Dispute over routine costs assessment in Volkswagen class action

“A cause célèbre out of what should have been a straightforward assessment of costs,” wrote Justice Paul Perell in the decision

Dispute over routine costs assessment in Volkswagen class action

In the class-action against Volkswagen for their emissions-test-cheating software, Ontario Justice Paul Perell admonished both sides for what “should have been a straightforward assessment of costs,” but ended in a “cause célèbre.”

The Ontario Superior Court recently dealt with the dispute over a cost award for a post-settlement motion, Quenneville v. Volkswagen Group Canada, Inc., 2019 ONSC 5518, heard Sept. 24. In the Volkswagen case, the defendants had asked that class counsel, and not their clients, pay costs.

Lawyers have professional and fiduciary responsibilities to clients and it is “not for the court to incentivise lawyers to do their job,” Perell said in the decision.

The dispute over costs, who would pay them and incentivising or disincentivising class counsel are part of the continuing growth of the class-action practice area, says Cheryl Woodin, co-head of class actions at Bennett Jones LLP and who acted for the defendants.

“In the area of class actions, there are all sorts of policy issues and legal issues that arise and continue to arise,” Woodin says.

A $2.1 billion settlement in emissions scandal

Volkswagen was hit with the high-profile class action after the company was caught installing software in their cars which cheated emissions tests by detecting when the car was being tested and lowering the levels of certain chemicals emitted at that time. The Canadian settlement, collected by around 105,000 drivers, was worth $2.1 billion, while the American sister-suit cost VW $10 billion.

The Sept. 24 dispute concerned a motion relating to the administration of the class settlement, part of which was the installation of an Emissions Complaint Repair to the class members’ vehicles.

Some of the class members were concerned the ECR posed a safety risk. Media reports show that some VW owners who had the ECR say it caused their cars to malfunction – losing power at times and at other times, accelerating out of nowhere. The class members’ lawyers sought a production motion for information about VW’s investigation into the ECR issues, an extension of the claims period until those issues could be analysed and resolved and costs.

Cost dispute involves ‘provocative request,’ judge says

Perell dismissed the motion and as a result, VW asked for $17,840 in costs. The defendants then asked that class counsel, and not their clients, pay those costs. Class counsel had agreed to indemnify their clients against any adverse cost award.

“Thus, without pretending that their request for costs was being made in the normal course of having the unsuccessful party on a motion pay costs, the defendants sought to do directly what would have happened indirectly had they just not made their provocative request,” Perell said in the decision.

Ultimately, Perell found, it is irrelevant whether it is lawyer or client who pays, when determining which side of the dispute will bear the costs. In this and other class-action cases, class counsel, the class proceedings fund, third-party funders and after-the-fact cost insurers protect plaintiffs, but that doesn’t change that it is the party to the dispute that pays the cost, Perell said.

Perell said the request was “ill-advised” as well as “all of unnecessary, provocative, unfortunate, and wrong” but noted class counsel responded to the request “with censorious outrage” which he also found “regrettable and disappointing.”

Barriers to the representation of class members

In the class counsel’s submission on why they should not pay the other side’s costs on the motion, they told the court they are obligated to “vigorously and tenaciously” advocate for the class members, even after the case is settled.

Imposing costs while a settlement is being implemented could “create unnecessary barriers to the representation of class members” and create a “very negative perception that class counsel has abandoned the class,” the lawyers said. A possible adverse cost award could incline class counsel not to advance an issue and could create the risk that class members will not instruct their lawyers to advance additional concerns after the claim is resolved, they argued.

Class counsel also told the court that the defendants’ lawyers knew the settlement prohibits class counsel from getting additional fees and costs and so, if the motion were successful, VW would not have to pay costs. So, class counsel reasoned, their opponents then should not have expected to be paid costs, as it would “create a one-way costs system” encouraging defendants “to be unreasonable on issues relating to settlement administration and implementation.”

Law continues to evolve

Perell rejected the idea class counsel would be deterred by the spectre of a cost award.

Ontario’s “entrepreneurial” class proceedings regime advances access to justice with contingency fees and adverse cost indemnities but that does not dilute a lawyer’s responsibilities or change the law, Perell said. The court simply expects lawyers to fulfil their duties, “which ironically is actually what occurred in the immediate case,” Perell said in the decision.

In “accordance with the norms of class action proceedings and litigation generally,” Perell awarded the defendants their costs, payable by the representative plaintiffs.

“Who may have recourse to the costs indemnity as against class counsel as they may be advised. Order accordingly,” Perell said.

Luciana Brasil, partner at Branch MacMaster LLP in Vancouver acted for the plaintiffs and declined to comment for this article.

As the law guiding class action continues to be refined and interpreted, even routine, conventional motions such as these “can add value to the development of jurisprudence,” Woodin says.

“Because the law is continuing to evolve, its continuing to be supervised by the courts, carefully monitored by the courts. And the courts are continuing to communicate with the class counsel bar about how the practice of class actions will be regulated,” says Woodin.

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