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In Canada, class actions are supervised closely by the courts, which are obligated to protect the rights of absent class members. Accordingly, all of the major steps in class actions litigation require court approval. If there are questions about the conduct of a class action, affected parties are able to seek directions from the court. The following is a case study in which the court was required to take active steps to protect class members’ interests.

Court Supervision of Class Actions

In Canada, class actions are supervised closely by the courts, which are obligated to protect the rights of absent class members. Accordingly, all of the major steps in class actions litigation require court approval. If there are questions about the conduct of a class action, affected parties are able to seek directions from the court.

Counsel for the plaintiffs have an obligation to protect the interests of absent class members. Most class counsel, including Siskinds, take this responsibility very seriously and strive to protect the interests of all class members throughout the litigation.

The following is a case study in which the court was required to take active steps to protect class members’ interests. Siskinds was not involved in these cases. Indeed, in most class actions, the issues addressed below will not arise. Typically, the claims process is designed to be easy to complete, such that class members can submit a claim under a settlement without assistance from a third-party. In more complex cases, the claims administrator and/or class counsel can assist in this process.

You should contact class counsel before retaining a third-party to assist in the process, and are always entitled to seek independent legal advice before entering into a contract.

Case Study: Court Intervention to Protect the Rights of Claimants under the National Residential Schools Class Action Settlement Agreement

Canadian courts recently determined that claimants in the Independent Assessment Process (“IAP”) under the national Residential Schools Class Action Settlement Agreement (the “Settlement Agreement”) may have been coerced into signing illegal and unenforceable contracts with so-called “Form Fillers.” Furthermore, they may have been coerced into paying illegal fees to these Form Fillers under the contracts.

In the near future, claimants under the IAP process may be able to seek compensation for these Form Filler fees if they were paid under illegal and/or unenforceable contracts.

Background

As the result of Settlement Agreement, individuals who attended residential schools and suffered serious physical abuse, sexual abuse, or serious psychological harm are entitled to compensation through the IAP process. In this process, adjudicators assess the appropriate level of compensation to be awarded to claimants, who are frequently represented by legal counsel.

The Involvement of “Form Fillers”

In many cases, claimants were referred by their legal counsel to agencies that assisted them with filling out the paperwork associated with the IAP process. These agencies are commonly known as “Form Fillers.” In some situations, these Form Fillers are closely associated with the law firms offering legal representation to IAP claimants. Some complaints arose with respect to the Form Fillers—it was alleged that certain Form Fillers exercised inappropriate, sometimes coercive tactics in collecting fees, and that the fees themselves were illegal.

The Court Examines the Form Fillers’ Contracts

The Manitoba Court of Queen’s Bench recently examined the legal fees and form filling fees collected by the law firm of Kenneth Carroll (the “Carroll Firm”) and an associated form filling agency, First Nations Residential School Solution Inc. (“FNRSSI”)1. In the case of these entities, the Carroll Firm agreed to restrict its legal fees to 15% so that FNRSSI could charge a further 15%, resulting in the maximum allowable total fee of 30% on the IAP awards. Mr. Carroll became a 25% shareholder in FNRSSI and the FNRSSI office was set up in the same building as the Carroll Firm, with Mr. Carroll as its landlord.

The Manitoba Court concluded that FNRSSI’s contracts were contrary to public policy for three reasons:

  1.  they purported to be assignments or directions to pay from a claimant’s IAP award, which was contrary to the settlement agreement and the Financial Administration Act;
  2. they purported to charge for services in furtherance of IAP claims on a contingency basis; and
  3. they purported to provide what are essentially legal services.

As such, the contracts were void.

The FNRSSI contracts were also void for unconscionability. The Court found that the claimants were in a position of unequal bargaining power, so the contracts amounted to improvident transactions. The Court also found that Mr. Carroll did not meet his fundamental duty of loyalty to his clients and the Carroll Firm was relieved of its ability to pay settlement funds to claimants.

Conclusions of the Manitoba Court

The Manitoba Court took a strong stance opposing the payment of settlement funds to Form Filling agencies and crafted a pro-active order with a view to compensating those claimants who paid illegal fees.

The Court ordered that all “Service Contracts”, “Assignment Agreements” and “Directions to Pay” requiring IAP claimants to pay contingency fees to Form Filling agencies are null and void. Further, these agreements are void if they require IAP claimants to pay Form Filling Agencies for non-legal services.

All settlement proceeds obtained by the Carroll Firm were ordered to be paid to the Court Monitor for distribution to the IAP claimants.

The Court also imposed obligations on over thirty other Form Filling agencies. Finally, the Court required the Court Monitor to report to all of the Settlement Agreement’s Supervising Judges within four months and propose a means by which IAP claimants can recover monies paid to Form Filling agencies.

Similar Contracts in Other Cases

It appears that the problems found by the Court with respect to the FNRSSI contracts are not an isolated incident. A lawyer in Calgary, David Blott, was recently disbarred by the Alberta Law Society for taking financial advantage of survivors of residential school abuse.2 Mr. Blott hired a non-arm’s-length Form Filler company called Honour Walk, which raised concerns through its use of printed forms with pre-witnessed signatures and was banned from future participation in the administration of the settlement agreement.

Conclusion

As discussed above, this situation is unusual, but serves as a reminder of the importance of court supervision and professional class counsel who prioritize the protection of class members’ rights.

Class members are always entitled to seek guidance from class counsel. You should always speak to class counsel or a lawyer you trust before agreeing to pay anyone to file a claim for you.


1 Fontaine Estate v Canada, 2014 MBQB 113

2 Kim Pemberton, “Lawyer disbarred for allegations of misconduct while representing residential school survivors”, Vancouver Sun (June 23, 2014) online: Vanouver Sun

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