Should class counsel rush to the courthouse with skeletal pleadings, or invest time and money in preparing a comprehensive claim? If a carriage motion results, should they bring forth the evidence they intend to use at trial, in full view of the defence, or keep those cards close to their chest?

Last week, the Ontario Superior Court addressed these issues in deciding a carriage motion between two groups of experienced plaintiff-side class action counsel. Both had moved before the Court to be designated as counsel to a class consisting of certain shareholders.

In the course of the hearing, the Court effectively rejected simple, quick measures to determine carriage – first to file, firm reputation, expediency of proposed proceeding – and instead approved the practice of sinking substantial costs into preparing comprehensive pleadings and vigorously prosecuting a carriage motion.

“Carriage motions” – the hearings in which multiple lawyers seek to be judicially recognized as the official counsel for a large group of absent, non-participating class members – occasionally take place in class actions as class action counsel compete over which firm should lead the prosecution of a proposed class claim.

In order to determine which counsel should be awarded carriage of a class action, judges must decide which appointment would be in the best interests of the class, having regard to the following factors:

  1. the nature and scope of the causes of action advanced;
  2. the theories advanced by counsel as being supportive of the claims advanced;
  3. the state of each class action, including preparation;
  4. the number, size and extent of involvement of the proposed representative plaintiffs;
  5. the relative priority of the commencement of the class actions;
  6. the resources and experience of counsel; and
  7. the presence of any conflicts of interest.1

The Court’s recent decision in Mancinelli v. Barrick Gold expanded upon these factors in a number of important ways.2 

Legal Fees a Relevant Factor

In his decision, Justice Belobaba openly mentioned the cost of legal counsel as a relevant – and potentially determinative – consideration in a carriage dispute. Had the proposals of the two groups otherwise been equal, His Honour considered that the lower contingency fee arrived at in a “reverse auction” would be a deciding factor.

As class counsel frequently retain between 20-30% of the funds awarded to the classes they represent, this factor has clear relevance to the best interests of the class. In a class action, a 10% difference in contingency arrangements could potentially translate into a difference to the recovery of the class members in the millions of dollars.

Legal Specialization, Filing Date and Funding are Irrelevant Factors

Justice Belobaba also made three interesting determinations of neutral factors in his decision:

  • Provided that the competing firms all have sufficient expertise in the subject area of the claim, no preference will be given to a firm that is more specialized or experienced than the other.
  • The Court reiterated that Ontario is not a ‘first to file’ jurisdiction and did not afford any weight to the fact that one firm filed its claim five months before the other. The later filing was ultimately the successful one.
  • The fact that one group of counsel had a funding arrangement in place was a neutral factor, on the assumption that another group would be able to secure such an arrangement as well.

Evidence was Heard on the Motion

The Court ultimately ruled that one consortium of law firms (“RGG”) would be awarded the action over a second consortium (“KMG”), while ruling that both were “elite” groups entirely capable of effectively managing the action. RGG had advanced several claims on the action, including conspiracy and fraudulent concealment, whereas KMG focused on a number of environmental misrepresentations and promised a more streamlined, efficient proceeding.

In the course of finding that the best interests of the class lay with the more comprehensive action, the Court considered several expert reports and substantial evidence put forward by RGG.  While noting that it was inappropriate to compare the merits of the case and the likelihood of success on a carriage motion - particularly with defence counsel present - the Court did weigh evidence in considering whether or not there was a sufficient basis for RGG to plead its additional causes of action, or whether the additional causes of action were not sufficiently well-founded to be of any benefit to the class.

A plaintiff is generally required to show that there is “some basis in fact” for its claims in a class action at the certification stage.3  Without making explicit reference to that test, the Court appeared to apply that same standard to the different pleadings advanced by RGG on this carriage motion, determining that their expanded claims were “not ‘kitchen sink’ type claims” and were “supported by the evidence collected to date”.4 

Preparation in Drafting the Pleadings was Determinative

The ultimate decision in this carriage dispute rested on the vastly superior level of preparedness exhibited by RGG – but importantly, the difference in the parties’ level of disclosure was not driven by a difference in skill or dedication, but rather a strategic schism between these two groups of experienced counsel.

KMG put forward comparatively thin pleadings in line with their streamlined approach to the litigation, and with a view to depriving the defendant of valuable evidence at this early stage, far in advance of certification. RGG’s submissions, on the other hand, openly disclosed expert evidence on which they intended the class to rely, reflecting months of in-depth investigation both through review of documentary evidence and extensive interviews and investigations at the site of the alleged tort.

KMG “minimized and even ridiculed” the efforts of RGG at the hearing, calling it a “rookie mistake” to file expert evidence on the merits of the case at a carriage motion attended by the defendant.5  The impetus to limit disclosure on a carriage motion has been part of the established wisdom of class proceedings practice since the inception of the carriage motion in Ontario jurisprudence.

The Court disagreed strongly with this proposition, ruling that the additional evidence had demonstrated that it was objectively in the best interests of the class to award the action to the more prepared team of counsel.

New Developments

It appears from this case that carriage motions have the potential to become a more expensive and time-consuming stage of the class proceeding process, at least in notable cases attracting the attention of multiple class counsel. Although this may add to the cost and delay involved in bringing a contested class action, this decision bears the benefit of encouraging counsel to draft sober and intelligent pleadings grounded in evidence that will serve the class well through certification and beyond by minimizing disputes over meritless aspects of a claim.