After a 10 day break, the creditors, companies and other stakeholders involved in the CCAA-managed resolution of the lawsuits against Canadian tobacco companies met again today before Chief Justice Morawetz.
There was only one item on the agenda - the fees that would be permitted for the legal terms representing the three class action lawsuits.* Nonetheless, discussion of the item was not finished because the advice of a former Quebec judge (André Prévost) had only recently been commissioned and was not yet available.
All three class actions which are included in the settlement were managed on a contingency-fee basis. The lawyers entered into contracts under which they would receive no money unless and until their case was successful at trial or through settlement. All three cases involved a contract stipulating the percentage of any award or settlement that would be paid as a fee.
The lawsuits filed by 11 provinces and territories also used contingency-fee arrangements with lawyers (only Ontario and Quebec did not), but their fees did not require approval by judge supervising the CCAA process. These fee contracts have not been made public. Lawyers assigned by the court for the Pan-Canadian settlement were paid on a fee-for-service basis.
In advance of today's hearing, the law firms involved in these class actions formally filed requests for payment and provided background information on their cases to support the amount they were seeking:
- In their motion, counsel for Tobacco Producers sought the 25% fee defined in its retainer plus tax and $1.5 million in unpaid disbursements. The settlement provides for a payment of $15 to producers.
- In their motion, counsel for the Knight Class Action sought the 33% fee defined in its retainer, plus tax and about $1 million in disbursements, as well as asking for permission to provide an honorarium to the representative class counsel. The settlement provides for a payment of $15 to the Knight Class action.
- In their motion, counsel for the Quebec Class Action sought the 22% of their retainer, plus taxes. This sum is intended to cover their disbursements to date, as well as the costs of administering the payments to Quebec claimants and other future costs. The settlement provides for a payment of $4.12 billion to injured Quebec smokers.
Who decides how much is too much?
It appears that, if approved, the retainer fee of the Quebec class action ($901 million) would set another high-water mark in a case that is already full of superlatives. By any standard, that is a fair chunk of change.
Anticipating, perhaps, the eyebrows that would be raised, the law firms
attached to their request affidavits which provided information about their efforts on the case over the past 26 years as well as the effort and costs involved (203,849 hours of professional time! $46.6 million in disbursements!)
These readable 100 pages are the most complete back-story to the case that has yet been made public.
From the paper work filed in advance of today's hearing, it would seem that not everyone was agreeable to the lawyers receiving an amount creeping up to the $1 billion mark. The
Quebec government filed a formal response to the proposal, saying that it wanted to make sure that such fees would be "fair" to the class members.
"It’s for this Court to determine at what point, even in 26 year long high-risk case, could counsel fees become unreasonable. Particularly, when those counsel fees operate to reduce class compensation," the government's representative offered before suggesting that in "mega-fund" cases, the retainer contract should not be presumed valid. They also quibbled about the level of detail in the statement of costs.
The tone of the Quebec government brief suggested that there might be a bit of a dust-up when today's hearing on the issue was held. This did not turn out to be the case.
Presenting the Quebec counsel request
Standing to present the QCAP case for $900 million was a new face in Toronto, but a familiar name to followers of the Montreal trials. André Lespérance centred his presentation on the principles that had been applied to approving large legal fees in other class actions. Those who did not watch the hearing on YouTube can benefit from the
compendium filed yesterday that provides these details.
He began by pointing out that retainer agreements were contracts and that class actions and contingency fees were tools designed to serve policy objectives. Core criteria to assess the reasonableness of a fee, he said, were the risk involved in pursuing the case, the work required and the outcome received. Other considerations included the image and the integrity of the legal profession and - in his view a final but not primary element - the relationship of the fees to the usual cost of the work involved (the multiplier).
For more than an hour, Mr. Lésprance explained the circumstances behind other courts decisions to award fees in the cases
highlighted in the compendium. These cases were summarized in a table of the highest fees allowed in Canadian cases along with the relationship of the fee to the retainer agreement, the amount of the award and the 'multiplier'. He showed how the amount the Quebec team were requesting - with its multiplier of 4 - was consistent with these decisions.
He spoke briefly about the enormous and unprecedented risk he and his colleagues had assumed when taking tobacco companies to court, the enormity and unprecedented effort required on their part to go through the trial and many appeals, the enormity and unprecedented nature of their court victory, and the benefit their case provided in facilitating a resolution to the provincial cases and in providing compensation to smokers outside of Quebec.
Only if there were a principled reason should the courts over-rule the contract with the clients, he concluded. Once again, Chief Justice Morawetz was being told that he should not interfere with the arrangements reached among other parties.
Voicing support
Standing in support of this fee request were counsel for the Canadian Cancer Society and for the Pan Canadian Claimants - neither of whom worked in this case on a contingency basis.
Rob Cunningham of CCS outlined the "exceptional high degree of difficulty" in tobacco cases and the scorched earth litigation strategy they followed as exemplified by a well-known RJ Reynolds claim that “the way we won these
cases was not by spending all of our money, but by
making that other son of a bitch spend all of
his.”
The Quebec lawyers should be understood to have spent the last 27 years "going up against three super goliaths". "One cannot just say they did an incredible job – it is orders of magnitude greater than that ... For the litigation threat to work there must be the ability to file lawsuits for future lawsuits. In the past there was asbestos. Now there is tobacco. In the future there will be others. We need an incentive for counsel to take such cases. Their work has been consistent with the highest standards of the legal profession."
Raymond Wagner, who was assigned by this court to represent smokers outside of the Quebec class membership in 2019, similarly offered high praise for the work of his Quebec colleagues. As a class action lawyer who otherwise worked on contingency fees, he spoke of the personal risks that were part of the work, and of the benefits to others that the Quebec class action has resulted in . "I have had some pretty catastrophic defeats and I know the sacrifices you bring in when taking these cases forwards.... despair for the time away form families and their sacrifices. On behalf of PCCs, we thank QCAP - these 200,000 people will get compensation they would not otherwise have got ... I cheer the work they have done and thank them. Job well done."
Two counsel representing provincial governments spoke to clarify material they had filed with court, and to assert that they were not taking a position in favour of or opposed to the fee request. On behalf of the Consortium of 6 provinces and 3 territories, André Michael said that the information they filed last Friday
regarding their own contingency fee had been presented only to correct the impressions that had otherwise been left from press reports.Counsel for the Quebec government, Guneev Bhinder, walked back the position expressed in Quebec's
earlier responding factum and clarified that Quebec did not suggest that 3% to 5% was a sufficient reward in this case.
"After Quebec filed a factum it became aware of the appointment of an amicus curiae on this topic. Given that development, Quebec is content to not make further submissions on the fee approval. "
Presenting the request for the Knight class action
In asking Justice Morawetz to support their request for 33% of the $15 million provided in this lights class action, Doug Lennox gave a quick overview of the length of their involvement (20 years this week since certification), the contribution of this case to other suits (such as fighting off third-party claims against the federal government), and the challenges of a tobacco suit that existed in Canada's common law provinces. (Under Quebec's civil code system it is easier for a class action to be certified and some public support is given for costs). He also described some of the differences in B.C. that affected the business decision to sue and which resulted in contingency fees typically being higher in that province.
Standing in support of this request, Rob Cunningham of the Canadian Cancer Society reminded Justice Morawetz of the public health importance of ending the sale of light and mild cigarettes - and gave a shout out for the work of Mr. Lennox when he acted pro bono on the Battaglia small claims case - one of only three Canadian lawsuits to make it to trial.
Presenting the request for the Producers Class Action
William Sasso also began his comments by referring to the length of time -- more than 15 years -- that tobacco farmers had been seeking redress. He explained the structure of their request in light of the fact they received partial fee payments during the CCAA process.
Although he aligned his farmer clients as "part of the tobacco industry", he nonetheless spent much of his time praising the work of the Quebec lawyers who had fought against that industry. He praised their work during the CCAA negotiations which had contributed to the negotiations moving away from a "pari passu" approach - where every creditor is given an equal proportion of what they are owed - to a system where individual victims received a greater proportion than did governments.
"If words that are laudatory are to be spoken here, they should also be spoken about the role that they played in negotiating a substantial recovery for their particular clients, for their class in a manner that in relation to the group of creditors bears no relationship to the small percentage they have in connection of the overall debt."
He linked that approach to his own ability to deliver meaningful compensation to his clients. "Our recovery on a $29 million contractual obligation is approximately 50% of the principal amount – a number that in these circumstances was brought about because all of the other creditors took a look at the claim and thought these suppliers were entitled to a larger than pro rata share. To that extent I think we have represented our clients well."
Shortly before 1:00, the hearing was adjourned. Chief Justice Morawetz indicated there would be an opportunity to respond to the opinion from André Prévost when it became available, and reminded that the question of fees was contingent on the decision on the Sanction Motion. Still under reserve!
