Judge takes aim at class counsel in lowering costs

In a trio of new rulings, Superior Court Justice Edward Belobaba has outlined his preference for a no-costs rule in class actions while awarding substantially lower amounts than plaintiffs’ counsel had requested on certification motions and outlining in detail how he’ll deal with the issue in the future.

The burden of Belobaba’s remediation efforts in response to his concern about increasingly expensive proceedings appears to be falling solely on the shoulders of class counsel. In three separate cost assessments, all of which followed successful certification motions, Belobaba made awards that were substantially lower than the sums requested by veteran class counsel firms. Indeed, the decisions undercut their requests by some $1.5 million, including the disallowance of substantial disbursements.

In Rosen v. BMO Nesbitt Burns Inc., Belobaba awarded $290,000 (all figures include disbursements) to plaintiffs’ counsel Koskie Minsky LLP. The firm had asked for $575,000. Defendant’s counsel Lenczner Slaght Royce Smith Griffin LLP had said costs shouldn’t exceed $315,000.

In Dugal v. Manulife Financial, plaintiffs’ counsel Siskinds LLP had asked for $1.18 million. The defence teams from Torys LLP, Lenczner Slaght, and McCarthy Tétrault LLP said the award shouldn’t exceed $418,000. Belobaba awarded $467,000.

In Crisante v. DePuy Orthopaedics, plaintiffs’ lawyers Kim Orr sought more than $700,000. Defendants’ counsel from Blake Cassels & Graydon LLP asked for a cap of $125,000. Belobaba awarded $175,000.

“We’re all somewhat dumbfounded,” says Won Kim of Kim Orr. “What Belobaba is trying to do is to minimize the role of certification by weaning people away from an Armageddon approach to the litigation and de-emphasizing the merits component. But in my view, he’s alone among Ontario’s judges.”

In the real world, Kim says, plaintiffs’ counsel routinely face voluminous documentation and transcripts.

“Defendants, especially global companies, usually fight certification very hard,” says Kim.

“I have cases where the motions record alone consists of some 14 or 15 volumes of material. If we reply with only a minimal response to that, the case will soon be over.”

It’s an argument Belobaba’s reasons show little sympathy for.

“Normally, costs awards are routine and can be easily adjudicated,” he wrote.

“Not so in the world of certification motions. Here, excess appears to be the norm in every aspect of the proceeding — in the amount of time spent by legal counsel, the volume of material filed with the court, the number of days scheduled for the oral hearing, and the over-litigation of most issues. No wonder, then, that the costs that are typically sought by the successful party are in the hundreds of thousands of dollars. No wonder, also, that the number of class actions on an annual basis is declining.”

As hard as he is on counsel, Belobaba doesn’t spare his fellow judges as he suggests that the reasons given in many costs awards are “wordy, use unreliable metrics, and are analytically unclear.”

In fact, Belobaba says most lawyers on both sides of the class action bar are in agreement that a no-costs rule would “be much more sensible.” He goes on to state that he was wrong in his previously expressed view that costs should “follow the event” in class actions.

“I . . . wish that the recommendations on costs as set out in the Ontario Law Reform Commission’s Report on Class Actions had been accepted,” wrote Belobaba.

“Instead, the provincial legislature decided to adopt the views of the attorney general’s advisory committee and continue the ‘costs follow the event’ convention for the very different world of class actions as well. I was a member of that advisory committee. I now realize that I was wrong and that the OLRC was right. I understand that the provincial law commission is undertaking a review of the Class Proceedings Act, including the costs provisions. Hopefully, our mistake will be corrected.”

For his part, Kim favours a no-costs rule but notes the legislative trade-off will be tougher requirements for certification through enhanced examination of the merits.

An anecdotal survey of a handful of members of the defence bar, however, found that most lawyers believe costs are an appropriate incentive to make plaintiffs and their lawyers think about litigation. Even those who were willing to contemplate a no-costs regime showed only guarded enthusiasm for the prospect.

“I’m not at all sure about a no-costs regime because costs do serve some purpose as a deterrent in some cases,” says Caroline Zayid of McCarthys’ Toronto office.

As Belobaba saw it, the guidance in the Rules of Civil Procedure and from the Court of Appeal “can only take you so far.” After closely analyzing the Court of Appeal’s directions on costs in Pearson v. Inco Ltd. and taking considerable pains to point out the practical difficulties in implementing them fully, Belobaba goes on to outline the procedure he’ll follow in costs awards in certification motions apart from those falling within the categories of test cases, novel points of law, and matters of public interest:

1. Costs outlines certified by counsel will be adequate with actual dockets not required.

2. Hourly rates must fall within the range set out by the Law Society of Upper Canada’s rules committee in its information to the profession.

3. Apart from “obvious excesses in fees or disbursements, I will accept the costs outline as is” and “will not drill down into any of the detail.”

4. A party who wishes to argue that a submission is unreasonable should submit its own costs outline showing what it spent on the motion. “If a parallel costs outline is not submitted by the unsuccessful party (and none is required) I will probably conclude that the amount being requested by the successful party is not unreasonable.”

5. Historical costs awards in similar cases will be considered. The judgment contains a useful table of historical costs Belobaba has compiled.

6. The objective of the final award is to make one that is “fair and reasonable to both sides, always remembering that the fundamental objective of the Class Proceedings Act is access to justice.”

7. “In cases where the final fees or disbursement amount is dramatically above the norm, I will consider making a costs award in two parts: a portion that is payable immediately and a further portion that is payable in the cause.”

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