A Cautionary Tale: Saskatchewan Court Refuses To Approve $20 Million Class Action Settlement

The recent decision in Perdikaris v. Purdue Pharma et al., 2018 SKQB 86 refusing approval of a $20 million class action settlement is an important reminder that settlement approval is not a "rubber stamp" process. Canadian Courts have generally exercised their supervisory jurisdiction over class action settlements liberally and approved them unless the settlements are clearly unfair. However, Perdikaris is an important reminder that Courts may closely scrutinize the proposed settlement—including the evidence, assumptions, and calculations put forward by class counsel to justify the settlement amount—to ensure the settlement is in the best interests of the class.

Perdikaris involved a proposed $20 million settlement of a class action against the makers of OxyContin® and OxyNEO® on behalf of persons who became addicted to the drugs prescribed by their physicians. The settlement had already been approved in Ontario, Nova Scotia and Québec but, in Saskatchewan, Justice Barrington-Foote refused. He was not satisfied the proposed settlement was fair, reasonable and in the best interests of the class. The judge was particularly concerned that class counsel had failed to use appropriate assumptions and estimates when calculating the number of class members and expected damages for settlement purposes, such that the potential damages of the class might be much larger than those estimated by class counsel.

The judge also found that the $2 million portion of the proposed settlement allocated to the provincial health insurers (PHIs) could not be approved because class counsel had not received approval for the settlement from the PHIs in accordance with their applicable subrogation legislation. Citing the Saskatchewan legislation as an example, the judge found that an action in which the PHI's subrogated interest is advanced could only be settled for full payment of the cost of health services received by the beneficiary...