Douez v. Facebook, Inc.

2024 BCSC 653 Douez v. Facebook, Inc.

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Douez v. Facebook, Inc., 2024 BCSC 653 Date: 20240320 Docket: S122316 Registry: Vancouver Between: Deborah Louise Douez Plaintiff And Facebook, Inc. Defendant Brought pursuant to the Class Proceedings Act, RSBC 1996, c. 50 Before: The Honourable Madam Justice Iyer Oral Reasons for Judgment In Chambers Counsel for the Plaintiff: C.A. Rhone M. Sobkin A. Sharon J. Palef Counsel for the Defendant: M.A. Gelowitz V.A. Luxford Place and Date of Hearing: Vancouver, B.C. March 13, 2024 Place and Date of Judgment: Vancouver, B.C. March 20, 2024 [1] THE COURT: If written reasons are ordered I reserve the right to correct grammatical or typographical errors, and insert full citations. I will change nothing of substance. Overview [2] Ms. Douez applies for approval of a settlement of this class proceeding and for approval of counsel fees and disbursements and honorarium for herself. Facebook takes no position on these matters. Background [3] Ms. Douez commenced this action in March 2012 claiming that Facebook's Sponsored Stories marketing program breached Facebook users' privacy rights. Sponsored Stories allowed Facebook's advertising customers to pay Facebook to pair their brand with a Facebook user's name and profile picture if that user liked or performed another social action relating to the advertiser or its product. The user's name,

profile picture and social action, along with the brand's name and the banner, "Sponsored" would then appear on the user's friend's homepages. This program ran from January 2011 until April 2014. [4] The litigation was long and complex. The plaintiff filed the certification application in July 2012. Justice Griffin, as she then was, was assigned as case management judge. Facebook filed a jurisdictional challenge. In May 2014, Justice Griffin dismissed the jurisdictional challenge and certified the action as a class action. Facebook appealed both orders. [5] The Court of Appeal found for Facebook on the jurisdictional issue and did not decide the certification appeal. The plaintiff obtained leave to appeal to the Supreme Court of Canada. It allowed the appeal in June 2017. [6] As the Court of Appeal had not decided Facebook's certification appeal, the matter returned to that court. In November 2018, the Court of Appeal upheld the certification order, modifying it slightly. Facebook's subsequent application for leave to appeal that decision to the Supreme Court of Canada was dismissed. [7] I was appointed case management judge in June 2018 after Justice Griffin's appointment to the Court of Appeal. [8] The Class Proceedings Act, R.S.B.C. c. 50, was amended in November 2018 to permit national class actions to be certified in B.C. on an opt-out basis. The plaintiff applied to vary

the certification order to add residents of Manitoba, Saskatchewan, and Newfoundland and Labrador to the class, and to add new common issues about remedies. Facebook opposed the application. In May 2019, I granted the application. [9] The parties attempted mediation but that was not successful. Discoveries and document production followed. In 2021, the plaintiff applied for summary trial of all of the common issues. In addition to arguing that many of the common issues were unsuitable for summary trial, Facebook also challenged the court's jurisdiction to adjudicate breaches of Manitoba's and Newfoundland and Labrador's privacy statutes. [10] The matter proceeded by summary trial over 10 days in January 2022. In my reasons for judgment (reported at 2022 BCSC 914), I dismissed Facebook's jurisdictional challenge. I found that the common issues relating to liability were suitable for summary determination and I held Facebook liable for all claimed privacy breaches. I found that the issues relating to remedies were not suitable for summary trial and directed that they be heard by conventional trial. [11] Facebook appealed to the Court of Appeal and applied to me to stay my decision pending completion of the appeal. I dismissed the stay application. The remedies trial was subsequently set for four weeks commencing in November 2023. The Court of Appeal heard Facebook's appeal in May

2023. [12] Between September and November 2023, the parties attended another mediation and reached a negotiated settlement. As a result, the Court of Appeal held its judgment in abeyance and I adjourned the remedies trial. The parties signed the settlement agreement on November 30, 2023. [13] The total settlement amount is $51 million. Counsel fees and claimed administration fees, as well as disbursements will be deducted from this amount, and class members will receive a pro rata share of the residue to a maximum of $200 per person. Class counsel seek a fee of one-third of the total settlement amount, or $17 million, plus applicable taxes and disbursements. They propose to pay Ms. Douez an honorarium of $10,000 out of their fees. Post Settlement Activity [14] Over the past months class counsel obtained approval of the notice of settlement and retained a claims administrator. The claims administrator sent the notice of the proposed settlement to class members informing them about the settlement, including counsel fees, how to participate or opt out of the settlement, and how to object to it. Of the 18,867,027 emails sent to the email addresses of potential class members, about 4.5 million were opened. Notice of the settlement was also posted on Facebook ads, on Google AdWords, on class counsel's website, and on the Canadian Bar Association class action database. [15] Class

counsel received about 1,500 emails from potential class members in response to the notice of settlement. The majority supported the settlement. Of the 72 objections, 37 objected to the proposed settlement. The other 35 objected only to proposed counsel fees and/or the proposed honorarium. Settlement Approval [16] Section 35 of the Class Proceedings Act requires the court to approve the proposed settlement of a class proceeding. The central question in a settlement approval is whether the party seeking settlement approval has shown that the settlement is fair, reasonable, and in the best interest of the class; Coburn and Watson's Metropolitan Home v. BMO Financial Group, 2019 BCCA 308. [17] In general, the court should approach that assessment bearing in mind that public policy favours the settlement of complex disputes. The court is not to look for perfection and may not rewrite the agreement. The settlement should be approved if it falls within a range of reasonableness; Bodnar v. The Cash Store, 2010 BCSC 145. [18] Many cases have listed the factors a court may consider in conducting this assessment. I agree with class counsel that the framework this court applied in Coburn is useful here. It considers four factors: a) has counsel of sufficient experience and ability undertaken sufficient investigations to satisfy the court that the settlement is based on a proper analysis

of the claim? b) is there any reason to believe that collusion or extraneous considerations have influenced negotiations such that an inappropriate settlement may have been reached? c) on a cost/benefit analysis, are the plaintiffs well-served by accepting the settlement rather than proceeding with the litigation? and d) has sufficient information been provided to the members of the class represented by representative plaintiffs and, if so, are they generally favourably disposed to the settlement? [19] The first factor focusses on the experience of class counsel and the work they did in framing and prosecuting the claim. Class counsel in this case are very experienced in class action litigation. The settlement occurred after the trial court had found in favour of the class on all liability issues. The remedies trial would have been complex and challenging as certain key documents, for example, those identifying which Facebook user identities were used in the Sponsored Stories program no longer exist. [20] While the outcome of the liability appeal was not known, settlement occurred at a point where the parties were poised to commence the remedies trial. At that time, counsel had a comprehensive and detailed understanding of the risks entailed in that litigation. [21] The second factor requires consideration of the possibility of collusion. This concern arises because defendants

and class counsel may have "interest and incentives that may not align with the best interests of the class"; Coburn, at para. 29. [22] The parties mediated the dispute with the assistance of former judges. Even when they reached agreement in principle in September 2023, negotiations continued until the end of November. There is no reason to suspect collusion or motivation by extraneous considerations. [23] The third factor requires a cost benefit analysis based on the claim. The total settlement amount is $51 million and the interest on this amount will accrue for the benefit of class members. Each class member is entitled to a pro rata share of the net settlement amount up to a maximum of $200. That is a reasonable amount in the context of a claim that sought nominal, not compensatory, damages. It is also reasonable in light of the fact that the loss of documents means that the class is not confined to people whose identities were actually used in Sponsored Stories, but includes all Facebook users during the class period who used their real names and images in their profiles. [24] The risks of not settling are significant. As I have noted, the Court of Appeal has not issued its decision on the liability appeal. If it does, the appeal may be allowed. If it is dismissed, the outcome of the remedies trial is far from certain. Facebook will raise limitation defences. There are a

number of contested issues that could see each class member recovering much less than $200 per person. [25] I conclude that the cost benefit analysis favours settlement on the proposed terms. [26] The fourth factor asks whether the class has been informed sufficiently about the settlement and whether they are generally in favour of it. I approved the notice of settlement and the distribution plan. As I have noted, it appears that 4.5 million people received the notice and 1,500 emailed class counsel in response. Of those who did, only 37 or under five percent objected to the settlement. Many objected to the settlement amount as representing too low a recovery per individual, but did not expressly consider the legal factors governing settlement approval, such as the risk of an adverse outcome at trial. Some, including a thoughtful submission from an objector who appeared at the hearing, proposed uses for the settlement funds other than the individual awards. However, the court does not have the power to rewrite the parties' agreement. [27] I conclude that all four factors favour settlement. Fee and Honorarium Approval [28] The retainer agreement between Ms. Douez and class counsel must satisfy the requirements of s. 38 of the Act. It requires the agreement to be in writing, to state the terms under which fees and disbursements will be paid, to give an estimate of the proposed

fee, whether or not it is contingent on success, and to state the method by which payment is to be made. [29] Counsel pointed to a possibly unsettled question about whether the common practice of expressing the proposed fee as a percentage of the amount received is sufficient to meet the requirement of an "estimate of the proposed fee" in s. 38(1)(b). In Lam v. Ajinomoto, 2004 BCSC 651, at paras. 8-12, this court held that a proposed fee of 25% if the matter was settled before trial did not satisfy s. 38(1)(b). The court did not refer to its earlier decision in Knudsen (Guardian of) v. Consolidated Food, 2001 BCSC 1837, in which a fee expressed as a percentage of settlement or judgment was found to satisfy the statutory requirement. [30] Since 2004, this court has frequently accepted contingency fee estimates in retainer agreements that are expressed as percentages of settlement or judgment as satisfying s.

38. I have not found any case in which Lam has been followed in this respect. I accept that fee estimates expressed as a percentage of settlement or judgment in a written agreement satisfy the requirements of s. 38(1)(b) of the Act. [31] In this case, the retainer agreement proposed a counsel fee of 25% if the matter settled before commencement of examinations for discovery; 30% if it settled after that; and 33.3% if it was settled only after commencement of the common issues trial or determined by judgment after summary trial or full trial. As the matter settled after summary determination of the liability issues, class counsel seeks a fee of 33.3%. [32] In assessing a fee arrangement, the court applies a standard of fairness and reasonableness in the circumstances of the case. The most important factors are the risks that the claim will fail, leaving class counsel to absorb the financial loss, and the reward for the results achieved for the class; Manuge v. Canada, 2024 FC 68. [33] Other often cited factors include the time expended, the complexity of the case, degree of responsibility, the monetary value of the claim, the importance of the claim to the class, counsel's skill and competence, a plaintiff's ability to pay, fee expectations of the client and class, and the positions of objectors; see, for example, Coburn, McKay v. Air Canada, 2016 BSC 1671, and Sherry v. CIBC,

2022 BCSC 676. [34] With respect to risk, I agree with the characterization of this as a high risk case. Legal risks included the risk that Facebook's initial jurisdictional argument would succeed, as it did until overturned by the Supreme Court of Canada; the uncertainty in the law about what constitutes consent on a social media platform; and whether the B.C. courts have subject matter jurisdiction over alleged breaches of privacy statutes in Manitoba and Newfoundland and Labrador. Class counsel paid substantial costs and disbursements over a 12-year period and indemnified Ms. Douez for any adverse costs award. [35] The result achieved was significant, both financially and in clarifying the law. Financially, the award amounts to approximately $30 million, deducting counsel fees, disbursements and interest, for a class of potentially 4.3 million individuals. At an estimated take-up rate of 20%, each claimant would receive in the range of $36 to $42. This sum is likely in excess of what one would expect to be awarded as normal damages. For example, in the settlement of the parallel Fraley v. Facebook litigation in the United States, each claimant was estimated to receive $15. I agree that the litigation has clarified the privacy rights of social media users, particularly with respect to consent. [36] Turning to the other factors, the case was legally and procedurally complex

compared to other class proceedings. It included multiple applications, jurisdictional challenges, and appeals. The total monetary value of the claim is substantial. The claim and its resolution have attracted public interest. In my view, class counsel advocated vigorously for the class, as did Facebook's counsel for their client. Ms. Douez attests that she supports the fee proposal. [37] Counsel pointed to other complex class actions in which courts have approved contingency fees of one-third of the amount recovered and to judicial acknowledgment that similar percentages have been considered reasonable in many cases. I would not agree with any suggestion that a 33.3% contingency represents a default or norm. In my view, the reasonableness of proposed counsel fees requires a case specific analysis in light of the objectives of the Act and the public's trust in the justice system. [38] Approximately 52 people objected to counsel fees, whether alone or together with other objections. Understandably, none referred to the legal factors I have reviewed or to the fact that the claim only sought nominal damages, which means that the court was not going to be asked to quantify and compensate based on the harm suffered by each class member. Many objectors contrasted the $17 million in counsel fees with the nominal amounts they expect to receive. However, that is not a fair comparison.

The counsel fee represents the time, effort and money spent by class counsel over 12 years on a claim that could well have been dismissed. Other than Ms. Douez, the class members took no risks and spent no money on the litigation. It was for their benefit. [39] I conclude that in the circumstances of this case, the proposed counsel fee is fair and reasonable. I also approve the plaintiff's proposed holdback on fees and its disbursements. [40] Counsel propose that Ms. Douez be paid an honorarium of $10,000 to be paid out of counsel fees. That honorarium is eminently reasonable. Ms. Douez has been involved in this litigation since its inception and has attended numerous court proceedings, as well as two mediations. She was subjected to some adverse public comment for commencing this action. [41] In conclusion, I approve the settlement agreement, counsel fees and disbursements and the honorarium for Ms. Douez as proposed. [42] I thank all counsel for their hard work in this matter. "Iyer J."