Canada Court Clarified Extent of Duties for Class Action Settlement Administrators
Settlement administrators often play a crucial role in reaching and finalizing class action settlements. These administrators can help efficiently manage settlements by ensuring precision and thoroughness. If a firm has not retained an administrator to help with a class action, there is a good chance that the court will appoint one. A court in Canada recently determined what obligations a class action settlement administrator has when evaluating an individual Class Member’s claim. The court concluded that the settlement agreement terms will play the biggest part in establishing an administrator’s role. (DePagie v Crawford & Company Inc., 2018 ABCA 326)
Summary of DePagie Decision Affecting Class Action Settlement Administration
The DePagie decision stems from a class action lawsuit centered on blood transfusions that transmitted Hepatitis-C to several individuals treated in Canada. The class action spanned over multiple jurisdictions for several years, yielding a number of settlements. The settlement in question listed six disease levels where compensation increased at each level. The Class Member submitted a claim seeking compensation, which the court approved in May 2010 at level 2 based on his physician’s evaluation.
The claimant passed away in March 2012. His son, as the estate’s personal representative, asked the court for leave to sue the settlement administrator based on improper evaluation. The estate argued that the claimant should have received compensated at a level 3 and that the administrator had a duty under the settlement agreement to delve further into the claim. The chambers judge analyzed the request for leave based on whether the estate would have a “reasonable possibility of success” if the action proceeded. The judge denied the petition for leave and the estate appealed to the Court of Appeal of Alberta.
The estate maintained that the court should have evaluated the petition under the “actionable wrong” test, which was a much lower standard. The appellate judge dismissed the appeal and concluded that the chambers judge applied the correct test, explaining:
The “reasonable possibility of success” test is consistent with the purposes that are served by class action settlement agreements; namely certainty and finality. Pretrial settlement of class proceedings is in the public interest, as it reduces legal costs and enables efficient use of court resources.
Applying a lesser test would defeat the gate-keeping function for class action settlements, the purpose of which is to maintain the integrity of settlements and ensure conclusiveness. The court also agreed with the chambers judge, who concluded that the settlement administrator fulfilled their duties under the agreement. In short, the claimant’s physician was the party who was responsible under the settlement agreement for determining disease level, and the administrator was not required to challenge this qualified and complete determination or independently investigate.
How This Decision Affects Future Class Action Settlement Disputes
This decision will significantly affect Canadian litigators and settlement administrators who deal with class actions. In the present case, the estate pointed out that a Canadian court has never decisively determined what an administrator’s duties are under settlement agreements. Even though the petition was denied, the court still offered guidance about the extent of these duties. The important takeaways are:
- When determining whether to authorize suit against an administrator, courts should give significant weight to the underlying objective of maintaining finality for class action settlement agreements.
- Courts should look to the text of the specific settlement agreement at issue to ascertain an administrator’s duties. If the settlement agreement does not impose certain obligations on the administrator, courts should not hold them responsible for performing these additional duties.
- Courts should continue to analyze challenges against administrators under a stricter standard so only claims with merit will be approved for further litigation.
After a class action ensues, the members, parties, administrator, and court have the same goal: reaching a favorable conclusion in order to remedy any wrongdoings in a fair and just manner. Administrators are an important element to the class action process that help carry out this objective. Since there are so many moving parts in class action proceedings, it makes sense that the court would confine an administrator’s duties to what the parties agreed upon in the written agreement. Placing extra duties requiring settlement administrators to essentially doubt the role of others (here, the physician) would open the floodgates for endless challenges and never provide finality for the Class Members and defendants.