Even after a class action settles, disputes may arise that
require the intervention of the court. That was the situation in Eidoo v.
Infineon Technologies AG, where Justice Perell refereed a
dispute between class counsel and counsel representing five class
members regarding an approved distribution protocol. The procedural
decisions highlight the fact that class counsel must be transparent
in negotiating deals with counsel for other class members.
The dust had settled, or so it seemed. The courts in BC, Ontario
and Quebec had approved a national settlement agreement in the
DRAM competition class actions, the deadline for objections had
passed, and the distribution protocol was in the process of being
But at the 11th hour, a lawyer acting for five Class
Members contacted Class Counsel to advise that the approved
distribution protocol contravened the Ontario Human Rights Code and that his clients
would be seeking damages pursuant to s. 46.1 of the Code
and an amendment to the distribution plan. The portion of the
distribution protocol challenged related to the pooling of the
claims for compensation of family members.
Proposed Letter Agreement Not Approved
Justice Perell, on his own initiative, ordered class counsel to
serve and file materials for a motion for directions in order to
decide how to deal with the alleged contravention of the
Code. However, counsel instead negotiated a letter
agreement whereby the alleged contravention of the Code
would be remedied by posting an instruction on the claims website
and the lawyer for the five class members would potentially be paid
some of his costs.
Whatever is going on here, it does not work and whatever it is,
it is not an appropriate and responsible way for the court to
supervise a class proceeding. The proposed instruction may or may
not be adequate to address what may or may not be a problem, raised
by persons who may or may not have standing to challenge the
approved settlement distribution scheme, but, in any event, the
Court cannot endorse whatever this is at the whim of Class Counsel
and Mr. Letts and his clients without ruling on the merits of the
underlying dispute. The Court cannot indirectly endorse an
anti-suit injunction prohibiting Mr. Letts' clients from taking
administrative proceedings that may or may not be available to them
assuming that they are entitled to make claims notwithstanding the
releases that are a part of the court approved settlement. The
claim for costs is problematic. Why should costs be paid out of the
settlement fund absent an actual ruling on the merits of the
Decision on the Merits
The motion for directions ultimately morphed into a joint
hearing of the courts of British Columbia, Ontario, and Quebec on
the merits of the alleged violation of the Human Rights
While the Code applies to both the public and private
sector, it creates a right to be free of discrimination only in the
prescribed social areas of services, accommodation, contracts,
employment, and vocational associations. Justice Perell found that the
distribution of the proceeds of the settlement of a damages claim
is not the provision of "services, goods, or facilities"
within the ambit of the Human Rights Code, nor is it a
contracting process. The Code simply does not
apply to distribution protocols in a class action. Justice Perell
also concluded that, even had the Code been applicable,
the distribution protocol in this case did not contravene the
Justice Perell's decision confirms that distribution
protocols have the flexibility to accommodate family structures
without violating the Ontario Human Rights Code. This
flexibility will continue to allow counsel to design practical and
efficient distribution protocols.
Justice Perell's strong language regarding counsel's
proposed letter agreement also highlights the need for transparency
in negotiating resolutions with counsel for other class members
– particularly when it involves the payment of counsel's
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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