Canadian Lawyer

46 J U L 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 Wilson's ruling should be a warning to plaintiff counsel that judges seem to be increasingly uneasy with fees related to contingency agreements and the settle- ment of cases. So trudge carefully. Justice Edward Belobaba said as much in Leslie v. Agnico-Eagle Mines, a securities class action that settled for $17 million and involved a $4-million, or a 29-per-cent, contingency fee. In approving the settle- ment, he wrote that in "the vast majority of class action settlements, the court hears 'a one-sided presentation about how wonder- ful the settlement is and how aggressively class counsel championed the absent class's cause.'" He even questioned whether it's time to appoint independent counsel paid for by both parties to provide a "much needed adversarial dimension to the settle- ment approval hearing." Nonetheless, he found the agreement was "presumptively valid and readily recoverable." So why is a contingency fee in a class action securities case "presumptively valid," yet a plaintiff lawyer in a complex personal injury case must take a buzz cut? Part of the problem was that Freed- man's case involved a minor who was born with severe brain damage. Freedman sued the hospital and one of its doctors for neg- ligence, alleging his client suffered oxygen impairment during birth. The issue of causation, Freedman said in court docu- ments, was "hotly contested." As such, he felt liability should be apportioned at 65 to 35 per cent, which Wilson agreed was reasonable given the causation risk. He estimated the case was worth $8.8 mil- lion, including Family Law Act and OHIP claims, and settled in at $6.6 million after the 35-per-cent reduction. After reading the settlement materials, Wilson had a "number of concerns" and called in the Office of the Children's Law- yer to review the record and comment on the settlement. The OCL report found that Freedman's contingency fee agreement did not comply with the Solicitors Act because it said Freedman would receive 30 per cent of any costs paid by the defendants in addition to 30 per cent of the damages and pre-judgment interest. More importantly, though, the OCL said it was unable to recommend a settle- ment that would give the injured youth less than $5.4 million "given the severity and permanency" of the injuries. The boy's liti- gation guardian supported the settlement put forward by Freedman. Wilson agreed with Freedman that there was a risk in taking the case to trial based on causation; however, she took issue with his assessment of damages in the $8.8-mil- lion range, finding, instead, that a "reason- able assessment of the damages is in the $10-million to $12-million range without discount for liability or causation issues." So she lopped half a million off of his fees. For what it's worth, Freedman indi- cated he spent 155 hours on the file, or $85,205, plus $5,500 in clerk time. Wil- son also allowed his $70,000 claim for dis- bursements. That means the $1-million fee worked out to an hourly rate of about $6,400, or 12 times Freedman's legal bill, which isn't a bad return. However, that's not the point. First, few cases turn out like this. This is the legal exception, not the rule. The family could easily have received nothing if the hospital fought it tooth and nail. When judges, many of whom never practised in a contingency regime or faced the prospect of such a lucrative payout, start second-guessing counsel and lopping hundreds of thousands of dollars off of legal bills, they are intervening in the legal economics of practising law and creating uncertainty. That puts in peril the willing- ness of lawyers to take on risky cases and makes it harder for clients to find counsel. Wilson acknowledged this "was a com- plex action," yet she second-guessed coun- sel on the amount the case was worth. What if Freedman had settled on $12 million? Would the defence have capitulated? Or would there have been a trial with the risk of the plaintiff recovering zilch and the law- yer eating a large dollop of legal fees? Contingency fee arrangements exist for a reason. Governments have mandated them as a form of social policy and a means to enhance access to justice. Judges who manipulate fees to their liking are similar to a communist government that tries to run the economy. We know that doesn't work well in the long run. If Wilson so disliked the final settle- ment numbers and felt so strongly that it was a $10-million to $12-million case, she should have rejected the settlement. That would have sent a message to both parties that they missed the mark and would have given plaintiff counsel more leverage to dis- suade the hospital from balking at a larger number. Instead, she chose to penalize the plaintiff 's lawyer. I think she got it wrong. Jim Middlemiss is a legal writer and princi- pal at WebNewsManagement.com. B A C K PA G E O P I N I O N @JimMiddlemiss magine taking a tragic medical case six years ago on a contingency fee agreement with the standard 30-per-cent payout. You do well and arrive at a $6.6-million settle- ment and even agree to cut your contingency fee to 25 per cent in order to facilitate the negotiations. Remember, if you lose the case, you're paid nothing. Then, at the hearing to approve the settlement, Ontario Superior Court Justice Darla Wilson decides that your $1.5-million fee is $500,000 too much, and cuts it to $1 million, effectively rewriting the contingency fee arrangement and replacing your 30-per- cent deal with a court-imposed 15-per-cent one. That's what happened to Toronto personal injury lawyer Joel Freedman in Batalla v. St. Michael's Hospital. Ouch! That's more than a haircut on a legal bill, it's closer to a buzz cut. But no matter how you slice it, it's a financially painful outcome for the lawyer. When judges go rogue on legal bills I By Jim Middlemiss

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