Challenges To Proposed Class Action Settlements Must Be Based On Reasonableness Or Fairness

• Published date: 22 July 2022
• Subject Matter: Litigation, Mediation & Arbitration, Class Actions
• Law Firm: McCarthy Tétrault LLP
• Author: Ms Mirabelle C. Harris-Eze and Lyndsey Delamont

In Larocque v Yahoo! Inc., 2022 SKQB 136, the Saskatchewan Court of Queen's Bench confirmed its jurisdiction to grant a permanent stay of a class proceeding and held that there was no reason to find that a proposed overlapping settlement in Ontario was unfair or unreasonable, or that it failed to serve the best interests of the class as a whole.

Larocque illustrates that a plaintiff asking the court to reject a class action settlement must meaningfully challenge the reasonableness or fairness of the settlement agreement. Conversely, defendants must ensure their settlement agreements fall within a zone of reasonableness.

Background

In December 2016, the Ontario Superior Court of Justice certified a national class action styled as Karasik et al v Yahoo! Inc. and Yahoo! Canada Co. Five months later, and 2000 miles away, the plaintiff in Larocque commenced a substantially similar action in Saskatchewan. Both actions were purported national class actions arising from the alleged failure of the same defendant to prevent data breaches.

In Larocque v Yahoo! Inc., 2020 SKQB 263, Justice Elson adjourned the certification hearing and ordered a permanent stay pending the Ontario court's decision on settlement approval. In January 2021, the Ontario court approved a settlement agreement, conditional on the SKQB granting a permanent stay of Larocque.

SKQB Decision

The central issues before the SKQB were whether:

1. the court had jurisdiction to grant a permanent stay when not hearing a certification application; and
2. the settlement terms in the Ontario action were fair reasonable, and in the best interests of the class as a whole.

Jurisdiction Issue

The plaintiff argued that the court's authority to grant a stay in class action hearings was confined to the certification stage, where the court must consider s. 6(2) and (3) of the Saskatchewan Class Actions Act. S. 6(2) and (3) direct the court to engage in a preferability analysis when deciding whether to certify an action that involves similar subject matter to a multi-jurisdictional class action commenced elsewhere in Canada.

Justice Elson rejected the plaintiff's argument. The court has a broad authority to grant a stay under the Saskatchewan Queen's Bench Act. The court's discretion simply need be "based on evidence and [consistent] with recognized principles of law" (para 47).

Best Interests of the Class

Justice Elson found that the Ontario court's decision to...