Class action settlement approval hearings have evolved from being heard in the dark confidential corners of judges’ chambers to open courtrooms filled with objectors and gawkers. What follows is a summary of the Sixties Scoop Ontario settlement approval hearing held on May 29 and 30, 2018.
After Justice Belobaba rightly conducted a game of musical chairs in his packed courtroom to ensure that each class member in attendance had a seat, he addressed the proposed settlement by voicing his concerns with it:
- Is $25,000 sufficient to compensate each class member for losing his or her cultural identity? The proposed settlement included compensation for each class member ranging from $25,000 to $50,000, depending on the number of class members that came forward to claim their settlements.
- Are legal fees of $75 million fair and reasonable to compensate all the lawyers involved in the settlement when Ontario class counsel, Jeffrey Wilson and Morris Cooper, undoubtedly did the heavy lifting?
How Does a Judge Decide Whether a Settlement Should be Approved?
The test to be applied by a judge at a settlement approval motion is whether the settlement is fair, reasonable, and in the best interests of the class as a whole.
Factors that are taken into account by a court approving a settlement include: likelihood of recovery or success of the class; amount and nature of discovery evidence, if a case has proceeded that far; the terms and conditions of the settlement; the recommendations and experience of counsel; the future expense and likely duration of litigation absent the settlement; the recommendations of neutral parties, if any; the number of objectors, and the nature of objections; the presence of good faith and absence of collusion; the degree and nature of communication between class counsel and the representative plaintiff with the class members during the litigation; and information regarding the dynamics of and positions taken by the parties during the settlement negotiations.
Past decisions have held that the approval of lawyers’ fees must be considered separately from the approval of the settlement. Attempts – usually by class counsel – to tie the two issues together on an approval motion are not appropriate, Justice Cullity found in Garland v. Enbridge Gas Distribution Inc. that insisting that the settlement could only be approved if the lawyers’ fees were approved at the same time amounted to an improper attempt by counsel to prefer their own interests over those of the class. The court always has the jurisdiction to reduce the lawyers’ fees if they are not fair and reasonable in the circumstances. 
What Happened at the Hearing?
Jeffrey Wilson, an experienced child welfare lawyer, distinguished the moral value of the loss of cultural identity from its legal value, and argued that against a legal backdrop, $25,000 to $50,000 for each class member exceeds what he would recover on his best day in court.
When Justice Belobaba opened the floor to hear objections from the class members, however, he (and the rest of us) began to grasp how much this proposed settlement meant to survivors of the Sixties Scoop. Instead of voicing their objections, class members took the opportunity to tell their stories. Some survivors wanted more compensation, but the overwhelming majority was supportive of the proposed settlement, which included the creation of a healing foundation to provide culturally appropriate help for the survivors and their families and to protect the suffering from loss of cultural identity in the future.
By the mid-morning break on the first day of the hearing, Justice Belobaba was inclined to accept the proposed settlement, but he was not prepared to approve the legal fees of $75 million. This is where things got complicated.
Because the settlement agreement required the approval of both the Federal Court and the Ontario Superior Court and because the Federal Court had already approved the settlement in its entirety, Ontario class counsel sternly advised Justice Belobaba that he had a binary choice here: either approve the entire settlement (including legal fees) or reject the entire settlement.
During this argument, no one seemed to recall Justice Cullity’s finding in Garland.
Justice Belobaba had no doubt that Ontario class counsel deserved legal fees of at least $20 million for their hard work. The Ontario class action was the furthest along among all 24 Sixties Scoop class actions commenced throughout Canada. Justice Belobaba was quite concerned with the differential between the $20 million which he felt lead counsel deserved, and the $75 million provided for in the settlement. He was alert to the real possibility that the remainder of class counsel simply rode on the coattails of Wilson and Cooper, in which case Justice Belobaba felt that they would be undeserving of such exorbitant fees.
Naturally, Justice Belobaba was also concerned with the jurisprudential value of his decision, and his responsibility to author a decision that could serve as a roadmap to other lawyers settling “mega fund” class actions for $100 million or more.
In order to give both parties enough time to confer with extra-provincial class counsel to refine the deal by reducing legal fees, Justice Belobaba adjourned on May 29th.
When court reconvened on May 30th, class counsel’s position had not changed. Counsel reiterated that the settlement agreement would not be effective unless it was approved by both the Federal Court and the Ontario Superior Court of Justice. They urged Justice Belobaba to take it or leave it and were careful to remind him that rejecting the settlement would screw the class members out of a deal that he acknowledged was fair and reasonable. Again, no mention of Justice Cullity’s decision in Garland.
The arguments put forward by class counsel were characteristic of the peculiar dynamic of settlement approval motions, one accurately identified by Jasminka Kaladjzic in her book, Class Actions in Canada: The Promise and Reality of Access to Justice. Both class counsel and the defendants are in support of the settlement they crafted, but no one represented the interests of absent class members before the court or pointed out the deficiencies of the proposed settlement. Judges are often left with the difficult task of attempting to fill this “adversarial void” on behalf of the class, despite not being the appropriate party to do so.
At the end of these two days, Justice Belobaba announced that he would take time to review the evidence and submissions to be made by extra-provincial class counsel before making his decision.
So where does that leave us? Although Justice Belobaba’s decision won’t be released for at least several weeks, here are the essential take-aways:
- Justice Belobaba was in support of the $25,000 and $50,000 for each class member, and the $50 million to create a healing foundation contemplated by the proposed settlement;
- Justice Belobaba did not view $75 million in legal fees as fair and reasonable. Wilson and Cooper did not lead any evidence that convinced Justice Belobaba that this quantum was fair and reasonable to compensate all class counsel involved;
- Wilson and Cooper were adamant that Justice Belobaba had no choice but to approve the settlement in its entirety, including legal fees, or else the whole deal would fall apart. Class counsel submitted that the parties were not likely to return to the bargaining table to craft a new deal if the settlement was rejected; and
- Justice Belobaba was optimistic that if he did not approve the legal fees and the deal did fall apart, the parties would return to the bargaining table and come to an agreement with respect to legal fees that was ostensibly fair and reasonable.
 Dabbs v. Sun Life Assurance of Canada,  O.J. No. 1598 (Gen Div.)
 Garland v. Enbridge Gas Distribution Inc., 2006 CanLII 41291 (ON SC).