Canadian Class Action Defence Blog

Settlement: Second Time’s a Charm?

Mar 31, 2016 3 MIN READ
Geoffrey Hunnisett

Partner, Disputes, Toronto

Gillian S.G. Scott

Partner, Litigation Operations & Products, Toronto

The case of Fulawka v. The Bank of Nova Scotia – one of the “bank overtime” class actions – has had a long procedural history, and attracted significant attention since it was commenced December 10, 2007. The action was certified as a class action February 19, 2010, leave to appeal was then granted by the Divisional Court May 5, 2010, and certification on most common issues upheld by the Ontario Court of Appeal June 26, 2012.

The First Settlement

After leave to appeal to the Supreme Court of Canada was refused on March 20, 2013, the parties reached a settlement (the “Settlement”). The Settlement was approved by Justice Belobaba of the Ontario Superior Court of Justice on August 12, 2014.

As we noted at the time, the Settlement was a “claims made” settlement, where only class members who submitted claims for unpaid overtime would receive payment. Justice Belobaba remarked that both sides believed that the claims review process was fair and reasonable, and in his reasons approving the Settlement Justice Belobaba “congratulated the parties and their counsel for achieving a sensible settlement.”

Claims were to be submitted by class members to Scotiabank by October 15, 2014. Scotiabank then had until November 28, 2014 to respond to the claims, and class members unsatisfied with Scotiabank’s response were permitted to appeal to an independent arbitrator.

The claims process did not go smoothly. In early November, 2014, the representative plaintiff took issue with Scotiabank’s approach, alleging that it was not complying with the claims process as set out in the Settlement (including, among other things, by sending out “template” witness statements, and reducing or rejecting claims that did not include sworn evidence). Class counsel brought a motion to address these concerns. Scotiabank then brought its own motion to extend the November 28, 2014 deadline for responding to the claims, and Justice Belobaba suspended the claims process until the motions could be resolved.

The Action Settles – “For the Second Time”

After months of negotiation and a two-day mediation before the Hon. George Adams, the parties agreed to a more streamlined payment approach and the terms of the original settlement were revised (the “Revised Settlement”). Scotiabank agreed to pay a further $20.6 million, in addition to the $18.7 million it had already paid out. Justice Belobaba released his decision approving the Revised Settlement on March 18, 2016.

The new approach involves dividing the claims into two categories: those that had been reduced by Scotiabank, and those that had been rejected. Within each category the claims are further subdivided into bands, depending on the amount of the claim. Claimants will receive a specified percentage of the amount claimed depending on what category, and what band, they fall into.

Key Take-Aways for Class Action Defendants

The Settlement of this action took a flexible approach; however, the parties’ differing views on how that flexible approach ought to unfold resulted in a breakdown of the claims process and the necessary Revised Settlement. The months of negotiation and mediation inherent in obtaining the Revised Settlement were costly, with associated additional class counsel fees alone reaching $2.3 million.

As we commented in respect of the original settlement in August, 2014, “claims made” (versus “all in”) settlements often make good sense for defendants, and can limit a defendant’s overall exposure. The breakdown of the claims process in Fulawka, however, may give pause to defendants considering such an approach to settlement, as the additional costs that can result from a breakdown of the claims process can be significant. This is especially so when considered alongside the uncertainty of payout and effort required to process claims. The cost-savings resulting from a “claims made” settlement may therefore not always be as high as perceived, and these concerns should be seriously considered when a “claims made” settlement is on the table.