Adams v Apple Inc., 2023 ONSC 2957

Court File and Parties

COURT FILE NO.: CV-12-17511 DATE: 20230516 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Nancy Jean Adams, Plaintiff AND: Apple Inc, Hachette Book Group Canada Ltd., Hachette Book Group, Inc., HarperCollins Canada Limited, HarperCollins Publishers, Inc. MacMillan Publishers, Inc., Penguin Group (USA), Inc., Pearson Canada Inc., c.o.b. as Penguin Group (Canada) and Simon & Schuster Canada, a Division of CBS Canada Holdings Co. Defendants

Proceedings under the Class Proceedings Act, 1992

Court File No.: CV-16-24156CP RE: Nancy Jean Adams, Plaintiff AND: Apple Inc, Hachette Book Group Canada Ltd, Hachette Book Group, Inc., HarperCollins Canada Limited, HarperCollins Publishers, LLC., MacMillan Publishers, Inc., Penguin Group (USA), LLC. (formerly Penguin Group (USA), Inc.), Penguin Canada Books, Inc. (formerly Pearson Canada Inc., c.o.b. as Penguin Group (Canada)) and Simon & Schuster Canada, a Division of CBS Canada Holdings Co. Defendants

Proceedings under the Class Proceedings Act, 1992

BEFORE: Justice R. Raikes

COUNSEL: Luciana Brasil, Andrew Morganti - Counsel, for the Plaintiff J. Thomas Curry, Paul- Erik Veel - Counsel, for the Apple Defendants Emry Davis - Counsel, for the Defendant, MacMillan Publishers, Inc. Linda Plumpton, James Gotowiec – Counsel for the Hachette Defendants Katherine Kay, Danielle Royal - Counsel for the HarperCollins Defendants David Kent, John Clifford - Counsel for the Penguin Defendants Suzy Kaufman - Counsel for the Simon & Schuster Defendants

HEARD: November 30, 2022 and January 13, 2023 (Virtual). (Written submissions made January 27, 2023.)

Endorsement

1Class Counsel move for an order approving,

1. the contingency fee extension agreement with the plaintiff;
2. fees of $2.7 million and disbursements of $43,669.39 plus applicable taxes on both payable to Class Counsel; and
3. an honorarium payment of $5,000 to the representative plaintiff.

2Class Counsel have agreed between them that the Quebec class represents roughly 10% of all class members in the overall litigation. Therefore, Quebec Counsel will seek approval in the Quebec action for payment of additional fees ($300,000) representing 10% of the total fees sought and disbursements incurred in that action ($12,375.35).

3Thus, the aggregate Class Counsel fee request including Quebec is $3,000,000 plus applicable taxes to be paid from the settlement monies.

4Some history is necessary to put the requests in paragraph one in context.

Litigation Background

5In February 2012, the plaintiff commenced an action as against the defendants in Court File No. CV-12-17511 (hereafter “the 2012 Action”). The plaintiff alleged that the defendants had entered into an unlawful conspiracy to fix, maintain, increase or control the price of eBooks sold in Canada contrary to Part VI of the federal Competition Act. Companion actions were commenced in British Columbia and Quebec for putative class members in those jurisdictions.

6In May 2014, the Plaintiff entered into a settlement agreement with the Publisher Defendants in the 2012 Action (“the Publisher settlement”). Apple was not a party to that settlement.

7Pursuant to the Publisher settlement, the Publisher defendants agreed to pay $3,175,000 for the benefit of the class. That settlement was approved by Patterson J. on October 6, 2014. Courts in parallel class proceedings in Quebec and British Columbia likewise approved the Publisher settlement. The issue of distribution of those settlement funds was deferred pending resolution of the action(s).

8When the Publisher settlement was reached and approved, it was contemplated that the Publisher defendants had already, or would soon, enter into consent agreements with the Commissioner of Competition, the effect of which would be to allow eRetailers who sold the defendant Publishers’ eBooks to sell those books at a discount. An eRetailer, Kobo, challenged the agreements between the Publisher defendants and the Commissioner. The challenge was successful on technical grounds.

9The plaintiff then commenced a second national class proceeding which is Court File No. CV-16-24156-CP (hereafter “the 2016 Action”). In the 2016 Action, the plaintiff asserted the same causes of action as against the same defendants (as refined to reflect amalgamations) albeit covering a later time period.

10By January 2017, the Apple defendants had entered into a consent agreement with the Commissioner. Three Publisher defendants also entered into the new form of consent agreement with the Commissioner. Kobo launched another challenge that was dismissed in February 2018.

11The Commissioner commenced proceedings against HarperCollins pursuant to s. 90.1 of the Competition Act. That litigation resolved and the proceedings were withdrawn when HarperCollins entered into the new form of consent agreement in January 2018.

The Apple Settlement

12Settlement negotiations with the Apple defendants began in October 2014. The negotiations were aided by an experienced mediator. An agreement in principle was reached in May 2017. Subsequent discussions between counsel centered principally on obtaining third party eRetailer data, aspects of the distribution protocol, and notice dissemination issues.

13The parties signed a settlement agreement on May 14, 2018 (“the Apple settlement”). Thereafter, more discussions took place including with the Publisher defendants. The Apple settlement agreement was amended May 25, 2020.

14The Apple settlement requires Apple to pay $12 million. The settlement amount paid is an “all-in” amount; viz. there is no designation of any portion of the settlement amount as a contribution toward plaintiff costs or disbursements.

15The Publisher and Apple settlements effectively resolve all related eBook class proceeding litigation across Canada on a final basis.

16The Apple settlement required approval of all three courts for the 2012 litigation and only the Ontario and Quebec courts for the 2016 litigation. Approval in the 2012 Action and 2016 Action has been obtained from this Court. Counsel advise that once finalized, approvals will be sought in Quebec and a discontinuance sought in the 2012 British Columbia action.

17The aggregate settlement monies paid by the defendants from both settlements is $15,175,000.

Prior Fee Approval

18At the time of the approval of the Publisher settlement in the 2012 Action, Patterson J. approved the contingency fee retainer agreement between the plaintiff and counsel, and approved Class Counsel fees of $674,687.50 and disbursements of $169,369.55 plus applicable taxes. The approved fee represented 25% of the Publisher settlement amount.

19Although the monies recovered in the Publisher settlement remained in trust to be distributed at a later date, Class Counsel were paid the approved amounts from the settlement funds at that time.

20To be clear, the fee request by Class Counsel on the motion before me represents 25% of the Apple settlement (excluding Quebec which will be dealt with by the Quebec Court). The disbursements sought are those incurred by Class Counsel over and above those already paid from the Publisher settlement.

Contingency Fee Retainer Extension Agreement

21Ms. Adams entered into an initial contingency fee agreement with Class Counsel on March 29, 2012 (“initial retainer agreement”). That retainer agreement was approved by Patterson J. following the Publisher settlement.

22The initial retainer agreement was a contingency fee agreement. The lawyers would only be paid upon success in the action. “Success” was defined to include, inter alia, a settlement that benefits some or all members of the class. If successful, the lawyers were entitled to be paid:

1. Para. 7 – 25% of any Recovery plus HST “plus a proportionate share of any interest accruing on the Recovery” if the 2012 Action settled before examinations for discovery commenced. The percentage increased if the matter settled after examinations for discovery commenced.
2. Para. 8 – disbursements reasonably incurred in the 2012 Action plus applicable taxes and interest on those disbursements pursuant to s. 33(7)(c) of the Class Proceedings Act.
3. Para. 9 – recoverable disbursements included, inter alia, a nightly fee of $220 for use of a condominium used by lawyers in lieu of a hotel room when in Toronto.

23“Recovery” was a defined term. It meant “the amount actually recovered by award, judgment, settlement or otherwise, …, excluding any amount separately identified or specified as costs and/or disbursements ”. [Italics added.]

24Soon after the successful challenge of the agreements between publishers and the Commissioner by Kobo, the plaintiff and Class Counsel entered into a contingency fee retainer extension agreement dated September 22, 2016 (“the extension retainer agreement”). According to the recital “L”, the new agreement was to extend and update the terms of the initial retainer agreement to include the 2016 Action. The initial retainer agreement was attached as Schedule “D” to the extension retainer agreement

25At para. 3, under the heading “Purpose and Effect of this Contingency Fee Extension Agreement”, the parties agreed:

3. The Client understands and acknowledges that the purpose and effect of this Contingency Fee Extension Agreement is to extend the terms of the Initial Contingency Fee Agreement she executed with the Lawyers in respect of the Initial Action to the Subsequent Action mutatis mutandis so that the Lawyers shall have the same entitlement in respect of fees and disbursements in the Subsequent Action as they have in the Initial Action.

26Accordingly, paras. 7, 8, and 9 of the initial retainer agreement were incorporated by reference into the extension retainer agreement. Those provisions are summarized above.

Approval of Retainer Agreement

27As mentioned, the initial retainer agreement has already been approved by Patterson J..

28The retainer extension agreement adopts and incorporates the approved initial agreement. The criteria found in s. 32(1) of the Class Proceedings Act are satisfied. The retainer extension agreement is approved.

Issues Raised by the Court

29The Notice disseminated to class members of the Apple settlement and its terms included notice of Class Counsel’s request for approval of legal fees and disbursements, including the amounts sought. The Notice told Class members that they had the option to opt out of the 2016 action. They were also told that they had the right to object to the terms of the settlement and/or the lawyers’ fee request including how to do so.

30A very small number of class members elected to opt out of the 2016 Action. No objections to the Apple settlement were received No objections were received from class members to the fee request by Class Counsel.

31As is quite common in fee approval hearings, only Class Counsel made submissions. Although present, defence counsel took no position. It was a one-sided hearing given the absence of any objectors.

32During oral submissions, I raised the following issues with Class Counsel:

1. the appropriateness of the condominium nightly charge in lieu of hotel if work was being done in Toronto. I was assured that the disbursements for which Class Counsel seek approval contain no such charge. Although present in the agreement, that provision was not triggered;
2. whether provisions governing contingency fees generally applied to class proceedings; specifically, regulations under the Solicitors Act that prohibit including disbursements and costs awarded or contributed when calculating the contingency fee payable;
3. whether a notional contribution to costs by the defendants should be imputed when the settlement paid is an “all-inclusive” amount so that the percentage fee calculated is determined net of that contribution; and
4. whether anticipated administration costs should be deducted from the settlement amount off the top and counsel fees calculated based on the net amount.

33Class counsel asked and were provided the opportunity to make submissions in writing on issues 2, 3, and 4. Again, there was no one to respond to those submissions. I considered whether this was an appropriate case to appoint amicus to assist the court but ultimately determined that I could deal with the issues raised without that assistance.

34Class Counsel were offered the opportunity to make further oral submissions on these issues and declined.

35In their written submissions, Class Counsel submit that:

1. the Class Proceedings Act, (as amended), is a complete code for the approval of Class Counsel fees and disbursements in class proceedings. As such, the provisions of the Solicitors Act and its regulations dealing with contingency fee agreements do not apply;
2. this position is reinforced by the plain language of the Class Proceedings Act and the many cases since its inception that have dealt with counsel fees and disbursements under the Class Proceedings Act without regard to the Solicitors Act and its regulations;
3. there is no express provision extending the application of the Solicitors Act to class proceedings;
4. the regulations under the Solicitors Act do not apply here because the amount recovered is an all-in amount. No costs were awarded, and no portion of the Apple settlement is earmarked for disbursements or costs; and
5. the regulations under the Solicitors Act provide no mechanism to calculate Class Counsel’s contingency fee on an amount less than the total settlement amount.

Is the CPA a complete code for class counsel contingency fees and disbursements?

36A brief history of the relevant statutory and regulatory provisions is necessary for context.

37Prior to the enactment of the Class Proceedings Act in 1992, contingency agreements were prohibited in Ontario. That blanket prohibition changed when s. 33 of the Class Proceedings Act expressly permitted a lawyer and representative party to enter into a written agreement that provided for payment of fees and disbursements only in the event of success in the class proceeding. That exception applied only to class proceedings.

38Ten years later, in 2002, the Solicitors Act was amended to allow contingency agreements except in criminal and family law matters: s. 28.1(3). The contingency agreement had to be in writing: s. 28.1(4). The agreement could not exceed the maximum percentage prescribed by regulation (s. 28.1(5)) unless approved by a judge of the Superior Court within 90 days of execution of the agreement (s. 28.1(6)).

39Subsection 28.1(8) stated:

(8) A contingency fee agreement shall not include in the fee payable to the solicitor, in addition to the fee payable under the agreement, any amount arising as a result of an award of costs or costs obtained as part of a settlement, unless,

(a) the solicitor and client jointly apply to a judge of the Superior Court of Justice for approval to include the costs or a portion of the costs in the contingency fee agreement because of exceptional circumstances; and (b) the judge is satisfied that exceptional circumstances apply and approves the inclusion of the costs or a proportion of them. [Italics added.]

40Assessment of the lawyer’s bill under a contingency agreement is governed by s. 28.1(11). The Lieutenant Governor in Council is authorized to make regulations governing contingency retainer agreements including,

• the maximum percentage of the amount recovered (s. 28.1(12)(a)),
• the maximum amount of remuneration a lawyer could be paid pursuant to a contingency agreement (s. 28.1(12)(b)),
• the treatment of costs awarded or obtained where there is a contingency fee agreement (s. 28.1(12)(c)),
• standards and requirements for contingency agreements including terms to be included (s. 28.1(12)(d)), and
• exempting persons or classes of persons, actions or proceedings from s. 28.1 or any regulation made under that section (s. 28.1(12)(g)).

41No regulations have been enacted setting a maximum percentage or maximum remuneration.

42In 2004, Contingency Fee Agreements, O Reg 195/04, a Solicitors Act regulation came into force. Sections 2 and 3 set out minimum mandatory content requirements for contingency fee agreements. Section 5 dealt with contingency fee agreements for the benefit of persons under a disability. Section 6 stated:

6. A contingency fee agreement that provides that the fee is determined as a percentage of the amount recovered shall exclude any amount awarded or agreed to that is separately specified as being in respect of costs and disbursements.

43O Reg 195/04 was repealed and replaced by Contingency Fee Agreements, O Reg 563/20 which came into force July 1, 2021. Section 2 of O Reg 563/20 replaced former s. 6 of O Reg 195/04. It states:

2. A contingency agreement that provides that the fee is determined as a percentage of the amount recovered by the client under an award or settlement shall exclude any amount that is specified as being in respect of disbursements that a court allows or would allow as recoverable from an adverse party.

44There are two notable differences from the earlier regulation:

1. there is no longer an exclusion of costs awarded or agreed to (although that prohibition remains in s, 28.1(8) of the Act); and
2. the lawyer must exclude disbursements that a court “would allow as recoverable from an adverse party”.

45It is undisputed that the initial retainer agreement, extension retainer agreements, and Apple settlement agreements were signed during the period when O Reg 195/04 was in force. The Apple settlement was approved after O Reg 563/20 came into force.

46Following the amendments to the Solicitors Act in 2002 permitting contingency agreements, the provisions of the Class Proceedings Act dealing with the approval of class counsel fees and disbursements and retainer agreements remained unchanged until 2020.

47Pursuant to the transition provision of the current Class Proceedings Act (s. 39), these actions and this motion are governed by the Class Proceedings Act as it was before the 2020 amendments. Sections 32 and 33 of the Class Proceedings Act deal with contingency fee retainer agreements and determination of fees and disbursements payable to class counsel. Prior to the amendments in 2020, they read:

Fees and disbursements

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.

(2) An 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.

(3) Amounts owing under an enforceable agreement are a first charge on any settlement funds or monetary award.

(4) If an agreement is not approved by the court, the court may,

(a) determine the amount owing to the solicitor in respect of fees and disbursements; (b) direct a reference under the rules of court to determine the amount owing; or (c) direct that the amount owing be determined in any other manner.

Agreements for payment only in the event of success

33(1) Despite the Solicitors Act and An Act Respecting Champerty, being chapter 327 of Revised Statutes of Ontario, 1897, a solicitor and a representative party may enter into a written agreement providing for payment of fees and disbursements only in the event of success in a class proceeding.

Interpretation: success in a proceeding

(2) For purposes of subsection (1), success in a class proceeding includes,

(a) a judgment on common issues in favour of some or all class members; and (b) a settlement that benefits one or more class members.

Definitions

(3) For purposes of subsections (4) to (7),

“base fee” means the result of multiplying the total number of hours worked by an hourly rate; “multiplier” means a multiple to be applied to a base fee.

Agreements to increase fees by a multiplier

(4) An agreement under subsection (1) may permit the solicitor to make a motion to the court to have his or her fees increased by a multiplier.

Motion to increase fee by a multiplier

(5) A motion under subsection (4) shall be heard by a judge who has,

(a) given judgment on common issues in favor of some or all class members; or (b) approve a settlement that benefits any class member.

Idem

(6) Where the judge referred to in subsection (5) is unavailable for any reason come up the regional senior judge shall assign another judge of the court for the purpose.

Idem

(7) On the motion of a solicitor who has entered into an agreement under subsection (4), the court,

(a) shall determine the amount of the solicitor's base fee; (b) may apply a multiplier to the base fee that results in fair and reasonable compensation to the solicitor for the risk incurred in undertaking and continuing the proceeding under an agreement for payment only in the event of success; and (c) 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.

Idem

(8) In making a determination under clause (7)(a), the court shall allow only a reasonable fee.

Idem

(9) In making a determination under clause (7)(b), the court may consider the manner in which of the solicitor conducted the proceeding.

48Do the provisions of the Class Proceedings Act expressly or impliedly exclude application of the Solicitors Act and its regulations as they relate to contingency fees?

49Class counsel point to the opening words of s. 33, “Despite the Solicitors Act …”. They submit that those words make clear that the Solicitors Act does not apply to class proceedings. I would not go so far.

50In R. v. Ulybel Enterprises Ltd., 2001 SCC 56, at para. 28, the Supreme Court reiterated the correct approach to the construction of statutes as stated in Driedger’s Construction of Statutes (2nd ed. 1983):

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.

51The Class Proceedings Act is a procedural statute enacted to permit class proceedings, to provide a mechanism to screen what actions are appropriate to be class proceedings, and to set out the how class actions will be managed through trial and other resolution. It filled a procedural gap for large multi-party claims. Its objectives are access to justice, judicial economy, and deterrence.

52At the time of its enactment, there was a strict statutory prohibition against any form of contingency fee retainer agreement. To achieve its objectives, the Class Proceedings Act allowed contingency fee arrangements. Such arrangements facilitated the necessary lawyer-client relationship and incentivized lawyers to take on class proceedings.

53I do not read s. 33(1) of the Class Proceedings Act to exclude the application of the Solicitors Act except insofar as the Class Proceedings Act permitted contingency fee retainer agreements, something then prohibited by the Solicitors Act. A carve out was needed and s. 33(1) provided same. Read in its grammatical and ordinary sense, the opening words in s. 33(1) – “Despite the Solicitors Act and An Act Respecting Champerty …” - simply allowed that which was then prohibited by those statutes.

54I am buttressed in that construction by the 2020 amendments which removed the opening words of s. 33(1). That they were not removed earlier when the Solicitors Act was amended in 2002 does not change the plain reading of s. 33(1).

55At the time of its enactment, the regime established by the provisions of the Class Proceedings Act dealing with contingency fee agreements and class counsel fees was unique. The Class Proceedings Act set minimum requirements for retainer agreements. The retainer agreement required court approval. All class counsel fees required court approval. The Court was tasked with responsibility to ensure that the interests of the class were protected, and counsel were compensated fairly, but not unreasonably, for the risks taken and results obtained.

56For approximately ten (10) years, the class proceedings contingency fee regime remained a legal unicorn. That changed when the Solicitors Act was amended in 2002 and contingency fee agreements were more broadly permitted in civil proceedings. Lawyers were permitted to enter into contingency fee agreements for civil actions including personal injury actions and professional negligence actions, to name but two.

57Nothing in the Solicitors Act as amended in 2002 expressly excluded class proceedings. It does not state that its provisions cover all contingency fee agreements except those in class proceedings.

58There are, however, clear differences in the requirements for contingency agreements and in the process for court review or supervision under the Solicitors Act. Where the plaintiff(s) is not a minor or person under a disability, the lawyer does not require court approval for his or her fees payable pursuant to the contingency fee agreement. There is a client right to an assessment of those fees within a year. Court approval is required for those who are deemed vulnerable – minors and persons under a disability.

59To be clear, the regime for approval of class counsel fees is different for most other civil litigation where a contingency fee is used than for class proceedings. Even where court approval is needed for a minor or person under a disability, the motion is generally done by way of basket motion. By contrast, in a class proceeding, notice is given to class members who may object in writing or attend and participate in the approval hearing.

60Thus, there are two Ontario statutes that deal with contingency fee retainer agreements and review/approval of lawyers’ fees pursuant to such agreements. Neither statute expressly excludes operation of the other save as indicated above.

61Unlike the Class Proceedings Act which is silent on this subject, the Solicitors Act expressly deducts any amount arising as a result of an award of costs or costs obtained as part of a settlement from the calculation of the lawyer’s fees: s. 28.1(8). Likewise, the regulations made under the Solicitors Act deduct disbursements awarded or agreed upon as part of a settlement from the calculation of the lawyer’s fees.

62In Ulybel, at para. 30, the Supreme Court quoted with approval the following passage written by Professor Ruth Sullivan in Driedger on Construction of Statutes (3d ed, 1994):

The meaning of words in legislation depends not only on their immediate context but also on a larger context which includes the Act as a whole and the statute book as a whole. The presumptions of coherence and consistency apply not only to Acts dealing with the same subject but also, albeit with lesser force, to the entire body of statute law produced by a legislature. … Therefore, other things being equal, interpretations that minimize the possibility of conflict or incoherence among different enactments are preferred.

63Statutes dealing with the same subject matter are presumed to operate together harmoniously: Ulybel, at paras. 50-51; Sullivan on the Construction of Statutes (5th ed., 2022), at p. 416.

64Does s. 28.1(8) of the Solicitors Act apply to the determination of class counsel fees under the Class Proceedings Act? Do O Reg 195/04 and O Reg 563/20 apply to the determination of class counsel fees?

65In my view, they do. The provisions Solicitors Act including the regulations under the Solicitors Act dealing with contingency fees in relation to costs and disbursements recovered/awarded should be read to apply harmoniously to class proceedings under the Class Proceedings Act. There is no compelling reason to do otherwise.

66Most class proceeding contingency fee retainer agreements are expressed as a percentage of recovery. Recovery is usually a defined term in the retainer agreement. It would be incongruous for a lawyer to receive a partial payment for fees on account of costs awarded, and then seek to strictly apply the percentage stipulated by the retainer agreement on the full amount of the settlement or judgment. By the same token, where an amount is recovered by award or agreement specifically to reimburse disbursements, the lawyer should not seek recovery of both his or her disbursements and a percentage of the gross amount of the settlement which includes the same disbursements. That is double-dipping and is precisely what the s. 28.1 of the Solicitors Act and regulations seek to avoid.

67If I am wrong in my conclusion that s. 28.1(8) and the regulations thereunder apply, I nevertheless conclude that the rationale underpinning those provisions should apply in the class proceedings context. Doing so promotes consistency of approach and is fair to class members and counsel alike.

68That courts have dealt with class counsel fees and disbursements under the Class Proceedings Act without regard to the provisions of the Solicitors Act and its regulations does not mean they do not apply. No case law was provided to say these provisions do not apply or that their applicability was considered and not followed.

Where an all-inclusive settlement is negotiated, with no separate allocation for disbursements or costs, should the court deduct counsel’s actual disbursements and/or impute an amount as a contribution by the defendants to costs for the purpose of determining a reasonable fee?

69The settlement here is an all-inclusive amount. There is no specific allocation of any amount for disbursements or costs. Class Counsel submit that in those circumstances, the above cited provisions of the Solicitors Act and its regulations do not apply. They should get 25% of the Apple settlement amount (as adjusted for Quebec) and 100% of their disbursements in addition.

70I observe that the initial retainer agreement with the plaintiff defined “Recovery” as the amount obtained by way of judgment or settlement “ excluding any amount separately identified or specified as costs and/or disbursements”. The agreement is consistent with Solicitors Act and contemplates that a settlement may include an amount allocated for costs and/or disbursements. That exclusion from “recovery” is a potential benefit to the class and rests entirely with Class Counsel to at least seek that allocation in their negotiations.

71Here, there is absolutely no evidence that Class Counsel sought to reach agreement with the defendants to parse out or allocate an amount within the settlement for disbursements and costs as part of their negotiations. Surely it is incumbent on the lawyers in these circumstances to provide some evidence that they sought to benefit the class by such an allocation consistent with their obligations in the retainer agreement. Such efforts would demonstrate their good faith even though doing so would likely modestly reduce their fee entitlement under the retainer agreement. I have nothing on that score.

72In infant settlements and settlements where the plaintiff is a person under a disability, the well-established practice in the case of an all-inclusive settlement is for plaintiff’s counsel to automatically deduct their disbursements off the settlement amount where disbursements are not specifically allocated in the settlement amount. Likewise, counsel in such cases typically apply a notional contribution to costs. In personal injury cases, it is generally 15% on the first $100, 000 and 10% on every dollar above that.

73In this case, the amount for disbursements that Class Counsel seek to recover over and above their fees is quite modest. There are many cases where the disbursements incurred are substantially higher – orders of magnitude higher.

74It cannot be the case that counsel can avoid the statutory or contractual application of a reduction for disbursements by simply negotiating an all-inclusive settlement figure with no specific contribution toward disbursements. At a minimum, there should be some evidence that an effort was made to get such an allocation especially where, as here, the plaintiff class would benefit from that allocation by the terms of the retainer agreement signed by the representative plaintiff.

75Where a settlement is negotiated for an all-inclusive amount with no specific allocation for disbursements incurred and in the absence of any evidence that an effort was made to achieve that result, it makes sense that disbursements, as approved by the court, be deducted first from the settlement amount and class counsel’s fees determined by reference to the amount of the settlement net of those disbursements. Such an approach is fair to the plaintiff class and class counsel. It will also encourage class counsel to be prudent in spending for disbursements.

76Where class counsel seek fees as a percentage of the gross settlement amount for an all-inclusive settlement, should the amount of the recovery be reduced by a notional costs contribution by the defendants?

77There is a distinction between costs already awarded and paid versus costs allocated in a settlement agreement but not yet paid. In the former, counsel have already received partial payment for their work done. The risk taken by counsel is partially mitigated. In the latter, they have done the work with no such payment and have borne the full risk of the litigation to the point of settlement approval. Their risk includes that the settlement will not be approved, and they will have to continue the litigation.

78In 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 v. Cadbury Adams Canada Inc., 2010 ONSC 2752, at para. 23; Abdulrahim v. Air France, 2011 ONSC 512, at para. 8.)

These factors are broadly understood to address: 1) results achieved, 2) risks assumed, and 3) responsibility undertaken.

79The terms of the retainer agreement signed are part of the expectations of the class as to the amount of fees; i.e. factor (i) above. That is also true of counsel’s expectations. Both sides to the initial retainer agreement and retainer extension agreement knew and understood that the “Recovery” would be an amount net of any amount separately identified as an amount for costs. Class Counsel’s percentage applies to the Recovery.

80I appreciate that the issue of class counsel fees is approached holistically in the sense that rigid mechanical adherence to the percentages specified in the retainer agreement is not the rule. The court retains an overarching discretion to ensure that counsel fees are reasonable. In doing so, one of the factors considered by the court is the result achieved.

81Here the Apple settlement is for $12 million with no allocation specified for costs. Class counsel seeks to apply the contractual rate (25%) to that gross amount (with an adjustment for Quebec). At the end of the day, they seek what amounts to $3 million for counsel fees in aggregate on a $12 million settlement.

82What if the settlement had a specified contribution to costs by the defendants – say 10% or $1.2 million? If so, class counsel would be limited by the terms of their retainer agreement to seeking a maximum of 25% of $10.8 million ($12 million less 10%) which is $2.7 million. That $2.7 million includes whatever amount the Quebec court approves. That figure does not include any reduction for disbursements.

83Knowing that the class would benefit from a specified contribution to costs, albeit at counsel’s expense, where is the evidence that Class Counsel sought an agreement with the defendants to allocate a portion of the settlement amount for that purpose? There is none. In the absence of such evidence, I infer that no such discussions occurred.

84In summary, in assessing the result achieved where the settlement is an all-inclusive amount with no specified contribution to disbursements or costs, disbursements actually incurred should be deducted from the gross amount of the settlement. Likewise, a notional contribution to costs should be applied. The amount of that notional contribution is best determined on a case-by-case basis. Counsel should adduce evidence that they made reasonable efforts to have a portion of the settlement allocated for disbursements and costs, especially where the retainer agreement provides a benefit to class members if that is done.

Should settlement administration costs be treated as a disbursement and deducted from the gross settlement amount in the calculation of class counsel’s fees?

85In my view, settlement administration costs are not a disbursement incurred by counsel; rather, they are a necessary expense to notify affected class members, to ensure entitlement to share in the settlement proceeds, and to process payment. These costs are incurred after the settlement has been reached. Most of these expenses arise after court approval of the settlement and approval of class counsel’s fees. By that point, the action has been dismissed as against the settling defendants. Those defendants have received comprehensive final releases. The expenses to administer the settlement are a by-product of the resolution of the action and generally large number of class members affected.

86The retainer agreements in this case are silent as to settlement administration costs.

What is the appropriate class counsel fee in this case?

87Class Counsel seek payment of $2.7 million plus HST which is 25% of $10.8 million dollars after deducting 10% of the settlement amount as pertaining to the Quebec action.

88They also seek disbursements of $43,669.39 plus applicable taxes. The supplementary affidavit filed for the motion details the disbursements incurred. I am satisfied that those disbursements are reasonable and appropriate to the litigation. They are approved to be paid from the settlement funds.

89As of November 14, 2022, the total number of docketed hours was 1658.1 hours. Counsel have expended additional time since then for the settlement approval motion and for this motion. They will also be responsible to respond should issues arise during settlement administration. The time spent extends over many years.

90I observe that Mr. Morganti and Ms. Brasil show an hourly rate range that extends to $750 and $785, respectively. Mr. Morganti has been at the Bar only 12-13 years and the high end of the range of his hourly rate strikes me as very high. Ms. Brasil is a leading counsel in the class action Bar, and while her rate is high, I would not go so far as to say it is excessive.

91I turn to the factors enumerated above at para. 78.

Factual and Legal Complexities

92This is a price fixing class action. The factual issues surrounding the alleged conspiracy are complex. When the actions were commenced, the law was less settled. It appears that the focus of counsel’s efforts in the 2016 Action and to a large extent in the 2012 Action was directed at settlement negotiations and distribution protocol issues. This is not a case where the parties engaged in scorched earth litigation on every procedural and substantive issue. Although the action has a moderate level of complexity inherent in the nature of the claim, they did not litigate those issues to any great extent.

Risk Undertaken

93Settlement discussions began with Apple in 2014, two years after the 2012 Action was commenced. An agreement-in-principle was reached in 2017 and a settlement agreement signed in 2018. That agreement was amended in 2020.

94The lawyers assumed the following risks:

1. The Apple defendants would not settle and force the plaintiff to litigate the case through trial on the merits.
2. The plaintiff might lose that trial.
3. The actions might not be certified.
4. The settlement negotiations with Apple would yield no settlement and that time would be wasted.
5. The claims might be barred by a limitation period.
6. Money spent on disbursements would be lost.
7. The lawyers would be liable to indemnify the representative plaintiff for adverse costs awarded.

95It seems to me that some of the risks present on day one of the 2012 Action were reduced or attenuated by the time the 2016 Action was commenced. By then, counsel had been negotiating with Apple for some time. They had a completed settlement including payment of disbursements and monies on account of fees from the Publishers settlement. Certainly, the risks were abated by May 2017. They might not have been reduced to zero, but they were less.

Degree of Responsibility

96Class counsel assumed full responsibility for prosecution of the litigation and the negotiations to resolve same. The degree of responsibility assumed was high.

Monetary Value of Matters in Issue

97The plaintiff claimed damages of $100 million in the 2012 Action and $50 million in the 2016 Action. This was high stakes litigation.

Importance to Class

98It is difficult to assess this factor. Affected class members were not protesting in the streets for example. Nevertheless, the litigation was important both to recoup overcharges and to deter similar antitrust behaviour by these defendants and the others in the future.

Skill and Competence of Counsel

99I have no hesitation finding that counsel exhibited a high degree of skill and competence in their conduct of the litigation including the settlement reached. There is nothing in the material filed that suggests otherwise. They achieved a real and tangible benefit for class members in what would be hard-fought litigation otherwise.

Results Achieved

100Class counsel achieved a settlement of the litigation that falls within the range of reasonable outcomes. The settlement was approved because it was fair, reasonable and in the best interests of the class. I do not have the sense that counsel left money on the table. I do not doubt that the defendant, Apple, a large, well-funded litigant could have vigorously fought this litigation through trial and appeal with no guarantee on the result. The class could have lost. It might have recovered far less. Class members might have been put to the expense of individual damages hearings for very modest amounts. Instead, they have a pot of money that will see most class members credited for the overcharge with no or minimal effort on their part.

101As I have indicated above, disbursements should be deducted from the gross settlement amount. That reduces the non-Quebec portion of the settlement to $10,756,330.

102I have also indicated that some portion of the gross settlement amount should be treated as a notional contribution to costs. Given the lack of examinations for discovery, no contested certification motion or other contested procedural steps, a reasonable notional contribution to costs is $500,000. That reduces the gross settlement amount to $10,256, 330. That is what counsel has achieved for the class in terms of monetary recovery net of disbursements and costs.

Ability of Class Members to Pay

103The economic realities of this litigation are that it is unlikely that any class member would have litigated these issues but for a class proceeding. The cost to pursue such a claim is beyond the means of all but a small subset of class members and dwarfs the value of any individual claim.

Expectations of the Class

104I have reviewed the terms of the retainer agreements above and have already addressed class expectations. All class members would logically expect that Class Counsel who funded the cost of the litigation, did the work, assumed the risks they did, and achieved the result they have, would be compensated accordingly.

Loss of Opportunity Cost

105If the lawyers were not working on this case, they would have been expending their time and efforts on other profitable work.

Balancing the Factors

106Class Counsel took on moderately complex litigation claiming a significant amount for damages against well-known and reputable defendants. The litigation was far from risk free. They have achieved two court approved settlements that significantly benefit class members.

107Cases like this one go on for years. When counsel take on these cases, they know there will be no monthly cashflow from the case until it is resolved. But the rent must be paid. Staff must be paid. Annul dues and insurance are mandatory. All the expenses inherent in a law practice must be paid. And, at the end of the day, if they lose, they get nothing. Whatever they spent for disbursements is gone. If they borrowed money to fund those disbursements, they still have to pay that money back. If they agreed to indemnify the representative plaintiff, they may be liable for much more.

108Class action litigation for plaintiff’s counsel is not for the faint of heart. The amounts at stake are usually significant. The issues are important. Defendants are usually large corporations or governments with the resources to fight the long fight.

109Class Counsel have already been paid Class Counsel fees of $674,687.50 and disbursements of $169,369.55 plus applicable taxes from the Publisher’s settlement. No deduction was made for disbursements or an allocation of costs. Presumably those issues were not raised and were not considered. It is not for me to reach behind Justice Patterson’s order to make another adjustment at this stage. That ship has sailed.

110Having regard to the above factors, especially the risks take, the responsibility shown, and the result achieved, I find that an appropriate fee to Class Counsel is $2,450,000 plus applicable taxes. I add parenthetically that even if I am wrong regarding deduction of disbursements and a notional amount for defence contribution to costs, the amount of $2,450,000 resonates as a fair and reasonable fee regardless. It includes a reasonable premium on the value of time worked.

Honorarium to Representative Plaintiff

111In Bodnarchuk v. Guestlogix Inc., 2020 ONSC 4789, at paras. 37-39, Perell J. summarised the law in Ontario with respect to honoraria for representative plaintiffs:

37Where a representative plaintiff can show that he or she rendered active and necessary assistance in the preparation or presentation of the case and that such assistance resulted in monetary success for the class, the representative plaintiff may be compensated by an honorarium.

38However, the court should only rarely approve this award of compensation to the representative plaintiff. Compensation for a representative plaintiff may only be awarded if he or she has made an exceptional contribution that has resulted in success for the class. Compensation to the representative plaintiff should not be routine, and an honorarium should be awarded only in exceptional cases.

39In determining whether the circumstances are exceptional, the court may consider among other things: (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.

112I am satisfied that a modest honorarium is merited in this case. Ms. Adams has remained involved and dedicated to the prosecution of this claim for 13 years. While she has not been subject to cross-examination or examination for discovery, she has shown remarkable commitment throughout. She has provided input to counsel and made herself available. In my view, an honorarium fixed at $2,500 payable from the settlement funds is appropriate.

Conclusion

113For the reasons above, I conclude as follows:

1. the retainer extension agreement is approved;
2. Class Counsel shall be paid $43,669.39 plus applicable taxes for disbursements and $2,450,000 plus applicable taxes for class counsel fees from the Apple settlement funds; and
3. the representative plaintiff shall be paid $2,500 from the settlement funds as an honorarium.