Leslie v. Agnico-Eagle Mines, 2016 ONSC 532

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CITATION:Leslie v. Agnico-Eagle Mines, 2016 ONSC 532COURT FILE NO.:CV-12-448410-CP

DATE:20160212

SUPERIOR COURT OF JUSTICE ONTARIO

RE: AFA LIVFRSKRINGSAKTIEBOLAG, AFASJUKFRSKRINGSAKTIEBOLAG, AFATRYGGHETSFRSKRINGSAKTIEBOLAG, KOLLEKTIVAVTALSSTIFTELSENTRYGGHETSFONDEN TSL and WILLIAM LESLIE /Plaintiffs

AND:AGNICO-EAGLE MINES LIMITED, SEAN BOYD, EBERHARD SCHERKUSand AMMAR AL-JOUND /Defendants

BEFORE: Justice Edward P. Belobaba

COUNSEL:Michael G. Robb and Ronald Podolnyfor the Plaintiffs

James Doris, Luis Sarabia and Chantelle Spagnola for the Defendants

HEARD: January 20, 2016

Proceeding under theClass Proceedings Act, 1992

SETTLEMENT AND LEGAL FEES APPROVAL

[1] This securities class action, certified on consent,1has settled for $17 million. Theplaintiffs now seek judicial approval of the settlement agreement and class counselslegal fees.

[2] For the reasons set out below, both the settlement and the legal fees are approved.However, I hasten to add the following. The judicial approval of class action settlements,

1Leslie v. Agnico Mines, 2013 ONSC 2290. The plaintiffs allege that the defendant gold miner, with producingproperties in Canada, Finland and Mexico, misrepresented the scope and effect of certain water inflow problemsat one of its gold mining properties in Quebec causing share purchasers to sustain losses.The defendant consentedto leave under s. 138.8 of the Securities Act, R.S.O. 1990, c. S.5 (OSA) and certification under s. 5(1) of the ClassProceedings Act, 1992, S.O. 1992, c. 6 (CPA).


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especially securities class action settlements, leaves much to be desired. Judges should domore to ensure that a proposed settlement is in the best interests of the class.

Approval of the settlement agreement

[3]

It is widely recognized that the approval of class action settlements remains themost difficult and problematic area of class action practice.2And it has often been saidthat class action settlements should be viewed with some suspicion and seriouslyscrutinized by judges.3The problems of sweetheart and blackmail settlements arewell-known and have been the subject of study in the legal literature.4

[4] In Ontario, of course, the concern about blackmail or strike-suit settlements islessened because of the statutory leave requirement in s. 138.8 of the OSA (which setsout a preliminary merits test). But the concern about sweetheart settlements, in whichclass members interests are compromised to those of class counsel, remains - especiallyin the area of securities class actions that are almost always settled.5

[5] The core problem is that the only players at the settlement table - the defendants(or their counsel) and class counsel have interests and incentives that can be alignedagainst the best interests of the class. The class action settlement is often at the expenseof the group that is not at the table: the absent class.6

2Watson, Settlement Approval The Most Difficult and Problematic Area of Class Action Practice, (Unpublishedpaper presented at the National Judicial Institutes Conference on Class Actions, Toronto, April 9, 2008).

3Dobbs v. Sun Life Assurance,(1998) 40 O.R. (3d) 429 (Gen. Div.) at para. 30.

4 See, for example, Hay and Rosenberg, Sweetheart and Blackmail Settlements in Class Actions: Reality andRemedy (2000) 75 Notre Dame L.Rev. 1377; Erichson,The Problem of Settlement Class Actions (2014) 82Geo.Wash. L.Rev. 951; and Koniak,How like a Winter The Plight of Absent Class Members Denied AdequateRepresentation(2004) 79 Notre Dame L. Rev. 1787.

5

According to class counsel, whose law firm is the leader in securities class action litigation in Canada, only onesecurities class action has actually gone to trial Kerr v. Danier LeatherInc, [2004] O.J. No 1916 (S.C.J.), revd(2005) 77 O.R. (3d) 321 (C.A.), affd 2007 SCC 44. Class counsel advises that his firm has commenced some 29securities class actions, all of which were settled well before the common issues trial in amounts ranging from $1.3million to $139 million. American data cited by class counsel describes a similar story: more than 99.6 per cent ofthe securities class actions filed in the U.S. have settled before or just after certification. Only 21 of the 4300 casesthat have been filed since 1995 have gone to trial.

6Koniak,supra,note 4, at 1797.


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[6] The potential for conflict of interest, collusion and abuse of the class actionsettlement procedure was recognized by the Ontario Law Reform Commission almost 35years ago in its seminalReport on Class Actions:7

There is a real possibility that, without the benefit of appropriate

safeguards, parties and their counsel might be tempted to abuse the classaction procedure in reaching settlement The agreement reached couldbe inadequate or unfair to the class members.8

[7] Hence, s. 29(2) of the CPA requires court approval of every class action settlementbefore it can take effect. Judges must be satisfied that the proposed settlement is fair andreasonable and in the best interests of the class.9

[8]

But how does a judge do this? Judges are obviously not in position to second-guess the actual amount of the proposed settlement. Nor should they do so. The most theycan do, apart from making sure that the settlement was negotiated at arms length by

competent counsel, is (1) scrutinize the actual agreement and supporting affidavitmaterial for any so-called structural indicators that suggest collusion or conflict ofinterest10 and (2) satisfy themselves that the settlement amount falls within a range orzone of reasonableness.11

[9] Unfortunately, class counsel rarely provides much information about why thesettlement falls within a zone of reasonableness. That is, information explaining why thecase settled for $17 million and not say $37 million or $57 million? Instead of providingmuch-needed information about why the settlement is within a zone of reasonableness,class counsel presents an unhelpful catalogue of self-serving (almost generic) reasons

why the settlement should be approved: the many litigation risks; the hard-foughtnegotiation; the arms-length settlement; and class counsels impressive credentials andlitigation experience.

7Ontario Law Reform Commission,Report on Class Actions(Toronto: Queens Printer, 1982).

8Ibid.,at 806.

9

Dobbs v. Sun Life Assurance,(1998) 40 O.R. (3d) 429 (Gen. Div.), affd (1998) 41 O.R. (3d) 97 (C.A.), leave toappeal to S.C.C. refused Oct. 22, 1998.

10For example: legal fees that are paid by the defendant directly to class counsel separate and apart from the moniesthat are paid to the class; non-monetary settlement features such as coupons that are then monetized to enlarge theamount of the so-called recovery by class counsel; or reversionary rights that require the return to the defendant ofany monies not taken up by class members.

11Dobbs, supra, note 9, at para. 30 (Gen. Div.)


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[10] In the vast majority of class action settlements, the court hears a one-sidedpresentation about how wonderful the settlement is and how aggressively class counselchampioned the absent classs cause.12

[11] The motivation behind what has now become a boiler-plate recitation of reasons

is undoubtedly well-intentioned but it doesnt help the court. It doesnt tell the judgehow you got from there to here.13In Sheridan Chevrolet v. Furakawa,14an auto parts

price-fixing settlement, I criticized class counsels use of boiler plate to support thesettlement approval motion. I said this:

The boiler-plate for settlement approval comes down to something likethis:Were experienced class counsel; we know what were doing;there were lots of litigation risks; we negotiated the best possible deal for

the class members; trust us.

I am not denigrating class counsel I am criticizing the boiler-plate that

is found in too many of the settlement approval facta and the judges whosuccumb to thewere experienced class counsel - we know what weredoing trust uskind of argumentation.

If class action judges are to do their job (and be more than rubber-stamps) in the settlement approval process, and ensure that the settlementamount is indeed fair and reasonable and in the best interests of the class(and not just class counsel) then at the very least class counsel shouldprovide affidavit evidence explaining why the actual settlement amountis fair and reasonable or more specifically, clear reasons why thesettlement amount is in the zone of reasonableness.15

[12] I agree with American jurist Richard Posner that a high degree of precisioncannot be expected in valuing a litigation, especially regarding the estimation of the

probability of particular outcomes.16However, as Posner goes on to explain, a ball parkvaluation is nonetheless achievable and he urges the settlement approval judge to makeevery effort to translate his intuitions about the strength of the plaintiffs case and the

12

Koniak,supra, note 4, at 1798.13Watson,supra,note 2, at 9.

14Sheridan Chevrolet v. Furakawa Electric,2016 ONSC 729.

15Ibid.,at paras. 10-12.

16Reynolds v. Beneficial National Bank, (2002) 288 F. 3d. 277 (7 thCirc.) at 284.


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range of possible damages into numbers that would permit a responsible evaluation ofthe reasonableness of the settlement.17

[13]

In Sheridan Chevrolet,18I was not persuaded by the boiler-plate and I asked classcounsel to file further information estimating the amount of the over-charge and

explaining why the $10.4 million settlement amount fell within a zone of reasonableness.To their credit, they understood my concern and filed a supplementary affidavit within afew days. With this additional information about sales volume and estimated over-charge,I was satisfied that the settlement was fair and reasonable and in the best interests of theclass and I approved the settlement.19

[14] Here I voiced the same concern. I knew that counsel had engaged in a one-daymediation that helped frame the eventual settlement. I asked to see the mediation briefs

but counsel were reluctant to file confidential documents. So instead I pressed for moreinformation. Boiler-plate aside, I needed to know why class counsel believed that the $17million settlement amount fell within a range or zone of reasonableness. And, here again,as in Sheridan Chevrolet,class counsel agreed to file a supplementary affidavit

[15] The additional affidavit material filed herein described in more detail certainrecently discovered risks and the range of possible damage recoveries. The additionalaffidavit explained how the high end of the damages range had dropped from some$300 million to only $30 million and why the $17 million settlement was therefore withinthe range of reasonableness.

[16] I am persuaded by this additional information and I am satisfied that the $17million settlement is in the best interests of the class. The settlement is approved.

[17] A final comment. Judicial approval of class action settlements, especiallysecurities class action settlements, needs more rigour. Some American courts have goneso far as to describe the settlement approval judge as a fiduciary of the class and thussubject to the high duty of care that the law requires of fiduciaries.20In Canada, somecommentators are saying the time has come for settlement approval judges to appointindependent counsel that can review and oppose the settlement if it is not in the best

17Ibid.

18Sheridan Chevrolet, supra,note 14.

19Ibid.,at para. 15.

20Reynolds, supra, note 16 at 280, and case law cited therein.


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interests of the class.21The shared concern is obvious: class action judges must do morethan acquiesce to the self-serving submissions of class counsel that often amount tonothing more than - were experienced class counsel - we know what were doing trust us.

[18]

I dont know what the future holds. Perhaps the time has indeed come for judgesin appropriate cases to appoint independent counsel (with his or her legal fees paid by the

parties) in order to add a much-needed adversarial dimension to the settlement approvalhearing. One thing, however, is clear: class counsel can no longer rely on boiler-platereasons that do nothing more than describe generic litigation risks or class counselsso-called experience22 class counsel must at the very least provide the court withinformation why the settlement amount falls within a range or zone of reasonableness.

Approval of the legal fees

[19] Based on the retainer agreement, class counsel is seeking a 29.5 per cent

contingency recovery which amounts to $4,094,000, plus disbursements and taxes. As Iexplained in Cannon23 such a contingent fee arrangement is presumptively valid andreadily recoverable. I therefore have no difficulty approving $4,094,000 in legal fees plusdisbursements and taxes. I only ask that class counsel reduce the disbursements by $3828for the legal research charge that, in my view, should not be billed as a disbursement.24I also approve the payment of $700,000 to American law firm, Kessler, Topaz, Meltzerand Check for legal assistance provided to class counsel, such payment to come out ofclass counsels legal fees award.

[20] Order to go accordingly.

_____________________

Belobaba J.Date: February 12, 2016

21

Watson,supra note 2, at 6 and 10.22Given that almost every class action is settled well before trial, class counsels litigation experience is actuallylimited to motions work mainly certifications and summary judgment motions. If some securities class actionswere actually taken to trial, the boast about litigation experience would carry more weight.

23Cannon v. Funds for Canada Foundation,2013 ONSC 7686.

24As discussed in Sheridan Chevrolet, supra, note 14, at footnote 3.


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Leslie v. Agnico-Eagle Mines, 2016 ONSC 532

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