The Lawyers

A.     Introduction 

[1]               In 2012, Ms. Hodge commenced a class proceeding pursuant to the Class Proceedings Act, 1992[1] against Gary Neinstein and Neinstein & Associates LLP seeking repayment to Class Members of legal fees and disbursements paid by the Class Members upon the settlement of their motor vehicle personal injury claims. She alleged that Mr. Neinstein and the law firm had breached the Solicitors Act[2] and their fiduciary duties because they charged an amount for costs in addition to a percentage fee under a contingency fee retainer agreement. She further alleged that the lawyers charged excessive or inappropriate disbursements and interest on the disbursements. In September 2018, after six years of litigation and after nine months of negotiations, including three days of mediation before the Honourable Warren K. Winkler, Q.C., the parties reached a settlement. This is a motion for court approval of the settlement and also for court approval of Class Counsel’s request for legal fees and for an honorarium for Ms. Hodge.

B.     Facts

1.      The Class Action Proceedings

[2]               In 2012, Ms. Hodge commenced a class proceeding against Gary Neinstein and Neinstein & Associates LLP seeking repayment to Class Members of legal fees and disbursements paid by the Class Members upon the settlement of their motor vehicle personal injury claims. She alleged that Mr. Neinstein and the law firm had breached the Solicitors Act and their fiduciary duties because they charged an amount for costs in addition to a percentage fee pursuant to a contingency fee retainer agreement. She further alleged that the lawyers had charged excessive or inappropriate disbursements and interest on the disbursements.

[3]               To pursue the proposed class proceeding, Ms. Hodge retained Class Counsel pursuant to a Contingency Fee Retainer Agreement that provided a contingency fee percentage of 33.3% of all amounts recovered for the Class Members or in the alternative at Class Counsel’s option, a multiple of up to 9 of the lawyers’ hourly rates expended on the case.

[4]               Mr. Neinstein and the lawyers of the law firm denied the allegations and opposed the certification of the action. They maintained that the question of whether or not fees charged in each particular client’s case was improper could be determined only on an individual basis following a review of solicitor-client privileged information, which would make a class action unmanageable.

[5]               There were three contested motions prior to certification: an abandoned third-party funding motion, an omnibus motion by the Applicant addressing a number of discovery-related and other matters,[3] and an extensive refusals motion.

[6]               In July 2014, I heard the certification motion. I refused to certify the proceeding. I concluded that it failed to satisfy the commonality and preferable procedure criteria for certification.[4] I concluded that the critical question raised in the case of whether the fees charged to a particular client contravened the Solicitors Act required an investigation from beginning to end of a lawyer and client relationship, between the individuals that formed that relationship and that assessments under the Solicitors Act were available and a preferable way to determine whether the fees in each case were fair and reasonable.

[7]               My decision was reversed by the Divisional Court, and it certified the proceeding.[5] Subject to deleting one common issue, the Court of Appeal affirmed the Divisional Court’s decision.[6] The Supreme Court of Canada dismissed a motion for leave to appeal from the Court of Appeal’s decision on December 7, 2017.[7]

[8]               The certified class includes clients of the law firm dating back almost 15 years. The class definition is as follows:

A client of Neinstein & Associates LLP or Gary Neinstein Q.C. that:

(a) signed or amended a contingency fee agreement or arrangement after October 1, 2004, and

(b) who has paid before December 9, 2015, being the date of certification, the respondents for their legal services on the completion of the matter in respect for which services were provided,

(c) except a client:

(i) for whom the court has approved the respondents’ fee;

(ii) for whom the court has assessed the respondents’ account; or

(iii) that have signed a release or settled any claim with respect to his or her contingency fee agreement or arrangement.

[9]               On March 2, 2018, Mr. Neinstein and the law firm served a Statement of Defence and Counterclaim to the Amended Amended Notice of Application. They advanced several substantive defences including:

1.   that the Solicitors Act provides a complete code which bars the claims;
2.   that Class Members cannot bring an independent cause of action for statutory breach;
3.   that the Limitations Act, 2002 bars a majority of claims;
4.   that in the alternative, there is no breach of the Solicitors Act as the fees charged were fair and reasonable;
5.   that the aggregate fees charged between tort and accident benefits typically do not exceed the percentage fee in the Retainer Agreement and therefore there was no breach; and,
6.     that disgorgement of fees is not an appropriate or available remedy on a class wide basis.

[10]           Mr. Neinsten and the law firm advanced a counterclaim that included a claim for payment of fees on a quantum meruit basis.

[11]           The merits of the Class Members’ claims remain to be resolved. A significant risk factor for Class Members is that if the litigation proceeds, the need for individual assessments will substantially delay recovery. Neinstein and his law firm submitted that the ultimate issue is whether the amount of compensation they received was fair and reasonable in light of the work they performed for each client in the circumstances of each individual.

[12]           The litigation was complex and it involved novel points of law, including the unresolved issues of whether breaches of sections 28.1(8), 28.1(9) and33 of the Solicitors Act could be pursued by way of a class action and whether disgorgement of overcharged legal fees and disbursements was a viable remedy. There was considerable litigation risk.

[13]           For fees, Class Counsel has expended approximately $1.3 million in lawyers’ time inclusive of HST but exclusive of time for preparation of the approval of the settlement motion and exclusive of the anticipated time to implement the settlement. To date, Class Counsel has received $361,702.98 inclusive of HST in partial indemnity costs from the interlocutory orders and appeals.

[14]           Ms. Hodge has been active participant throughout these proceedings. She attended most hearings at each level of court, reviewed most of the court filings with Class Counsel and attended the two-day mediation. She has been cross-examined at length during the proceedings. Ms. Hodge’s participation in the proceeding has involved extensive travel. Over the course of the proceeding, Ms. Hodge made many trips from her home in Brooklin, Ontario to meet with Class Counsel in Toronto. Each round-trip commute was over 135 km and took 3 hours or more.

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• 2.

  Hodge v. Neinstein, 2017 ONCA 494 — 2017-06-15

  Court of Appeal for Ontario — Ontario

  common — class members — solicitor-client privilege — contingency fee — certification

   
• 3.

  Hodge v Neinstein, 2015 ONSC 7345 — 2015-12-09

  Divisional Court — Ontario

  contingency fee agreement — class — unenforceable — fees — motion

   
• 4.

  Hodge v. Neinstein, 2014 ONSC 6366 — 2014-11-04

  Superior Court of Justice — Ontario

  certification motion — contingency fee — costs — class proceeding — access to justice

   
• 5.

  Hodge v. Neinstein, 2014 ONSC 4503 — 2014-07-29

  Superior Court of Justice — Ontario

  contingency fee agreement — client — solicitor — class proceeding — disbursements

   
• 6.

  Hodge v. Neinstein, 2014 ONSC 1723 — 2014-03-18

  Superior Court of Justice — Ontario

  costs — indemnity — omnibus motion — docketed — refused this request sought

   
• 7.

  Hodge v. Neinstein, 2014 ONSC 706 — 2014-01-30

  Superior Court of Justice — Ontario

  certification — refusals — motion — cross-examination — oppose

   
• 8.

  Hodge v. Neinstein, 2012 ONSC 7181 — 2012-12-18

  Superior Court of Justice — Ontario

  motion — third-party funder — third party funding — abandoned — costs