GM class settlement nets class counsel judge-approved ‘premium’

Fees will amount to $1.9 million including an $804,000 premium to lawyers acting on behalf of plaintiffs in a class action against General Motors Canada over cuts to employee benefits

In early August, a group of about 3,200 non-union retirees reached a settlement with General Motors Canada Ltd. after the company cut their benefits as part of restructuring during 2008.

GM Canada will pay $9 million to the retirees to pay for life insurance claims and health benefits lost.

GENMO is a group of non-unionized salaried employees and executives who retired between Jan 1, 1995 and Oct. 20, 2011. In May 2010, they filed a class action lawsuit against General Motors of Canada. Leading the action in O’Neill v. General Motors of Canada was Joseph O’Neill, who worked at GMCL for more than 40 years. Several years into his retirement, GM reduced his health care benefits and cut his life insurance benefit from just under $100,000 to $20,000. O’Neill commenced the class action on behalf of the salaried and executive retirees. O’Neill passed away in 2012 and Lynn McCullough replaced O’Neill as the representative plaintiff.

In the summary judgment decision released in July 2013 Justice Edward Belobaba found for the class members on most of the issues. GMCL appealed the decision and the plaintiff cross-appealed on the issues on which he was not successful. Shortly after the parties served their appeal factums, they began to explore the possibility of resolving the action in its entirety.

They agreed to adjourn the appeal for three months to see if the matter could be settled. The parties obtained actuarial valuations of the class members’ claims, tried mediation without success and then, just days before the appeals were to be heard, reached agreement.

The proposed settlement establishes a $9-million fund for past life and health claims to cover the period up to Aug. 31, 2014, and restores most of the class members’ health and life insurance benefits effective Sept. 1, 2014.

In his Aug. 27 comments in the settlement approval, Belobaba praised the settlement and approved a premium of $804,746 proposed in the legal fees for class counsel.

“This was a very big win and it deserved a good fee for class counsel,” says Kirk Baert, a partner with Koskie Minsky LLP, adding that “overall it’s a positive decision for class counsel.”

“The judge said the fees were very, very reasonable for the work undertaken, the risk taken and the success achieved. Also, his view was that he tends to give a large amount of weight to the agreement signed at the outset. This has not been the practice to date as many judges have used hindsight to assess the risk.”

Of the $3 million allocated to fees by the defendant, $1,033,334.06 was remitted to the Class Proceedings Fund; and $903,200.06 went to GENMO (the organization made up primarily of class members who had funded the litigation) to reimburse them for their legal fees. The balance (over and above the premium) was for disbursements incurred after settlement, and costs of administering the settlement, which Sack Goldblatt Mitchell LLP and Sotos LLP will be handling. With the premium of $804,746 the total in legal fees paid to class counsel will be about $1.9 million.

“I find that this is completely reasonable,” Belobaba said in his remarks. “Given that the actuarial value of the overall settlement is in the range of $130 million, a payment to class counsel of legal fees in the amount of $1.9 million is only about 1.5 percent of the overall recovery — well under the 10 or 20 per cent that, in my view, would have been readily approved had the retainer been on a contingency basis.”

Class counsel initially agreed to work on a straight hourly basis. The retainer agreement with GENMO provided that class counsel would render monthly accounts and be paid on the basis of their hourly rates and incurred disbursements. Class counsel advised they have been paid just over $903,000 on the basis of this retainer.

The initial retainer agreement was formally revised in July 2014. GENMO agreed to pay a “premium” if the result achieved justified such a premium and if the payment of the premium did not come from the members of the class.

Belobaba noted: “I pause here to note that normally I would view payment of ‘premium’ requests with suspicion. I take initial retainer agreements seriously and, as a general rule, would only approve an additional premium if I was satisfied that the premium was agreed to not just by the representative plaintiff but by a significant majority of class members, and that the premium would not come from funds that belong to the class. Here, I am satisfied on both points. The premium was agreed to by GENMO, an organization that funded the litigation and de facto represented the class; and the premium would not come from class members but was included in a separate payment from GMCL.

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