Preliminary Class Action Fee Approval Not Appropriate Absent "Exceptional Circumstances"
Section 38 of BC’s Class Proceedings Act requires judicial approval with¬†respect¬†to any class action fee agreement prior to it being¬†enforceable¬†. ¬†Interesting reasons for judgement were released this week by the BC Supreme Court, Vancouver Registry, addressing the timing of such approval. In short the Court held that ‘preliminary’ approval prior to settlement/judgement is not appropriate absent “exceptional” circumstances.
In this week’s case (Plimmer v. Google, Inc.) the Plaintiff filed a proposed class action against Google. The Plaintiff’s lawyer sought a “preliminary but not final approval of the Plaintiff’s fee agreement“. ¬†Madam Justice Griffin found that such approval was not warranted in the usual course and provided the following feedback:
¬†¬†¬†¬†¬†¬†¬†¬†¬†I conclude that preliminary approval of fee arrangements in class proceedings in B.C. should only be sought in exceptional circumstances, such as where there is a novel and potentially controversial form of agreement of which the court should be apprised in its supervisory role, to address and avoid the potential that the agreement could later be seen as affecting the integrity of the legal process or the proper administration of justice.¬† Over time as case law develops and gives guidance to counsel and representative plaintiffs, there will be less occasion for these exceptional circumstances to arise.¬†
¬†¬†¬†¬†¬†¬†¬†¬†¬†Those exceptional circumstances do not exist here with respect to the fairness and reasonableness of the fee agreement in general. ¬†I consider it inappropriate to address the approval of the fee agreement in slices, and I conclude that it is premature to consider these general issues at this early stage.
¬†¬†¬†¬†¬†¬†¬†¬†¬†The role of the court is not to give preliminary legal advice to the plaintiff or plaintiff‚Äôs counsel, and the court ought not to be put in the position of making what are essentially moot rulings without all of the facts before it.
¬†¬†¬†¬†¬†¬†¬†¬†¬†For the most part, the court‚Äôs assessment of the fee agreement in this case should await another day when the court will have heard all of the relevant evidence including as to the risks, merits and complexities of the case, and when other class members will have received notice of the fee agreement.¬†
The Court went on to note that one issue did deserve preliminary comment, and that was an order with respect to fee splitting agreements amongst various lawyers. ¬†The Court held that there was nothing wrong in¬†principle¬†with such agreements in a BC class action lawsuit and provided the following reasons:
¬†¬†¬†¬†¬†¬†¬†¬†¬†I make the above general observations subject to one aspect of the fee agreement which warrants judicial consideration now.¬† That aspect concerns the plaintiff lawyers‚Äô arrangements to fee-split with assisting lawyers who are based in the United States.
¬†¬†¬†¬†¬†¬†¬†¬†¬†The case law regarding Canadian counsel cooperating in class proceedings with lawyers based in the United States is evolving.¬† I recognize that the plaintiff‚Äôs B.C. counsel are being prudent by advising the court of the fee-splitting arrangements they have entered into precisely because the case law is developing and such arrangements could affect the administration of justice.¬†
¬†¬†¬†¬†¬†¬†¬†¬†¬†I have concluded that the novelty and potentially controversial nature of these types of arrangements are exceptional circumstances which justify the court embarking on the supervisory task of reviewing the fee agreement in respect of its arrangements to split the plaintiff‚Äôs counsel fees with lawyers based in the United States…
¬†¬†¬†¬†¬†¬†¬†¬†¬†In conclusion, leaving aside the percentage split which is not for this Court to approve at this time, I declare as an interim order that this Court approves in principle of the fee-splitting arrangement between the plaintiff‚Äôs B.C. counsel of record, and the Assisting Lawyers, in substantially the terms as described to this Court.
¬†¬†¬†¬†¬†¬†¬†¬†¬†I considered stating this declaration in the negative, namely, that this Court does not disapprove of the fee-splitting arrangement, to reinforce the limitations in the supervisory discretion I have exercised.¬† The point I wish to emphasize is that the application for final approval of the fee agreement should proceed as a hearing¬†de novo¬†when it comes to the end of the case.¬†