Even after a class action settles, disputes may arise that require the intervention of the court. That was the situation in Eidoo v. Infineon Technologies AG, where Justice Perell refereed a dispute between class counsel and counsel representing five class members regarding an approved distribution protocol. The procedural decisions highlight the fact that class counsel must be transparent in negotiating deals with counsel for other class members.

Background

The dust had settled, or so it seemed. The courts in BC, Ontario and Quebec had approved a national settlement agreement in the DRAM competition class actions, the deadline for objections had passed, and the distribution protocol was in the process of being executed.

But at the 11th hour, a lawyer acting for five Class Members contacted Class Counsel to advise that the approved distribution protocol contravened the Ontario Human Rights Code and that his clients would be seeking damages pursuant to s. 46.1 of the Code and an amendment to the distribution plan. The portion of the distribution protocol challenged related to the pooling of the claims for compensation of family members.

Proposed Letter Agreement Not Approved

Justice Perell, on his own initiative, ordered class counsel to serve and file materials for a motion for directions in order to decide how to deal with the alleged contravention of the Code. However, counsel instead negotiated a letter agreement whereby the alleged contravention of the Code would be remedied by posting an instruction on the claims website and the lawyer for the five class members would potentially be paid some of his costs.

Justice Perell refused to authorize the agreement, stating:

Whatever is going on here, it does not work and whatever it is, it is not an appropriate and responsible way for the court to supervise a class proceeding. The proposed instruction may or may not be adequate to address what may or may not be a problem, raised by persons who may or may not have standing to challenge the approved settlement distribution scheme, but, in any event, the Court cannot endorse whatever this is at the whim of Class Counsel and Mr. Letts and his clients without ruling on the merits of the underlying dispute. The Court cannot indirectly endorse an anti-suit injunction prohibiting Mr. Letts’ clients from taking administrative proceedings that may or may not be available to them assuming that they are entitled to make claims notwithstanding the releases that are a part of the court approved settlement. The claim for costs is problematic. Why should costs be paid out of the settlement fund absent an actual ruling on the merits of the motion?

Decision on the Merits

The motion for directions ultimately morphed into a joint hearing of the courts of British Columbia, Ontario, and Quebec on the merits of the alleged violation of the Human Rights Code.

While the Code applies to both the public and private sector, it creates a right to be free of discrimination only in the prescribed social areas of services, accommodation, contracts, employment, and vocational associations. Justice Perell found that the distribution of the proceeds of the settlement of a damages claim is not the provision of “services, goods, or facilities” within the ambit of the Human Rights Code, nor is it a contracting process. The Code simply does not apply to distribution protocols in a class action. Justice Perell also concluded that, even had the Code been applicable, the distribution protocol in this case did not contravene the Code.

Implications

Justice Perell’s decision confirms that distribution protocols have the flexibility to accommodate family structures without violating the Ontario Human Rights Code. This flexibility will continue to allow counsel to design practical and efficient distribution protocols.

Justice Perell’s strong language regarding counsel’s proposed letter agreement also highlights the need for transparency in negotiating resolutions with counsel for other class members – particularly when it involves the payment of counsel’s costs.