Federal Court cuts legal bill in half for class actions relating to First Nations child welfare

The Federal Court has ruled class action lawyers involved in a historic, multi-billion dollar settlement for First Nations child welfare can receive $40 million for their work — half of the amount originally sought.

Five legal firms were initially seeking $80 million plus applicable taxes and about $600,000 in out-of-pocket expenses from the federal government.

Ottawa called the initial request excessive and negotiated to reduce the amount, settling on $55 million with the law firms.

Justice Mandy Aylen said that amount was still too much.

"This court must avoid approving counsel fees that result in windfalls, as class action litigation is not a lottery and the purpose of this court's class action regime is not to make lawyers wealthy," she said in a written decision released Friday.

Instead, Aylen approved $40 million in legal fees plus disbursements and taxes for the lawyers, which will be paid out of public funds.

Cindy Blackstock, who filed the 2007 human rights complaint along with the Assembly of First Nations that led to the settlement, said she hopes the decision sends a message to other class action lawyers.

"I'm glad there's a significant reduction from the $80 million that was asked for," said Blackstock, executive director of the First Nations Child and Family Caring Society.

"I'm very concerned that this type of extraordinary amount of legal fees could create an imbalance with the people who have undergone the harm and are receiving far less of that per capita."

On top of the $40 million, Aylen also approved up to $5 million for ongoing work to implement the settlement agreement.

The five firms that will receive the fees are Sotos LLP, Kugler Kandestin LLP, Miller Titerle + Co., Nahwegahbow Corbiere and Fasken Martineau Dumoulin LLP.

Judge took issue with lack of billing detail

The legal bill will not come out of more than $23 billion in federal cash previously approved by the Federal Court for compensation to First Nations children and families, or from an additional $20 billion earmarked by Ottawa for the long-term reform of the First Nations child and family services. 

Under the settlement agreement reached between the lawyers and Ottawa, more than 300,000 First Nations people will each receive tens of thousands of dollars because the federal government chronically and knowingly underfunded child and family services on reserves and in the Yukon.

The deal is based on a 2016 ruling from the Canadian Human Rights Tribunal that found Canada engaged in wilful and reckless discrimination against First Nations children and families by failing to provide them with the same level of child and family services provided elsewhere.

In 2019, the tribunal ordered Canada to pay the maximum human rights penalty of $40,000 per First Nations child and family member.

The tribunal said the government's actions created an incentive for foster care systems to remove First Nations children from their communities, cultures and families.

Dubbed the "millennium scoop," the practice meant more Indigenous children ended up in foster care than were sent to residential schools at their peak.

Three class action lawsuits were filed against Canada, and two combined into one.

In her decision, Aylen found the class actions did not till new ground and relied on the proceedings and decisions by the human rights tribunal.  

Aylen also took issue with the lack of detail provided by lawyers to justify their requested billing. She also scolded Ottawa for failing to press the issue.  

"I have concerns regarding the number of recorded hours and the hourly rates," she wrote. 

Approximately 24,000 hours of billable time were recorded by the five legal firms with billing rates ranging between $180 and $975 per hour.

"Class actions cannot be an open-ended invitation for class counsel to docket their time without regard to productivity, knowing that there is no client who will scrutinize their dockets in the same manner that a traditional paying client would do," she wrote. 

"The use of inflated hourly rates, which has the effect of artificially increasing the amount of actual fees, is a further mischief to which this court is alert and it will not be tolerated."