In Ontario, a settlement in a class action must be approved by the Court. The same is true of class counsel’s fees. What happens when the Court makes an order refusing to approve a settlement and class counsel’s fees? In its January 28, 2015 decision in Waldman v. Thomson Reuters Canada Limited, the Ontario Court of Appeal determined that such an order is interlocutory. Therefore, an appeal must be brought in the Divisional Court, with leave, instead of the Court of Appeal.

The Case

In the underlying case, the representative plaintiff alleged that the defendant infringed the copyright of the class members (a group of lawyers) by republishing their work without their permission. After certification, the representative plaintiff and the defendant agreed to terms of a settlement. The Superior Court refused to approve the settlement.

The Appeal

The representative plaintiff appealed the decision to the Court of Appeal. The Ontario Class Proceedings Act does not specify the Court to which an appeal of an order dismissing a motion to approve a settlement is to be brought. As such, the Courts of Justice Act (“CJA”) had to be analyzed. Section 6(1) of the CJA grants the Court of Appeal appellate jurisdiction over final orders of the Superior Court unless the appeal lies to the Divisional Court under another Act. The Divisional Court, on the other hand, has jurisdiction over interlocutory appeals.

The representative plaintiff argued the Court of Appeal had jurisdiction in this case because the Superior Court’s order was “final”. In the alternative, he argued that even if the refusal to approve the settlement was an interlocutory order, the refusal to approve class counsel’s fees was a final order. The Court of Appeal, pursuant to s. 6(2) of the CJA, can assume jurisdiction to hear an appeal of an order that would normally lie to the Divisional Court if another appeal in the same proceeding lies to and is taken to the Court of Appeal.

An Order Refusing to Approve Class Counsel’s Fees is Not Necessarily Final

Justice MacFarland, for a unanimous Court of Appeal, held that an order refusing to approve class counsel’s fees will not always be a “final” order. She distinguished this case from an earlier decision which held that an order approving a settlement, but reducing the fees sought by class counsel, is final. In that case, the litigation was ended by the order approving the settlement. This is not the case when, as here, a settlement is not approved.

An Order Refusing to Approve a Settlement is Interlocutory

The representative plaintiff argued that the order refusing to approve the settlement was final because the settlement agreement was a contract that bound the parties and refusal to approve it “puts an end to these contractual rights.” Justice MacFarland rejected this position. She thus distinguished this case from an instance where a Court declines to enforce minutes of settlement or determines whether a settlement has or has not been reached – in such an instance, litigation ends. In the class action context, however, a settlement is not binding unless and until Court approval is obtained, meaning that a proposed settlement cannot create final legal rights.

The fact that this particular settlement could not be reconsidered did not make the order the final. Were that position accepted, any distinction between final and interlocutory orders would be suspect, because every interlocutory order “finally” determines the narrow issue raised by the motion or application that prompted it.

Conclusion

A settlement finally disposes of legal rights – but only once the settlement itself is finalized and enforceable. And in the class action context, a settlement is not finalized and enforceable until approved by the Court. Waldman recognizes this and is a reminder that litigants should be cognizant of the distinctions between class action settlements and settlements in other contexts.