In Jones v. Zimmer GMBH, 2016 BCSC 1847, Justice Bowden of the B.C. Supreme Court recently approved settlement of a class action despite the objections of a number of class members to the settlement agreement that had been reached between the representative plaintiff, class counsel and the defendant. This decision is instructive for class action defendants negotiating and arranging settlements with class counsel.
Events Leading To The Settlement Of The B.C. Class Action
This past July, we wrote about the decision of Justice Perell of the Ontario Superior Court in Crider v. Nguyen, 2016 ONSC 4400, where he ordered that an Ontario plaintiff could pursue an individual action against a manufacturer of a hip implant device, Zimmer, while claims relating to that same device were already being advanced against Zimmer as part of two class actions: one certified in British Columbia (Jones v. Zimmer), and the other certified in Ontario (McSherry v. Zimmer).
The representative plaintiffs in the Jones and McSherry class actions reached a settlement agreement with Zimmer, to which some fourteen objections were filed by certain class members who did not agree with the settlement. Two of the fourteen objections arose from members of the Ontario McSherry action, while the remaining twelve arose from the B.C. Jones action.
Shortly after issuing his decision in Crider, Justice Perell approved settlement of the Ontario McSherry class action despite the two objections that had been filed, and the parties then sought approval of the settlement of the Jones action from the B.C. Supreme Court.
The Objections Of Certain Class Members To The Settlement Of The B.C. Class Action
The proposed settlement agreement provided that class members would receive compensation in exchange for a release of their claims. The amount of compensation was to vary with the nature of a class member’s individual claim. For example, a class member who underwent an uncomplicated revision surgery to correct complications with the hip implant might be eligible to receive up to $97,500, while one who experienced a complicated revision might be eligible to receive up to $172,500. On the other hand, a class member who had not undergone revision surgery by September 1, 2015 (the “Eligibility Deadline”) would only be entitled to receive $600.
Justice Bowden summarized the twelve objections that had been filed by certain class members against this settlement into five categories:
- that the proposed settlement limited the potential damates of those class members who had not undergone revision surgery or scheduled such surgery prior to the Eligibility Deadline to a nominal $600..
- The proposed settlement did not include class members who require revision surgery but for various reasons did not have it or schedule it before September 1, 2015.
- The proposed settlement was reached before expert reports were exchanged or oral examinations for discovery were held. As a result, the defendants would have known that that plaintiff had little interest in going to trial.
- The proposed settlement did not provide any compensation for individual claims such as loss of earnings or pain and suffering short of revision surgery.
- The timing of the notification of the terms of the proposed settlement was such that class members were not able to opt out of the B.C. class action.
On October 6, 2016, Justice Bowden approved settlement of the Jones action despite these objections.
The B.C. Court’s Treatment Of The Objections And Approval Of The Settlement
In coming to his decision, Justice Bowden noted that individual class members do not participate in the conduct of the litigation during the common issues phase of a class action. When the Jones class action was certified by the B.C. Supreme Court, the Court appointed a representative plaintiff to prosecute the action on behalf of the class and to instruct counsel for the class. Justice Bowden commented that it would not have been feasible or appriopriate for class members to generally be involved in the private and privileged mediation sessions and settlement negotiations that were conducted with the defendant over a number of years.
While the most serious objections to the proposed settlement were with respect to the Eligibility Deadline that determined a class member’s level of potential compensation, Justice Bowden found that this deadline had been selected by the representative paintiff, class counsel and the defendant on a principled and reasonable basis that reflected the increasing difficulty for class members to prove causation with the further passage of time.
With respect to the various levels of compensation that were part of the settlement, and the overall quantum of the settlement, Justice Bowden noted that class litigation is in the hands of class counsel, as instructed by the representative plaintiff, and is not subject to the views of class members in general; therefore, Justice Bowden found any objection that the overall settlement amount is insufficient to be unpersuasive because, in his view, a settlement is a compromise of claims. Justice Bowden observed that it is a court’s task to determine whether the settlement is fair, reasonable, and in the best interests of the class as a whole, and if it a court so finds, then the objections of a few class memebrs cannot be persuasive in changing this determination.
Finally, with respect to the objection that many class members only learned of the terms of the settlement after the deadline by which they could have opted out of the class action, Justice Bowden highlighted that the B.C. class action legislation requires that class members make a decision to opt in or opt out of the proceeding before the outcome of the litigation is known and that, therefore, class members must elect to be bound by the judgment on the common issues, whether by settlement or a decision of the court, and whether favourable or unfavourable. In Justice Bowden’s view, a class member is not permitted to wait on the sidelines and make their decision after knowing the results of the litigation; the predictability and finality required by the parties to resolve a class action would be undermined if a class member could change their election after knowing the results of the litigation.
Justice Bowden’s decision indicates that representative plaitniffs, class counsel and class action defendants may negotiate and arrange settlements of class actions and obtain approval of such settlements despite the objections of some class members so long as the settlement agreement that is submitted for the court’s approval is fair, reasonable, and in the best interests of the class as a whole.