Precedent Set in B.C. for Litigation Funding Agreements
June 24, 2014 | Bridgepoint Financial |Posted in Viewpoint
Decision paves way for future motions to approve LFAs in province
On May 28th, 2014, Justice Gropper of the British Columbia Supreme Court approved a Litigation Funding Agreement (“LFA”) in the class action Stanway v. Wyeth Canada Inc.1 This represents the first time a B.C. court has approved a third party financing agreement for class actions.
The B.C. class action concerns the use of the hormone replacement therapy drugs, Premarin and Premplus, which were and are sold by Wyeth Canada Inc. The compensation is sought on behalf of women who were prescribed these drugs between January 1, 1977 and December 1, 2003 and were diagnosed with breast cancer. The action was certified as a class action in August 2011 and this was upheld by the British Columbia Court of Appeal in June 2012. A trial is expected to be held in the fall of 2014. The law firm, Klein Lyons, represents the representative plaintiffs in this action.
The representative plaintiffs, through their counsel, had negotiated an arrangement with BridgePoint Global Litigation Services (“BridgePoint”) to fund disbursements for the class action. The agreement provides that funding would be advanced in three separate instalments with the recovery by BridgePoint to depend on the amount advanced.
The Court recognized that although British Columbia is a no cost regime for class actions, representative plaintiffs and their counsel still face the daunting task of funding disbursements to move the litigation forward:
While British Columbia class action plaintiffs do not face that [adverse cost] risk, they still face the obligation for the payment of disbursements even if they are successful. In a claim such as this one where there will be an intense battle of experts, the disbursements can be several thousands of dollars. As Strathy, J. points out: “The grim reality is that no person in their right mind would accept the role of representative plaintiff if he or she were at risk of losing everything they own. No one, no matter how altruistic, would risk such a loss over a modest claim” (at para 28)...2
After reviewing the current caselaw and the terms in the LFA and hearing the arguments presented by both sides, Justice Gropper made the following findings:
- BridgePoint is the only third party funder that provides litigation funding in a personal injury claim. There is a limited market from which the representative plaintiffs could choose a litigation funder for the funding that they were seeking.
- Compensation takes into account risk. The Court found the LFA to be reasonable and fair. The Court recognized that litigation can be protracted and the results speculative. As a result, BridgePoint would have taken these factors into account when determining its compensation. Further, the Court found the commission in the LFA to be consistent with commissions that have been approved in other cases.
- Counsel maintains its independence. The Court did not find that the independence of the representative plaintiffs’ counsel would be affected by the LFA. In particular:
- The termination clause would only come into effect in an extreme circumstance such as abandonment of the claim;
- There was no reason to believe that the representative plaintiffs and their counsel would not meet the requirement that they comply with a Court approved litigation plan in order to continue funding; and
- While BridgePoint could provide advice to the representative plaintiffs’ counsel, counsel has no obligation to follow the advice.
- BridgePoint is obliged to sign a Confidentiality Undertaking. The defendants had expressed concern that BridgePoint would have access to documents that had been provided by its American counterparts under an Access Order. The Court ordered that BridgePoint would need to sign a confidentiality undertaking before having access to any documents covered by the Access Order.
- The representative plaintiffs do not need to obtain independent legal advice on a LFA. The Court dismissed the defendants’ suggestion that the representative plaintiffs obtain independent legal advice on the LFA. In British Columbia, representative plaintiffs are required to obtain independent legal advice on contingency fee agreements, but such agreements do not require court approval. Meanwhile LFAs require court approval before the representative plaintiffs can enter into one. Further, given that there had been significant progress on the action, the Court found that obtaining independent legal advice would be of little benefit at this stage of the litigation.
This decision paves the way for future motions to approve LFAs in British Columbia and is an important contribution to the developing caselaw on LFAs in Canada. BridgePoint is proud to be able to assist the representative plaintiffs and their counsel in Stanway v. Wyeth Canada Inc. as they move the litigation forward to resolution and break new ground establishing a precedent for future financing transactions.Insights