Contingency Fees – An Abundance of Costs

| 2 minutes

Cannon v. Funds for Canada Foundation, 2013 ONSC 7686

In this class action decision Justice Belobaba of the Ontario Superior Court of Justice set out new, generous guidelines for assessing contingency fee requests by class counsel in the context of a settlement of an action. Courts have adopted different methods for assessing whether contingency agreements should approved including the “lodestar” approach, the “multiplier” approach, combinations thereof and attempts to fix a notional “cap” on the percentage of a settlement amount. As a consequence, costs awards have been determined on an ad hoc basis leading to inconsistent results.

Justice Belobaba conducts a quick review of this sometimes tortured process and concludes that a single, simple, straightforward approach to contingency fee agreements should be adopted. His test:

[7] In my view, it would make more sense to identify a percentage-based legal fee that would be judicially accepted as presumptively valid. This would provide a much-needed measure of predictability in the approval of class counsel’s legal fees and would avoid all of the mind-numbing bluster about the time-value of work done or the risks incurred.

[8] What I suggest is this: contingency fee arrangements that are fully understood and accepted by the representative plaintiffs should be presumptively valid and enforceable, whatever the amounts involved. Judicial approval will, of course, be required but the presumption of validity should only be rebutted in clear cases based on principled reasons.

Justice Belobaba held that this approach to assessing costs would advance the objectives of class actions because class counsel fees would be more easily understood, more principled, more reasonable and more predictable and this will encourage class counsel to undertake the risks associated with these actions.

The question that Justice Belobaba does not answer is how  this presumption of validity can be rebutted and by whom? Defendants have no standing at fee approval motions. Representative plaintiffs are a captive audience who no one expects will object to the terms of a contingency agreement they signed at the outset of an action. And the complaints of “objectors” to a settlement, rare as they are, are almost uniformly dismissed with the observation that if they do not like the settlement they can simply opt-out.

 

ad hoc “lodestar” approach “multiplier” approach Cannon v. Funds for Canada Foundation contingency fee arrangements Justice Belobaba objectors Ontario Superior Court of Justice

Subscribe

Stay Connected

Get the latest posts from this blog

Please enter a valid email address