When can a party put into evidence a settlement reached between the parties, and to what end? In most cases, the answer is never. Not only are parties generally careful to insert a confidentiality clause in the settlement agreement, but in many cases, the relevance of a related settlement is doubtful to say the least. The situation is different in class action matters, where parties will inevitably have to publicize any settlement that has been reached, its terms and the amounts the Respondent has agreed to pay. Just last month, the Quebec Superior Court rendered a judgment in Cunning v. FitFlop on the question whether an out-of-province settlement is relevant for production at authorization.
In Cunning, a Quebec Petitioner had commenced a class action against FitFlop, a shoewear manufacturer, alleging false representations and misleading advertising. As is often the case in class action litigation, similar class actions, which sought to represent overlapping class members, had been filed in other jurisdictions, based on substantially similar allegations. One of those actions had been commenced by a separate Plaintiff in the United States, and had been settled shortly before the Quebec authorization hearing.
At the authorization hearing, the Respondent in Cunning objected to the Petitioner’s attempt to file the American settlement notice, which contained the detail of the agreement reached between FitFlop and the American Plaintiff. FitFlop’s counsel had argued that as a settlement, it was concluded without prejudice and without any admission whatsoever on the part of FitFlop, and was therefore irrelevant to the Quebec proceedings. The Petitioner’s counsel, on the other hand, argued that the document was publicly accessible.
The Court held that the American settlement notice was admissible evidence at the authorization stage, where the Petitioner’s burden is one of demonstration and not of proof. It is important to note, however, that the Court also pointed out that its determination on admissibility at the authorization hearing did not have any bearing on the document’s admissibility or probative weight at the trial on the merits. Specifically, the Court stated that although it could take into account the existence of the American settlement, this evidence did not necessarily prove anything in the present case.
Beyond its purely legal interest, the significance of the judgment in Cunning lies mainly in the impact it is likely to have on class action defense strategy. Will the judgment be a disincentive on class action Respondents to settle, particularly those Respondents represented by the same firm in overlapping multijurisdictional class action? The admissibility of the terms of an extra-territorial settlement, and its potential weight at authorization and on the merits, risks scaring Respondents away from settling, out of a concern that they are somehow admitting a certain guilt.
If the justice system is to encourage out-of-court settlement generally, why allow such a document to be filed? If the American settlement does not have any probative weight, what is its relevance in Quebec, other than allowing the Petitioner to colour the file against the Respondent? The judgment in Cunning at first glance seems to tilt even further towards Petitioner rights in the Province, allowing Petitioners to file any evidence they wish at authorization, while imposing stringent limits on Respondent filings. But does it not also encourage Respondents to avoid settlement, therefore ultimately going against Petitioner interests?