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Law schools’ loss is Law Foundation’s gain

|Written By Robert Todd

Canadian law schools have been cut out of a $28.4-million cy pres award from a class action settlement after a judge ruled there was no guarantee the money would be spent as intended on legal ethics and professionalism.

Paul Pape

The law schools’ loss, however, is the Law Foundation of Ontario’s gain. It will now get $14.2 million “for the purpose of advancing public access to justice in Canada,” according to the ruling of Superior Court Justice Maurice Cullity.

That’s on top of the $4.3 million it will also get for its Class Proceedings Fund, which automatically receives 10 per cent of any awards or settlements in favour of class action plaintiffs in funded proceedings.

In rejecting the original proposal from plaintiffs’ lawyers Paul Pape and Harvey Strosberg, Cullity noted that the only structure proposed to ensure the law schools spent the money as intended was a committee of lawyers and judges to vet proposals and disburse funds.

“It may have been contemplated that the use of the funds would be entirely within the discretion of the recipients subject only to a moral obligation to apply them for the approved purposes,” he wrote.

The law foundation’s trustees will be in charge of administering a special trust fund for the $14.2 million cy pres.

“I do not think there is any doubt that a purpose of providing or promoting access to justice must be considered to be beneficial to the public,” said Cullity.

The remaining $14.2 million from the cy pres will go to Social and Enterprise Development Innovations for the promotion of financial literacy, as proposed by the Toronto-Dominion Bank.

The award comes from a $55-million deal between class members and the Toronto-Dominion Bank, which was accused of levying unauthorized charges for foreign currency transactions on Visa credit cards. The bank denies the allegations, saying the amounts were part of the exchange rates it was allowed to determine according to cardholder agreements.

Class members will share up to $11 million from the settlement, with their lawyers receiving $11 million in fees.

Cullity denied certification of the class action in 2005, a decision backed by the Divisional Court but overturned in 2007 by the Court of Appeal, which sent the matter back to Cullity. He said the lawyers deserved the large payout for their diligence.

“This was hard-fought litigation - conducted with tenacity and skill by counsel who, in effect, snatched victory from the jaws of defeat by persevering with it through successive appeals from the initial decision that denied certification,” the judge wrote.

“It is inherent in percentage of recovery agreements that counsel may receive large fees where, as here, the degree of success achieved is substantial. Equally, of course, they take the risk that the results achieved will provide them with little or no compensation.”

Law foundation CEO Elizabeth Goldberg says the cy pres funds come “at a very good time, when needs are great and revenues are low” during the economic recession.

Goldberg says she “really can’t answer” whether any of the cy pres funds will go to Legal Aid Ontario.

She notes that 75 per cent of the LFO’s interest revenue automatically goes to LAO.

Criminal Lawyers’ Association president Frank Addario is currently leading defense lawyers across the province in an ongoing boycott of legal aid cases involving homicides and guns-and-gangs cases or serious offenders. They are looking for an increase to the legal aid tariff, which currently tops out at $98 per hour.

Addario says that while the funds may help the LFO funnel more money to legal aid in the short term, a lasting fix remains elusive.

“Realistically, the law foundation can’t provide stable funding because its income depends on outside variables,” he says. “So while it’s good to see them get a shot in the arm during an economic downturn, the LFO’s contribution is not a long-term answer to legal aid’s problems. This is a public program and it needs public funding.”

Pape says he’s disappointed by Cullity’s decision to reject the proposal for funds to law schools.

“We believe that the legal education system, given the way it evolved, wasn’t teaching people how to be effective lawyers,” he says.

“The bar admission course that had been run by the law society is now defunct, and the law schools are really running liberal-law-arts programs. They’re not teaching people how to draft documents, run lawsuits. So we decided it might be a good idea to encourage law schools to get into that line of work.”

He says law schools and deans backed the proposal, “but the judge didn’t. It’s as simple as that.”

However, Pape agrees that the LFO is a worthy recipient of the funds.

“How bad can it be? It’s a good decision,” he says. “You know, $14 million to people who are disadvantaged is a significant sum of money. So Strosberg and I are proud and pleased, even though it wasn’t our first choice.”

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