Court Extends Deadline To Share In Settlement Given Low Take-Up Rate

A class action may settle, but that does not mean that all class members will divide the settlement fund. Some of them – often most of them – will never exercise any claims that they might have to the settlement. That was the case in the recent Canada Post parcel shipping class action. The number of class members who originally submitted claims was so low that the case management judge actually extended the claims deadline and ordered further notice to be sent to the class.

Recognizing Low Take-Up Rates

Where a small number of class members actually applies to receive part of the settlement fund, this is known as a low “take-up” rate. Extremely low take-up rates have long been a recurring theme in class actions in both Canada and in the United States, often in as low as the single digits. Although it is difficult to get reliable figures because class counsel are generally not required to report such things, it is clear that a high percentage of class members never “take up” the opportunity to get paid out of a class action settlement. The Canada Post case is no exception.

Courts occasionally recognize these low take-up rates. The British Columbia Supreme Court in Smith v. Vancouver City Savings Credit Union recently took note of take-up rates of 30% and 16% in similar class actions and said that the rates in that case were expected to be even lower (given how old the claims were). In Apple Canada Inc. c. St-Germain, Justice Duval Hesler pointed to lower numbers still, noting that rates below 10% were typical in the United States.

For more on low take-up rates in Canada, see Daryl-Lynn Carlson’s article in the Financial Post. See also Drew Hasselback’s article addressing the low take-up rates in securities class actions.

What Low-Take Up Rates Mean in Practice

Do low-take up rates reflect a lack of appetite for class actions from the very people who are intended to benefit from them? Each case is different. But class action practitioners should not lose sight of this issue. As the Ontario Court of Appeal recently held, it is at least relevant to class counsel’s compensation in some situations. In Lavier v. MyTravel Canada Holidays Inc., for example, the Court of Appeal refused to allow class counsel to collect a fee premium given the low take-up rate of class members. Just under 9% of the class submitted claims. For more on that case, see the Osler Update and Julius Melnitzer’s article.

What happens to settlement funds that are never claimed? It depends on the settlement. In some cases, the leftover funds revert to the defendant. Often, however, they are distributed to charities under the cy près doctrine. For more on that doctrine and why defendants should care, see the blog post of July 9, 2013: The Cy Près Doctrine: Why Should I Care Where the Money Goes?