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Class counsel fees and their relationship to class member compensation are among the most important—and most controversial—statistics used to evaluate the normative outcomes of the class action mechanism. The perception that class attorneys reap windfall rewards while the class ‘gets nothing’ is persistent among class action critics. The ratio of legal fees to settlement funds captures the critical trade-off between counsels’ entrepreneurial incentives to pursue lucrative claims and the agency challenges endemic to these proceedings. In the most comprehensive analysis of Canadian class actions to date, the authors use new data and novel econometric methods to explore the nature of class action fee ratios in Ontario for both economics and legal audiences. To start, we calculate “all-in” fee ratios—lawyer fees plus disbursements divided by settlement amounts in Ontario—of 25.0% on average and at the median. Next, we show that judges are sensitive to windfall gains and sweetheart deals, problems associated with large awards, and adjust fees based on settlement size. These data and estimates contribute to a better understanding of judicial economy and access to justice in practice, the principal arguments in favour of class proceedings.
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Class counsel fees and their relationship to class member compensation are among the most important – and most controversial – statistics used to evaluate the normative outcomes of the class action mechanism. The perception that class attorneys reap windfall rewards while the class ‘gets nothing’ is persistent among class action critics. The ratio of legal fees to settlement funds captures the critical trade-off between counsels’ entrepreneurial incentives to pursue lucrative claims and the agency challenges endemic to these proceedings. The authors’ analysis uses new data and novel econometric methods to explore the nature of class action fee ratios in Ontario for both economics and legal audiences. To start, we calculate “all-in” fee ratios -- lawyer fees plus disbursements divided by settlement amounts in Ontario -- of 25.0% on average and at the median. Next, we show that judges are sensitive to windfall gains and sweetheart deals, problems associated with large awards, and adjust fees based on settlement size. These data and estimates contribute to a better understanding of judicial economy and access to justice in practice, the principal arguments in favour of class proceedings.
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The most controversial of the recent amendments to Ontario’s Class Proceedings Act is the addition of two requirements to the certification test: to meet the preferable procedure criterion, s. 5(1.1) requires that common issues in the litigation must now “predominate” over individual issues, and a class action must be “superior” to all other forms of resolution. The importance of the interpretation of Ontario’s new certification test to the continued viability of class actions in the province merits a thorough and rigorous analysis of s. 5(1.1). The language of predominance and superiority is strikingly similar to requirements that have long applied to US class actions for monetary damages. As courts in Ontario begin to grapple with the new predominance and superiority requirements, however, the authors caution against turning to American jurisprudence for guidance. Several important structural differences between the Ontario and American class action regimes, as well as different constitutional considerations and a variety of approaches within US case law diminish its utility. Instead, the authors examine the history and language of the amendments to propose an interpretation of the predominance and superiority requirements that is informed by Canada’s own procedural and constitutional framework and that avoids the pitfalls of legal transplants.