Written By Francesca Taddeo

In Walid c. Compagnie Nationale Royal Air Maroc, 2024 QCCS 2674, the Superior Court of Quebec refused to approve a settlement agreement because Class Counsel’s fees were unreasonable and excessive, even though the settlement was otherwise fair, reasonable and in the interest of class members, and no class member objected. This case is a reminder to parties of the risks of settlement agreements under which approval of the settlement is contingent on approval of Class Counsel fees.

The Court was concerned that the settlement agreement provided $110,000 in fees to Class Counsel, an amount which was likely to exceed what Class Counsel would have been entitled to under the terms of their contingency fee retainer with the plaintiff. Despite the Court’s invitation, Class Counsel also refused to amend the settlement agreement to allow for the approval of Class Counsel fees in two installments: a first installment payable immediately, and the value of a second installment to be determined after completion of the claims process.

Having found that Class Counsel's fees were unreasonable and excessive, the Court found it was unable to approve the settlement overall because the agreement provided that settlement approval depended on the approval of Class Counsel fees.  The Court considered this case to be an example of the possible downsides of such terms. Class Counsel’s position also caused the Court to have concerns as to the integrity of the negotiated settlement and whether Class Counsel might have been incentivized to put their interests before class members' interests.

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• When considering the reasonableness of Class Counsel fees, the Court will consider the amount of the fees in light of various factors, including the global value of the settlement and the amount provided for under the contingency agreement. 
• Settlement agreements can be structured to allow for negotiation and approval of Class Counsel fees to take place at different stages of the settlement process.
• The Court reaffirmed that its role does not include modifying the settlement agreements, although it can suggest amendments. 
• The Court would have approved the defendant (rather than a third-party claims administrator) as the claims administrator had the settlement been approved. The defendant was in possession of all relevant information and had the resources to pay class members directly, so having it act as claims administrator would have been efficient, cost-effective and in the best interest of the class.