In a recent class action settlement approval hearing, Justice Belobaba of the Ontario Superior Court affirmed the value of early “ice breaker” settlements in complex class actions involving multiple defendants. In such a settlement, one defendant settles ahead of the rest for what may be viewed as a “token” amount, along with a pledge to provide cooperation to the plaintiffs. (Di Filippo and Caron v. Bank of Nova Scotia et al, 2019 ONSC 3282).
In the case in issue, the proposed settlement would resolve two class actions each involving substantially the same group of defendants, all of which were financial institutions. It was alleged that the defendants had engaged in manipulative trading in gold and silver instruments.
Approval of the Settlement
At the settlement approval hearing, one objector opposed approval of the settlement on the basis that the settlement amount of $5.47 million was only a “token amount” in comparison to the total damages claimed of $1 billion in each class action.
Class counsel sought to justify the settlement amount on two bases. First, in a somewhat similar class action relating to allegedly manipulative foreign exchange trading, settlements of Ontario class actions for amounts representing approximately 3.5 to 4.8 % of settlement amounts approved in parallel US class actions were approved by the Ontario court. The settlement in the case before Justice Belobaba represented approximately 4.33% of amounts paid by the settling defendant to settle parallel class actions in the US. Justice Belobaba accepted that on that basis the Canadian settlement amounts were consistent with the settlement range in the foreign exchange case.
Second, class counsel argued for the approval of the settlement on the basis that it was an “ice breaker” that provided significant non-monetary benefits to the class. Justice Belobaba agreed that the plaintiffs’ agreement to accept what may be a “token” settlement amount was more than outweighed by the “importance and potential benefits” of the non-monetary cooperation that the settling defendant committed to provide as a term of settlement. His Honour observed that particularly in class actions alleging “secret price fixing conspiracies”, a settling defendant’s commitment to cooperate with class counsel is “one of the most significant and valuable features of the settlement”, assisting in the advancement of claims against the non-settling defendants and encouraging them to settle.
In addition to the approval of the proposed settlement the Court also approved an interim fees award to class counsel, noting that such awards lessen the significant financial burden typically assumed by class counsel in complex cases, and motivate class counsel to continue to devote their best efforts to the cause, in the best interests of the class.
Query whether Justice Belobaba’s comments about the efficacy of ice breaker settlements may lead to a race by defendants to be the first to settle complex class actions involving multiple defendants where providing cooperation is of value to the class.