Houle-most There Continued: Divisional Court Upholds Order Conditionally Approving Litigation Funding Agreement

  • January 23, 2019
  • Christopher Wirth and Michael Tersigni

In Houle v St. Jude Medical Inc., 2018 ONSC 6352 (“Houle”), the Ontario Divisional Court showed substantial deference to Justice Perell of the Superior Court, upholding his decision to conditionally approve a litigation funding agreement in a products liability class action.

Background

The Plaintiffs in Houle allege that the Defendants were negligent in the development, manufacture, and distribution of implantable cardiac defibrillators. Class counsel was retained on a contingency fee basis, whereby they were entitled to receive 33 per cent of any amounts recovered by the Plaintiffs in the case.

In order to fund the litigation, the Plaintiffs entered into a litigation funding agreement (the “LFA”) with Bentham IMF Capital Inc. (“Bentham”). Under the LFA, Bentham agreed to pay disbursements up to a prescribed maximum, costs assessed against the Plaintiffs, any security for costs, and a portion of class counsel’s fees up to a prescribed maximum. Additionally, class counsel agreed pursuant to the LFA to lower their fee to between 10 to 13 per cent of amounts recovered, depending on when the case was resolved. Bentham was entitled to between 20 and 25 per cent of the potential proceeds, again depending on when the case was resolved. The LFA also gave Bentham the right to terminate the agreement in certain circumstances.

The Defendants objected to the LFA on the basis that its distribution scheme favors Bentham and thus is champertous. The Defendants also argued that the termination provision permits Bentham to control the litigation and thus interferes with the lawyer-client relationship and the administration of justice.