingent upon approval of the Panasonic Settlement Agreement and approval of Class Counsel legal fees, disbursements and applicable taxes by the Supreme Court of British Columbia and the Superior Court of Québec, and the terms of this order shall not be effective unless and until such orders are made by the Supreme Court of British Columbia and Superior Court of Québec.
Justice R. Raikes Date: March 15, 2021