Court File and Parties

COURT FILE NO.: CV1899/15CP DATE: 20220107 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, Sarah Bowden, Jean-Marc Metrailler -Counsel, for the Plaintiff Sandra Forbes and Maura O’Sullivan - Counsel, for the Kamaya Defendants Kevin Wright and Todd Shikaze – Counsel, for the Susumu Defendants Sinziana Hennig – Counsel, for the KOA Defendants

HEARD: November 25, 2021

Endorsement

[1] The plaintiffs move for an order pursuant to ss. 29 and 39 of the Class Proceedings Act, 1992 approving a partial settlement reached with the defendants, Kamaya Electric Co., Ltd. and Kamaya, Inc. (hereafter “the Kamaya defendants”). The settlement agreement is dated January 21, 2021.

[2] By way of background, the plaintiff commenced this action by statement of claim on September 11, 2015. The claim alleges that the various defendants engaged in a price fixing conspiracy to fix, raise, maintain, or stabilize the price of linear resistors in Canada with the intent of raising prices of linear resistors and products containing linear resistors.

[3] On April 27, 2017, a second conspiracy action was commenced in Ontario advancing the same price fixing allegations as against other defendants. The two Ontario actions were consolidated by order dated January 31, 2020.

[4] On July 22, 2021, an order was made discontinuing this action as against the Alps defendants, the Midori defendants, the TOCOS defendants, and Vishay Intertechnology, Inc..

[5] This is the second settlement reached in this action. The first was with the Panasonic defendants. That settlement was approved on March 12, 2021. Panasonic paid $2.35 million dollars and provided cooperation to the plaintiffs to assist in the prosecution of the claim as against the remaining defendants.

[6] There are parallel class proceedings in British Columbia and Quebec. Class counsel in this action are working cooperatively with counsel in the British Columbia and Quebec class proceedings.

[7] The Kamaya defendants were originally named as defendants only in this action. They have recently been added to the Quebec action for settlement approval purposes. Settlement approval is required from both courts failing which the settlement is void and the parties proceed as if no settlement was ever reached.

Class Definition

[8] On July 22, 2021, I certified the following class definition in respect of this proposed settlement:

All persons or entities in Canada who purchased a Linear Resistor or a product containing a Linear Resistor between July 9, 2003 and September 14, 2015, other than (1) all Quebec Settlement Class members and (2) Excluded Persons.

Settlement Negotiations

[9] The negotiations leading to this settlement started in Spring of 2019. The settlement was reached on July 24, 2020, only 17 days after the settlement with Panasonic was made. It took much longer to reduce the settlement with the Kamaya defendants to a written, signed agreement. As a result, the Panasonic settlement approval went first notwithstanding that it would have been far more efficient and cost effective to have done both together.

[10] The negotiations were arm’s length between experienced counsel. Numerous offers and counteroffers were exchanged. Numerous drafts of proposed wording for the agreement were likewise exchanged. No third-party mediator was involved.

Outline of Settlement Terms

[11] The settlement agreement with the Kamaya defendants provides that:

1. Kamaya will pay $770,000 for the benefit of class members in Canada. This includes persons in British Columbia and Quebec.
2. Kamaya will provide cooperation to plaintiff’s counsel through, a. an evidentiary proffer from Kamaya’s counsel; b. a witness interview; c. document production; d. sales and transactional data; and e. affidavit and testamentary evidence by a knowledgeable employee for use at a summary judgment motion and trial.
3. The action is dismissed as against the Kamaya defendants.
4. The Kamaya defendants get a full and complete release.
5. The non-settling defendants are not affected or prejudiced by this settlement.

[12] The settlement terms are comparable to that in the Panasonic settlement save that the amount paid is substantially less. I will address the reasonableness of the settlement amount below.

Law re Settlement Approval

[13] Settlement of a class proceeding requires court approval: s. 29 CPA. Once approved, the settlement binds all class members: s. 29(3) CPA.

[14] In Osmun v. Cadbury Adams Canada Inc., 2010 ONSC 2643, Strathy J. (as he then was) adopted the summary of principles applicable to a motion for settlement approval from the decision of the Cullity J. in Nunes v. Air Transat A.T. Inc., [2005] O.J. No. 2527 at para. 7:

a) to approve a settlement, the court must find that it is fair, reasonable and in the best interests of the class; b) the resolution of complex litigation through the compromise of claims is encouraged by the courts and favoured by public policy; c) there is a strong initial presumption of fairness when a proposed settlement, which was negotiated at arm’s length by counsel for the class, is presented for court approval; d) to reject the terms of a settlement and require the litigation to continue, a court must conclude that the settlement does not fall within a zone of reasonableness; e) a court must be assured that the settlement secures appropriate consideration for the class in return for the surrender of litigation rights against the defendants. However, the court must balance the need to scrutinize the settlement against the recognition that there may be a number of possible outcomes within a zone or range of reasonableness. All settlements are the product of compromise and a process of give-and-take. Settlements rarely give all parties exactly what they want. Fairness is not a standard of perfection. Reasonableness allows for a range of possible resolutions. A less than perfect settlement may be in the best interests of those affected by it when considered in light of the risks and obligations associated with continued litigation; f) it is not the court’s function to substitute its judgment for that of the parties or to attempt to renegotiate a proposed settlement. Nor is it the court’s function to litigate the merits of the action or simply rubber stamp a proposed settlement; and g) the burden of satisfying the court that a settlement should be approved is on the party seeking approval.

[15] In assessing the reasonableness of a proposed settlement, the following factors are useful:

a) the presence of arm’s length bargaining and the absence of collusion; b) the proposed settlement terms and conditions; c) the number of objectors and nature of objections; d) the likelihood of recovery or likelihood of success; e) the recommendations and experience of counsel; f) the future expense and likely duration of litigation; g) information conveying to the courts the dynamics of, and positions taken by the parties during the negotiations; h) the recommendation of neutral parties, if any; and i) the degree and nature of communications by counsel and the representative plaintiff with class members during the litigation.

(See Osmun, at para. 32; Nunes, at paras. 6-7; Farkas v. Sunnybrook and Women’s Health Sciences Centre, [2009] O.J. No. 3533 (S.C.J.), at para. 45).

[16] The above factors are not to be applied in a mechanical way. It is not necessary that all factors be present in every case, nor that they be given equal weight: Osmun, at para. 33. These factors are a guide to aid in assessing whether the settlement is fair and reasonable and in the best interests of the class as a whole.

[17] In the absence of evidence to the contrary, the recommendation of experienced counsel should be given great weight. Counsel are well-positioned to assess the potential risks and rewards of the litigation: Vitapharm Canada Ltd. v. F. Hoffman-La Roche Ltd., [2005] O.J. No. 1118 (S.C.J.), at para. 142.

[18] Early settlements that help both to finance and advance the prosecution of the action against non-settling defendants are productive for both class counsel and class members: Mancinelli v. Royal Bank of Canada, 2016 ONSC 6953, at para. 33.

[19] Cooperation with the first settling defendant is particularly important and offers substantial benefit to the class: Nutech Brands Inc. v. Air Canada, at para. 37. In Osmun, at para. 36, Justice Strathy observed:

[36] …In addition, securing the cooperation of Cadbury and ITWAL is an important and immeasurable non-pecuniary benefit. This would be significant in any case, but in a conspiracy action, where the allegation is that the defendants share a dark secret, obtaining the cooperation of two of the alleged conspirators to assist the plaintiff in pursuing the alleged co-conspirators is of inestimable value. ...

[20] The burden of satisfying the court that a settlement should be approved is on the party seeking approval: Nunes, para. 7 citing Vitapharm Canada Ltd. v. F. Hoffmann-La Roche Ltd., [2005] O.J. No. 1118 (S.C.J.).

Analysis

[21] On July 22, 2021, I certified this action for settlement purposes only as against the Kamaya defendants. The order approved notices to class members and a notice plan that advised class members of the settlement and how to object to same. Because the action was previously certified for the Panasonic settlement, there was no need to address the issue of opt-outs. No class members expressed any opposition to or comment on the settlement.

[22] I am satisfied that procedural fairness is present. This settlement was achieved through arm’s length adversarial negotiation over a lengthy period.

[23] Plaintiff’s counsel are experienced in class proceedings. They recommend the settlement. Although now six plus years old, the settlement occurs at a procedurally early stage in the action. The claim period is long past. Whatever damages exist, if any, they have crystallized. This is not a case where there is an ongoing harm that increases by the month.

[24] The contested certification motion is months off. It may be appealed regardless of outcome. If certified, the discovery process remains. Expert reports will be required. Even an aggressive timetable would see the trial of this matter in three years or longer. The outcome of the trial is uncertain. Meanwhile, there is expense and risk for all parties.

[25] Counsel submit that the amount paid under the settlement (the funds have already been deposited into plaintiff counsel’s trust account), is fair and reasonable having regard to the risks of the litigation, the alternatives to settlement, and the benefits achieved for the class through the settlement. They submit that the Kamaya settlement is so close in time to that reached with the Panasonic defendants that the two are essentially contemporaneous. Both should be assessed as early settlements with added weight attached to the cooperation benefits provided. Further, they submit that the settlements reached are comparable given their respective global market shares

[26] According to plaintiff’s counsel’s affidavit filed for this motion, Kamaya indicated that its direct sales of linear resistors in Canada during the claim period was less than $100,000. That amount is more than 28 times less than Panasonic’s direct sales in Canada in the same period. That modest amount of direct sales weighed heavily on Kamaya’s negotiating position.

[27] The Kamaya defendants’ settlement position was also informed by the amounts paid in litigation in the United States. Kamaya was sued civilly in class actions by direct purchasers and indirect purchasers. They settled that litigation by paying $2 million for indirect purchasers and $5.25 million for direct purchasers. Both amounts were in U.S. dollars. Without converting to Canadian dollars, the settlement in this litigation is roughly 10.62% of that paid in the United States which, of course, is a much larger market.

[28] Plaintiff’s counsel provided an economic analysis based on several assumptions. The Kamaya defendants do not accept the appropriateness of that analysis nor the assumptions made. The non-settling defendants took no position on this motion, but it is highly likely that they also would take issue with the approach and assumptions. The analysis provides insight into class counsel’s reasoning only. At this early stage of the litigation, there are no expert damages reports to use as a touchstone.

[29] Class counsel calculates the exposure of the Kamaya defendants to be approximately $1.64 million (CDN). That is based on a 2.75% share of the global market. Counsel submits that the payment by Kamaya is roughly 47% of the estimated conservative calculation of Kamaya’s exposure for damages which compares favourably to the same analysis submitted to the court for the Panasonic settlement.

[30] I note that the analysis fails to include any calculation of prejudgment interest or any contribution to costs. The percentage paid is less if prejudgment interest is included and a modest amount attributed to costs.

[31] Plaintiff’s counsel indicate that this settlement, like Panasonic, reflects a discount for settling early. The same considerations apply. There are benefits to having information and evidence available before discovery and through cooperation rather than litigation. This augments the prospects for successful prosecution of the action against the remaining defendants. It reduces the opposition, albeit very slightly, to contested certification and the remainder of the action, if certified. Plaintiff’s counsel depose that the remaining defendants are unlikely to get the same discount for early settlement as was given to Panasonic and Kamaya.

[32] I am mindful that I approved the Panasonic settlement which is in an amount proportionately comparable to that paid by Kamaya. The two settlements were negotiated separately but at the same time. They reflect compromise for risk and the advantages obtained from early cooperation. Settlements made after this date will not be entitled to the same consideration.

[33] I have concerns with the amount paid by Kamaya but find that it falls within the zone of reasonable outcomes, albeit close to the lower end of that zone. There are other benefits obtained through the settlement that cannot be quantified but which may yield significant advantage to the plaintiff class. Accordingly, I approve the settlement for essentially the same reasons I earlier approved the Panasonic settlement.

Conclusion

[34] For the reasons set out above, I approve the settlement with the Kamaya defendants.

Justice R. Raikes Date: January 7, 2022