In Ontario, as in other provinces, only one class action may be certified in the same jurisdiction representing the same class in relation to the same claim. Where rival actions exist, the proposed representative plaintiffs must bring a “carriage motion” to determine the action that will proceed on behalf of all class members and the actions that will be stayed or consolidated.
A recent Ontario Court of Appeal decision, Mancinelli v Barrick Gold, 2016 ONCA 571, considers which group of law firms should have carriage over a multi-billion dollar securities class action that, if certified, would become one of the largest in Canadian history. In so doing, the Court discussed a non-exhaustive list of criteria courts should consider in a carriage motion, and included a new consideration: proposed fee arrangements between class counsel and the plaintiff.
The Competing Claims
The proposed representative plaintiffs are shareholders in Barrick Gold who claim that the company misrepresented disclosures related to its Pascua-Lama mine, which was closed by Chilean authorities due to environmental violations in 2013. The proposed representative plaintiffs seek damages for declines in the Barrick Gold share price after the mine closure was announced.
Two groups of law firms brought claims. In one corner was Koskie Minsky, Siskinds, Sutts Strosberg, and Groia and Company (the “K Group”) that advanced a single claim alleging misrepresentation of the mining project’s compliance with environmental regulations, known as the “Labourer’s action.” In the other corner was Rochon Genova Group, the Merchant Law Group and Rosen Naster (the “R Group”) that advanced several misrepresentation claims related to environmental compliance, completion time, financial statements, conspiracy and fraudulent concealment, known as the “Lee action” and the “DALI action”.
In 2014, Justice Belobaba of the Superior Court of Justice granted carriage to the R Group, consolidated the DALI and Lee actions, and stayed the Labourer’s action. Justice Belobaba found the R Group “clearly and decisively come out ahead” primarily due to the broader claims advanced and superior state of preparation. Unlike the K Group, the R Group actually flew to Chile to meet with government officials, attend relevant Chilean court proceedings, interview potential witnesses from environmental NGOs and indigenous communities, and visited the Pascua-Lama mine itself.
The K Group was granted leave to appeal to the Divisional Court. In 2015, Justice Harvison Young dismissed the appeal, concluding that Justice Belobaba had “applied the correct test” and finding that no reversible error had been made.
In 2016, Chief Justice Strathy, writing for a unanimous panel of the Ontario Court of Appeal, agreed with the lower court’s decisions and dismissed the K Group’s appeal. Chief Justice Strathy emphasized that the K Group must throw in the towel despite its apparently favourable third party funding arrangement, which provided an indemnity against any adverse costs award and $50,000 towards counsel’s disbursement in return for a 7% contingency fee with caps at different stages of litigation.
Carriage Criteria: Fee Agreements as a New Consideration
Mancinelli v Barrick Gold provides a useful list of the non-exhaustive criteria courts should consider in a carriage motion:
- the policy objectives of the Class Proceedings Act, 1992, S.O. 1992, c. 6;
- theories advanced by counsel as being supportive of the claims advanced;
- state of each class action, including preparation;
- number, size and extent of involvement of the proposed representative plaintiffs;
- relative priority of commencing the class actions;
- resources and experience of counsel;
- presence of any conflicts of interest;
- definition of class membership;
- definition of class period;
- joinder of defendants;
- the plaintiff and defendant correlation;
- prospects of certification; and
- proposed fee arrangement between class counsel and the representative plaintiff.
In addition to the usual list of factors, Chief Justice Strathy added a consideration of proposed fee arrangements between class counsel and the representative plaintiff because it “vitally affects the interests of the class.”
While both the Court of Appeal and motion judge emphasized that courts should not employ a “tick the boxes” approach to carriage motions, they agreed that the ultimate question is whether class counsel’s proposed strategy is reasonable, defensible, and in the best interest of the class members.
Mancinelli v Barrick Gold is an example of a growing trend of carriage motion fights that can delay a class proceeding, but provide valuable insights to defendants about the strategy of the plaintiff’s case, the evidence gathered in support, and the stakes for class counsel, now that fee arrangements are in the mix of criteria to be considered.