The Role of Plaintiffs’ Counsel in Class Actions
How does the role of plaintiffs’ counsel in a class action differ from the role of plaintiff’s counsel in ordinary litigation faced by a business enterprise?
At the most fundamental level, a business enterprise that has been named as a defendant in a class action needs to understand that the real adversary is the plaintiffs’ lawyer rather than the plaintiff.
Canadian class action statutes have clearly established the plaintiffs’ lawyer as the agent by which the goals of class action legislation are to be realized. Provisions governing the financing of class actions and the remuneration of class counsel are intended to, and result in, plaintiffs’ lawyers seeking out potentially actionable claims.
Class actions subject business activity to legal scrutiny; in some cases, this amounts to market entrepreneurs using the machinery of the courts seek to act as regulators. As such, the class action can supplement – or even replace – public agency initiatives with private regulatory activity driven largely by a profit motive.
Class action legislation contains mechanisms to make the role of plaintiffs’ counsel more financially attractive. These include court-approved contingency fee arrangements, statutory funding mechanisms governing fees and disbursements, and court-approved solicitation of class members. Of these, the contingency fee arrangement, paired with the potential for large damage awards, is the most compelling incentive.
Contingency fees are those that are only payable if the claim succeeds. At the start of the case, the contingency fee must be agreed upon between plaintiff’s counsel and the named plaintiff. In order for counsel to be paid, the court must approve the amount of the contingency fee paid to counsel. Courts have the discretion to reduce the agreed-upon amount of plaintiffs’ fees, and have done so; courts have also approved more creative fee arrangements, including in one Canadian province by allowing class counsel to finance the litigation through marketing the case as an investment.
The availability of remuneration only in the event of success means that the plaintiffs’ lawyers have a far greater personal financial stake in the outcome of a class action than he or she would in a traditional lawsuit. As such, the defendant will be engaged in a negotiation or contest not so much with a group of claimants as with plaintiffs’ counsel, who is motivated by a combination of professional integrity and economic self-interest.
For more information on this and other class action issues, see McCarthy Tétrault, Defending Class Actions in Canada, 3rd ed., (Toronto: CCH, 2011)
class action contingency fee arrangements