Executive Summary: Key Legal and Evidentiary Issues

• Dispute centered on the fair and reasonable quantum and allocation of legal costs following a $7.5 million class action settlement concerning Paxil-related birth defects.

• Competing proposals for legal fees allocation arose, involving class counsel, former counsel, and lawyers with individual retainers, with concerns of potential double recovery.

• The Court found the 2018 contingency fee agreement with Merchant Law invalid but used it to gauge the reasonable expectations regarding legal fees.

• Complex internal disputes among counsel, including issues regarding the Fees Undertaking, partnership authority, and alignment, complicated cost allocation.

• The Court ruled that administration costs (Claims Administrator, Claims Officer, and honorarium) should not reduce class members’ compensation but come from the legal fees.

• A subsequent ruling determined no party was entitled to recover costs from the Costs Application, citing unnecessary and contentious conduct that prolonged proceedings.

Facts of the case

Fiona Singh and her son, Muzaffar Hussain, represented by Ms. Singh, brought a class action against GlaxoSmithKline Inc., GlaxoSmithKline LLC, and GlaxoSmithKline PLC, alleging that Paxil® and Paxil CR™ caused or increased the likelihood of certain congenital malformations in children born to women who took these medications during pregnancy. The action, commenced on October 12, 2012, was certified on November 17, 2022. GSK denied liability but agreed to a settlement. On September 24, 2024, a $7,500,000 settlement was approved, along with releases, a distribution protocol based on medical assessment, compensation for provincial and territorial health authorities, and procedures for administering claims.

The case was marked by significant procedural disputes, particularly over legal representation and costs. Ms. Singh changed counsel in 2019 from Merchant Law to a consortium of firms. Disagreements arose over legal fee entitlements between Merchant Law, the Consortium (including Guardian Law and KoT Law 2019), Napoli Shkolnik Canada, and lawyers with individual retainers. Disputes over the proposed legal fees delayed resolution of the Costs Application.

Policy terms and clauses at issue

At issue was a contingency fee agreement signed by Ms. Singh with Merchant Law on August 22, 2018. This agreement provided for a 33% fee plus disbursements and taxes but was found invalid as it did not meet the service requirements under section 38 of the Class Proceedings Act. The settlement agreement proposals included either a cap of 33.33% of the settlement plus specific costs (Proposed Legal Costs) or a cap of 35% for legal fees (Alternate Legal Costs), both including provisions for Lawyers’ Fees based on individual retainers. The Court found that neither proposal adequately protected class members from excessive legal cost deductions or double recovery by counsel.

Outcome

The Court determined that neither the Proposed Legal Costs nor the Alternate Legal Costs was fair or reasonable. Instead, it imposed a legal costs structure in line with the invalid contingency fee agreement: legal fees capped at 33% of the $7.5 million settlement (covering class counsel fees, Lawyers’ Fees, Claims Administrator and Officer fees, disbursements, and taxes). Disbursements were to be reviewed by an assessment officer. Ms. Singh was awarded a $10,000 honorarium for her role and the risks she bore, including exposure to adverse cost claims and the stress of procedural disputes.

In a subsequent costs decision on June 23, 2025, the Court ruled that no party would recover costs from the Costs Application, citing that the parties’ conduct unnecessarily prolonged proceedings, and the internal disputes among counsel (including pending litigation in Ontario) should not have affected the Alberta proceedings.