Ontario court won’t approve class action settlement without detailed evidence supporting interests of the class

Judges asked to approve class action settlements must determine whether that settlement is in the “best interests of the class.” The task is challenging, as the settlements are presented on consent, in the absence of the usual adversarial scrutiny and debate. The task is more difficult when the settlement is presented early in the litigation, before certification, and before the merits and scope of the case have subjected to any real examination by the court.

In Aps v Flight Centre Travel Group, a very experienced Ontario class action judge, Justice Belobaba, recently emphasized that the approval of class action settlements remains “the most difficult and problematic area of class action practice.” And it has often been said that class action settlements should be “viewed with some suspicion.”

This case dealt with allegations of unpaid overtime. Justice Belobaba noted that his initial reaction was he “would be hard-pressed to approve a $7 million settlement amount when the original claim for unpaid overtime was $100 million and covered a class period of more than 10 years with some 10,000 class members.”

The evidence supporting the settlement

To address the concerns of the Court, class counsel subsequently filed an expanded motion record containing detailed analyses and a number of affidavits from class members indicating that they supported the proposed settlement.

This evidence satisfied the Court that:

  1. the actual size of the claim was much smaller than initially pleaded;
  2. the same amount of settlement compares favourably with other overtime settlements, an therefore falls within the “zone of reasonableness”;
  3. the Covid-19 pandemic presents a “major litigation risk”; and
  4. there is an impressive level of class member support.

This evidence provided the Court with the basis to conclude that the settlement was in the best interests of the class.

Key takeaways

This decision emphasizes that Courts will carefully scrutinize settlements in class actions, particularly where those settlements occur pre-certification.

Courts will likely demand evidence justifying that the settlement is in the “best interests of the class” – and sometimes supporting the proposed fees to Class counsel. This evidence, which should be presented by the plaintiff, but which may require defendant input, can include:

  1. evidence detailing the actual claim size, thereby demonstrating that the proposed settlement amount is fair and reasonable; and
  2. evidence detailing the support for the settlement, including affidavits from various class members.