Introduction
The British Columbia Supreme Court’s recent decision in Warner v Google LLC (“Warner”)1, a privacy class action related to the collection of data from smartphones, puts the role of the representative plaintiff and the nature of the solicitor-client relationship in the class action context front and centre.
Before the Court were two applications – one where counsel of record, Klein Lawyers LLP and Mathew P. Good Law Corporation (“Klein LLP”), sought orders substituting the named plaintiff, Kipling Warner, and certifying the claim; and another where Mr. Warner sought an order substituting counsel of record.
The issue was that, in the context of negotiating a multi-jurisdictional settlement, Mr. Warner insisted that cy-près funds be disbursed to his charity of preference. When Mr. Warner was advised the defendants would not agree to his proposal, he refused to cooperate, and his counsel sought out a new representative plaintiff. Mr. Warner, for his part, thought he was still his former-lawyers’ client.
The case is illustrative of what issues courts will consider when the interests of the named plaintiff and the class diverge. À la Led Zeppelin, it’s a communication breakdown that drives clients, class members, and lawyers insane. However, unlike the chaos of rock n’ roll, in court proceedings, the communication breakdown must be resolved.
Cy-près funds
A central concern in Warner is the distribution of cy-près funds. What are these? In circumstances where the distribution of a settlement is impractical, the court sometimes fashions an alternative method of disbursing the money called a cy-près or “as near as possible” distribution.
While cy-près settlements are consistent with the Class Proceedings Act (“CPA”) and, under certain circumstances good public policy, they are not without controversy. Among other reasons, this is because settlement funds do not flow to directly to class members. Rather, they are used in a manner that might reasonably be expected to benefit class members in some other way (e.g., a donation to a relevant charity or a provincial Law Foundation).
There are different kinds of cy-près arrangements, some better (or at least, more necessary) than others. All or some of the money recovered from defendants can be disbursed this way. Where all the settlement funds are paid out as a cy-près deal, these arrangements are much harder to justify, because there is usually a way to get money to class members if counsel are creative enough. However, in circumstances where a portion of settlement funds are distributed by cy-près arrangement, they make more sense. For example, if there were money remaining once claims were made by class members and paid out, it would be appropriate to donate it for the benefit of the class rather than reverting it back to defendants.
By way of preview, in Warner, it was proposed, and the court ultimately approved, the donation of cy-près settlement funds to the Law Foundations of Ontario, Quebec, and British Columbia. In Ontario, these donations fund the Law Foundation’s Access to Justice Fund. Grants under the program have enhanced linguistic and rural access to justice, Indigenous people’s rights, innovative approaches to family law, and consumer and investor rights.2 It is, in the author’s opinion, a pretty decent use of the money.
The facts
Following the exchange of certification materials, a mediation was held involving the parties to the BC action (Warner) and two parallel cases in Ontario and Quebec. A national settlement was negotiated and set out in binding minutes dated November 30, 2018 (“Minutes of Settlement”).
Mr. Warner attended the mediation and approved of the Minutes of Settlement, as did the named plaintiffs in the Ontario and Quebec actions, who did not attend but were kept informed by their respective counsel.
Pursuant to the Minutes of Settlement, a portion of the settlement funds were agreed to be paid in cy-près format. The recipients were to be determined by the parties later, subject to court approval.
Mr. Warner insisted that the funds go to the Free Software Foundation, Inc. (“FSF”), an American non-profit organization which he supported. In that regard, Mr. Warner provided his lawyers with a letter addressed to FSF’s Executive Director, describing himself as the “lead plaintiff,” indicating that he had “authorized a settlement on behalf of all class members,” and framing the settlement funds as a personal gift to the FSF. The letter failed to reference the other parties to the Minutes of Settlement.
Mr. Warner’s lawyers later attested that while efforts were made to present the FSF proposal in the best possible light, the defendant, Google, advised it was not acceptable. The provincial Law Foundations were proposed as a good alternative and were subsequently approved by the Ontario and Quebec plaintiffs.
Nevertheless, Mr. Warner insisted that the cy-près funds be donated to FSF. He floated the idea that the other parties might agree to donate to a Canadian FSF subsidiary, if one were created. Mr. Warner’s lawyers asked to be informed within a week regarding the proposed subsidiary, or steps would be taken to address the impasse – Mr. Warner would have to “fire” Klein LLP or Klein LLP would have to “fire” Mr. Warner in order to move forward.
On June 10, 2019, Mr. Warner was scheduled to meet his lawyers in person to discuss these issues. For reasons that are unclear, Mr. Warner sought to postpone the meeting. His lawyers, however, insisted the meeting proceed. In response, Mr. Warner wrote by email: “I’m not going ahead with…[the] proposal. The best option is to find another lead plaintiff.”
After receiving the note of rejection, Mr. Warner’s lawyers called him. Mr. Warner stated he was “done” with the BC Action and that it would be best to use someone else for the settlement. This is where the confusion began, as his counsel took Mr. Warner to mean he wanted no further involvement in the negotiations.
Klein LLP proceeded to identify another class member, Elizabeth Chartrand, who was willing to be substituted in as plaintiff. Ms. Chartrand finalized settlement terms, which included donations to the provincial Law Foundations, with the other parties to the Minutes of Settlement in the form of an agreement dated August 22, 2019 (the “Settlement Agreement”).
Meanwhile, Mr. Warner had a very different understanding of what had happened, and what he expected ought to occur. He considered his June 10, 2019 email a rejection of his lawyers’ proposal to donate the cy-près funds to the Law Foundations. He expected to be served with a substitution application which he intended to oppose on the grounds that he should to be entitled to instruct Klein LLP to continue to seek the other parties’ agreement to FSF.
At this point, Klein LLP filed a notice of application seeking, among other things, orders substituting Ms. Chartrand as plaintiff (the “Application”). Mr. Warner was not put on notice, as his former lawyers understood him to want no further involvement in the matter. When Mr. Warner saw the Application on Court Services Online, he was alarmed and called Klein LLP to figure out why he hadn’t been served. The competing conceptions came to a head. Mr. Warner refused to consent to being removed as plaintiff, while Klein LLP indicated Mr. Warner was no longer the firm’s client.
Mr. Warner filed a Notice of Intention to Act in Person and retained new counsel. Klein LLP filed a more detailed application seeking orders substituting Ms. Chartrand, certifying the BC Action on consent pursuant to the Settlement Agreement, and striking Mr. Warner’s Notice of Intention to Act in Person.
Analysis
Broadly stated, Klein LLP’s position was that Mr. Warner’s post-Minutes of Settlement conduct indicated he could not “fairly and adequately represent the interests of the class” for the purposes of s. 4(1)(e)(i) of the CPA, which must be met for the action to be certified. He gave clear instructions to be substituted, and the other plaintiffs and defendant took important steps in reliance on that submission. Accordingly, Klein LLP argued Mr. Warner should “not be allowed to hold courts and class members across the country hostage because he wants a platform to express his idiosyncratic views.” Put more simply, it was too late for Mr. Warner to change his mind after he said he wanted out.
Mr. Warner, on the other hand, asserted Klein LLP was not entitled to substitute him. He argued that he was a “genuine plaintiff” who had acted properly, whereas Klein LLP had overstepped its proper role, breaching its duty of loyalty to its client by disregarding his instructions.
The Court has a significant role in overseeing class proceedings, including a responsibility to protect the interests of absent class members. In view of this guiding principle, the Court went on to consider whether Mr. Warner was disqualified.
Justice Tucker first observed that the court is not a substitute decision-maker for the plaintiff and will not lightly intervene. However, it is obliged to do so where there is “cogent evidence that steps taken may have an adverse impact on the absent class members.” More specifically, where a plaintiff has given litigation instructions tainted by an improper purpose, he/she cannot fairly and adequately represent the interests of the class.
With respect to cy-près donations, His Honour observed they are “made in lieu of direct compensation to class members, and thus should indirectly benefit those class members.” While Mr. Warner had asserted that funding FSF would optimize the behaviour modification achieved by the litigation, the question was whether he wanted to make this donation for an improper purpose.
The issue turned on Mr. Warner’s donation letter. The Court was satisfied by the tenor and form of the letter that Mr. Warner, a software engineer, anticipated receiving some personal benefits in the form of recognition from FSF, and within the software industry. These collateral benefits were distinct from any benefit to other class members, and therefore an improper purpose.
In addition, there was no evidence suggesting Google or the other plaintiffs would reconsider their position with respect to FSF. Mr. Warner’s continuing pursuit of agreement to FSF was without promise and would result in delay, prejudicing the interests of class members. For these reasons, the Court found he was not qualified to act as representative plaintiff.
Having determined to remove Mr. Warner, the Court turned next to the issue of whether Klein LLP was disqualified from continuing on as class counsel. Mr. Warner argued that Klein LLP breached its duty of loyalty, and its disqualification was necessary to maintain the repute of the administration of justice.
Weighing this argument, the Court observed that the application of legal ethics is one of the many ways in which class proceedings are sui generis (or in non-legalese, “unique”). Class counsel have well-established duties to their client, but also have a “relationship with, and…owe certain duties to, potential class members.” Class counsel’s duty to a named plaintiff like Mr. Warner is “inherently qualified from the outset.” Indeed, the Court held that “class counsel never owe an exclusive duty of loyalty to the plaintiff in the traditional sense” because of the relationship with potential class members.
Thus, practical considerations must be made about advancing the interests of the collective whole. Class counsel have a duty to ensure that the prosecution of the action is carried out in a manner that achieves this goal, and in the circumstances did what was necessary to facilitate the prompt resolution of the matter. Accordingly, Justice Tucker was satisfied there was no breach of the duty of loyalty and, furthermore, that “removing Klein LLP at the present stage of the proceedings would not be necessary to avoid bringing the administration of justice into disrepute. To the contrary, it would introduce unnecessary cost and delay to the prejudice of the class.” If Klein LLP were removed, and the finalized settlement thrown back up in the air, the interests of class members would undoubtedly be compromised.
Conclusion
Warner highlights the careful ethical balancing act that must be performed by class counsel when the interests of the client and the class come into conflict pre-certification. In the author’s opinion, the Court got it right. Mr. Warner was not the only one with rights and interests at stake, but it appears he put his desires first.
There are lessons here for both named plaintiffs and counsel. Mr. Warner felt betrayed by his lawyers, who were responsible for taking his instructions and advancing his interests. But what that ignores was that this was not a normal piece of party-versus-party litigation. Class actions bring to the fore unique obligations that must be considered by the named plaintiff in their instructions. When the plaintiff takes self-interested steps for an improper purpose, the court will intervene, and in the appropriate circumstances, disqualify them. As for counsel, they must not only take their client’s instructions, but also consider how those instructions might impact the rest of the class. Where the impact is severe, counsel must take steps to address the issue and ensure that the proceeding moves ahead. The simpler lesson is this: when there is a communication breakdown, lawyers and clients must take extra steps to be clear, and to make sure they are listening well to the other side.
1 Warner v. Google LLC, 2020 BCSC 1108, https://www.canlii.org/en/bc/bcsc/doc/2020/2020bcsc1108/2020bcsc1108.html
2 Online: https://lawfoundation.on.ca/for-lawyers-and-paralegals/direct-a-cy-pres-award/