Canadian Lawyer

46 F E B R U A R Y 2 0 1 6 w w w . C A N A D I A N L a w y e r m a g . c o m Behind the scenes, some lawyers have dubbed such go-away payments to Mer- chant as the 10-per-cent Merchant Tax. Perell questioned the legality and value of such an arrangement and wondered if it bordered on champerty as discussed in McIntyre Estate v. Ontario (Attorney Gen- eral), a key case that opened the door to contingency fees in Ontario. Perell noted that the B.C. case was well past the carriage-motion fight stage, with a certification motion already scheduled when the Merchant actions appeared. He equated it to a "ransom fee in order to stay late-arriving rival class actions in Alberta and Saskatchewan." However, rather than stand their ground and fight, "Class Counsel took the discre- tion over valour cop-out, rather than stand- ing up for their Class Members and taking on the 'good fight' to oppose the Mer- chant Law Group's late-arriving rival class actions," said Perell. "I say it is the good fight because the integrity of the entrepreneurial model for the class action regime depends on genuine risk and genuine competition for the privilege of earning a contingency fee paid from the proceeds that belong to the class members. Putative class counsel should be abused of the idea that they can commence a class action in the anticipation that they will inevitably share in the contin- gency fee paid by the class members." Perell ruled the fee-sharing agreement was unenforceable, noting class members shouldn't pay to stay a rival class action. "It is not fair and reasonable for a client to pay for legal services that were useless to the client." He ordered that "Class Counsel shall not pay the Merchant Law Group any sums from the settlement proceeds or from any other source on account of the unau- thorized and possibly illegal Fee Sharing Agreement." When it comes to the fight over national class actions, Perell was clear that law firms need to buckle down and get at it, noting "it is time to stop blaming the Canadian Constitution, which creates a federation of jurisdictions, for the so-called jurisdictional problems of national class actions. There are already in place the legal tools necessary to stop the multi-jurisdictional tactics of law firms that get in the way of access to jus- tice, behaviour modification, and judicial economy for Canadian citizens. "An amendment to the Constitution is not necessary, nor should the Constitution be blamed for what happened in the case at bar. The formation of bona fide consor- tiums of Class Counsel from across the country and the existing tools of stay and carriage motions can resolve the problems of multiple discrete or overlapping provin- cial or national class actions, but those tools need to be used." So what does that mean for compa- nies defending class actions? Most general counsel will tell you their companies want to fight a single battle covering all jurisdic- tions. It's cleaner and simpler than juggling multiple lawsuits in many jurisdictions with many law firms. Is there now an onus on the defence to use more stay motions and weigh in on carriage fights, which will no doubt increase following this ruling? Carriage fights are a crapshoot and unseemly, as plaintiff counsel attack each other over who has the best foot to bring forward. They expose the weakness of a case to defence lawyers, who are essentially paid peeping toms, or class action voyeurs. In the interest of finding a workaround to the constitutional quagmire Perell raises, why shouldn't the voyeurs be required to take a stand using stay motions or weigh in more heavily on carriage fights that have national class action overtones? After all, defendants stand to benefit from stream- lined litigation, so shouldn't they be part of the solution to making that happen and eliminating the kind of fee-sharing agree- ments to which Perell objects? For example, defendants could start by taking steps to limit litigation and seeking to confine it to one province by mov- ing to stay actions in peripheral jurisdic- tions, while matters get sorted — unless, of course, defendants actually want multiple proceedings to make it more complex for plaintiff counsel, and string things out and bleed plaintiffs dry. But that's a cynical view, kind of like Perell's view on the willingness of plaintiffs to take on the risk of carriage motions at the expense of potential retain- ers, hence fee-sharing arrangements. Perell is right to call on lawyers to use the tools they have, but it's not just plaintiff lawyers who should be stepping up to the plate. It's time for the defendants to weigh in, too, in order to sort out the national class conundrum. Plaintiff lawyers might not like it, but the administration of justice is best served when their fee-sharing arrange- ments don't hold plaintiffs at ransom. Jim Middlemiss is legal writer and a prin- cipal at WebNewsManagement.com. B A C K PA G E O P I N I O N @JimMiddlemiss By Jim Middlemiss n-house counsel and defence class action lawyers should be wary of a recent Ontario ruling in a class action suit. It raises the question of whether defendants and their counsel need to engage more in carriage battles when it comes to national class actions. In Bancroft-Snell v. Visa Canada Corp., a November price-fixing class action suit dealing with the fees that businesses pay to credit card companies, Ontario Superior Court Justice Paul Perell took a swipe at lawyers who complain about the lack of a national class action system for determining carriage of files. It came up in a settlement hearing where Perell also took strong exception to a fee- sharing arrangement between the class counsel carrying the file (a group of B.C. law firms) and Merchant Law Group. Merchant agreed to stand down in bringing forward and continuing similar cases in exchange for a 10-per-cent cut of fees from any settlement. That allowed the class consortium to have carriage of the suit as a national class action. Time for the voyeurs to engage I

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