Assessing Fees When Class Actions Follow Government Action

The Supreme Court of Canada’s Sun-Rype and Fischer decisions have recently focused attention on the relationship between public enforcement and private class actions. This essay considers an under-studied aspect of that relationship; namely, how courts should calculate fees in a class action that follows and benefits from a prior government enforcement action. The author contends that class actions that follow government actions are less risky for class counsel and are inferior to independently initiated class actions at ensuring behaviour modification and access to justice. Accordingly, the author argues that Canadian courts should follow the US Courts of Appeals for the Second and Third Circuits and adopt a specific rule governing fees when class actions follow government action. This rule would both reward plaintiffs’ attorneys who independently initiate class actions with increased fees, and would reduce fees for class actions that follow government action in proportion to the benefit that class counsel receive from the prior government action. This rule will allow courts to appropriately assess risk in light of the reduced-risk profile that class actions that follow government action generally present. It will also encourage independently initiated class actions and thus help ensure behaviour modification and access to justice for wrongs in cases of government inaction.