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Court settles Kim-REO class action matter

|Written By Robert Todd

The Ontario Court of Appeal has backed a representative plaintiff’s choice of counsel in a class action following the 2007 breakup of Roy Elliott Kim O’Connor LLP, setting a clear test for resolving such disputes in the future.

Peter Roy

“I think it’s not unusual for there to be some carry-over matters when firms split up, and this is one of those carry-over matters,” says Peter Roy, a founding partner of Roy Elliott O’Connor LLP, in reference to the split with Won Kim, who now is a principal with Kim Orr Barristers.

Adds Roy, “I don’t have any animosity towards Won; I just take a different approach to class actions, and I was pleased to see that, of the seven judges who listened to the argument to decide it, all of them agreed with me, and none of them agreed with Won.”

Roy says Kim, “clearly had a different view of what the [solicitor-client] relationship ought to be, and a different view of what his role in that relationship is.” Roy adds that he is “not prone to animosity” and that he and Kim still talk.

Kim referred Law Times’ questions to his lawyer, Alan Lenczner, who did not respond by press time to a request for comment. Kim said he did not think it would be “appropriate” for him to comment on the decision because he is a litigant in the matter.

The case followed Joseph Fantl’s move in 2006 to retain REKO to pursue a class action against Transamerica Life Canada over alleged overcharging of fees. But near the end of 2007 the firm dissolved after Kim left to open his own shop with James Orr.

Fantl decided to continue the class action with REO due to his close relationship with Roy - Fantl was the best man in Roy’s wedding - and because “he had some experience with, and respected members of, the firm,” wrote Chief Justice Warren Winkler for the court on behalf of Justice Stephen Goudge and Justice Janet Simmons.

Kim Orr then brought a motion asking for an order forcing Fantl to retain their firm, or for Fantl to be removed as the representative plaintiff, with two new plaintiffs entered in his place. That motion was dismissed, a decision backed by the Divisional Court.

The Court of Appeal agreed to expedite its hearing on the matter, with approval of a settlement in the class action “imminent,” said Winkler.

The chief judge, in dismissing Kim Orr’s appeal, said it’s up to the representative plaintiff to select class counsel. Winkler said courts must consider three aspects when engaged to review a choice for class counsel: whether the plaintiff has chosen “competent counsel”; whether there are any improper considerations underlying the choice made by the plaintiff; and whether there is prejudice to the class as a result of the choice.

“Unless this inquiry reveals something unsatisfactory to the court, it ought not to interfere with the choice of counsel made by the plaintiff,” said Winkler. “The court is not a substitute decision-maker for the plaintiff in the litigation.

Accordingly, any intervention based in its supervisory jurisdiction must be limited to situations where there is cogent evidence that steps taken may have an adverse impact on the absent class members.”

Kim Orr argued that it should be class counsel in part due to access to justice objectives within the Class Proceedings Act.

“It is argued that if representative plaintiffs are allowed to switch counsel at will, there will be less of an incentive for counsel to take on class actions and make an investment of time and effort that may be lost,” wrote Winkler in summarizing that argument.

But the court rejected that line of reasoning, saying “an entrepreneurial class action bar” is not a goal of the CPA.

“This argument fails because as far as the CPA is concerned, the entrepreneurial lawyer is a means to an end, not an end in and of itself,” said Winkler.

“Sections 33(1) and (4) of the CPA, which provide for contingency fees and a multiplier effect on fees to reward risk and success, are intended to provide sufficient incentives for lawyers to take on class proceedings that would not otherwise be attractive,” he wrote.

“This is the entrepreneurial aspect of class proceedings legislation that enhances access to justice. The CPA does not, nor was it ever intended to, provide lawyers with a vested interest in the subject matter of the lawsuit entitling them to override the choices of the representative plaintiff in the litigation, including the choice of counsel.”

The court also ruled that the relationship between Fantl and Roy would not “constitute an improper purpose in and of itself. An improper purpose would be one where the plaintiff was seeking to gain a personal advantage, the hope of an advantage not shared by the class members, or was motivated in some way that was inconsistent with the interests of the class.”

Roy says the decision “accords with what my understanding of solicitor-client responsibilities are all about. It’s not a great surprise to me that class actions require the same duty of loyalty and put the representative plaintiff first.”

Bonnie Tough, a founding partner of Tough & Podrebarac LLP, says the court has provided “very clear direction” with the decision. “It’s a very good reiteration of the fact that this is real litigation, these are real plaintiffs who have a say in their lawyer,” says Tough.

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