Written by Ranjan Agarwal and Tim Heneghan
In Makris v Endo International PLC, 2020 ONSC 5709 [Makris], Justice Glustein of the Ontario Superior Court of Justice opined on a niche area of class actions law—honorarium payments for representative plaintiffs. The claim in Makris arose after the corporate defendant’s alleged misrepresentations artificially inflated its stock price. The parties ultimately settled the matter, and Ms. Makris, the representative plaintiff, moved to have the Court approve the settlement. The resolution contemplated a roughly $400,000 cy-près payment to an Investor Protection Clinic and a $15,000 honorarium payment to Ms. Makris for the time and effort she had expended on the class’s behalf.
While Justice Glustein approved the cy-près distribution, he rejected the request for an honorarium payment to the representative plaintiff. He noted that honorarium payments were “exceptional” and “rarely done”, and available only when a representative plaintiff had “gone well above and beyond the call of duty”. Justice Douglas of the Supreme Court of British Columbia recently offered a slightly different line of reasoning in Cardoso v Canada Dry Mott’s Inc., 2020 BCSC 1569 [Cardoso] (which was released three weeks after Makris). In Cardoso, the two representative plaintiffs each sought $10,000 honorarium payments. Relying on authority from the British Columbia Court of Appeal, which provides that a “modest award” in recognizing a representative plaintiff’s efforts were “consistent with restitutionary principles and recognition of the principle of quantum meruit”, Justice Douglas approved reduced honoraria of the modest sum of $1,500 per representative plaintiff. Justice Douglas added that while she was satisfied that both plaintiffs “fulfilled their duties”, neither provided any “special expertise”, nor were they required to attend examinations for discovery or cross-examinations on their affidavits.
The decisions in Makris and Cardoso highlight somewhat divergent approaches to honorarium payments across Canada’s class actions regimes. While Makris seems to require a representative plaintiff go “above and beyond the call of duty”, British Columbia’s courts may be more lenient—entitlement to a small honorarium is not uncommon for mere fulfillment of duties.
Background to Honorarium Payments
Under Ontario’s Class Proceedings Act, and comparable legislation across Canada, courts have held that representative plaintiffs have a duty to “fairly and adequately represent the interests of the class members” and “ensure they do not have a conflict of interest”.
As class members, representative plaintiffs have a right to receive a proportionate share of the outcomes they help facilitate, be it a settlement payment or damages award. While their role in advancing the litigation may have required far more of their time than it did their fellow class members—e.g., corresponding with class counsel, attending examinations, assessing offers—at the end of the day they are one among equals when it comes to a payout.
There is an argument that this system may be unfair to representative plaintiffs. The lack of compensation for the representative plaintiff’s work deters others from playing that vital role. Honorarium payments may address this problem.
On the other hand, honorarium payments may risk creating a conflict of interest. Representative plaintiffs may accept settlement offers based on the size of the honorarium, rather than the best interests of the class.
The Traditional “Test” for Honorarium Payments in Ontario
There is no ironclad test for awarding an honorarium payment in Ontario, although the multi-factor analysis set out in Robinson v Rochester Financial Ltd., 2012 ONSC 911, has been cited several times. In that decision, Justice Strathy (with some “regret”) rejected $5,000 honorarium payments sought by the two representative plaintiffs who had spent over 300 hours each assisting class counsel. He listed the factors for courts to consider when being asked to approve such payments:
- active involvement in the initiation of the litigation and retainer of counsel;
- exposure to a real risk of costs;
- significant personal hardship or inconvenience in connection with the prosecution of the litigation;
- time spent and activities undertaken in advancing the litigation;
- communication and interaction with other class members; and
- participation at various stages in the litigation, including discovery, settlement negotiations and trial.
Honorarium Payments in Practice
In practice, the analysis employed by Canadian courts deciding whether to approve honorarium payments focuses more on the payment’s quantum than a rigorous application of the factors established by Robinson or similar jurisprudence.
Currie v McDonald’s Restaurants of Canada Ltd., 2007 CarswellOnt 6010 [Currie], helps explain this point. The representative plaintiff in Currie sought approval of a $1,000 honorarium payment, which Justice Cullity approved despite noting that added compensation should be awarded only in exceptional circumstances. Justice Cullity noted that the amount requested was small, and not meant to represent quantum meruit compensation for the representative plaintiff’s work.
Recent Developments in the United States
In Johnson v NPAS Solutions LLC, Case No. 18-12344, the U.S. Court of Appeals for the Eleventh Circuit rejected a $6,000 honorarium approved by the district court. Citing Supreme Court jurisprudence from the nineteenth century, the Eleventh Circuit held that individual incentive awards were “decidedly objectionable” and a product of “inertia and inattention, not adherence to law.” The Eleventh Circuit noted that the fact that such awards were commonplace did not make them lawful, and warned of the creation of a conflict of interest between the interests of the class and representative plaintiff.
While it is too early to forecast the effects of the Makris and Cardoso decisions on Canadian practice, Makris in particular could suggest increasing resistance to the judicial approval of honorarium payments.
If you would like further information about this issue or other matters pertaining to Canadian class proceedings, please contact a member of the Bennett Jones Class Action Litigation group.