Court Rejects Class Action Settlement in Long-Standing Copyright Dispute Between Lawyers and Legal Publisher

Court Rejects Class Action Settlement in Long-Standing Copyright Dispute Between Lawyers and Legal Publisher

An Ontario Superior Court has rejected a class action settlement between the publisher Thomson Reuters and a collection of Canadian lawyers and law firms, stating that the proposed settlement is not “fair, reasonable, or in the best interests of the Class Members.” The proposed settlement would have seen Thomson Reuters fund a trust for public interest litigation, and would have provided counsel with contingency fees, but included no compensation for class members and the imposition of a non-exclusive licence allowing the publisher’s use of lawyers’ written materials.

Procedural History

In May 2010, a collection of lawyers and law firms in Canada launched a class action suit against Thomson Reuters, alleging that the company’s Westlaw “Litigator” service directly infringed works in which the individual members owned copyright. The claim, led by representative plaintiff Lorne Waldman, alleged infringement in over 50,000 works available through the Litigator service, and sought general damages of $50 million, as well as $1 million in Punitive Damages (IPilogue’s coverage of the initial statement of claim is available here).

In February 2012, Judge Perell granted class certification for the proposed action under the Class Proceedings Act, 1992, SO 1992, c C-6 (for IPilogue’s coverage of the certification, see here). In the decision granting certification, the Court noted certain public policy problems involved in granting copyright protection to the types of material included in Westlaw’s Litigator service. Citing IP Osgoode's Professor David Vaver, Judge Perell noted in paragraph 93 that recognition of copyright in such materials

would affect the ability of lawyers to serve other clients and would detract from the profession’s obligation to serve the public to the best of its ability, would promote needless variety when standardization and consistency in legal expression would be beneficial, and would monopolize legal services and suppress healthy competition.

However, as this was a certification proceeding, the Court declined to rule on the merits of the action and specifically made no finding on the existence or restriction of copyright protection in court documents.

The Proposed Settlement

Two years after certification, and four years after the action was commenced, the parties negotiated a settlement agreement. One major factor spurring settlement was the SCC’s release of its Copyright Pentalogy cases, two of which (Society of Composers, Authors and Music Publishers of Canada v Bell Canada, 2012 SCC 36 and Alberta (Education) v Canadian Copyright Licensing Agency, 2012 SCC 37) dealt with the fair dealing exception in a manner which had a direct impact on the litigation.

Counsel for the affected class saw these decisions as “substantially increase[ing] the litigation risk for the Class Members” [para 46], as the decisions of the Supreme Court provided Thomson Reuters with a broader fair dealing defence, and clarified that the for-profit nature of its Litigator service was not an insurmountable barrier against pleading fair dealing under s. 29 of the Copyright Act. The negotiations which followed were, in the words of the Court, “adversarial, arm’s length, and intensive.” In the end, Thomson Reuters made no admission of liability, and continues to deny the validity of Waldman’s claim.

Nevertheless, the parties were able to come to a mutually agreeable conclusion. Thomson Reuters insisted on a licence as part of the settlement, to avoid any claims in the future. Counsel for the class members proposed that Thomson Reuters fund a cy-près trust in the amount of $350,000 in lieu of direct compensation for individual plaintiffs, as specific losses were impossible to calculate.

The settlement also included mandatory copyright notices to users of the Litigator service about potential third-party copyright claims affecting the material accessible through Westlaw’s database. Class Members were permitted to opt out of the settlement, and Counsel for the plaintiffs secured $825,000 in legal fees as part of the settlement.

Fair and Reasonable: Objection to the Settlement and its Rejection by the Court

This proposed settlement was objected to by seven class members, all of whom are individual lawyers whose works appear on the Litigator service. Of these seven, five explicitly mention the disproportion between the amount awarded to the Class ($350,000) and the amount awarded to Class Counsel ($850,000).

Of the remaining two lawyers, one strongly objected to the notion that he retained any copyright in his court documents after they were filed, and objected to the suit on principle. Another objector claimed that no licence should be given to Thomson Reuters, as the settlement would therefore confer a direct benefit on the defendant (a licence) but only an indirect benefit on the plaintiffs (a fund for public interest litigation).

The Court agreed with the objecting Class Members, and rejected the settlement on the grounds that it was not fair, reasonable, and in the best interest of Class Members. In particular, Judge Perell emphasized that the paramount concern in approving a proposed class action settlement is access to justice. Moreover, the decision contains a consideration of what the phrase “access to justice” means in the context of class action settlement. In addition to substantive and procedural fairness, the Court held that a consideration of fairness in the context requires a court to consider:

circumstantial fairness, i.e., the fairness of the settlement to the parties and the class members in their particular circumstances, institutional fairness, and the fairness of the settlement from the perspective of a robust notion of access to justice that includes an outcome that objectively should satisfy the class members’ entitlement to justice for their grievances. [para 88]

In particular, “institutional fairness” prevents a Court from “rubber stamping” settlements, to avoid setting an example through which fatigue, incompetence, opportunism, or the business model of Class Counsel or representative plaintiffs will result in a settlement which restricts the legal options of individual Class Members.

In the current settlement, the Court found it was unable to approve the settlement both because the award to Class Counsel was larger than that to Class Members, and because the settlement effectively “expropriates the Class Members’ property rights in exchange for a charitable donation from Thomson” [para 95].

Moving Forward – Class Actions and Copyright Infringement in Canada

The decision contains valuable insight into judicial approval of class action settlements involving copyright infringement in Canada. The idea of class certification in copyright infringement actions seems at first glance to overcome some of the current barriers imposed on rights holders in asserting claims in the current legal climate – in particular the difficulty of proving individual damages, the restrictions on statutory damages imposed through recent legislative amendments, the limited means of some rights holders, and the relative power of organizations which distribute and communicate works to the public.

However, the decision in Waldman v Thomson Reuters shows that such actions have substantial public policy considerations involving access to justice. In particular, the decision shows that “access to justice” means something particular in the context of a settlement. The access to justice at issue is that afforded to members of the Class, not general projects – such as a fund for public interest litigation – which may provide access to justice for society writ large.

In addition to the concern about optics, the Court also addressed the ability of Class Members to “opt out” of the settlement agreement.  Since classes are certified in part because individual members lack the resources to pursue claims individually, the Court saw the argument that the settlement was fair because individual members could opt out as “specious.” Class action infringement suits may offer Canadian rights holders a powerful option for protecting their intellectual property, but the Ontario Superior Court has made it clear that such options must be exercised with a real concern for the Class Members whose rights are being protected.

David Bowden is an IPilogue Editor and a JD Candidate at Osgoode Hall Law School