Class action against law firm upheld in court
Appeal court says there appears to be ‘widespread’ non-compliance with law
A possible 6,000 accident victims can now band together to try and get their money back from a law firm alleged to have double dipped from their settlements.
Ontario’s top court ruled Thursday to uphold the class-action certification for a case against personal injury law firm Neinstein & Associates LLP that is accused of taking more fees from its former clients than Ontario law allows.
The hotly anticipated ruling by the Ontario Court of Appeal could have wide-ranging ramifications for personal injury lawyers in the province because it shines an increasingly glaring spotlight on Ontario’s contingency fee system — “you don’t pay unless we win.”
In simple terms, lawyers working on contingency cannot take a sum of money called “costs” in addition to an agreed-upon percentage fee they take out of a final settlement. The court ruled that the case against Neinstein can move forward as a class action.
The court, drawing on information presented to it during the hearing earlier this year, stated there appears to be “widespread” non-compliance in Ontario with the Solicitors Act when it comes to protection of contingency fee clients and the allocation of costs.
Class counsel Peter Waldmann said Thursday’s ruling brings his client, accident victim Cassie Hodge, and other former clients of the Neinstein firm “one step closer to seeking remedies in this case.” Hodge, a mother of two from Brooklin, Ont., developed chronic pain after a December 2002 car accident. She hired the Neinstein firm. When the case settled, the final account rendered to her included charges for “legal fees” of $30,326 and “costs” of $30,000. She was also charged for $48,924 of disbursements, which included $4,008 for photocopies, $2,791 for “laser copies,” and $1,372 for “interest recovery,” the court of appeal ruling said.
Hodge alleges she was left with a fraction of her $150,000 settlement.
Rejecting arguments that a classaction lawsuit would violate clients’ privacy, the three-judge panel at the court of appeal said court records submitted as part of the attempt to certify the case as a class action were filled with examples of how the Neinstein firm took costs.
“The record on appeal is replete with examples of final accounts showing party-and-party costs payable to (the Neinstein firm), in addition to a percentage of the award and settlement,” the court ruled.
The ruling said determining if costs were taken from former clients would be a “simple matter.”
An ongoing Star investigation found that personal injury lawyers in Ontario routinely take their fees then also take the “costs,” which the Divisional Court judge who earlier heard the case has called “double dipping.” As a result, the Star story said, many Ontario residents have been overcharged thousands of dollars and likely do not know it.
Earlier this year, the Law Society of Upper Canada made changes to the referral fee system and the way lawyers can advertise their services. The province’s legal regulator has now turned its attention to the remaining piece of the puzzle — contingency fee agreements.
Now that the decision has come down in Hodge’s favour, Waldmann said the next step was to put in his submissions to ask Neinstein’s firm to pay the legal bills for the Court of Appeal challenge that they launched in 2016.
Originally, a Superior Court judge refused to certify the Neinstein case as a class action. Then a Divisional Court reversed that decision, and then the Neinstein firm took the case to the Court of Appeal.
Waldmann said he will arrange to go before a case management judge who will adjudicate the merits of Hodge’s claim along with the claims of other former clients.
Counsel for the Neinstein firm did not immediately return the Star’s request for comment. The firm has 60 days to ask for permission from the Supreme Court of Canada to appeal. It is rarely granted.
Members of this class action include any client of the Neinstein firm and Gary Neinstein who has signed or amended a contingency fee agreement or arrangement after Oct. 1, 2004, and who has paid their bill. The class does not include clients whose fees were approved by a judge or have had their fees assessed by the court or who have settled a claim with respect to their contingency fee agreement, the ruling said.
In Thursday’s ruling, justices Alexandra Hoy, Eileen Gillese and David Brown said that in Hodge’s case, the Neinstein firm kept the costs and the firm did not get a judge’s approval to do so.
“Ms. Hodge was the successful party in this court and the court below,” the ruling said.
In addition to cost-taking, the court of appeal said Hodge’s case had several issues in common with other potential members of the class action.
Those common issues included determining whether costs should be ordered to be repaid and whether other former clients had contingency fee agreements similar to Hodge’s.
The ruling said there appears to be “no dispute” that the contingency fee agreement signed by Hodge “violated” the Solicitors Act, the law that governs how Ontario lawyers can charge fees.
Another common issue, according to the decision, is whether the Neinstein firm committed a fiduciary breach by not disclosing to clients that the contingency fee agreements they signed were in violation of the act.
An additional common issue is whether punitive damages should be awarded to Hodge and other class members.
One of the issues many in the legal community agree on is that the language the Solicitors Act uses concerning contingency fee agreements is confusing. The court of appeal stated the wording has “created difficulties for lawyers and clients for many years” and this case “represents another struggle to make sense of the Act.”
Claire Wilkinson, president of the Ontario Trial Lawyers Association, said “it has been known for sometime that the Solicitors Act, which governs agreements between lawyers and clients, is poorly drafted. As this decision makes apparent, the poor drafting has created unnecessary uncertainty for lawyers, clients and the court. Hopefully this decision will spur on a much-needed regulatory overhaul to bring greater certainty to lawyers and their clients.”
Malcolm Mercer, chair of the Law Society of Upper Canada committee looking at contingency fee agreements and other issues, said the ruling addresses existing legislation.