OVERVIEW
In Moushoom v Canada (Attorney General), 2023 FC 1739 (“Moushoom”), and Manuge v Canada, 2024 FC 68 (“Manuge”), the Courts assessed the fairness of class counsel fees in “mega-fund” settlements (recoveries exceeding $100 million). While the settlement fund in Moushoom is 30 times greater than in Manuge, class counsel’s fee is lower.
The disparity in class counsel awards between Moushoom and Manuge hinges on the risks undertaken and the outcomes attained by class counsel. In Manuge, the claims were entirely novel, but in Moushoom part of the claim overlapped with a Canadian Human Rights Tribunal (“CHRT”) matter. Although class counsel in Moushoom achieved significant results, they were not as remarkable as in Manuge, where additional calculation errors found by class counsel led to a larger settlement.
These cases demonstrate that courts approving class counsel fees require rigorous justification for fair fees, especially in cases seeking to address historical injustices or cases in which the complexity and workload significantly deviate from initial expectations. These cases underscore the importance for class counsel to establish transparent mechanisms to ensure accountability and fairness.
FACTS
The plaintiff in Moushoom alleged systemic discrimination against certain First Nations children by the Government of Canada since 1991. The settlement compensates eligible First Nations children and their caregivers for two forms of discrimination: denial of proper funding to child welfare agencies and delayed or denied essential services.
The plaintiff in Manuge alleged miscalculations and underpayments of disability pension benefits for members and veterans of the Canadian Armed Forces and the Royal Canadian Mounted Police. The settlement addressed errors acknowledged by Veterans Affairs Canada (“VAC”) and additional errors discovered by class counsel.
CONTRASTING COUNSEL FEE AWARDS
In Moushoom, plaintiff and defendant counsel agreed on a $50 million class counsel fee. Justice Aylen, relying on the Federal Court Rules, concluded that the agreement does not remove the court’s obligation to approve the fee. She concluded that the court must protect against the perception of unjust gains in class actions, preventing unethical lawyers from taking advantage of class action complexity to secure excessive fees, potentially leaving plaintiffs with insufficient compensation.
As Justice Aylen identified, counsel fees must be fair and reasonable. In “mega-fund” settlements like the $23.32 billion awarded in Moushoom, the court’s role in evaluating this standard becomes more complex because percentage or multiplier-based fee structures might result in excessive payments to counsel. If the court deems the reported fees unreasonable, it can reduce them.
Justice Aylen proposed that once the court determines the actual legal fees—based on the work done and time spent (akin to a traditional solicitor-client relationship)—it may then consider adjusting counsel fees by approving a premium. This premium is determined based on ten factors: risk, results, effort, complexity, responsibility, similar case fees, class expectations, counsel expertise, class ability to pay, and litigation importance. The two most crucial factors are the risk assumed by class counsel and the results achieved.
Justice Aylen reduced the class counsel award to $40 million, less than 0.2% of the total settlement. She cited relatively low risk for class counsel and attributed the settlement’s size to the large class and overlap with another proceeding before the CHRT, in which Canada had already been found liable for similar conduct during part of the relevant period. Claims overlapping with the CHRT represented $9.65 billion of the settlement. Justice Aylen balanced that reduced risk with the additional significant results achieved by class counsel.
In contrast, in Manuge, Justice Kane, while guided by the Moushoom decision, deemed the $58.2 million (over 7% of the settlement) request of class counsel appropriate.
Justice Kane acknowledged the high risks and efforts undertaken by counsel to achieve a favourable outcome, emphasizing the crucial role of class counsel. In Manuge, there was no process comparable to the CHRT to guide class counsel’s actions. Class counsel sought compensation solely for errors beyond those acknowledged by VAC, diligently uncovering additional discrepancies and advocating for their inclusion in the FSA, despite initial objections from the Defendant.
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