Last week in Pro-Sys Consultants Ltd. v. Infineon Technologies AG (Pro-Sys), the British Columbia Supreme Court approved final settlements and a distribution protocol, as well as class counsel’s fees, in a certified class action relating to the manufacture of dynamic random access memory (DRAM), a component in many household appliances such as televisions, computers and electronic notebooks.
The decision is noteworthy not only for the quantum of class counsel’s fees, but also for the comprehensive and flexible distribution plan approved in what is reported to be the second-highest value recovery to date in a Canadian competition class action.
The Canadian class action followed the United States Department of Justice investigation into allegations of price fixing of DRAM by its manufacturers and some computer manufactures. Ultimately, five DRAM manufacturers pleaded guilty to their involvement in an international price-fixing conspiracy and paid fines as high as US$180-million.
The action in Pro-Sys was filed in 2004 against manufacturers of DRAM, against whom the plaintiff alleged a large-scale price-fixing conspiracy for a period covering 1999 to 2002. Parallel proceedings were advanced in British Columbia, Ontario and Quebec. The litigation was contentious, and the sister action from Quebec went all the way to the Supreme Court of Canada as part of the 2013 “Class Action Trilogy.”
This decision approved settlements with the remaining defendants, the other defendants having previously settled piecemeal between 2012 and 2014. The settlements are national in scope and were approved in each of British Columbia, Ontario and Quebec. The parties invited the respective case management judges to confer in assessing the proposed settlements.
The ultimate settlement value for all defendants – inclusive of interest but before deductions for fees, disbursements and administrative expenses – exceeds C$80-million. The court observed that the settlements for the respective defendants were “in reasonable harmony with the market share” of each.
The court accepted the distribution plan put forward by the class. Prior to bringing the application for approval of the plan, class counsel initiated a public consultation phase and an adversarial process, whereby separate counsel were appointed for subgroups within the class in order to advocate for different levels of the distribution chain. Expert evidence was sought on the makeup of the chain of distribution of DRAM, and a carefully structured unit-value cost for each set of subgroup was designed. While more common in U.S. class actions settlements, this type of approach is still relatively new in Canada.
The distribution plan is notable for the substantial discretion that it leaves with class counsel and the claims administrator in order to create a flexible process for distribution, as settlement takes place, without the need to return to court for judicial oversight at every stage. The plan uses principles rather than specific criteria to govern the submission of claims.
Recognizing that indirect consumer class actions (as distinct from those alleging personal injury, for example) often suffer from low take-up rates, the class put forward four professional marketing plans (of C$1-million to C$4-million, respectively) in an attempt to achieve the highest take-up rate possible. At the same time, the class refrained from asking the court at the outset for cy-près distribution, leaving the option for compensation to be re-adjusted to avoid leftover funds.
Class counsel’s 30-per-cent fee, totalling approximately C$22.7-million across all settlements (and shared between four established plaintiffs’ firms) was also approved. This stands as one of the largest fee awards in a Canadian class proceeding, and is significant for having been made at the same level as the maximum under the plaintiffs’ contingency arrangements in Ontario and Quebec, although it was less than the 33-1/3-per-cent maximum permitted under the B.C. fee arrangement. In general, B.C. courts have not awarded at the top end of fee limits without the matter having first proceeded to a merits decision. It is equally worth observing that this dramatic fee was approved without any objection or comment from class members, the majority of whom stand to recover about C$20 per claim (for ordinary retail consumers).
The outcome in Pro-Sys will stand as a benchmark for future industry-wide competition cases, and may be used by both plaintiffs and defendants as useful reference on outcomes.