In the recent litigation funding approval decision of Pass Herald v. Google LLC, 2024 FC 305, the court considered whether there should be a cap on the combined recovery of class counsel and a litigation funder. The defendants suggested that the court impose a cap on their combined recovery in the range of 33-35%. The court refused to do so. Its analysis sheds light on the way that litigation funders – who provide a variety of fees, disbursements and adverse costs funding on a non-recourse basis[1] – share in the risks of class proceedings.
Background
This case is a proposed class action against Google, Meta, and certain related entities for anti-competitive conduct relating to digital advertising products and services. The plaintiff, the operator of Crowsnest Pass Herald newspaper (“Pass Herald”), claims $4 billion in damages against all defendants for breach of sections 45-47 of the Competition Act, R.S.C. 1985, c. C-34 (the “Act”) and $4 billion in damages against Google for breach of section 52 of the Act. The digital advertising space is highly technical and complex, and extensive expert evidence is required to prove the causes of action.
Pass Herald sought funding to pursue its claims. It entered into a litigation funding agreement (“LFA”) with a funder “for several million dollars in funding for various types of disbursements”[2] and adverse costs protection. The LFA entitled the funder to a return of 3% of the damages plus a multiplier of deployed funds, ranging from twice to six times the capital advanced. The LFA included a cap on the funder’s return and a priority payment of $12.5 million to class members.
The Court found that it was in the best interests of justice to approve the LFA. The LFA satisfied the relevant factors underlying the test for approval, including that it is necessary to facilitate access to justice by class members, will make a meaningful contribution to deterring wrongdoing, is not champertous, and is fair and reasonable to current and prospective class members. The latter conclusion, as it relates to the funding return, was restricted to a pre-approved return of 10%. The court preserved discretion to consider whether to award the full funder’s return provided in the LFA in the “very limited and purportedly unrealistic or unlikely scenarios”[3] where a low case resolution would translate into the funder’s return exceeding the pre-approved amount.
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