Fight Over Factums: Ontario Divisional Court Grants Leave to Appeal From Decision Refusing to Approve a Class Action Settlement

In Waldman v. Thomson Reuters Canada Limited, 2015 ONSC 3843, Justice Swinton of the Ontario Divisional Court granted leave to appeal an order of Justice Perell, who had refused to approve a settlement of the proceeding/class counsel fees in the class action that was at issue in this proceeding.

The case involved a certified class action for copyright infringement. The action was commenced because Thomson makes available, through its subscription services, court documents authored by lawyers. The class members alleged that Thomson was infringing their copyright by making available, without permission and for a fee, copies of court documents that they (and their firms) had authored.

The parties agreed to a settlement, under which: (i) Thomson would settle a $350,000 cy-près trust fund to support public interest litigation; (ii) Thomson would make changes to the copyright notices on its services; and (iii) the class members would grant a non-exclusive license of their copyrights to Thomson. It was also agreed that $825,000 in fees would be paid to counsel for the class members.

Justice Perell refused to approve the settlement agreement on the basis that it would not be fair, reasonable, and in the best interest of the class members. In granting leave to appeal this decision, Justice Swinton noted that there were several reasons to doubt the correctness of the order, including:

1. Justice Perell added a new criterion for the approval of settlements to those normally considered in the case law, institutional fairness, which was designed to protect against settlements obtained through misadventure, incompetence, lassitude or fatigue, factors which did not apply in this case.
2. Justice Perell mis-categorized the non-exclusive license agreed to in the settlement as the “transfer of a property right”.
3. Justice Perell failed to take into consideration the likelihood of the class members’ recovery or success in the litigation.
4. Justice Perell erred in saying that under the terms of the settlement agreement the court had no opportunity to reduce the counsel fee to an amount that was more appropriate.

In light of these errors, and because the appeal raised issues of importance for the development of the law, leave was granted, meaning that the Divisional Court will now hear the appeal.

A copy of the Justice Swinton’s appeal decision can be found here.

A copy of Justice Perell’s decision below can be found here.