In a class proceeding, Mr. Justice Benjamin T. Glustein in Kaplan v. PayPal CA Limited, 2021 ONSC 1981 approved a settlement agreement as a “fair and reasonable and in the best interests of the Class Members”, noting that the settlement had been achieved by involving “a senior and highly-regarded lawyer and mediator” to resolve the claims. When evaluating the proposed settlement against the criteria set out in Robinson v. Medtronic, Inc., 2020 ONSC 1688, Glustein J. supported his own approval of the settlement terms with inter alia references to the terms being recommended and supported by the experienced mediator.
Plaintiff applied under the Class Proceedings Act, 1992, SO 1992, c 6 for two (2) orders:
(i) an order to approve the settlement of the action in accordance with the terms of a settlement agreement executed on December 3-4, 2020 (“Settlement Agreement”), along with ancillary relief; and,
(ii) an order to approve the payment of fees and disbursements for class counsel and to approve the payment of an honorarium to Plaintiff, along with ancillary relief.
Defendants consented to order (i) and did not oppose order (ii).
Glustein J. granted the orders at the hearing and signed them, with reasons to follow.
Defendants, PayPal CA Limited, PayPal Canada Co., PayPal, Inc. and PayPal Holdings, Inc. (collectively, “PayPal”), process online payment transactions across international borders. A transaction can be funded (a) by a cash balance, if any, in the accountholder’s PayPal account, (b) through a bank account linked to the accountholder’s PayPal account; or, (c) through a credit card linked to the accountholder’s PayPal account.
For accountholder’s transaction involving foreign currency and funded by either an account balance in another currency, a bank account, or a linked credit card, PayPal automatically made the currency conversion.
Plaintiff commenced the action November 24, 2017 and class members included residents (outside of Québec) who transacted with PayPal during the class period in currencies other than Canadian dollars. Glustein J. noted that, in regard to the two (2) orders he considered, similar relief was to be sought before the Superior Court of Quebec in Court (500-06-000910-188) which he identified as “a companion action” initiated February 28, 2018.
Plaintiff’s action challenged the following alleged practices:
(i) overcharge claim: Plaintiff alleges that PayPal imposed an undisclosed fee on users’ foreign exchange transactions by inflating the exchange rate PayPal applied to the users’ transactions between January 14, 2017 and August 8, 2018; and,
(ii) authorization claim: Plaintiff alleges that PayPal performed currency conversions when it lacked authorization to do so for certain types of transactions and certain time periods between 2006 and August 8, 2018.
Glustein J. referred to settlement negotiations at paras 20-22, explaining that the parties had ongoing exchanges beginning in August 2018 and into early 2020. Glustein J. observed that, parallel to discussions, the parties exchanged records, conducted written and oral cross-examinations, delivered written argument for the authorization hearing and therefore “narrowed and refined” the claims.
In addition to using the litigation process to narrow and refine the claims and advance towards a judicial resolution, the parties also undertook mediation which Glustein J. outlined at paras 23-28 of his reasons.
“ In the spring of 2020, the parties exchanged further settlement offers to determine whether a contested authorization motion in Quebec followed by a contested certification motion in Ontario could be avoided. All of the offers were premised on a national settlement of both the Ontario and Quebec actions. By the spring of 2020, the parties believed that they had made sufficient progress in their negotiations that a facilitated mediation would be productive.
 In August 2020, the parties held a two-day mediation before Max Mendelsohn, a senior and highly-regarded lawyer and mediator in Montreal. Prior to the mediation, the parties exchanged comprehensive mediation briefs setting out their positions on the claims in the actions, both on the certification/authorization issues and on the merits. PayPal also provided information about the potential quantum of the overcharge claim.
 The parties negotiated extensively at the mediation. At the end of the second day of mediation, the parties (i) agreed to settle both actions for an all-inclusive amount of $10 million and (ii) negotiated in principle the process for distribution of settlement funds and provision of notice to the Class Members.
 Distribution and notice were challenging in these actions because of the enormous size of the Class and their very small individual alleged damages.
 The mediator strongly recommended the settlement to Class Counsel.
 Over the next three months, the parties negotiated a comprehensive settlement agreement which was signed on December 3-4, 2020”.
Glustein J. referred back to his earlier reasons in Robinson v. Medtronic, Inc., 2020 ONSC 1688 paras 63-68 to set out the test for settlement approval in a class proceeding. Which, among other principles listed in the excerpt at para. 52, included the following:
“(i) the presence of arm’s-length bargaining and the absence of collusion,
(ii) the proposed settlement terms and conditions,
(iii) the number of objectors and nature of objections,
(iv) the amount and nature of discovery, evidence or investigation,
(v) the likelihood of recovery or likelihood of success,
(vi) the recommendations and experience of counsel,
(vii) the future expense and likely duration of litigation,
(viii) information conveying to the court the dynamics of and the positions taken by the parties during the negotiations,
(ix) the recommendation of neutral parties, if any, and,
(x) the degree and nature of communications by counsel and the representative plaintiff with class members during the litigation”.
In regard to the “recommendation of neutral parties”, Glustein J. referred at points in his analysis to the fact that the proposed settlement was recommended and supported by an experienced mediator.
(a) Regarding the presence of arm’s length bargaining and absence of collusion, Glustein J. noted the following.
“ Settlement negotiations began in August 2018 and continued periodically into early 2020. The negotiations were adversarial, leading to a two-day mediation before an experienced mediator who recommended the settlement. The parties bargained at arm’s length”.
(b) Regarding the support of representative Plaintiff, neutral party and objections, Glustein J. noted the following at para. 83: “Its terms were also supported by the parties’ experienced mediator”.
(c) Regarding the first of the two (2) orders, Glustein J. at para. 85 concluded as follows:
“ The settlement is fair and reasonable and in the best interests of the Class Members. The settlement was achieved through an arms’ length and adversarial process. At various times, the parties took conflicting views which, had they not resolved, would have resulted in termination of the negotiations. The settlement fulfills all of the objectives of the CPA, and provides immediate, direct benefits to Class Members with eligible claims, while protecting them from serious risks of litigation. The settlement falls within the zone of reasonable outcomes in the case and should be approved”.
urbitral notes – First, for more on mediation, see the recent Arbitration Matters note “Québec – parties urged to mediate/arbitrate to ‘avoid bogging down’ in ‘complex and costly judicial procedures’ – #279”. In Équipements de gardien de but Michel Lefebvre inc. v. Sport Maska inc., 2020 QCCS 44, Mr. Justice Frédéric Bachand (as he then was, now with the Court of Appeal) dismissed an application for a provisional injunction but, in doing so, prompted the parties to seize the opportunity, already consented to in their contract, to undertake mediation and arbitration ‘to avoid bogging themselves down in complex and costly judicial procedures’. Bachand J. also urged the parties to engage in less formal exchanges of information which may allow them to find a faster solution to their dispute.