Executive Summary: Key Legal and Evidentiary Issues

• Court approved a $7.5M class action settlement for Paxil-related birth defect claims, leaving legal costs for later determination.

• Disputes arose among current and former counsel over entitlement and allocation of legal fees and disbursements, including issues of firm succession and standing.

• The original contingency fee agreement with Merchant Law was found invalid for failure to serve it, but the Court still relied on it to assess fairness.

• Both proposed and alternate legal cost structures were rejected for being inconsistent with class expectations and for unfairly burdening class members with administrative costs.

• Court set total legal costs at 33% of the settlement (including administrative fees and taxes), to be allocated equally among Merchant Law, the Consortium, and lawyers with individual retainers.

• Ms. Singh was awarded a $10,000 honorarium recognizing her risk, effort, and impact of lawyer conflicts.

Background and Facts

This Alberta class action stemmed from allegations that the antidepressants Paxil® and Paxil CR™ increased the risk of congenital malformations when taken during pregnancy. Fiona Singh brought the action on behalf of her son, Muzaffar Hussain, and a proposed class of similarly affected individuals. The action, filed in 2012, alleged GlaxoSmithKline Inc. (GSK) failed to adequately warn of these risks.

Following certification in 2022 (Singh v GlaxoSmithKline, 2022 ABKB 762), and extensive litigation history involving multiple law firms, a global settlement of $7.5 million was reached and approved by the Court on September 24, 2024. The settlement included:

• A release of GSK,

• A medical-based Distribution Protocol for claimants,

• Appointment of a Claims Administrator,

• Settlement of claims with health authorities,

• Proposed payment of legal fees, disbursements, and taxes,

• A request for an honorarium for Ms. Singh.

Dispute Over Legal Costs

At the approval hearing, the Court declined to approve the legal fees and honorarium, adjourning those issues due to conflict among counsel. These disputes involved:

• Merchant Law, former counsel to Ms. Singh, which claimed $1.1M in fees and $175,000 in disbursements,

• Casey Churko (KoT Law PC) and Clint Docken KC (Guardian Law), part of the new “Consortium” counsel,

• Napoli Shkolnik Canada, involved through collaboration agreements with KoT and Guardian Law,

• Guardian Law, which had dissolved but claimed 10–30% of certain legal fees based on past agreements,

• A dispute over whether the Consortium was succeeded by Napoli Shkolnik Canada, now internally conflicted.

Invalid Contingency Fee Agreement

Ms. Singh had signed a contingency fee agreement with Merchant Law in 2018, but later swore in an affidavit that she was never served with it, as required by section 38(5) of Alberta’s Class Proceedings Act (CPA). The Court found it invalid, but used it as a baseline for expectations since it reflected an understanding of fair legal cost allocation at the time.

Proposed vs. Alternate Legal Costs

Two competing cost structures were proposed:

Proposed Legal Costs (Merchant Law + Churko):

• Class counsel fees: $2M

• Merchant Law: $1.1M

• Additional Lawyers’ Fees tied to individual retainers

• 33.33% cap (excluding disbursements and admin costs)

• Class counsel would get 15% of unrepresented claimants' funds

Alternate Legal Costs (Docken + Napoli Shkolnik):

• Class counsel fees: $500K–$750K

• Limited Merchant Law compensation

• More generous allowance for lawyers with individual retainers

• 35% cap on legal fees (excluding disbursements and admin costs)

Court’s Findings

Justice Sidnell rejected both proposals, concluding that:

• Both imposed excessive cost burdens on class members,

• Neither aligned with the original expectations in the (invalid) contingency fee agreement,

• Both lacked fairness in allocation among lawyers.

Instead, the Court set legal costs at 33% of the settlement (i.e., $2,475,000), including all of the following:

• Class counsel and Lawyers’ Fees,

• Disbursements and taxes,

• Costs of the Claims Administrator and Claims Officer,

• Ms. Singh’s honorarium ($10,000).

The remaining 67% of the settlement would go to health authorities and eligible class claimants. Based on assumptions, this would result in:

• 61% to the class (54% to eligible claimants, 7% to health authorities),

• 39% to legal and administrative costs.

Fee Allocation

The legal fees (inclusive of GST) are to be equally split, one-third each to:

1. Merchant Law (fulfilling a court-recognized undertaking),

2. The Consortium (to be held in trust pending court resolution of internal ownership),

3. Lawyers with Individual Retainers, subject to caps and verification.

• If a claimant is unrepresented, their corresponding portion of lawyer fees reverts to the class fund.

• Disbursements must be verified by an assessment officer.

• Guardian Law entitled to 10% of class counsel and individual retainer fees from the Consortium share, per contract.

• Any unresolved internal firm disputes are to be litigated separately.

Honorarium for Ms. Singh

The Court awarded $10,000 to Ms. Singh, citing:

• Her exposure to legal cost risks,

• Stress from being caught between warring law firms,

• Her commitment to continuing as representative plaintiff despite adversity.

This award was to be paid from the legal cost pool, not deducted from class member compensation.

Next Steps

• Health authorities to be paid first.

• Disbursements to be assessed within 30 days.

• Claims Officer to review class claims.

• Claims Administrator to finalize distribution, hold funds in trust as required, and ensure lawyer payments follow the Court’s directions.

• Remaining funds to be distributed pro rata to validated claimants.