Two recent Ontario Superior Court decisions highlight the importance of carefully crafting any class action settlement agreement. The different outcomes in the Durling v Sunrise Propane Energy Group Inc. and Banerjee v Shire Biochem Inc. cases demonstrate the importance of procedural details where the class action process is used for settlement purposes.
In both cases, the parties desired to canvass class members in order to assess the size of the class and the nature of the damages they allegedly suffered, with an eye towards reaching a settlement that would cover only those class members who had stepped forward. However, by insisting on an outright bar on claims of those who failed to participate in a claims registration process, and by doing so before any settlement agreement had actually been reached, the Durling parties went a step too far and drew the ire of the court, whereas the Banerjee settlement was approved.
Durling v Sunrise Propane Energy
In Durling, the parties had reached an agreement on a consent certification order. As part of this agreement, all class members were required to register their claims in an online registration system within six months. Those class members who failed to do so were forever barred from participating in any future settlement and commencing any action against the defendants, subject to further order of the court. Those who registered late could avail themselves of a late registration procedure that could be contested by the defendants.
Justice Horkins found that the practical effect of this claims bar was to convert Ontario's Class Proceedings Act from an "opt-out" to an "opt-in" regime that was not supported by Ontario's class proceedings law. Noting that 73% of class members had not yet registered their claims, Justice Horkins was concerned that the proposed settlement would be unfair to those class members who failed to register by the deadline. She was also concerned that defendants, who would be able to view the information class members submitted during the registration process, would effectively gain early discovery of the class members before they would be entitled to do so under Ontario's Rules of Civil Procedure.
Banerjee v Shire Biochem Inc.
Justice Horkins' strong rejection of the certification settlement agreement in Durling can be contrasted with the decision to approve a settlement agreement in Banerjee. In Banerjee, as in Durling, the parties reached a consent certification agreement that required detailed information from class members. However, in Banerjee the process for obtaining information from class members was characterized as a "pilot project" or "negotiation process" leading up to settlement and it included no explicit claims bar. The certification agreement and pilot project were approved by Justice Strathy.
After collecting detailed information from class members through the pilot project, the parties reached a settlement agreement to compensate the 58 class members who had been identified. Unlike Durling, Justice Strathy expressed his satisfaction with the process undertaken by counsel for the plaintiffs and defendants, which resulted in a "careful and thorough assessment" of each class member's claim.
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