Tobacco class-action loss, a victory of sorts

…was appalled at the tobacco companies' tactics. "It's exceedingly rare for costs to be visited on lawyers," he says. "That's Draconian to seek costs against counsel." He argues that the high cost to contingency-fee lawyers of bringing forward class-action cases provides enough disincentive against launching cases with little or no merit.

The Globe and Mail
March 21, 2005

Tobacco class-action loss, a victory of sorts
Cigarette giants tried, but failed, to win court costs against law firm, BEPPI CROSARIOL says
Beppi Caroariol

Toronto lawyer Andreas Siebert is a surprisingly happy man for someone who recently lost a costly, nine-year court battle against Canada's Big Three tobacco multinationals.

That's because Mr. Siebert considers himself lucky to have avoided losing much more than just the case — specifically, more than $1.2-million in court costs sought by the cigarette giants for the trouble he and his law firm caused them.

In a highly unusual case in Ontario's Superior Court watched closely by class-action litigators across the country, lawyers for the defendants — Imperial Tobacco Ltd., Rothmans Benson & Hedges Inc. and JTI-Macdonald Corp. — earlier this month turned the tables on Mr. Siebert and his law firm, Sommers & Roth.

They asked a judge to hold the lawyers financially accountable for driving up legal fees with "errors," and "excessive" motions and cross-examinations.

Ultimately, Mr. Justice Warren Winkler dismissed the tobacco companies' request, saying that to punish lawyers as well as clients would have a "chilling effect" on important future litigation.

The case serves to highlight the rising tensions between not only plaintiffs and defendants in highly emotional product-liability lawsuits, but also between the legal teams on either side of the class-action war zone.

"The court recognized that where you have a bona fide claim being put forward by plaintiffs' counsel, [the lawyers] shouldn't be punished for having represented poor plaintiffs or persons with modest means," says Mr. Siebert, who helped launched the lawsuit that was dismissed late last year.

The original suit was launched in the mid-1990s on behalf of four sick smokers who claimed their illnesses were the result of tobacco company negligence. They sought class-action status for their suit, which would have enabled millions of other smokers to join in and collect any resulting damages.

However, after a protracted battle, Judge Winkler declined to certify the case because it was too broad and unworkable.

So, in a surprise move, lawyers representing the three tobacco companies sought to penalize their opponents with a bill for their considerable lawyers' fees.

Laws in most provinces, including Ontario, generally entitle the winning side in a civil suit to recoup a portion of their legal fees from the loser.

In class-action cases in particular, however, such costs tend to be awarded much less frequently and, depending on the province, only in specific circumstances.

In Ontario, for example, a successful defendant cannot collect costs for class proceedings that are deemed to raise novel points of law or that involve a strong public-interest component. It was mainly on those two scores that the tobacco companies failed.

As Judge Winkler wrote in his March 8 decision: "The use of tobacco products is considered to constitute a serious risk to the health of the public in this province and elsewhere in Canada. It logically follows that any proceeding that might have the effect of either curtailing the use of those products or visiting the health costs of their use on the defendants rather than the public at large clearly raises issues that go beyond the interests of the proposed class, and is of some specific societal significance to residents of Ontario and the rest of Canada."

Still, lawyers for the defence say the landmark decision will ultimately have the effect of making it nearly impossible to ever recoup costs in a class-action proceeding — a harsh development that they say is at odds with the general loser-pays rule in Canada.

"This decision is going to make it very difficult for successful defendants to recover costs in class-action proceedings," says Lyndon Barnes, a senior partner with Osler Hoskin & Harcourt LLP, who led the case on behalf of Imperial Tobacco. "In a system where the loser pays, yes, it's unfair."

And, he adds, denying costs to defendants in class actions would be particularly punishing to large corporations targeted by such suits because they are obliged to defend themselves with vigour due to the potentially catastrophic consequences of losing.

"The defendants have to take class-action proceedings extremely seriously because usually the magnitudes of the sums of money being sought are significant to the bottom line of the companies," Mr. Barnes says.

What made this case unusual, however, was that, instead of seeking costs only from the plaintiffs, the tobacco companies' also attempted to recoup costs from the plaintiffs' lawyers, whom they argued were the real agents — in their words the "de facto plaintiffs" — behind the case.

The novel argument underscored one of the more controversial aspects of class-action suits, many of which involve product-liability or malpractice claims. Typically, lawyers fighting such cases work on a so-called contingency-fee basis — performing work at no upfront cost to the plaintiffs in the hope of scoring a substantial portion of any settlement or court award, typically in the range of 30 to 40 per cent.

Critics argue that such arrangements encourage a form of lawsuit lotto in which lawyers champion cases that have negligible merit on the assumption that large corporations with deep pockets prefer to settle out of court rather than entangle their executives in lengthy and distracting litigation.

But on this point, too, Judge Winkler disagreed. The defendants, he wrote, "allege at the same time that the plaintiffs' counsel were the de facto plaintiffs by their conduct. There is no evidence to support that assertion and I reject it."

Lawyers who specialize in advocating plaintiffs' class actions agree.

"That's a huge swipe at you as a plaintiffs' counsel," says Harvey Strosberg, a partner at Windsor, Ont.-based Sutts Strosberg LLP and one of the country's leading plaintiffs' lawyers specializing in class actions.

Mr. Strosberg says the strategy of trying to penalize lawyers for spearheading class actions in Canada is unheard of. "It's precedent setting in the sense that, in the context of a class action, it's the first time that I've seen this having been done."

David Church, a partner at litigation firm Church & Co. in Vancouver, says the Ontario decision affirms what he considers to be the vital and courageous role that lawyers play in furthering the public good by actively soliciting class-action cases on behalf of victims who don't have the money or knowledge to take up on their own.

"You cannot have these cases unless you have lawyers' involvement," he says. "And the lawyers often will find the plaintiff, the lawyers will often find the cause of the action and the lawyers will often pursue it. And it will be out of the lawyers pocketbook if the action isn't successful."

Some observers, however, argue that it's wrong to view the plaintiffs' counsel exclusively as "little guys" who are outgunned by comparatively rich corporations.

"This is not a loosely organized David-and-Goliath setting," says Prof. Lorne Sossin, associate dean of University of Toronto's law faculty and an expert in administrative law and civil litigation. "These are very capable, well-organized and well-financed counsel often in these large cases."

He says there's a popular "Hollywood notion" that all class-action suits are brought forth by destitute individuals who rack up monumental legal fees on credit. "I'm aware of very few cases where class-action litigation in Ontario has been advanced with personal credit cards getting maxed out."

The Ontario class-action case was also followed closely in British Columbia, which, like most provinces — in contrast to Ontario — denies defendants the recourse to seek legal costs except in rare circumstances, such as when a suit is brought forth out of malice or for an ulterior motive.

J.J. Camp, a partner with Camp Fiorante Matthews, a Vancouver firm specializing in plaintiffs' litigation, was appalled at the tobacco companies' tactics.

"It's exceedingly rare for costs to be visited on lawyers," he says. "That's Draconian to seek costs against counsel." He argues that the high cost to contingency-fee lawyers of bringing forward class-action cases provides enough disincentive against launching cases with little or no merit.

The Ontario tobacco case, he adds, affirms his opinion that the Ontario Class Proceedings Act should be amended so that no costs are awarded to any party.

"People do not bring frivolous class actions in B.C.," Mr. Camp says. "You've got to be a dumb lawyer to bring a bad case."

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