In an interesting decision out of Ontario a couple weeks ago, the Court refused to approve settlement of a class action against legal publisher Thomson Reuters: Waldman v. Thomson Reuters Canada Limited, 2014 ONSC 1288.
Thomson Reuters runs Carswell which has a database called Litigator. Litigator compiles court documents (factums, pleadings, affidavits) from interesting or high profile cases and allows other lawyers to access them electronically. Waldman, a lawyer for Maher Arar whose documents had found their way onto Litigator, brought the claim as class plaintiff alleging copyright violations. The class was certified and was to include lawyers whose documents had wound up on Litigator: 12,000 – 13,000 lawyers.
In mid-2012, the release of the SCC’s copyright decisions (Society of Composers, Authors and Music Publishers of Canada v. Bell Canada, 2012 SCC 36; Alberta (Education) v. Canadian Copyright Licensing Agency, 2012 SCC 37, made the class action far riskier as it strengthened the defendant’s fair dealing defence. Thereafter, a settlement was negotiated.
Per the terms of settlement, Thomson would fund a $350,000 cy-pres trust to support public interest litigation. Class members would not only receive no payout, they would sign a release and grant a non-exclusive licence of their copyrights in the court documents to Thomson. The judge described this change of position as follows: “Upon analysis, the behaviour modification arguments of the parties in the case at bar are reminiscent of the entreaty of the Brer Rabbit who cunningly begged not to be thrown into the briar patch to which he actually wished to return.”
Further, as a term of the settlement, class counsel would be paid fees of $825,000.
In considering the settlement, the judge quotes from a variety of letters of objection from class members including Sharon Matthews, Q.C., and other B.C. lawyers. One lawyer, from a highly regarded firm that does class action work, comments: “From my admittedly limited understanding of this action, it appears to be a case which benefits Defence Counsel and Class Counsel, with no real benefit to individual class members. I expect that members of the public without legal training who see the relative sizes of the cy-près payment and Class Counsel fees would be more critical than I am. I believe that contingency fees and class actions play important roles in our legal system, but their legitimacy is undermined where there is a perception that only the lawyers benefit. As a result, I object to the proposed settlement.”
The judge clearly saw things similarly, rejecting the settlement:
 I begin by saying that the Settlement is fair and reasonable for the immediate parties to the Settlement; that is, Mr. Waldman, Class Counsel, and Thomson.
 In his factum, Mr. Waldman stated that in light of the recent Supreme Court of Canada copyright law jurisprudence, there was a substantial likelihood of the action being dismissed, and I, therefore, think the Settlement Agreement is an excellent settlement for Mr. Waldman and for Class Counsel, and indeed it would be a great success for them if I approved the Settlement and they emerged unscathed from what started out as high-risk uncertain litigation but what has become prohibitively high-risk litigation.
 Approving the settlement would be an excellent result for Thomson, which at an expense of approximately $1.2 million is purchasing something of value; namely approximately 13,000 non-exclusive copyright licences and also releases from the copyright owners. Some litigation risk remains for Thomson and a settlement spares Thomson the uncertainty, time, and expense of litigation. It may secure some goodwill by establishing the cy-près trust. Thomson also secures the right to continue its business more or less at it did before without paying for licences for future copying of court documents. After ten years, and perhaps earlier, it can return to its practice of not giving notice to Class Members that their documents have been included in Litigator.
 Of course, a class action settlement is not approved because it is an excellent result from the perspective of the representative plaintiff, defendant, and class counsel. To be approved, the settlement must be substantively, procedurally, circumstantially, and institutionally fair to class members. In the case at bar, I think that the best that can be said for the proposed Settlement is that it is procedurally fair and that it was arrived at after the hard bargaining of very competent counsel on both sides.
 I, however, do not find that the Settlement Agreement is substantively, circumstantially, or institutionally fair to Class Members. In this regard, I agree with the general sentiment of the objectors to the Settlement that the Settlement Agreement brings the administration of justice and class actions into disrepute because: (a) the Settlement is more beneficial to Class Counsel than it is to the Class Members; and (b) in its practical effect, the Settlement expropriates the Class Members’ property rights in exchange for a charitable donation from Thomson.