Koskie Minsky LLP fights court order to pay $1.5-million to charity after class-action settlement

Koskie Minsky LLP fights court order to pay $1.5-million to charity after class-action settlement
Koskie Minsky LLP fights court order to pay $1.5-million to charity after class-action settlement

Koskie Minsky LLP , a prominent law firm is fighting back after a judge criticized its settlement for deaf children who had been beaten and abused in Ontario schools, and ordered it to pay $1.5-million to charity in return for collecting its fee.

The Toronto firm of Koskie Minsky LLP, which specializes in class-action lawsuits, will tell the Ontario Court of Appeal at a hearing on Thursday that the order is unprecedented, and that Superior Court Justice Paul Perell had no authority to make it.

The hearing will shine a light on what Justice Perell called an inherent conflict of interest for lawyers in class actions: If they settle a case for less than an optimal amount, they receive a large contingency fee, while if they fight on, they risk losing and not being paid at all.

Koskie Minsky sued the Ontario government four years ago for $325-million on behalf of 4,500 students at three schools for the deaf, and their families, alleging sexual, physical and emotional abuse between 1938 and 2016. The firm settled with the government for $15-million, but 90 per cent of the students, and all of the families, are entitled to nothing – not even an apology.

Only children who were sexually or physically abused are entitled to payouts, to a maximum of $45,000.

Justice Perell called it a “poor settlement,” and made the charitable order, he explained in a ruling last May, so that those who receive no settlement monies will still benefit through the charities. Koskie Minsky appealed.

While in a narrow sense, the appeal hearing in Welsh v. Ontario is about whether Justice Perell had the authority to order the charitable donation. But the case has far-reaching implications, says Toronto lawyer Michael Rosenberg, who specializes in class actions, and was not involved in the case.

At its heart, he said, the case is about how courts maintain the balance in class actions between giving lawyers financial incentive to take on risky public-interest cases, and guarding against the approval of “windfall” sums taken from the pockets of vulnerable groups.

Of the $15-million, after the $3.75-million fee and $487,500 in HST, $500,000 in disbursements and other costs, and a $1-million payment to a fund for class actions, just $9.2-million remains to be split by those who were sexually or physically abused. And there is no guarantee that all of the $9.2-million will be paid out; it depends on how many of those who are eligible put in claims. Unpaid monies revert to the province. (In another unusual move, Justice Perell ordered that the $3.75-million fee be reduced by the same proportion as that of the unpaid settlement monies. Koskie Minsky is also challenging that order.)

Justice Perell said the outcome, after his charitable order, “maintains the honour of the [legal] profession.”

Kirk Baert, a partner at Koskie Minsky, declined to comment before the appeal is heard. But in a document filed with the appeal court, the firm said Justice Perell erred by rejecting the “best evidence” that the settlement was fair – comparison to similar settlements that had been approved by other judges.

For the deaf community, the class action was of keen interest in its claims of discrimination and substandard teaching that left people grossly impaired later in life, said Stephanie DiGiuseppe, a lawyer who represented a former student who fought the legal fees.

“I think there’s a sense of betrayal that those claims were not pursued vigorously,” she said in an interview.

The children and families who received nothing in the settlement 13 months ago permanently lose their right to sue the Ontario government over the schools, unless they signed documents opting out of the class action. (Class actions end the right to sue, for members of the “class” or group certified by a court, whether those members were aware of the litigation or not.) Four members of the group objected formally to the fees requested by Koskie Minsky.

The representative plaintiff in the case is Christopher Welsh, who lived in residence at Ernest C. Drury School for the Deaf in Milton, beginning at age five, from 1964 to 1971, and then attended the Robarts School for the Deaf in London for five years. Sir James Whitney School for the Deaf in Belleville was also part of the claim.

Mr. Welsh alleged in a legal document that he was regularly hit in the mouth at Ernest Drury for using American Sign Language, rather than speaking. In its statement of defence, Ontario denied the abuses occurred and said that, if they did, it was not legally responsible for them.

Koskie Minsky had argued that the risks of fighting the case in court and losing were high, and that the proceedings could take years to conclude. But Justice Perell said the firm was aware of the litigation risks when it set out; it could have certified a smaller group, thus preserving the legal rights of the larger one.

He said the settlement “failed to respect the dignity of the overwhelming majority” of the group. In the end, though, he reluctantly approved the settlement, he said, so that a small number would receive compensation.

Koskie Minsky provided no breakdown of what work it did, who did it or its hourly rate, Justice Perell said in his ruling.

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