Class members ineligible for a settlement denied the right to appeal

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In Hébert v. Wenham, 2020 FCA 186, over a quarter of the class was ineligible for a settlement approved by the Federal Court. Several ineligible class members sought leave to appeal. The Federal Court of Appeal held that (i) the appeal was doomed to fail because of the deference owed to the settlement and the Federal Court and (ii) the ineligible class members could not opt-out. The case demonstrates the high burden on a class member who wants to overturn a settlement.

The case arises from the use of Thalidomide, a drug linked to birth defects. The federal government established a program to provide funds to children who survived. Mr. Wenham applied for inclusion in the program, but was rejected because the program effectively required individuals to prove beyond all reasonable doubt that they were eligible—a rigorous evidentiary threshold. He brought a class proceeding on behalf of all rejected applicants.

The parties ultimately agreed to a settlement where the federal government adopted less rigorous evidentiary requirements and other procedural safeguards as part of a new program. However, the new program was categorically restricted by birthdate—individuals born outside a defined period were ineligible.

42 of the 158 class members were born outside the relevant period and thus ineligible for the new program. The Federal Court nevertheless approved the settlement, noting that

If it was in the power of this Court, it would have struck out these date parameters but that would have put the Settlement in jeopardy. Regrettably, the Court is powerless to do anything about this issue, other than to encourage a compassionate reconsideration. A rejection of the Settlement would be unfair to the Class and others and is not a viable alternative.

Several ineligible class members wanted to appeal. Under the Federal Court Rules, they needed leave to exercise the representative plaintiff’s right of appeal. Similar rights exist under provincial class proceedings legislation.

The Federal Court of Appeal dismissed the leave application because the appeal was doomed to fail. The court held that considerable deference was owed to the decision to approve the settlement and the settlement agreement. The ineligible class members were merely rearguing their objections, not attacking the reasoning of the Federal Court.

Further, the Federal Court of Appeal refused to allow the ineligible class members to opt-out. The court held that the opt-out period had expired and that class members knew the risks of an adverse judgment or settlement when the decided not to opt out earlier in the litigation. Further, a court cannot approve a settlement prohibiting late opt outs and modify it by allowing late opt outs.

The Federal Court of Appeal also noted that there was no conflict between Mr. Wenham and the ineligible class members—they were aligned on the certified common issues. The judgment suggests that different eligibilities for a settlement cannot create a disqualifying conflict.

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