Court File and Parties

COURT FILE NO.: CV-20-648610-00CP

DATE: 20211214

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Colin Loewenthal

AND:

Sirius XM Holdings, Inc. et al.

BEFORE: J.T. Akbarali J.

COUNSEL: Glyn Hotz, Darrel N. Hotz, Mark C. Canofari, and Jodi Rhiger, for the plaintiff class

Michael Rosenberg and Stephanie Willsey, for the Canadian defendants

HEARD: September 20, 2021S

ENDORSEMENT

Overview

[1] On this motion, counsel for the plaintiff class seeks approval of class counsel fees and disbursements, and approval of an honorarium for the representative plaintiff and another class member who was involved in instructing counsel.

Background

[2] In this class action, the plaintiff alleged that the defendants unlawfully collect, maintain, store and use data and personal information belonging to the plaintiffs and class members who purchased or serviced new or pre-owned vehicles which came equipped with SiriusXM satellite and Internet radio services. The action sought damages of $500,000,000 and alleged a number of causes of action, including intrusion upon seclusion, negligence, breach of contract, and statutory causes of action, among others.

[3] At an early stage in the action, the Canadian defendants indicated that they intended to move for summary judgment. The non-resident defendants were considering a jurisdiction motion. There was disagreement about whether these motions should proceed before or after the certification motion and, as a result, I scheduled a sequencing motion.

[4] Shortly after delivery of the sequencing motion materials, the parties reached a settlement in principle under which the defendants agreed to make a cy-près distribution of $50,000 to the Automobile Protective Association, an Ontario-based consumer watchdog, to fund a report on best practices to address privacy concerns in the automotive industry. Under the settlement, class counsel was to receive $100,000 in fees, plus $75,000 in disbursements, while the representative plaintiff and another class member who had been involved in instructing class counsel were each to receive a $5000 honorarium. In exchange, the defendants were to receive a release from class members.

[5] I certified the proceeding on consent for the purposes of settlement, but expressed some concerns about the value of the settlement to the class, noting that the settlement was half of the proposed class counsel fees.

[6] By the time of the settlement approval motion, the parties had amended the settlement to provide for a cy-près payment of $150,000 to the Automobile Protective Association, $75,000 in class counsel fees, and $75,000 in disbursements.

[7] There were objectors at the settlement approval hearing, including some that wished to object to counsel fees, the approval of which was not part of the motion then before me. I found that the proposed settlement was fair, reasonable, and in the best interests of the class: 2021 ONSC 4482.

[8] Given the significant risks that were inherent in the action, I held that I would have approved the discontinuance of the proposed class action, with or without costs, and without any benefit achieved for class members. In those circumstances, the proposed cy-près distribution provided some benefit to the class and was a fair and reasonable settlement in the class’s best interest.

[9] At this juncture, I am asked to approve class counsel’s fees of $75,000, inclusive of HST, disbursements of $75,000, inclusive of HST, and an honorarium for the plaintiff, Colin Loewenthal, and another class member, Colin Head, of $5,000 each. Consistent with the parties’ settlement agreement, the Canadian defendants take no position on this motion.

[1] In addition, an issue arose during the notice period with respect to the notice provided to the class, which necessitated the retainer of a third party to manage communications with class members. Although not technically part of class counsel’s motion, to ensure a complete account of events, I briefly address the costs associated with the notice program in these reasons.

[2] Although details of the fee approval hearing were published, and also provided directly to any objectors, no class member made any submissions on the motion. There may have been some class members in attendance at the zoom hearing for part of the hearing, but the few attendees other than court staff, counsel, and the parties did not identify themselves and all dropped off the hearing while class counsel was making submissions.

Class Counsel Fees

[3] The plaintiff’s retainer agreement with class counsel is made as of January 9, 2020 and effective as of October 1, 2019. It provides that class counsel is responsible for the payment of disbursements in the first instance, and shall only be paid fees and disbursements in the event of success in the action. It provides that fees shall be payable only from, and to the extent of, the recovery.

[4] The agreement provides that, in the event of success in the action, class counsel shall be paid from the recovery an amount for fees which is “the lawyers’ billable time as reflected in an hourly rate set out and agreed upon,” and listed in the schedule attached to the agreement. The schedule reflects hourly rates for five counsel that ranged between $650 per hour and $750 per hour as of January 2019.

[5] The costs outline filed by counsel uses a rate of $500 per hour for each lawyer on a partial indemnity scale, and discloses close to 1,000 hours in time spent by counsel collectively on the file.

[6] As Morgan J. recently noted in Austin v. Bell Canada, 2021 ONSC 5068, at para. 10, citing Commonwealth Investors Syndicate Ltd. v. Laxton, [1994] O.J. No. 2922, at para. 63 (S.C.J.), generally speaking, when considering whether to approve class counsel fees, “the amount payable under the contract is the starting point for the application of the court’s judgment.”

[7] The general principles to apply to the assessment of class counsel’s fees were set out by Juriansz J.A., in Smith Estate v. National Money Mart Co., 2011 ONCA 233, at para. 80:

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 the fees;

j. the opportunity cost to class counsel in the expenditure of time in pursuit of the litigation and settlement.

[8] In this case, the claim was factually complex due to the different interactions that each class member would have had with the dealership they dealt with. The claim was legally complex and legally uncertain, as during the currency of the claim, the jurisprudence was evolving. As I noted in my reasons arising out of the settlement approval hearing, there was a risk that the matter might not be certified. Class counsel had undertaken to bear the disbursements and the opportunity cost of a claim that was heavy with risk.

[9] The monetary value of the matters in issue was not significant; unlike other privacy related cases, this case involves no hack or database breach, and no evidence of actual damages being suffered by the class. However, I find that the issues raised were important, as demonstrated by the plaintiff, Mr. Loewenthal’s, evidence that he approached class counsel after being unable to determine how SiriusXM obtained his personal information.

[10] Class counsel demonstrated a degree of skill and competence and managed to achieve results that provide an indirect benefit to the class.

[11] There is no evidence of the ability of the class to pay fees or the expectations of the class as to the amount of fees. I would have had concerns had counsel fees remained at twice the value of the cy-près distribution, which arguably would have been inconsistent with the class’s expectation as to the amount of the fees, at least relative to the value of the settlement, but the amendments to the settlement have resolved that concern.

[12] I accept that class counsel paid a significant opportunity cost in the expenditure of their time on this matter. By my calculation, close to 1000 hours was spent between five counsel on this matter. Class counsel’s costs outline uses an hourly rate of $500 for each lawyer on a partial indemnity scale. That is high for partial indemnity, but in any event, the $75,000 in fees agreed to is far, far, less than the value of the time spent by counsel, even if one calculated fees using a partial indemnity rate of $325, half the hourly rate of the least expensive timekeeper. Rounding the hours spent down to 900, the fees work out to about $83 an hour.

[13] I have no difficulty concluding that the fee request is fair and reasonable, given the risk undertaken, the time expended, and the fact that class counsel was able to obtain an indirect benefit to the class in a case with very questionable prospects of success.

Honoraria

[14] Consistent with the settlement agreement, class counsel seek $5000 honoraria paid to each of Mr. Loewenthal and Mr. Head.

[15] In Brazeau v. Attorney General (Canada), 2019 ONSC 4721, at para. 32, Perell J. considered whether to approve an honorarium payment to a representative plaintiff. He concluded that compensation to a representative plaintiff should not be routine, and an honorarium should only be awarded in exceptional cases. He identified the following factors for the court to consider when determining whether the circumstances are exceptional such as to justify the payment of an honorarium:

a. active involvement in the initiation of the litigation and retainer of counsel;

b. exposure to a real risk of costs;

c. significant personal hardship or inconvenience in connection with the prosecution of the litigation;

d. time spent and activities undertaken in advancing the litigation;

e. communication and interaction with other class members;

f. participation at various stages in the litigation, including discovery, settlement negotiations and trial.

[16] The evidence indicates that Mr. Loewenthal grew concerned about SiriusXM’s potential misuse of his personal information and sought out counsel as a result.

[17] The evidence also indicates that Mr. Lowenthal was exposed to a real risk of costs. Mr. Loewenthal (and Mr. Head) were advised, as is documented in the retainer agreement, that the file was technically and legally difficult, and it “may not be easy or even possible to prove damages.” The retainer agreement indicates that the action would be difficult to establish on a class-wide basis because of the various representations made and differences in privacy policies between dealerships and differences in the law between provinces.

[18] The agreement also notes that class counsel intended to indemnify the plaintiff prior to the certification hearing by obtaining an independent policy of insurance or through the law foundation application process to indemnify the actions at the cost of 10% of the recovery. The agreement also notes the risk of losing interlocutory or final motions and provides that “the Client acknowledges that only the certification motion will be insured.”

[19] As I have noted, the Canadian defendants intended to bring a sequencing motion, and a summary judgment motion, while the non-resident defendants were contemplating a jurisdiction motion. There was a real possibility that these motions would proceed, uninsured, and that Mr. Lowenthal would be exposed to an adverse costs award. Notwithstanding, Mr. Lowenthal decided to proceed.

[20] The evidence also indicates that Mr. Loewenthal took an active role in the litigation, including meetings with class counsel, undertaking efforts to obtain information relevant to the proceeding from his dealerships and from SiriusXM, and assisting class counsel with research with respect to specific IT solutions, as Mr. Lowenthal has expertise in information technology.

[21] Mr. Head became involved as class counsel sought a representative plaintiff to represent class members who had bought in the pre-owned market. He was advised that a summary judgment motion was contemplated, that there were risks of losing and that there could be costs against him. Mr. Head agreed to be the second proposed representative plaintiff notwithstanding those risks.

[22] Mr. Head participated actively in the litigation, by compiling lists of dealerships that might be willing to speak with class counsel. He spent close to a week reviewing the documents that were filed.

[23] In my view, and having particular regard to the active involvement of Mr. Lowenthal and Mr. Head, and their willingness to take on personal risk which was more than theoretical, this is an appropriate case to award each an honorarium in the amount of $5000. As MacLeod J. put it in Hardwick v. Blue Buffalo Company, Ltd. et al., 2021 ONSC 5297, at para. 19, “[a] modest payment of $5000 which the defendant has agreed to fund is unlikely to suggest that acting as a representative plaintiff is a lucrative pursuit but is some reward for the time and risk.”

Disbursements

[24] Consistent with the settlement agreement, class counsel claims disbursements in the amount of $75,000, all inclusive.

[25] The retainer provides that, in the event of success in the action, class counsel shall be paid from the recovery all disbursements counsel reasonably incurs in and in relation to the action, plus taxes and interest.

[26] Unusually, class counsel did not provide an itemized list of disbursements in their motion materials. Rather, their costs outline describes disbursements as follows:

$75,000 as per settlement agreement to reflect expenses associated with consultation of U.S. counsel as indicated hereunder, 8 experts, filing and out-of-pocket and other expenses, and proportional share of running the file for the four firms involved from October 1, 2020 to June September 14, 2021 [sic]

[27] I asked counsel to provide an itemized list, together with any supporting documentation to allow me to better evaluate this request. The information provided (not including the costs of dealing with the notice program, which I address below) demonstrates out of pocket expenses totaling $55,657.36, plus a claim for firm expenses in the amount of $50,400. The latter is calculated by each of the four plaintiff firms attributing $1,400 per month over nine months as an estimated proportional share of firm resources, expenses relative to their case load to run the file, including office expenses, proportional share of operational expenses, administrative and research expenses.

[28] Class counsel notes that, to the extent I do not approve any of the fees, disbursements, or honoraria, the funds which the Canadian defendants agreed to pay do not get added to the cy-près distribution, but revert to SiriusXM. Class counsel argues that the payments that the Canadian defendants have agreed to make achieve the goal of behaviour modification, while not approving an amount payable under the settlement agreement would detract from that goal.

[29] There are two problems with class counsel’s argument. First, no wrongdoing on the part of the defendants has been established at any point in this proceeding, making it far from clear that behaviour modification of these defendants is required. The value of the settlement in this proceeding can realistically be linked to the cost to the defendants of defending it.

[30] Second, class counsel is claiming for items that are not typically considered disbursements. The claim for “a proportional share of running the file” is a claim for overhead as a disbursement. Overhead is generally built into counsel’s hourly rate, and not a separately recoverable disbursement. Class counsel did not provide any authority for the proposition that overhead can be recovered as a disbursement, and I am not prepared to treat overhead as a disbursement.

[31] I thus approve disbursements in the amount of $55,657.36.

The Expenses Associated with the Notice Program

[32] In the course of addressing the information provided to the court about the disbursements, an issue arose regarding expenses associated with the notice program. At my direction, class counsel filed two affidavits to address the issues that were outstanding. Subsequently, those two affidavits were withdrawn, and counsel filed an agreed statement of facts to clarify matters. If the affidavits of Darryl Hotz, sworn October 6, 2021 and November 9, 2021, were filed with the court, given that they have been withdrawn, I direct their removal from the court file. Class counsel shall file the agreed statement of facts, together with the letters attaching disbursement invoices delivered on December 10, 2021 and December 13, 2021, through the portal to ensure the court file is complete. It is on these documents that I rely to address the expenses related to the notice program, below.

[33] The notice program to advise the class of the settlement approval hearing was ambitious, and included direct email to millions of class members. The notice resulted in thousands of emails from class members to class counsel; it was challenging for class counsel to address that volume of correspondence. SiriusXM paused the distribution of notice emails at the request of class counsel. Counsel agreed on proposed changes to the notice to, among other things, remove class counsel’s direct contact information from the email notices.

[34] On April 15, 2021, I approved an amended form of notice for the class members who had not yet received a notice email by that time.

[35] Due to the volume of correspondence from class members, SiriusXM agreed to pay for a third-party administrator to administer the notice program. Ricoh Digital Services was engaged for that purpose. Ricoh has invoiced its services in the amount of $40,837.97, of which an invoice dated September 30, 2021 in the amount of $1,139.83 is outstanding. SiriusXM has paid the balance directly to Ricoh. Although not part of the original motion for approval of class counsel’s fees and disbursements, class counsel seeks this outstanding amount from Ricoh’s billings also be approved as a disbursement, which they will then pay to Ricoh. I agree this amount is appropriate to be paid to Ricoh; I approve an increase in the ordered disbursements to $1,139.83 as long as that amount has not been paid directly to Ricoh by SiriusXM by the release of these reasons.

[36] There was a further payment of $33,600, inclusive of HST, to class counsel by SiriusXM relating to legal fees class counsel billed to Ricoh to provide legal advice in connection with the notice program. Class counsel does not seek approval of these fees, relying on s. 32(2) of the Class Proceedings Act, 1992, which provides that “[a]n agreement respecting fees and disbursements between a solicitor and a representative party is not enforceable unless approved by the court, on the motion of the solicitor.” Counsel contrasts this provision with r. 334.4 of the Federal Court Rules, SOR/98-106, which provides that “[n]o payments, including indirect payments, shall be made to a solicitor from the proceeds recovered in a class proceeding unless the payments are approved by a judge.” Counsel notes that their account to Ricoh was not paid from the proceeds recovered in the class proceeding, and the fees billed to Ricoh were not billed pursuant to an agreement respecting fees and disbursements between a solicitor and a representative party. Thus, they argue, no court approval is required.

[37] I have a general concern that structuring payments to class counsel in this manner presents an opportunity to impoverish a settlement fund in favour of class counsel, and to do so in a manner that may not be disclosed to the court. In my view, class counsel should disclose all of the fees they will be receiving related to the class proceeding, whether they take the position that approval is required for any or all of them or not, at the time that the court is considering approval of the settlement. Transparency is important; the court must be able to determine whether the proposed settlement is in the best interests of class members, having regard to all of the relevant factors, including all of class counsel’s intended fees related to the class proceeding, no matter how they are structured.

[38] This case was unusual, because the volume of correspondence from class members was significant, and at the time the settlement agreement was entered into, that level of engagement by class members was not anticipated. Moreover, even adding $30,000 to the $75,000 I have already approved for class counsel’s fees, and rounding down the hours counsel spent on the file to 900, the actual fees class counsel are receiving come in around $117/hr - much lower than counsel’s reasonable partial indemnity rates. Had I been asked to approve $105,000 in fees, taking into consideration the considerable effort required on the part of class counsel to respond to class members’ inquiries during the notice, in addition to the factors I have already reviewed, I would have approved fees in that amount.

[39] In this case, as I have noted, the defendants are contractually bound to take no position on class counsel’s fees and disbursements. The question of whether approval is required for the fees paid to class counsel relating to their provision of legal advice to Ricoh has not really been argued. Given my finding that I would have approved the fees in any event, the question does not need to be addressed. However, I should not be taken as concluding that judicial approval of fees structured in this manner do not require court approval. For clarity, I make no finding on that issue in these reasons.

Conclusion

[40] I approve the following amounts:

a. Class counsel fees of $75,000 all inclusive;

b. Honoraria for Mr. Loewenthal and Mr. Head of $5,000 each;

c. Disbursements in the amount of $ 55,657.36;

d. A further disbursement, payable to class counsel, for $1,139.83, in respect of Ricoh’s September 30, 2021 invoice, if, by the time of release of these reasons, SiriusXM has not already paid that amount to Ricoh directly;

e. If the affidavits of Darryl Hotz, sworn October 6, 2021 and November 9, 2021, were filed with the court, given that they have been withdrawn, they shall be removed from the court file. Class counsel shall file with the court the agreed statement of facts, together with the letters attaching disbursement invoices delivered on December 10, 2021 and December 13, 2021.

J.T. Akbarali J.

Date: December 14, 2021