Product liability settlements: bringing closure to Canadian class action litigation

May 1, 2008

Product liability class action litigation is a major concern for many corporations. A strong business case can often be made for settling these cases: the company can cap its exposure, avoid litigation expenses and negative publicity, and get back to focusing its energies on its core business priorities. However, once the decision has been made to settle, close attention must be paid to the mechanics of the settlement to ensure that these business justifications are fully realized.

This paper will analyze a number of considerations relating to the settlement of product liability class actions in Canada, with a view to assisting corporations in effectively implementing product liability settlements. In particular, it will address the following topics:

  • Structuring the settlement;
  • Class certification and settlement approval strategies;
  • Managing opt-outs and objectors; and
  • Avoiding pitfalls in the notice and claims process;

Structuring the settlement

Class action settlements are subject to court approval. To approve a class action settlement by which class members are bound not to pursue further litigation, the court must determine that the settlement is fair, reasonable and in the interests of all those affected by it1. In drafting the settlement, counsel must consider not only issues relating to the proposed class definition and the breadth and scope of the proposed release, but also how class members will be compensated, relevant jurisdictional considerations where there are multi-jurisdictional claimants and claims, the claims procedure, notice and other settlement administration issues.

Class definition

Contrary to the approach that may have been taken by the defendant at the contested certification hearing (where the defendant was no doubt vehement that an appropriate class could not be defined or that the class was far more restricted than the overly broad class proposed by the plaintiff), once the parties have reached a settlement, those arguments are likely forgotten as the focus of defendant’s counsel turns to structuring a settlement that encompasses all potential claims and brings the greatest
possible degree of finality to the litigation2.

Release

Similarly, careful attention needs to be paid to the language of the release and to the definition of the claims covered by the settlement agreement to ensure that any subsequent court order approving the settlement effectively prevents the settlement class from re-litigating claims against the defendants and others that are intended to be covered by the settlement agreement. In this regard, the class definition and the release provisions contained in the settlement agreement are critical building blocks that frame the scope and define the limits of the settlement.

Settlement fund structures

How the settlement or settlement fund is structured will depend, at least in part, on the degree to which the parties to a class proceeding can accurately assess the number of potential class members. In some cases, defendants have an accurate idea of the total number of alleged defective products in the marketplace and are able to define the settlement class accordingly. In other cases, however, it may be extremely difficult to assess the size of the potential settlement class with any degree of accuracy.

In an effort to obtain full recovery for their clients, plaintiffs’ counsel often pursue a settlement on a “claims-made” basis, in which the total value of the settlement is effectively open-ended and depends upon the number and value of the individual claims that are made by class members. Where the defendant has a good grasp of both the number of potential claimants and of the likely value of their respective claims, a claims-made settlement may offer certain advantages. For instance, if the defendant has reason to believe that not all or only a limited number of class members are likely to make claims, (i.e. because members of the class have already received compensation), then a claims-made process may suit the interests of both plaintiffs and defendant.

While the uncertainty created by a claims-made settlement often makes this form of settlement difficult for the defendant to accept at first, there are ways of dealing with it. For instance, a cap on the total amount of the settlement can permit a claims-made settlement process to proceed while limiting the defendant’s ultimate exposure. Where the amounts claimed by class exceed such a cap, the settlement fund is generally distributed on a pro rata basis. Alternatively (or in addition), the amount of each individual claim or type of claim may also be capped. Where the defendant is dealing with a known number of class members, capping the amount of each individual claim will also provide increased certainty regarding likely exposure. Where the parties have an interest in ensuring that certain types of claim receive a greater portion of the settlement fund, the parties may agree to place a cap on the total claim amount for certain types of claims or damages (e.g. claims for out-of-pocket expenses) to ensure that the bulk of the settlement fund is distributed to those class members with the “preferred” type of claim (e.g. physical injury claims).

Counsel have shown great creativity in developing various settlement mechanisms(including grid systems, point allocations and schedules) that are used to control both the amounts paid out and the manner of distribution of the settlement fund. Depending upon the type of claim, vouchers or coupons may also form part of the settlement. In Appendix A, there is a summary of a number of product liability class action settlements that gives an idea of some of the possibilities.

Counsel Fees and Administrator Costs

The settlement agreement should also address whether counsel fees and claims administration fees will be paid out of the settlement fund or whether such fees will be paid separately by the defendant. Additionally, because these fees are subject to court approval, the settlement agreement should provide that the failure of the court to approve the fees sought by the counsel for the plaintiffs will not invalidate or be grounds for termination of the settlement agreement.

Dealing with Surplus

Should any surplus remain after class members have been compensated from a settlement fund, the defendants may seek to have such amounts returned to them. The rationale for returning the surplus to the defendants is that once all claimants have been compensated and made whole, there is no reasonable basis to provide further compensation to class members or to non-parties. An alternate approach often seen in lump-sum settlements is to provide that any surplus will be given to a third party for disbursement as a cy-pres distribution, typically to one or more institutions or organizations that would benefit the class members. In any event, the parties should address in the settlement agreement what is to be done with any residue or unclaimed amount, including the identities of any institutions and organizations that are to receive the residue3.

Future Funds

To meet the requirements of fairness and reasonableness to the proposed class members, class action settlements may require that the defendant set aside funds for a number of years to meet the needs of future claimants. This way, class members who suffer injury in the future can apply for compensation when their injuries arise. In Parsons v. Canadian Red Cross Society4, the Ontario Superior Court recognized the responsibility owed towards future claimants in respect of a settlement on behalf of all persons who were infected with the Hepatitis C Virus during a specific span of time.

Class certification and settlement approval strategies

In addition to the structural components of the settlement, consideration must also be given to where (i.e. in what jurisdictions) and in what order court approval of class action settlements will be sought from the court(s) in Canada. Unlike our neighbours to the south, we do not have the procedural mechanism of the multi-district litigation (MDL) to assist in the implementation of a comprehensive settlement. As a result, defendants in Canada can often find themselves named in numerous proposed class proceedings in various jurisdictions across Canada. This is particularly common where plaintiffs’ counsel are vying for carriage of the action and there is no agreement amongst the plaintiffs as to which action and jurisdiction will take the lead5.

Given that all but one of the Canadian provinces have now enacted class proceedings legislation, combined with the fact that court approval is required to settle actions that have been certified as class proceedings and that in some jurisdictions court approval is required to settle or discontinue a proposed class proceeding prior to certification, there are a number of important jurisdictional and procedural issues that need to be addressed in order to implement a comprehensive class action settlement strategy.

The jurisprudence in Ontario would suggest that the simplest and most cost effective solution when faced with multiple class proceedings in various jurisdictions in Canada may be to certify a national class in Ontario. Often, approval of the national class is also sought in Québec and B.C. (the other jurisdictions that were among the first to have class proceeding legislation) either by seeking recognition and enforcement of the Ontario order or by excluding the members of the Québec and B.C. from the national class and seeking separate certification and approval hearings in these jurisdictions. The certification of a national class generally meets the goals of judicial efficiency and economy and provides a reasonably low-cost procedure for implementing a nation-wide settlement of the Canadian litigation. However, as addressed below, there is a line of cases which calls into question the reliability of a nationwide settlement on the basis of a national class certified in Ontario as a means of obtaining closure to the litigation.

Much has been written regarding the constitutional validity of the national class. While a full discussion of that thorny legal issue is beyond the scope of this paper, the practical decision about where to seek court approval of proposed class action settlements necessarily raises this issue and defendants need to be aware of the risks of certifying a national class.

Challenges to a National Class

The Québec Court of Appeal, in Hocking v. Haziza6, recently affirmed a decision of the Québec Superior Court refusing to recognize and enforce the judgment of the Ontario Superior Court certifying a national class and approving a settlement of a class action against HSBC Bank Canada. The basis for the refusal to recognize the Ontario judgment was that (i) the required real and substantial connection did not exist between the claims of the non-resident class members in Québec and the jurisdiction of Ontario, (ii) the notice to Québec residents was inadequate, and (iii) the Ontario court’s failure to consider the interests of the non-resident members of the class violated fundamental principles of procedure and natural justice.

Similarly, in Lépine v. Société canadienne des postes7, the Québec Court of Appeal applied the real and substantial connection test and refused to recognize an Ontario class action settlement judgment which certified a national class. The court also determined that the notices issued to Québec residents were confusing and impaired the ability of Québec residents to understand the impact of the Ontario settlement on their rights. In addressing the importance of clear and sufficient notice, the Québec Court of Appeal in Lépine stated (in a passage that was also recently quoted in the Court’s decision in Hocking):

The class action has social significance in that its objective is to provide access to justice at a reduced cost for citizens affected by a common problem with generally low pecuniary value. It must be possible for a member of the group contemplated in the class action to express a wish to be excluded from the settlement of the dispute before judgment is rendered. Concerned readers are able to make informed decisions only if the information communicated to them is adequate. The content of the Notice to Members and the method of dissemination are thus two fundamental principles of procedure in class actions within the meaning of article 3155 (3) C.C.Q. They alone make it possible for all members to personally define their positions and, as the case may be, to protect themselves from the release that the defendant could otherwise set up against persons who have not excluded themselves.8

Leave to appeal Lépine to the Supreme Court of Canada was granted on January 31, 2008 and is currently scheduled to be heard November 19, 2008.

On the basis of these and other authorities in Canada questioning the validity of a national class, parties that are determined to implement a class action settlement on the basis of a national class should ensure that significant attention is given to the adequacy of the notice program and to the jurisdictional connections between the subject matter of all class members’ claims and the court that is proposing to certify a national class9.

Cross-Border Trends: Adopting the U.S. Approach

Regardless of the jurisdiction or number of jurisdictions in which approval will be sought, the traditional approach in Canada for approving class action settlements has been for the courts to hear the motion for certification and settlement approval on a consolidated basis at one and the same time. Generally, the procedure is as follows: Once a proposed settlement has been reached, court approval will be sought of a form of notice advising the potential class members that a motion will be brought for certification of a settlement class and approval of the proposed settlement. Potential class members will be advised in the notice of the terms of the proposed settlement, the date and time of the certification and approval hearing as well as their right to attend and be heard at the certification and approval hearing.

In determining whether to approve the settlement, the court will give regard to the:

  • likelihood of recovery or success if the case were litigated;
  • amount and nature of discovery evidence;
  • terms and conditions of settlement;
  • recommendation of counsel;
  • future expense of and the likely duration of litigation;
  • recommendation of neutral parties or experts;
  • number and nature of objections;
  • presence of good faith bargaining;
  • absence of collusion between parties to the settlement;
  • degree and nature of communications by counsel and the representative plaintiff(s) with class members during the litigation; and
  • information conveyed to the court concerning the dynamics arising out the positions taken by parties during the negotiation.10

Assuming these and the other technical requirements for certification are met, the court will issue an order certifying the class and approving the settlement. A second court-approved notice will be provided to the potential class members advising them of the certification and approval of the settlement and of their ability to choose to be excluded or to “opt out” of the settlement class. Once the opt-out period has expired, all class members who have not elected to opt out are deemed to be members of the class and bound by the terms of the settlement, including the release. Claims may then be paid in accordance with the terms of the settlement.

Recently, with the increasing number of North America-wide class action settlements,
courts in Canada have been adopting a different procedure which attempts to replicate or mirror the two-step settlement approval process in the United States. Briefly, the U.S. approach involves holding a “preliminary approval hearing” which is conducted without notice to the potential class members. At the preliminary approval hearing the settlement class is conditionally certified, the settlement is preliminarily approved, a final approval hearing date is scheduled and the court is asked to approve the form of notice to the proposed class advising of the date and time of the final approval hearing, their opt-out rights, objection rights and the claims process.11

Under the U.S. approach, the opt-out period will typically run and expire prior to the final approval hearing date. Accordingly, the parties and the court will know at the final approval hearing how many potential class members have opted out of the settlement. In some cases, by the time the final approval hearing occurs, the claims period may have begun and in some cases may even have expired. This approval structure enables the judge hearing the motion for final approval of the settlement to have a better understanding how the settlement fund is likely to be distributed, whether there will be a residue or the extent of any pro rata distribution of the settlement fund.12

The trend in Canada of structuring settlement approval motions to mirror the U.S. approach is driven by the fact that there is often a single settlement fund to be distributed amongst class members in the United States and Canada and the settlement is contingent upon approval in all jurisdictions. But even where there are separate settlement funds and separate settlement agreements for Canada and the United States, settling parties have determined that it is advantageous for the Canadian approval process to mirror the U.S. approval process.

Recent cases in Canada which have adopted the U.S. settlement approval approach include Canadian Commercial Workers Industry Pension Plan v. Royal Group Technologies Ltd.,13 in which Mr. Justice Quigley ordered that an action be certified as a class proceeding and gave “pre-approval” to the global form of settlement that had been reached between the parties and approved the form of Notice to be sent to the putative class members. Three months later, on December 17, 2007, Quigley J. ordered that the settlement be approved and approved the fees and disbursement of counsel.

In Nutech Brands Inc. v. Air Canada et al., Madam Justice Leitch ordered that a national settlement class (excluding residents of B.C. and Québec) be certified for the purpose of implementing a partial settlement with three defendants. In recognizing that the motion for certification was brought well in advance of the motion for settlement approval, Leitch J. noted that there is authority for such procedure and after reviewing those authorities stated that she was satisfied that it was appropriate to follow the U.S. approach on the basis that the settlement agreements in the United States and Canada had been reached at the same time, and some flexibility is required to accommodate the procedural differences among those jurisdictions.14

In Kelman v. Goodyear Tire and Rubber Co., class counsel worked with counsel in the United States litigation to negotiate a settlement which applied to class members in both the United States in Canada. In considering the approval of the settlement, Mr. Justice Winkler (as he then was) stated that “[t]he effect of that cooperative approach has been the creation of a single settlement fund against which both Canadian and United States Class Members may make claims for compensation. It should be noted that in Kelman, Winkler J. held that where the fund was to be administered in the United States, the Ontario court would nevertheless maintain jurisdiction over the administration of the settlement it had approved.15

The U.S. approach to settlement approval was also followed in Donnelly v. United Technologies, where the parties brought a consent motion for certification in which they informed the court of the details of the settlement, sought preliminary approval of the notice plan and sought certification for settlement purposes. The proposed notice plan envisioned one single notice designed to advise the Canadian class of certification (and the corresponding right to opt out) and of the settlement (and the corresponding right to object to the settlement). Madam Justice Lax issued an order certifying the action as a class proceeding for the purposes of settlement and approving the notice to class members, advising of certification and of a future hearing to approve the Settlement Agreement.16

In Frohlinger v. Nortel Networks Corporation, Mr. Justice Winkler (as he then was) approved a class action settlement using the two-step U.S. approach and highlighted. At paragraph 30, Winkler J. commented on the need for more formal procedures for
dealing with cross-border settlements:

The differences in the jurisprudence between the two countries highlights some of the potential difficulties that may arise in cross-border litigation, particularly in respect of class actions. Courts in both countries have thus far been adept and adaptable in developing ad hoc procedures to deal with these types of issues. Given the increasing trends toward globalization, it is likely that cross-border litigation will increase. The instant case
is an example of this. Here the settlement is global in scope crossing provincial and international boundaries and the jurisdictions in which the underlying proceedings have been commenced include two countries and several provinces. It would be useful if more formal protocols were developed to facilitate the courts and the parties in dealing with these cases.17

Adopting the U.S. style of settlement approval highlights the issue that the class will be certified before the court has decided whether to approve the settlement. Typically the settlement agreement and certification order will specifically provide that the certification order shall be set aside and be without prejudice to any party in the event that the settlement is not ultimately approved by the court or courts in which approval is being sought. In this regard, certification is often referred to in the United States as “conditional” certification.

In Haney Iron Works Ltd. v. The Manufacturers Life Insurance Company, Mr. Justice Brenner (in a different context) rejected the argument of an objector that the defendant should be not able to reserve its rights to contest certification if the settlement was not approved:

If this view is correct, it would require defendants in class actions to decide whether to contest certification prior to any fairness hearing. Instead of opening negotiations when confronted with a proposed class action and trying to achieve an early global settlement, defendants would be forced to contest certification, since on [the objector’s] submission, participating in any proposed settlement would foreclose the right to challenge certification.

If defendants are required to either assert their opposition to certification at a separate hearing before any fairness hearing or waive their right to do so then the result will be added expense and a delay in the settlement negotiation process. Settlements will necessarily be delayed while the certification issues is litigated; this will inevitably introduce extra cost into the process.18

Partial Settlements and Bar Orders

Settling defendants who settle their claims with the plaintiff class, in circumstances where their co-defendants continue to defend the litigation, will want to ensure that their exposure to any cross claims or claims for contribution and indemnity are fully extinguished by the settlement. Consequently, as a condition of the partial settlement, defendants may seek a bar order to protect themselves from claims for contribution and indemnity from the remaining non-settling defendants. Winkler J. (as he then was) considered the availability of a bar order in Ontario New Home Warranty v. Chevron Chemical Co.19 and found that the court had the authority under ss. 12 and 13 of the Class Proceedings Act, 1992 to issue a bar order and that such an order did not prejudice the non-settling defendants. It should be noted in that case that Winkler J. ordered specific discovery rights be granted to the non-settling defendants with respect
to the settling defendants, which they would not otherwise have under the rules.

Managing opt-outs and objectors

Class proceedings legislation in Canada enables potential class members to opt-out of the class action and pursue their own independent action. Given that those persons who elect to be excluded from the settlement class are not bound by the terms of the settlement agreement, there is some risk that a large number of opt-outs could seriously negate the defendant’s ultimate goal in bringing closure to the litigation. To address the risk posed by a significant number of opt-outs, settlement agreements will
often contain a cap on the number of allowable opt-outs under the settlement. If the cap is exceeded, defendants typically reserve the right to terminate the settlement.20

In addition to a cap on the maximum number of opt-outs, in some instances the risk of opt-out litigation can be managed or at least mitigated through the use of an opt out refund mechanism. Whether an opt-out refund is a viable mechanism to mitigate the impact of opt-out litigation (or at least provide defendants with a reserve of funds to continue the litigation against the opt-out plaintiffs) will depend upon the facts of the case including the ease with which the individual opt-out claims can be quantified.
In the United States, the spread of large scale opt-out litigation has proven to be a serious threat that can undermine the benefits of a class action settlement. In response to this threat, there are increasing efforts by defendants’ counsel to prevent opt-out litigation from jeopardizing or negating the benefits of a class action settlement. In this regard the following comments are astute:

Class actions and class action settlements garner widespread attention. The offshoot opt-out cases do not. These seemingly small lawsuits often can spawn big trouble for class action defendants. The lawsuits, fought in the shadows of the class action, can and should be contained in terms of size and scope.

Opt-out plaintiffs do not have a right to re-open settled claims or obtain discovery commensurate with the class action lawsuit. Astute defence counsel can and will use aggressive motion practice in the settlement court to prevent opt-out litigants from
obtaining unfair advantages by turning their individual opt-out claims into expensive reruns of the settled class actions.21

In Prudential Life Ins. Co. of Am. Sales Practices Litigation,22 the parties obtained a court-approved class action settlement of claims alleging that agents for the Prudential Insurance Company of America used fraudulent and deceptive sales practices to sell insurance policies to class members. Two potential class members, Marvin and Alice Lowe, qualified for membership in the class because they had purchased four eligible insurance policies during the class period. The Lowes opted- out of the class with respect to two of their policies and filed a lawsuit in Florida state court against Prudential. As may often be the case in opt-out litigation, the Lowes’ state court claim was a virtual cookie cutter of the class action claim.

During discovery, the Lowes sought information regarding the sale of the class policies on the basis that the facts surrounding those policies were relevant to the Lowes’ claim for liability and punitive damages. Prudential sought an injunction from the federal court that approved the settlement on the basis that the Lowes were attempting to relitigate claims and issues that had been released in the class action settlement.

The federal settlement approval court found that it had jurisdiction and granted the
injunction on the basis that it was necessary to prevent state litigation of an issue that was previously presented to and decided by the federal court. In granting the injunction, the court recognized that the potential for mass re-litigation of settled claims poses a grave threat to a class action settlement and appeared to be influenced by the need to safeguard the finality of class action settlements. Whether the concerns raised by the federal court in the Prudential case would be similarly shared by courts in Canada that have approved a class action settlement remains to be seen.

Notice and claims administration

The more thought and consideration that is given to the notice plan and claims administration process at the outset of settlement, the less likely it is that settling parties will be delayed by unanticipated events down the road in the settlement process.

Notice

As highlighted above, particularly where approval of a class action settlement is being
sought on the basis of a national class, the importance of adequate notice and the procedural fairness of the settlement cannot be overemphasized. Mr. Justice Cullity’s comments regarding the inadequacy of the notice in Parsons v. McDonald’s Restaurants of Canada Ltd. provide a cautionary reminder of the results of inadequate notice:

I am satisfied that it would be substantially unjust to find that the Canadian members of the putative class in Boland had received adequate notice of the proceedings and of their right to opt out. Quite apart from the form and contents of the notice – Mr. Hilsee’s reference to “wall to wall legalese” conveys no more than a hint of its eye-glazing opaqueness – I believe that its dissemination in Canada was so woefully inadequate that the decision should be held to offend the rules of natural justice recognized in this court and, on that ground, to be binding on the Canadian members of the putative class in Boland, other than those whom I have found to have submitted to the jurisdiction of the court in Illinois.23

The class proceeding statutes in Canada provide significant flexibility with respect to how notice should be disseminated. Depending on the case, notice may be direct, by posting, advertising, publication, leaflet or any other means that the court deems appropriate. Where direct notice is possible, courts generally favour this method as the most reliable means to inform the potential class members of their rights.

To deal with the issue of notice, it is becoming increasingly common for parties to retain notice experts who specialize in and provide expert affidavit evidence supporting the proposed notice program. Notice experts will provide data and a methodology for ensuring that the proposed class notice reaches the targeted recipients. These experts also have available to them extensive data to identify the characteristics of the class, such as gender, income and education levels, with a view to focussing on the class members’ media habits.

In addition to ensuring the class notice is adequately disseminated, it is also critical that the notice be clear and understandable. The following tips are of assistance in drafting a clear and understandable class notice:

  • Organize the flow of information in a notice by putting the reader first. Who is the class member, and what does he or she want and need to know? By anticipating and answering the class members’ questions in a logical sequence, the notice becomes less intimidating and therefore more likely to be read.
  • Design the notice to present the information in an easy-to-read format. Break up the text with headings, subheadings, lists and tables to help the class member find needed information. Use a headline that engages the reader instead of the litigation style of cause.
  • The content of the notice should be clear and concise. Use short sentences and paragraphs and eliminate unnecessary information. Avoid the use of legal jargon, definitions, acronyms and difficult words.24

In addition to ensuring the notice is clear and unambiguous, when drafting the settlement agreement attention should also be paid to the deadlines and timing considerations for notice and completion of the various steps of the claims process. Deadlines for providing notice, objections, opt-outs and the making of claims should be reasonable given the specific facts of the case and should take into account a sufficient period of time for dealing with undeliverable notices, the need for class members to gather and collect documentary evidence in order to evaluate the settlement and potentially make a claim and the time required to accurately complete and evaluate claims.25

Claims Administration

With respect to the claims administration process, again, the more consideration given to this issue at the time the settlement agreement is reached, the less likely there are to be unanticipated issues. Depending upon the size of the class action, the services of a professional claims administrator can be very effective. The parties may also want to consider agreeing to the content of the claims form as well as guidelines or instructions to be followed by the claims administrator or adjudicators. Including these details in the settlement agreement will also permit the courts and the class members greater ability to assess the fairness and reasonableness of the settlement and the claims process, as well as allow the parties to ensure that the fund is distributed in accordance with the parties’ intentions.

Role of the Media

At the outset of any settlement discussions, it is prudent to determine how media issues will be handled. Product liability class actions will receive varying degrees of public attention, depending on the nature of the litigation and the allegations of the class members. All dialogue with media outlets should be filtered through a single source in order that the message being conveyed by a defendant may be controlled. The timing and form of these communications must also be determined.

Another consideration with regard to media exposure is whether a confidentiality agreement between the parties will be put in place. Again, this is an issue to be determined at the earliest possible instant. At a minimum the settling parties should give consideration to a provision in the settlement agreement that requires that any press releases or public statements in respect of the settlement be reviewed and approved by both parties before


1 Dabbs v. Sun Life Assurance Co. of Canada, [1998] O.J. No. 1598 (Gen. Div.).
2 It should be noted, however, the courts will still require the proposed class to meet the legal requirements for an appropriate class definition as set out in the relevant case law. See Frohlinger v. Nortel Networks Corporation, 2007 CanLII 696 (Ont. S.C.J.).
3 Pursuant to Québec law and regulations a portion of any residue must be paid to the Fonds d’aide aux recours collectifs.
4 Parsons v. Canadian Red Cross Society (1999), 40 C.P.C. (4th) 151 (Ont. S.C.J.).
5 By way of example, in the pet food recall litigation seventeen proposed class proceedings were commenced in Canada against certain pet food manufacturers. Eleven of these seventeen actions were commenced by a national consortium of a number of firms. The remaining seven proposed class proceedings were commenced by a Saskatchewan-based firm and other Canadian firms.
6 Hocking v. Haziza, 2008 Q.C.C.A. 800 (CanLII)
7 Société canadienne des postes c. Lépine [2007] R.J.Q. 1920]
8 Société canadienne des postes c. Lépine [2007] R.J.Q. 1920] (at para. 229):
9 Further guidance on ensuring notice is adequate is given in section Part C of this paper entitled “Notice and Claims Administration”, below.
10 Dabbs v. Sun Life Assurance Co. of Canada (1998), 40 O.R. (3d) 429 (Gen. Div.), appeal dismissed (1998), 41 O.R. (3d) 97 (C.A.); CCWIPP v. Royal Group et al. Court File No. 965/06 January 11, 2008.
11 Rule 23 of Federal Rules of Civil Procedure.
12 Contrary to the ordinary Canadian approach in which objectors have an opportunity to come forward and be heard at the approval hearing before having to
make a decision of whether to opt out, under the U.S. approach the opt-out period expires prior to the final approval hearing. Therefore, if a person wishes to object to the settlement, they will have no opportunity (as they would have under the ordinary Canadian approaches to later opt-out if their objections are not accepted by the court.
13 See Canadian Commercial Workers Industry Pension Plan v. Royal Group Technologies Inc. (September 10, 2007), Central West Region 965/06 (Ont. S.C.J.).
14 Nutech Brands v. Air Canada, 2008 CanLII 11643 (Ont. S.C.J.).
15 Kelman v. Goodyear Tire & Rubber Co., [2005] O.J. No. 175 (S.C.J.). It should be noted that in Kelman, Winkler J. held that where the fund was to be administered in the United States, the Ontario Court would nevertheless maintain jurisdiction over the administration of the settlement it had approved
16 Donnelly v. United Technologies Corp., 2008 Carswell Ont. 332 (S.C.J.).
17 Frohlinger v. Nortel Networks Corporation, 2007 CanLII 696 (Ont. S.C.J.). See also the comments of Winkler J. (as he then was) in McCarthy v. Canadian Red Cross, 2007 CanLII 21606 (Ont. S.C.J.) regarding the positive development of counsel permitting the courts to communicate and discuss with each other aspects of settlements which are sought in multiple jurisdictions.
18 Haney Iron Works Ltd. v. Manufacturers Life Insurance Co. (1998), 169 D.L.R. (4th) 565 (B.C. S.C.).
19 Ontario New Home Warranty v. Chevron Chemical Co., (June 17, 1999) 22487/96 (Ont. S.C.J.)
20 The maximum number of opt- outs is sometimes referred to as a “blow” or “tip-over” provision.
21 Andrew O. Bunn, “Protecting Class Action Settlements by Reining in the Opt-out Plaintiffs” (2004 Life, Health and Disability News)
22 Prudential Life Ins. Co. of Am. Sales Practices Litigation, 261 F.3d 355 (3d Cir. 2001); See also the discussion of this litigation in Andrew O. Bunn’s article cited above.
23 Parsons v. McDonald’s Restaurants of Canada Ltd., [2004] O.J. No. 83 (S.C.J. ) para. 58, aff’d Ont. C.A.
24 “Tips and Trends in Class Action Claims Administration and Notice”, Class Action Perspectives, Vol. II, Issue 2 August 2007.
25 Supra.


Appendix A

NANTAIS v. TELECTRONICS PROPRIETARY (CANADA) LTD.

Subject of Class Action
Leads

Date of Certification and Settlement
Certified in 1995 and settled in 1997.

Amount of Settlement
$14. 895 million to be held in trust as base, allocated as follows:

  • $9.895 million in “general fund” and $5 million in “assessment fund”

Class Counsel Fees

  • $6 million (exclusive)

Notice to Class

  • A notice letter with a claim form and the order, delivered to all class members for whom class counsel has their address.
  • A toll free number and publication and various newspapers/magazines.

Calculation of Claim Entitlement for Class Members
Class categories for Base Amount:

  1. each member who died before Nov. 1, 1994 entitled to receive $1500
  2. each member who died between Nov. 2, 1994-May 18, 1997 is entitled to receive $3,000
  3. Each member who was alive on May 19, 1997 but whose lead was not explanted on or before October 3, 1997 is entitled to $6000 for general damages and $4000 for all Family Law Act or similar claims for a total of $10,000.
  4. Each member who was alive on May 19, 1997 and whose lead was explanted on or before Oct. 3, 1997 is entitled to receive $9,000 for general damages and $6,000 for derivative claims for a total of $16,000.

N.B. Each class member is deemed to have received and paid $5,000 to Harvey Strosberg for
costs of the action and $5,000 for compromise on the settlement- the base + $10 000 is the
threshold amount

Damage Assessment
Any dispute as to claim entitlement or if a class member believes they are entitled to received
more than the threshold amount shall be determined by either of the two appointed (former)
judges as special referees.

The order gives discretion to the judges to determine their procedure and whether to have
costs paid out of assessment fund or by class member

Appeal of Claim Assessment
Three judges have also been appointed as the private appeal panel. All assessments must be
done by January 8, 1999.
 

Method of Distribution

Paid by the trustee to the claimant.

Other Notable Points
Excess funds: After all assessments are made and costs paid, the remainder plus accrued
interests returns to ARI.

HOY v MEDTRONIC

Subject of Class Action
Pacemaker Leads

Date of Certification and Settlement
Certified in 2001 and settled in 2005.

Amount of Settlement
$1.5 million

Class Counsel Fees
Legal Fees plus $227,557.40 plus $51,580 for disbursements and notice and administration
costs (inclusive)

Notice to Class

  • A notice letter was submitted to class members.
  • A newspaper notice was published in newspapers throughout B.C. (cost will be covered by class counsel and recovered from settlement fund)

Calculation of Claim Entitlement for Class Members
Point system based on:

  1. Class members who underwent lead extraction -20 points
  2. Class members who underwent replacement surgery-10 points
  3. Class members who underwent additional monitoring-1 point

Class members were only entitled to recover under one of the above categories.

Damage Assessment
Class counsel acted as administrators and assessed the claim forms submitted by class
members. Compensation for this was to be included in the class counsel fee.
After the claim period expires, class counsel calculated the total eligible points and determines
the value, such that each class member will get a percentage entitlement based on their points.

Appeal of Claim Assessment.
None specified.

Method of Distribution
Upon determining class members entitlement, class counsel mailed a cheque in the amount
determined. Agreement stipulated that best efforts will be used to mail cheques by Oct. 1, 2005.

Other Notable Points
Opt-Out: if persons opted out of the class, the amount in the settlement fund would
correspondingly decrease. ie.

  • 4-9 opt outs-reduced by $100 000; 10-14 opt outs-reduced by an additional $50,000; 15-
    + opt outs-reduced by an additional $200,000

Additionally “if 19+ of Class Members opt out of this settlement, the defendants or either of
them, in their sole discretion, have the option of terminating the Settlement and splitting the
cost of notice.

HEAD ET. AL. v. MIRALEX HEALTH CARE INC. & HUESON PHARMACEUTICAL CORP

Subject of Class Action
Miralex cream (psoriasis cream with steroid)

Date of Certification and Settlement
Certified in 2001 and settled in 2002.

Amount of Settlement
$1.4 million in the “settlement fund”

Class Counsel Fees
$537,934.76 (exclusive)

Notice to Class
Notice letter was sent to class members, with a claim form, and eligibility statement
Calculation of Claim Entitlement for Class Members.
Point System based on usage, age and side effects suffered:

  1. Class members who applied less than 4 ounces of miralex cream shall not be entitled to recover (as medical experts suggest they would suffer no damage)
  2. For every 4 ounces or more of miralex cream purchased after January 1, 1999, the class members will receive 1 point to a maximum of 12
  3. Class members will receive an additional 1 point if they were under 3 or over 60 years old
  4. Class members will receive an additional 1 point of suffering side effects and flare ups. Double points with a doctor’s note.

 

Damage Assessment
The claims administrator will determine the total number of points of all eligible class
members, and will be free to review sales records.

Appeal of Claim Assessment
None specified

Method of Distribution
After all claims are submitted each claimant will receive an amount of the global recovery fund
proportionate with their number of points.

Other Notable Points
Necessary to have court approval for any administration fee greater than $35 000

HARRINGTON v. DOW CORNING CORPORATION
Re: Dow Corning Settlement

Subject of Class Action
Breast implants

Date of Certification and Settlement
Certified in 1996, settled in 1999 and effective in 2004 (as a result of reorganization)
Amount of Settlement
$25.13 million (US) as settlement amount, to be paid in installments. (includes payments of
claims by class members, government authorities/insurers, administrative costs, legal fees, costs
and disbursement).

Also includes claims administrators fees up to a maximum of $200 000(US)

Class Counsel Fees
Deducted from the settlement amount.
Notice to Class
Notice by letter to individual class members; notice published in various newspapers nationally
and issue a press release.

Calculation of Claim Entitlement for Class Members.
Approved claimants are entitled to receive one of the following claims:

  1. Expedited settlement claims: a sole and exclusive remedy of $1200(US)
  2. Raw material claims: sole and exclusive remedy of $330.00(US), if the number of exceeds 2000, share a fund of $660,000
  3. Rupture claims: one time payment in accordance with the compensation schedule; neither expedited nor raw material claims can receive a rupture claim.
  4. Compensation ratios; after payment of all approved claims in 1 and 2, the Claims administrator shall determine the dollar amount of each ratio on the compensation schedule.
  5. Ongoing claims: each approved claimant shall be entitled to receive payment to be calculated in accordance with ratios set forth in compensation schedule. Any amounts left over shall be paid to current and ongoing claimants on a pro rata basis.

NB: compensation schedule also functions on a point system depending on severity of
harm/disability/medical conditions coinciding with a ratio or amount for compensation.

Damage Assessment
Deloitte approved as Claims Administrator to administer the settlement amount and process claims.
Claimants needed to submit medical records for proof of medical conditions and/or disability.

Appeal of Claim Assessment.
IF CA thinks claim is fraudulent, can bring to BC Court for resolution.
An eligible claimant has 30 days from when she receives notice of her compensation to appeal
her placement on the compensation schedule to a BC Court. The court’s decision is final.

 Method of Distribution
Claims administrator notifies each eligible claimant of approval or rejection of their claim and
if applicable her placement in the compensation schedule and then make arrangements for
payments.

Other Notable Points
Both class counsel and defendants have rights of withdrawal and termination from the
agreement based on the number of persons who register or opt out of the proceeding.

Claims were limited for pre-existing medical conditions.

(The Ontario settlement was agreed to on much of the same terms as this BC settlement,
however the amount was for $17,000,000 USD for principal claims and $900 000 for
supplemental/family claims; all inclusive of class counsel fees)

HARRINGTON V. DOW CORNING CORPORATION
Re: Bristol Meyers, Baxter, 3M Settlement

Subject of Class Action
Breast implants

Date of Certification and Settlement
Certified in 1996 and settled in 2003.

Amount of Settlement
$2.5 million to a maximum of $4.3 million.
In addition, the defendants shall pay their share of up to $200 000 for the Administrative
Fund which will be used the cost of claims administration and notice.

Class Counsel Fees
Class counsel fees, disbursements and taxes shall be paid and deducted from the settlement
fund prior to any money distribution

Notice to Class
Notice letter mailed within 30 days to all known members of the class and subclass, published
in various newspapers across the country, issued a press release with the exception of Ontario
and Québec, as the settlement doesn’t apply there. Included in the notices are the opt-out
form, opt-in form and claim form.

Calculation of Claim Entitlement for Class Members.
The actual compensation is based on either an expedited payment , where a member does not
wish to make a claim for an injury payment or an injury payment, calculated based on:

  1. the complications documented by a physician.
  2. rupture of the implant
  3. explanation

There are units or points associated with all of these categories to determine compensation.

Settlement also provides for an additional funding trigger which would require additional
funding to be injected into the settlement.

Damage Assessment
Claims administrator will review claims and determine whether they qualify as a funding
claimant and whether they qualify as having had a qualifying explant surgery.

Appeal of Claim Assessment.
Either class counsel or defendant can apply to the court for review and adjustment of the
Additional Funding Trigger contained in the Allocation report.

Other Notable Points
Defendant payments will be made according to:

  • Bristol-Myers Squibb Company, Medical Engineering Corporations and Cooper Companies, Inc: 50%
  • Baxter Healthcare Corporation: 37.5%
  • 3M: 12.5%

BISIGNANO v. LA CORPORATION INSTRUMENTARIUM INC

Subject of Class Action
Vitek Temporomandibular Joint (TMJ) Implants (jaw implants)

Date of Certification and Settlement
Certified in 1996 and settled in 1999.

Amount of Settlement
$9.38 million, inclusive of prejudgment interest, party and party costs and costs of administration of the settlement.
Settlement Fund: $8.38 million dollars

Class Counsel Fees
$350,000 paid (inclusive of settlement amount)

Notice to Class
Settlement class members whose identity is known to class counsel/defendant will receive
notice of settlement approval and the information package by ordinary mail.
Publication in a number of publications and the websites of class counsel. The cost of notice
shall be paid by the defendant.

Calculation of Claim Entitlement for Class Members
Point system based on

  1. number of surgeries and type (to a maximum of 35);
  2. age at implantation and current age;
  3. documented bone resorption (up to a maximum of 25 points)
  4. documented granuloma or foreign body reaction (10 points)

Damage Assessment
Class counsel and Defendant will propose a claim administration facility and administrator for
the purpose of processing and classifying the claims form.

Appeal of Claim Assessment

  • Appeal of the claim must be done within 30 days from the date the claimant receives notice of their claim.
  • Appeal will be based on written submissions only and within 20 days shall provide a written response.
  • If The judgment of the court with respect to any appeal is final.
  • Claims administrators shall pay eligible claimants.

Other Notable Points
A reserve fund was initially established in the amount of $1 million for claimants who are family
members or have derivative claims, as they may not make claims against the settlement fund.
(Sawatsky v. Societe Chirugiale Instrumentarium Inc. et. al. was a parallel proceeding)

COLEMAN v. BAYER INC.

Subjects of Class Action
Baycol (drug used to lower cholesterol)

Date of Certification and Settlement-
Certified for the purpose of settlement in 2004

Amount of Settlement-
No maximum amount stipulated, see below chart for calculation of claim entitlement.

Notice to Class
Notice by mail to class members, public notice through various newspapers across the country
and notice on class counsel’s website.
Calculation of Claim Entitlement for Class Members
Class system:

  • Class 1: all persons resident except in BC and Québec. who ingested Baycol and contemporaneously therewith suffered from Rhabdomyolosis
  • Class 2: all persons, including but not limited to, executors, administrators, personal representatives, spouses, and relatives on account of a personal relationship to any one or more of the persons described in Class 1, assert a derivative claim for compensation.

Level system: based on diagnosis of Rhabdomyolosis

  1. no hospitalization-$10,000
  2. without hospitalization and without exceptional treatment-$25000 plus $1000 for each day of in-patient treatment
  3. Hospital-ization with Exceptional Hospital treatment-$50,000 plus $1000 for each day of initial in-patient treatment, plus $2000 for each dialysis treatment for a maximum of $100,000
  4. those who require permanent dialysis or died (from $130,000-$175 000 depending on age)
  5. disputed cause or other injury not contemplated-mediation followed by arbitration if necessary.

Can also make claims for loss of income

Damage Assessment
Appointed a claims administrator (“CA”) to deal with settlement, who shall report to both
parties’ counsel. This will be paid by Bayer.

Upon receipt of a completed claims form, the CA will issue an acknowledgement and have 30
days to review it. Where it is incomplete, even after notice to claimant, both counsels will be
notified to determine entitlement. Where counsels disagree, a medical screener shall make a
determination.

Appeal of Claim Assessment
Any party may challenge the determination of the medical screener within 14 days to an
arbitrator, who has the final decision.

Method of Distribution
The Claims administrator shall pay all eligible claimants within 30 days of final determination.

Other Notable Points
Both counsel agreed to have access to all information by the claims administrator

WILSON v. SERVIER

Subject of Class Action
Ponderal and Redux (diet drugs)

Date of Certification and Settlement-
Certified September 2000 and settled September 2004

Amount of Settlement-
Settlement Fund in the amount of $25 million with a further amount of $15 million payable in
increments as required.
Any leftover to be paid back to Servier and public health insurers based on a grid, depending
on remainder of fund.
An additional $1.5 million paid for securing payment of notices and costs of administration of
settlement agreement

Class Counsel Fees
$3 million for class counsel costs and $1 million for disbursements (inclusive) with the
opportunity to bring a motion for a further amount to be paid out of the settlement fund

Calculation of Claim Entitlement for Class Members
Calculated on the basis of medical conditions list set out in the agreement and the level
associated with the condition. If
Further, of the $25 million, $3 million will be allocated to FDA positive claimants up to a
maximum of $2500 per claimant, who meet certain criteria demonstrated by an
echocardiogram.

Damage Assessment
Appointment of settlement administrator who shall be responsible for all administrative
matters and shall invest funds.

Additionally a roster of claims adjudicators will be appointed by the Court to receive and
review claims and make a determination. Written reasons will be provided with respect to each claim. The claims adjudicators shall include medically qualified personnel and must adhere to
a confidentiality agreement.

Appeal of Claimant Assessment
Claimants have the right to challenge the Claims Adjudicators decision to Justice Winkler,
where costs are only payable from the settlement fund if the claimant is successful. Justice
Winkler’s decision is final and binding and not subject to further review.

Method of Distribution
All claims must be submitted within the 5 year administration period

Other Notable Points
Agreement also provided for return of the defendant’s documentary productions and all
plaintiff class work product to be stored by a third party, until 6-7 years after the final
disbursement at which time it will be destroyed.

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