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Take-up Rate Relevant to Assessing Fair and Reasonable Class Counsel Fees


Written by on February 14th, 2013

The settlement in Lavier v. MyTravel Canada Holidays Inc. created a fund of $2.25 million for a class of approximately 4,000 members. The settlement, including a class counsel fee in the amount of $600,000 was approved. It also included the ability of class counsel to seek an additional fee following the conclusion of the claims process, but allowed for the defendant to oppose that fee. Of note, any amount left in the settlement fund after payment to the class members, to class to counsel, to public health insurers and for administration costs would be refunded to the defendant.

Following the conclusion of the claims process, the class counsel sought approval for an additional fee in the amount of $395,500 (see Lavier, (2012) ONSC 1673). Although the take up rate of the settlement was 8.85% of the class members and comprised 16.7% of the settlement funds, Justice Perell concluded that the take up rate should not be over-emphasized as a factor in whether to approve the additional class counsel fee. He noted that the litigation risk was high and the litigation had successfully provided access to justice for the class members. He approved the additional counsel fee. That approval was appealed to the Court of Appeal (Lavier, 2013 ONCA 92).

Justice MacPherson, writing for the Court, noted that the fixing or approval of fees is a discretionary decision with which an appellate court will interfere only if the motion judge gave either no weight or insufficient weight to the considerations relevant to the decision. The fee arrangement must be fair and reasonable, which is determined by assessing the risks assumed by class counsel, the results achieved, and in light of the objectives of class proceedings. In this case, because the initial counsel fee was found to be fair and reasonable, the issue was what additional premium, if any, is fair and reasonable.

The Court of Appeal found that the motion judge’s analysis minimized the significance of the actual recovery to the class and resulted in the approval of a fee that was grossly disproportionate to the results achieved and the risks undertaken. The collective result in this case did not justify valuing the benefits of the settlement on the basis of the entire fund made available, given the negotiated reversionary interest in favour of the defendant. When it is uncertain how many class members will make claims under a settlement, it is only when the take up rate is known that the information relevant to assessing the results achieved be available such that a court can assess the connection between the efforts of counsel and what was achieved for the class. Thus, the motion judge’s error was to adopt an analysis that rendered the take up factor as “distant second to the total fund”.

The court noted that the initial counsel fee was found to be fair and reasonable and that, after it and the settlement had been approved, there no longer remained any litigation risk for class counsel. The risk taken on by class counsel had thus already been recognized and rewarded by approval of a $600,000 class counsel fee. If a further $395,500 class counsel fee were approved, the total class counsel fee would reach nearly $1 million, nearly three times the value of the settlement to the class, which would be clearly disproportionate.

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