Recent Ontario Decisions Signal Judical Concern About “Excessive” Costs of Certification Motions

A recent trilogy of decisions awarding costs to plaintiffs successful on motions for certification provides some useful judicial insight into the direction of future class actions and in particular how the court may approach costs awards on certification motions - awards which are invariably in the hundreds of thousands of dollars.

More importantly, the trilogy reflects a growing judicial concern about the declining number of new class actions and an apparent judicial desire to reduce the perceived risks and other obstacles to the bringing of class actions.

The Decisions

All three decisions - Crisante v. DePuy Orthopaedics, Dugal v. Manulife Financial and Rosen v. BMO Nesbitt Burns Inc – were issued on the same day by Justice Belobaba, one of the judges assigned to the Toronto Class Proceedings List in the Ontario Superior Court of Justice.

Justice Belobaba began each decision with an identical lament for the cost and “excess” of certification motions and perceived decline in the number of new class actions:

Normally, costs awards are routine and can be easily adjudicated. Not so in the world of certification motions. Here, excess appears to be the norm in every aspect of the proceeding – in the time spent by legal counsel, the volume of material filed with the court, the number of days scheduled for the oral hearing and the over-litigation of most issues. No wonder, then, that the costs that are typically sought by the successful party are in the hundreds of thousands of dollars. No wonder, also, that the number of class actions on an annual basis is declining. Access to justice, even in the very area that was specifically designed to achieve this goal, is becoming too expensive.

Justice Belobaba also decried a perceived lack of transparency in costs decisions on certification motions and outlined a framework for how he would fix costs of a contested certification motion, the key points of which are as follows:

• A costs outline provided by counsel will be accepted as-is, unless there are “obvious excesses” or departures from the ranges of acceptable rates prescribed by the Civil Rules Committee. (As examples of excesses, Justice Belobaba cited having too many lawyers present at cross-examinations or the hearing or charging for online legal research expenses.)
• Historical costs awards in similar cases will be considered “seriously”. Justice Belobaba crunched the numbers himself and produced the following chart:

• Where the final amount is dramatically above the norm, part of the award may be payable in the cause (i.e., if the party that is awarded costs on certification also succeeds at the common issues trial).

Applying this framework to the three motions before him – which were brought in an overtime “misclassification” case, a securities case under Part XXIII.1 of the Ontario Securities Act, and a medical devices product liability case - Justice Belobaba awarded roughly 50% of the costs sought by class counsel in two cases and approximately 25% of what was sought in the third.

Although these awards are specific to the three cases, a few general points of interest to the class actions bar can be discerned from the analysis:

• In Justice Belobaba’s view, expert disbursements over $200,000 should only be awarded in certification motions in exceptional circumstances.[1]
• Where expert disbursements are incurred to lead evidence relevant to a proposed common issue that is not certified (e.g., aggregate damages),[2] or to issues that are not material to certification,[3] recovery of those disbursements will not be permitted.
• Justice Belobaba appeared to put significant weight on the historical averages in the chart above when determining the reasonable range for a costs award.

Justice Belobaba noted that his framework “will likely result in lower than expected costs awards. But if it also results in leaner and more focused certification motions, a greater measure of predictability for the participants, and in the overall, the continuing viability of the class action vehicle, that is all to the good.”[4]

This sentiment echoes an “editorial comment” by Justice Perell, another member of the Toronto Class Proceedings List, in a recent decision in McCracken v. Canadian National Railway Company. In that decision, Justice Perell stated that “the successful party on a certification motion should not anticipate an enormous cost award that if it became routine would defeat or diminish the access to justice purposes of the Class Proceedings Act, 1992” and “[t]he risk of grotesque adverse costs awards is a serious disincentive to law firms being prepared to take on class actions and serve the public’s demand for access to justice.”[5]

Practical Implications

At a practical level, the trilogy provides guidance to counsel when advising their clients – whether plaintiffs or defendants - of the risks and potential outcomes of a contested certification motion and when making costs submissions on such motions.

More broadly, by signalling the court’s reluctance to make large costs awards on certification motions, the decisions potentially reduce the downside risk of an unsuccessful certification motion to putative representative plaintiffs - or more precisely, to class counsel, third party litigation investors or other third parties that indemnify putative representative plaintiffs. Assuming that significant adverse cost awards do, in fact, act as a disincentive for plaintiffs' lawyers to prosecute claims on behalf of a class, reducing this downside risk will likely increase the incentive for lawyers to bring such claims and hence increase the prospect of class actions going forward.