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Civil procedure - Parties - Class or representative actions - Class counsel - Fees - Procedure

Thursday, January 19, 2017 @ 7:00 PM  

Appeal by the plaintiffs, Bancroft-Snell and 1739793 Ontario, from an order regarding a legal fee sharing agreement with respect to their class action against the defendant credit card companies. The plaintiffs commenced a class action against various financial institutions alleging a conspiracy to fix merchant discount fees paid by merchants who accepted Visa and Mastercard credit cards. Several similar proceedings were commenced across the United States and Canada, leading to a carriage dispute between class counsel in the predicate action and the Merchant Law Group (MLG). A fee sharing agreement between class counsel and MLG provided that MLG would receive up to an $800,000 share of the fees recovered by class counsel in exchange for an agreement to stay its rival proceedings in two provinces in favour of class counsel obtaining carriage of the actions on a national basis. In a motion to approve fees and a partial settlement of the action in all jurisdictions, the motion judge disapproved of the arrangement. The judge reduced the requested legal fees of $3.4 million by ten per cent to reflect his refusal of approval of the fee sharing agreement with MLG. The judge declared the agreement unenforceable and ordered class counsel not to pay MLG any sums from settlement proceeds or any other present or future source on account of the agreement. The plaintiffs appealed, with MLG granted intervenor status. Amicus curiae was appointed to advance the position of unrepresented class members.

HELD: Appeal dismissed with limited exception. The motion judge had authority pursuant to s. 32 of the Class Proceedings Act, or alternatively, s. 12 of the Act, to review the effect of the fee Sharing Agreement, and to grant relief accordingly. Whether to give effect to the fee sharing agreement in the context of the fee approval process, and in conjunction with the settlement approval process, and if so on what terms, was a matter within the motion judge’s discretion, the exercise of which was entitled to considerable deference. The motion judge did not err in exercising his discretion to reduce class counsel’s fees and order that no payments be made to MLG out of the fees approved or the settlement funds. Nor did the judge err in holding that the fee sharing agreement was unenforceable insofar as it related to the obligation by class counsel to make shared fee payments from settlement funds recovered in the class proceedings. Class members should not bear the burden of a fee sharing agreement resolving a carriage dispute. However, the judge exceeded the scope of his discretion in ordering that the agreement was otherwise unenforceable as between class counsel and MLG, and in prohibiting class counsel from making any payment pursuant to the agreement from any source whatsoever. Procedural fairness required MLG to have the opportunity to make submissions on the latter issue. The appeal was dismissed with the exception of varying the wording of the order to reflect the concerns regarding the declaration of unenforceability of the fee sharing agreement in its entirety, and the prohibition of payment from any source whatsoever.