Revisiting Class Counsel Fee Approvals: Towards Presumptive Validity of Contingency Fee Agreements

• Author: Peter W Kryworuk & Jacob Damstra
• Pages: 109-156

109

Revisiting Class Counsel Fee Approvals: Towards

Presumptive Validity of Contingency Fee Agreements

Peter W Kryworuk & Jacob Damstra

: Although Ontario’s Class Proceedings Act, 1992 has now been

in force for twenty-f‌ive years, a number of procedural and substantive

issues in class actions litigation remain unsettled. Among these is the

most appropriate method for rewarding class counsel for their ef‌forts

in successful class proceedings — whether that success is obtained by

settlement or judgment. Notwithstanding the statutory provisions in

the Class Proceedings Act, 1992 setting out a method of compensation for

class counsel using a multiplier, or “lodestar,” approach, courts have been

increasingly critical of that method from early in the development of the

jurisprudence on these issues. A percentage-based approach to fees has

gained traction in the class actions judiciary and is now commonplace

among class action litigators. More recently, following the leadership of

Edward Belobaba J, Ontario courts have moved towards accepting the

presumptive validity of contingency fee agreements between class coun-

sel and representative plaintif‌fs. Under this approach, the courts are gen-

erally deferring to the contractual agreement between the representative

plaintif‌f and class counsel regarding compensation for class counsel in

the event of a settlement or judgment, absent exceptional circumstances.

Recent amendments to the Ontario Class Proceedings Act, 1992 have incor-

porated some of the factors courts frequently consider on class counsel

fee approval motions, but the ef‌fect of these new provisions remains to

be seen. This article provides an overview and history of class counsel

fee approvals before moving on to discuss this movement towards a pre-

sumptive validity approach. The authors also discuss some of the limita-

tions and potential pitfalls of the presumptive validity approach. Finally,

this article looks toward the future of class counsel fee approvals and pro-

vides some comments on what may be necessary on this issue.

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REVISITING CLASS COUNSEL FEE

APPROVALS: TOWARDS PRESUMPTIVE

VALIDITY OF CONTINGENCY FEE

AGREEMENTS

Peter W Kryworuk & Jacob Damstra*

A. INTRODUCTION

How should a court approach class counsel compensation when a class

proceeding settlement is secured after “one imaginative, brilliant hour”

rather than “one thousand plodding hours”? This question has been taken

up by the courts tasked with addressing the problematic nature of trad-

itional class counsel fee approval methodologies.1 In Cannon v Funds for

Canada Foundation, Belobaba J approved class counsel fees in the amount

of 33 percent of the total $28.2 million settlement secured by class counsel

and introduced compelling reasoning for widespread judicial acceptance

of presumptive validity of well-drafted, clearly understood contingency

fee agreements.2 Cannon af‌forded presumptive validity to a one-third

contingency fee, introducing an innovative approach to class counsel fee

approval with full potential to remedy overwhelming concerns associated

with the more “traditional” methods of determining class counsel fees,

* Peter W Kryworuk is a senior litigation partner at Lerners LLP. Jacob RW Damstra is

a litigation associate at Lerners LLP. Both Peter and Jacob are members of Lerners’

Class Actions Practice Group. The authors would like to thank Margarita Dvorkina,

Summer Law Student at Lerners LLP, for her invaluable assistance with research and

early drafts of this article and Stephanie Coppens, Articling Student at Lerners LLP,

for her very capable assistance in updating an earlier version of this article. The

authors would also like to thank Michael G Robb of Siskinds LLP for his insightful

comments and recommendations.

1 Cannon v Funds for Canada Foundation, 2013 ONSC 7686 at para 5 [Cannon].

2 Ibid at paras 5 and 8.