An Ontario court has approved a $100-million settlement in a class action against several Bank of Montreal (BMO) subsidiaries over undisclosed foreign exchange fees charged in clients’ RRSPs and other registered accounts.
The Ontario Superior Court of Justice approved the deal, which was brought against the bank’s brokerage subsidiaries, BMO Nesbitt Burns Inc. and BMO Investorline Inc., and BMO Trust Co. in 2006.
The settlement followed a court ruling in 2020, which found that “the BMO defendants were liable to the class over the 10-year class period for breach of trust, breach of fiduciary duty and breach of contract, and concluded that the appropriate remedy for the defendants’ wrongdoing was an accounting and disgorgement of profits.”
Ultimately, the two sides agreed on a settlement of $100 million, which will be paid out to approximately 135,000 affected clients, subject to a $25 minimum, with the defendants paying the distribution costs.
The court granted the plaintiffs’ lawyers a $20 million fee and granted $50,000 to a former advisor who helped bring the case.
The court said that approving the settlement was easy, as the $100 million amount “is well within the required zone of reasonableness” and the resolution is “fair and reasonable and in the best interests of the class.”
On the tougher issue of legal fees, the court ruled that $20 million was appropriate, saying that in a “mega” settlement such as this, “the legal fees approved must take into account not only the risks incurred and results achieved but also the need to maintain the integrity of the legal profession.”
In this case, the class counsel sought a $25-million fee, reflecting their 25% contingent retainer.
However, the court said that simply applying a contingency fee percentage in mega-settlements “can result in undeserved windfalls and transform class action litigation into something approaching a lottery.”
Ultimately, after considering the risks incurred and the results achieved by the litigation, “the most this court can justify and explain in a principled fashion consistent with comparable case law is a legal fees award that falls within a range of $18 million to $20 million,” the decision read.
“The right number may well be around $19 million,” the court said. “However, given that this was a truly self-made class action that consumed 15 years of litigation, 10,000 hours in docketed time and resulted in a genuinely commendable settlement, I am prepared to err on the side of caution and in favour of class counsel.”
The representative plaintiffs in the case were also awarded a combined $70,000 with $10,000 going to each of two representative plaintiffs, and $50,000 going to a third plaintiff — James Richard Macdonald, a former advisor at Nesbitt Burns, who the court said suffered financial hardship as a result of bringing the case.
Macdonald was “entitled to the additional $40,000 because of the financial harm he sustained as the lead plaintiff in what became a high-profile class action in the banking community,” the court ruled.
“His employment as an investment advisor became strained and he had to leave the industry well before his retirement age,” the court said, noting that while Macdonald ultimately found a job teaching finance courses at a local community college, “his income today is much less than when he worked as an investment advisor.”
“I therefore have no difficulty concluding that Mr. MacDonald suffered significant financial hardship in taking on the role and responsibilities of the lead representative plaintiff. The request for a $50,000 honorarium is more than justified,” the court said.