BARE BONES BRIEFS: No kidding: $50 million counsel fee ruled "excessive" in $23 billion class action | CEO mismanagement is grounds for tax relief: FC | M&A activity lowest in decade | PE activity slows to pre-pandemic levels: Blakes | COVID inventory losses not insured: OCA

By Julius Melnitzer | January 7, 2024

FEDERAL COURT SLASHES $50 MILLION COUNSEL FEE

Justice Mandy Aylen of the Federal Court of Canada has denied approval of a $50 million fee sought by Sotos LLP; Kugler Kandestin LLP; Miller Titerle+ Co.; Nahwegahbow, Corbiere; and Fasken Martineau Dumoulin LLP, class counsel in the $23 billion settlement of a case alleging that the federal government underfunded First Nations Child and Family Services, resulting in the removal of First Nations children from their families. Aylen pointed out that the actions “did not raise entirely novel claims” and overlapped with Canadian Human Rights Tribunal proceedings from which counsel benefitted financially. As it turned out, the $50 million request represented a settlement reached between Canada and class counsel, who initially sought no less than $80 million in fees. Aylen wasn’t impressed: $40 million, she concluded, was quite enough.

CEO MISMANAGEMENT MERITS RELIEF FROM TAX PENALTIES

Justice Russel Zinn of the Federal Court has granted judicial review of three related Canada Revenue Agency decisions denying relief from penalties and interest to Maverick Oilfield Services Ltd. and Latigo Trucking Ltd. The companies requested relief based on the corporations’ mismanagement by a former CEO that resulted in their failure to comply with payroll remittance obligations. In sending the matter back to the CRA for redetermination by a different decision-maker, Zinn concluded that the original decisions “are unreasonable for failing to meaningfully consider circumstances that may be outside the Applicants’ control, namely the mismanagement of the corporations by the former CEO”.

HARD TIMES FOR GLOBAL M&A

According to The Law Society Gazette, citing LSEG Data & Analytics’ Global Mergers and Acquisitions Review, global corporate mergers and acquisitions activity hit a 10-year low in 2023. Announced deals decreased to 55,200, down 6% from 2022 and representing a three-year low. Mega deals exceeding $10 billion fell 13%, while cross-border activity was down 12 percent. On the bright side, LSEG saw signs of recovery in the last quarter of 2023.

PRIVATE EQUITY IN THE DOLDRUMS TOO: BLAKES

The fourth edition of Blake, Cassels & Graydon LLP’s Private Equity Deal Study, analyzing Canadian PE buyout and investment transactions, reveals that deal activity has slowed to pre-pandemic levels, due partly to increased leverage costs. The authors also concluded that earnouts’ popularity is decreasing after a peak, and that R&W insurance premiums are down from record highs and have retreated to historical values.

BUSINESS INTERRUPTION INSURANCE DOESN’T COVER COVID INVENTORY LOSSES: OCA

In the first Canadian appellate decision considering the relationship between COVID-19 and all risks policies, the Ontario Court of Appeal has ruled that business interruption insurance did not cover restaurants’ loss of food and beer inventories through spoilage resulting from government-mandated lockdowns. The court concluded that the lack of direct physical loss or damage was fatal to the insureds’ claims. The “civil and military clause” also did not apply because the pandemic was not an “other catastrophe” within the meaning of the provision, nor was the damage incurred a direct cause of the spoilage.

Julius Melnitzer is a Toronto-based legal affairs writer, ghostwriter, writing coach and media trainer. Readers can reach him at [email protected] or https://legalwriter.net/contact.