October 9, 2025
Dolden Class Action Newsletter-October 2025
Big Risk Nets Big Reward in Big Tobacco Class Action
By Jonathan Tatner, Dolden Toronto
$909 million – the recent U.S. Powerball jackpot? Close, but no. That figure represents the unprecedented legal fees recently approved by Chief Justice Geoffrey Morawetz of the Superior Court of Ontario for a group of Quebec law firms who took on Big Tobacco in a class action and won big in Imperial Tobacco Company Limited, 2025 ONSC 4497. Coincidentally, the September 6, 2025 Powerball draw was for roughly $1.8 billion (two different ticket holders recently claimed the win) and suddenly a trip to the U.S. sounds good.
Is this result fair, or is it unfair to class members and does it cast a negative light on the legal profession? Chief Justice Morawetz and others felt it was fair, but that sentiment was not shared by all. Let’s examine the issues and you can decide.
Background
The action began in 1998, roughly 27 years ago. Lawyers in Quebec represented a class of Quebec plaintiffs in 2 class actions against 3 large tobacco manufacturing companies (Rothmans, Benson & Hedges, JTI-Macdonald, and Imperial Tobacco). The lawsuit’s goal was compensation for the class, made up of tens of thousands of Quebecers, including former smokers, for misleading the public regarding the dangers associated with tobacco, and the related addiction, diseases, and deadly cancers. Ultimately, the damages sought were limited to moral and punitive damages.
Over the years of the litigation, the number of law firms representing the class grew to 4. At the outset of the action, the initial law firm agreed to a 20% contingency fee. In 2017 the fee was increased to 22% to reflect supplementary services.
In 2015 the Quebec Superior Court ruled in favour of the plaintiffs and awarded damages of about $15 billion against the tobacco companies. Notably, the trial unfolded over the course of 251 days between March 2012 and December 2014. The ruling was appealed, and in 2019, the Quebec Court of Appeal upheld the lower court’s ruling.
Several weeks later, the defendants filed for insolvency protection in Ontario. After the companies obtained creditor protection, the legal proceedings against them were stayed while they negotiated a deal with their creditors, which included provincial governments pursuing recovery of health care costs connected to smoking. After 5.5 years of mediation, the parties agreed to settle for $32.5 billion to be paid to provinces, territories, and individuals, in accordance with the Companies’ Creditors Arrangement Act (“CCAA”), which was approved by Chief Justice Morawetz on March 6, 2025.
The Numbers
For the Quebec-based class, their settlement portion was roughly $4.12 billion. Pursuant to the contingency fee agreement, being 22% of a settlement or award, the legal fees to be split among the 4 Quebec law firms were approximately $909 million. The law firms required the Court’s approval for the fees under Quebec’s Civil Code of Procedure.
Class counsel submitted that they worked on the action for roughly 26 years, expended over 203,849 hours on the file, and anticipated another 8,000 hours before completion of the CCAA plans. Based on roughly 212,000 hours, counsel estimated that billing would be approximately $215 million.
Class Counsel’s Submissions
Class counsel submitted that the fees were fair and reasonable. They argued that 22% was at the lower end of typical fees, and that fee agreements are presumptively valid. Further justification was premised on several key considerations. A major one was risks assumed by counsel. They submitted that despite knowing the tobacco companies have a litigious reputation and have previously evaded liability, they nonetheless devoted considerable time and expense, with the risk of not getting paid.
Class counsel also asked the Court to consider the successful outcome and recovery for the class members. They stated that any reduction in their fees would not affect the recovery for the class members, but any reduction would accrue to the provinces.
In support of class counsel the Canadian Cancer Society, an interested party, strongly voiced its support for the fees pointing to the extraordinary measures taken by counsel and the astonishing outcome.
Opposition
The Province of Quebec opposed, relying on 3 points: 1) the proposed fees reduced class compensation; 2) Quebec had an interest in undistributed funds; and 3) lack of detail to support the billable hours, rates, and disbursements. Quebec also argued that the fees were disproportionate to the amounts the class members expected to recover.
Findings
By Endorsement dated August 25, 2025 the Chief Justice approved the fees. The Court began its analysis by noting its duty to consider guarding the legal profession’s image against developing a “profit-seeking character.” Ultimately, the Court’s analysis centered on 3 key considerations: 1) risks assumed by counsel; 2) scope of the retainer; and 3) outcome achieved. Notably, the Court reflected: “The fee request of $909 million is unheard of in Canadian legal history. As previously stated, this is a unique case and this decision should never be considered to have precedential value.”
The Court also accepted a series of factors in support of the fee request: the 22% contingency was at the low end and was fair; success at trial; 5.5 years of hard-fought negotiations in mediation; exceptional outcome for the class; residual benefits to the provinces and territories owing to counsel’s work; and the fact that, except Quebec, none of the other provinces or territories took a position regarding the fees. It was rightly put that the fees were astronomical, but the Court found no principled basis on which to reduce the fees. In a postscript, the Court encouraged class counsel to use the funds to give back to society in the form of donations to health-related charities.
Judging the Endorsement
The Court analyzed all relevant factors and provided detailed support for its approval, grounded in law and the distinctive aspects of this case. The Court also had the assistance of retired Judge André Prévost, acting as amicus curiae (one tasked with assisting the Court), to provide further insight. The Court accepted his submissions.
One thing everyone can agree on is the sheer enormity of the settlement, which resulted in proportionately enormous legal fees in light of the valid contingency fee agreement. Given the amount to be allocated to the class, the legal fees do not appear unfair and no evidence was presented that the fees would reduce the class allocation. In this case, the large risk paid off and benefited the class members and their lawyers. The outcome can also be seen as a victory for access to justice which neutralizes the profit-seeking image that this result may engender.
Will this case encourage other risky class actions? Potentially, but only time will tell. In any event, a vital takeaway is that this is a unique case which is expressly not precedent-setting.
For further information or if you have any questions about the above article, please contact the author, Jonathan Tatner, Dolden Toronto. Email: jtatner@dolden.com.
Jurisdictional Gymnastics: Territorial Competence in Cline*
By Christine Galea and Jessa Conmigo, Dolden Toronto
*Ontario Bar Association publication, dated June 9, 2025
Cline v. Gymnastics Canada et al., 2025 BCSC 146 (“Cline”) is a recent decision arising from a pre-certification jurisdictional application brought by one of the defendants, Fédération de Gymnastique du Québec (the “Fédération”), in a proposed historical abuse class action commenced in British Columbia. The Fédération argued that the British Columbia Superior Court (“BCSC”) lacks territorial competence over the Fédération in relation to claims of its member gymnasts who do not allege they were abused in British Columbia (the “Ex Juris Fédération Gymnasts”).
The Court was not persuaded that the BCSC should take territorial jurisdiction over the claims of Ex Juris Fédération Gymnasts against a non-resident defendant, who does not carry on business in British Columbia. However, the Court did not make a final determination on the issue of territorial competence because of an incomplete evidentiary record. Since part of what was needed to determine territorial competence was decided, but not everything, the Court directed a bifurcated hearing by adjourning the application for the remaining grounds to be argued at the certification hearing.
Factual Matrix
Cline is a proposed class proceeding brought on behalf of all gymnasts resident in Canada who allege they were physically, sexually and/or psychologically abused while participating in Gymnastics Canada, its provincial member organization, or member club programs, activities, or events since 1978. The claim was commenced against Gymnastics Canada and twelve provincial member organizations (one from each Canadian province and territory except for Nunavut) (“PMOs”). Eleven of the PMOs are domiciled outside of British Columbia.
The claim alleges that the defendants caused or contributed to the abuse of gymnasts by creating a culture and environment where abuse of gymnasts could occur, and that they failed to take appropriate steps to protect athletes in their care and control, many of whom were minors. Systemic negligence, breach of fiduciary duty, and vicarious liability are pleaded. Common design is also pleaded as a pathway to joint liability, as it is alleged that the defendants assisted one another in breaching duties owed to the proposed representative plaintiff and putative class members.
Territorial Competence
The applicable test considered for jurisdiction territorial competence in the Fédération’s application was whether there was a “real and substantial connection” between British Columbia and the facts on which the proceeding against the Fédération is based. The plaintiff did not argue that a tort was committed against Ex Juris Fédération Gymnasts in British Columbia. Rather, it was the plaintiff’s position that the existence of a common issue among the putative class members is what establishes the real and substantial connection necessary for jurisdiction.
The Court distinguished, or otherwise declined to rely on, the case law relied upon by the plaintiff. The vast majority were product liability cases with factual underpinnings that rendered the territorial competence determinations in those decisions inapplicable to the analysis in Cline. For instance, the cases involved ex juris defendants putting product into the stream of commerce in the subject province, involved allegations of conspiracy against ex juris defendants, or otherwise involved defendants who were resident in or carried business in the subject province. None of these circumstances existed in Cline. Additionally, the alleged tortious acts against the Ex Juris Fédération Gymnasts, and the alleged damages arising therefrom, were not alleged to have occurred in British Columbia.
The plaintiff asserted that in proposed national class proceedings, common issues between the representative plaintiff and putative non-resident class members are sufficient to form the basis of the real and substantial connection between non-resident class members and British Columbia. In support of this position, the plaintiff relied on recent commentary of the Supreme Court of Canada in Sanis Health Inc. v. British Columbia, 2024 SCC 40 (“Sanis”), a decision arising from a proposed class action that was commenced by the Government of British Columbia for recovery of healthcare, pharmaceutical and treatment costs related to opioids.
The majority in Sanis commented that courts across Canada have endorsed the idea that common issues suffice to establish a real and substantial connection for jurisdiction over the class. However, that comment was made in the context of a constitutional challenge of a statutory provision[1] specific to opioids – Sanis was not a jurisdictional application – and the Supreme Court of Canada did not address how the real and substantial connection test is to be met in multi-jurisdictional class actions. As Justice Côté highlighted in her dissent, there remained diverging opinions at the appellate level on whether certification of common issues is sufficient to ground a Superior Court’s jurisdiction over foreign class members. Additionally, as the Court in Cline pointed out, Sanis was another product liability case in which the defendants put opioid products into the national stream of commerce. None of these circumstances existed in Cline.
As a result, the majority’s commentary in Sanis about the sufficiency of common issues to ground jurisdiction over a class had a limited scope of application to cases where there was already “something more” connecting the defendants to the jurisdiction. Sanis was also distinguishable because the issue was jurisdiction over ex juris plaintiffs, not jurisdiction of ex juris defendants in respect of the claims of ex juris plaintiffs.
The Court in Cline made the above determinations, but declined to definitively rule on the issue of territorial competence because of an incomplete evidentiary record. The evidence before the Court was that the Fédération’s representatives had attended meetings with Gymnastics Canada and other PMOs in British Columbia, but there was a lack of evidence on whether any decisions took place at those meetings that could form any part of the claims being advanced in the action, such as the allegation of systemic negligence. The Court queried whether the issue of abuse of gymnasts was discussed, whether any type of policy was formed to address it, and whether the Fédération implemented any such policies. Additionally, even though the parties agreed not to argue common design, the Court queried whether common design could be a potential avenue for territorial competence.
In light of the above, the application was adjourned to the certification hearing, with the parties being granted limited leave to make submissions regarding territorial competence on two outstanding issues:
- the substance of the meetings the Fédération attended in British Columbia and any impact those meetings had on the Fédération’s policies; and
- whether there is a real and substantial connection on the basis of a joint tort committed in British Columbia through common design.
Court of Appeal
The plaintiff appealed Cline: 2025 BCCA 132. The Court of Appeal quashed the appeal on the basis that the order arising from Cline was not appealable under British Columbia’s Court of Appeal Act, S.B.C. 2021, c. 6. Specifically, since the issue of territorial competence had not yet been decided, the order arising from the reasons in Cline did not determine any substantive rights. The Court of Appeal explained that appeals are not from reasons, they are from orders, and the substance of the order arising from Cline was effectively a mid-hearing adjournment of the application to the certification hearing.
The alternate relief sought by the plaintiff, for leave to appeal on the basis that the order in Cline is a sequencing or case management order requiring leave to appeal, was also dismissed by the Court of Appeal.
Takeaways
Although a determination on territorial competence has not yet been rendered in Cline, the reasons articulated by the Court thus far stand for the proposition that common issues standing alone do not create territorial competence for the purpose of a national class action. Territorial competence findings in prior product liability cases will not be instructive if the factual underpinnings of those decisions involve “something more”, such as the defendant being resident or carrying on business in the province, or putting products into the province’s stream of commerce.
The appeal decision arising from Cline also serves as a reminder that the Court of Appeal will not have jurisdiction to entertain an appeal of an order that does not determine any substantive rights. In the case of a mid-hearing order such as that in Cline, the appropriate time to bring an appeal is after the substantive ruling is rendered.
For further information or if you have any questions about the above article, please contact the authors, Christine Galea and Jessa Conmigo, Dolden Toronto. Emails: cgalea@dolden.com and jconmigo@dolden.com.
