(a) If the court decides the class action, in whole or in part, in favor of the class, in whole or in part, including by way of approving a settlement arrangement, it shall order the payment of compensation to the representative plaintiff, taking into account the considerations stated in subsection (b), unless it finds, for special reasons to be recorded, that this is not justified in the circumstances of the case.
(b) In determining the rate of remuneration, the court shall take into account, inter alia, the following considerations:
(1) the trouble incurred by the representative plaintiff and the risk he took in filing and managing the class action, in particular if the relief sought in the action is declaratory relief;
(2) the benefit brought by the class action to the class members;
(3) the degree of public importance of the class action.
Section 23 of the Class Actions Law states:
(a) The court shall determine the fees of the representative counsel for handling the class action, including the motion for approval; the representative counsel shall not receive fees in an amount that exceeds the amount determined by the court as aforesaid.
(b) In determining the rate of a representative attorney's fees under subsection (a), the court shall take into account, inter alia, the following considerations:
(1) the benefit brought by the class action to the class members;
(2) the complexity of the proceeding, the trouble incurred by the representative counsel and the risk he took in filing and managing the class action, as well as the expenses he incurred for this purpose;
(3) the degree of public importance of the class action;
(4) the manner in which the counsel representing the proceeding was conducted;
(5) The gap between the remedies claimed in the motion for certification and the remedies awarded by the court in the class action (emphasis mine – M. v.).
- Other Municipality Applications 2046/10 Estate of the Late Moshe Shemesh v. Dan Reichert (published in Nevo, May 23, 2012) (hereinafter: the "Shemesh case") The Supreme Court ruled that this is not a closed list of considerations, while enumerating additional considerations that have been recognized in case law over the years. It was written as follows:
Our eyes see that this is not an exhaustive list of considerations. In the court's ruling, three main types of considerations were recognized that must be taken into account in the framework of the decision regarding fees and remuneration in a class action. The first type of consideration deals with the system of incentives relating to the filing of a class action. The court must strike a balance between the desire to encourage the filing of proper claims and the desire to prevent the filing of frivolous claims. In this context, weight must be given to the interests realized by the action, both from the perspective of the represented group and from the perspective of the public as a whole. In this regard, the court must examine, on the one hand, the scope of the representation attorney's investment as well as the degree of risk in the action, and on the other hand, the relationship between the remedy claimed and the remedy that was approved... In this context, the court must also examine the question of whether, in order to obtain the requested relief, it was necessary to file a class action (see, Civil Appeal 10085/05 Tnuva - Cooperative Center for the Marketing of Agricultural Produce in Israel Ltd. v. Estate of the late Tawfik Rabi, paragraphs 62-63 ([published in Nevo], December 4, 2011)). A second type of consideration that the case law pointed out relates to the conduct of the representative plaintiff's counsel. The fees serve as an incentive to conduct the proceedings in an efficient and fair manner (see Civil Appeal 7094/09 Brozovsky Moving Ltd. v. Ituran Locating and Control Ltd., paragraphs 13-14 ([published in Nevo], December 14, 2010); See also, regarding non-class actions, Civil Appeal 9535/04 "Bialik 10" faction v. "Yesh Atid Bialik" faction, IsrSC 60(1) 39, 1, 3, 95 (2005))... Another type of consideration relates to the ratio between the fees and the class action as a whole. The court must refrain from awarding fees that would unreasonably reduce the growing benefit to the group (for a detailed discussion of the considerations presented, see, Civil Appeal 9134/05 Levitt v. Ko Op North, Cooperative Society for Services Ltd., paragraphs 12-14 ([published in Nevo], February 7, 2008); Alon Clement, "Guidelines for the Interpretation of the Class Actions Law, 5766-2006," Hapraklit 49 131 (2007) (hereinafter – Clement)).
- Another consideration recognized in the case law is the degree of success that the representative plaintiff has achieved in the proceeding. In this regard, see the Supreme Court's words in Other Municipality Motions 7685/12 Renen Gersht v. Tshva Yitzhak (Sharon) in paragraph 5 (published in Nevo, April 13, 2014), according to which "the degree of success that the representative plaintiff had in conducting the proceeding until the settlement was reached, is a relevant consideration in ruling on the rate of remuneration and fees" (see also: Civil Appeal 471/15 Avrahami Nehemia v. Cellcom Israel Ltd. (published in Nevo, 04.2016)).
- With regard to the method of calculating the fees that must be awarded, it was held in the Shemesh case that, in principle, the percentage method should be preferred:
In summary, we are of the opinion that in class actions that concern monetary relief, the percentage method should be adopted as the accepted method for determining the fees of the representative attorney. The percentage rate that will be awarded will be affected both by the specific circumstances of the proceeding, by the manner in which the proceeding was ended, and by the amount of the amount awarded. In addition, the rate of the fees will be calculated from the amount actually collected by the class. In addition, it is appropriate to award the fees at a gradual rate, in the sense that the higher the amount of the winnings, the smaller the percentage of the fees.
- It should be noted that in a later ruling – Appeal Petition/Administrative Claim 2978/13 Mei HaGalil – Regional Sewage Corporation Ltd. v. Younes (published in Nevo, 2015), the Supreme Court clarified that although the percentage method is the accepted method in Israel for calculating fees, the court is not obligated to do so, except in certain circumstances:
The starting point, therefore, is that the accepted method in Israel for calculating fees and remuneration in class actions is the percentage method, which began when monetary relief was awarded in favor of the members of the class represented. Admittedly, this does not mean that the court must rule on this method, but rather that if it wishes to adopt a certain method of calculation, beyond the general considerations listed in sections 22-23 of the Law, which deal with remuneration for the representative plaintiff and fees for his attorney, this must be done by way of the percentage method
- The parties did not reach an agreement regarding the amount of remuneration and legal fees, and summaries were submitted on their behalf. The Applicants argued in their summaries that the payment of remuneration in the sum of NIS 50,000 and legal fees of NIS 450,000 together with VAT should be ordered in accordance with the law. Inter alia, it was argued by the Applicants that the application for approval brought great benefit to the class group, to the public of children in need in Israel and to the general public.
- Thus, the settlement includes a very significant benefit in the form of a donation of toys worth NIS 1,950,000 to needy children and an additional donation of NIS 50,000 to a fund for the distribution of funds under section 27A of the Class Actions Law. Donating to needy children is a public goal of the highest order.
- In addition, the settlement led to a number of significant commitments by the Respondent with a forward-looking outlook. Thus, in the realm of compliance with the Consumer Protection Law and its regulations, when the Respondent undertook to indicate from now on every video and advertisement, to the extent that they are launched in Israel, and which concern the possibility of winning the lottery, in a prominent and clear manner that the chances of winning are as detailed in the Regulations, and to clarify where these Regulations can be found.
- In addition, with regard to section 30A of the Communications Law, the Respondent undertook that from now on, it will send advertising materials only to those recipients who have given their consent to receive such advertisements, in accordance with the provisions of the Communications Law, and will also allow those recipients to send a refusal notice in the manner in which those advertisements were sent, in accordance with the provisions of the Communications Law. Even if for the time being the Respondent has suspended the marketing of the card albums that are the subject of the application for approval, the Respondent's undertakings are of great significance, looking to the future, in light of the reasonable possibility that the Respondent will re-market the products that are the subject of the application for approval in the future. Moreover, this is the law enforcement in the field of advertising and marketing for children. This is an important and significant area, and therefore the benefit inherent in the settlement even exceeds the value of the monetary benefit to which the Respondent undertook.
- The Applicants further argued that there were input considerations in the form of the resources that were required of the Applicants and their counsel to file the application for approval and to conduct the proceeding. In addition, the filing of the application for approval made a material contribution to needy children, and in addition, the action incentivizes the Respondent and other Respondents to act in accordance with the law.
- As to the existence of a discrepancy between the alleged damage to the group and the amount of compensation to the group, it was argued that this is not a large gap, and in any case this discrepancy stems from the fact that the amount of the claim was estimated by way of estimate and that part of the damage claimed was non-pecuniary. It was further argued that the proceeding was conducted fairly and efficiently by the Applicants and the Attorney General, who did their best to shorten and streamline the proceedings, including the willingness of both parties, to end the proceeding in an agreed-upon manner without the need for a judicial decision. In addition, the requested remuneration is consistent with similar arrangements that were recently discussed.
- The court was asked to take into account the future arrangement and its importance, with regard to the amount of the benefits, and to determine that the percentage of the benefits will be calculated as a total of 125% of the value of the benefit agreed upon by the parties herein, i.e., a value of NIS 2,500,000. In this regard, the Applicants referred to a class action (Center) 3889-01-18 Yaniv Nissenbaum v. Yenot Bitan Ltd. (published in Nevo, December 15, 2021).
- On the other hand, the Respondent argued in the summaries on its behalf that remuneration and fees should be awarded to the lower party. According to the Respondent, the scope of the complexity and hassle invested by the Applicants and their counsel in the proceeding is at the lower level. Thus, with regard to the complexity of the proceeding, it is ultimately a "spam" claim that does not include any innovative or unique claim and did not require any special effort. In addition, the scope of the trouble invested by the Applicants in managing the proceeding was on the low side, since immediately after the filing of the pleadings, the parties turned to a mediation proceeding that ended after one mediation meeting. Accordingly, no additional proceedings were conducted.
- As for the expenses incurred by the Applicants, here too we are dealing with expenses on the lower side. Thus, the Applicants did not incur the payment of a fee, did not carry out any preliminary procedure of collecting evidence, and did not submit any expert opinion. It was further argued that against the background of the fact that the parties reached a settlement arrangement, with the exception of the matter of legal fees and remuneration, already in one mediation session, this is sufficient to testify that the Applicants did not put themselves at any risk, and at most at least at the slightest risk. In addition, the reduction of the Applicants' risks stemmed as a direct result of the Respondent's conduct, which preferred to reach a settlement.
- With regard to the degree of importance of the class proceeding, the Respondent noted that these were advertising text messages of the Respondent's products that were sent to a limited circulation of users who actively requested to receive marketing messages and registered in the Respondent's database, including the Applicants. The Request for Approval also indicates that it was possible to remove the User from the mailing list of the text messages in a very easy way by clicking on the link that appeared in the body of the text message.
- The Respondent also noted that the evidence of the low degree of public importance of the Request for Approval is the relatively small scope of amendments that were imposed on the Respondent in the framework of clauses 3.1 and 3.2 of the Settlement Agreement, when these are amendments of a rather technical nature. The Respondent further noted that these amendments will probably not be implemented in any case, in light of the termination of the Respondent's commercial activity in Israel under circumstances beyond its control.
- The Respondent further argued regarding the conduct of the Applicants and their counsel. It was argued that the request for approval was not filed shortly after the receipt of the text messages, but only after the publications appeared about that discussion in the Knesset, which was initiated, as aforesaid, by a business competitor of the Respondent. According to the Respondent, the Applicants' counsel, the father of Applicant 1 and the husband of Applicant 2, "identified an opportunity" to file a class action at a time when class actions were exempt from fees. To this must be added the fact that a motion to certify a class action, which is filed by a representative who is close to a nuclear family with the Applicants in the proceeding, is at the very least problematic. This difficulty is intensifying in light of the fact that the Applicants' ISA has in the past filed class actions through his family members for the same causes of action.
- The Respondent referred to a number of motions to certify a class action filed by relatives of the Applicants' attorneys, some of which even dealt with violations of the provisions of Section 30A of the Communications Law.
- It was further argued with regard to the conduct of the Applicants and their counsel that in the framework of the motion for certification, the Applicants did not bother to disclose the previous class proceedings that were taken against the Respondent, in which identical questions of fact and law arose.
- The Respondent further argued that there was a gap between the remedy claimed and the relief approved in the framework of the Settlement Agreement. Thus, while the damage claimed in the framework of the application for approval amounted to NIS 8,250,000, the compensation given in the framework of the settlement agreement is a total of NIS 2,000,000, with NIS 50,000 to be contributed to the Fund for the Distribution of Funds in accordance with Section 27A of the Class Actions Law, while the rest of the amount will be donated in the form of a donation of toys according to the value of the cost to the consumer, with the cost of the manufacturer being between NIS 415,000-517,000. According to the Respondent, in terms of the cost of the manufacturer, this is a gap of 94%.
- The Respondent further argued that to the extent that remuneration and fees are awarded, the rule is that the amount will be awarded from the amount of the settlement awarded to the group and not in addition. In this regard, the Respondent referred to a class action (Tel Aviv District) 44598-12-12 Israel Greenberg v. Meitav Dash Provident and Pension Ltd. (published in Nevo, December 20, 2021) as well as to a class action (Tel Aviv District) 2786/07 Sarah Israeli v. Maccabi Health Services Ltd. (published in Nevo, May 13, 2011). In the Respondent's opinion, the amounts of remuneration and fees that were awarded in a class action (Tel Aviv District) 51135-03-17 Barak Avivi v. Sunfrost Ltd. (published in Nevo, April 28, 2020) should be awarded, since taking into account the amount of the claim and the relief awarded in that matter, are similar to his case.
- After considering the arguments of the parties and taking into account the provisions of the law and case law, I have determined that the attorney fees for the applicants will be in the sum of NIS 60,000 together with VAT in accordance with the law, while the remuneration for the applicants will be in the sum of NIS 10,000, all for the reasons that will be detailed below.
- In his case, there are a number of considerations that lead to the conclusion that the amount of remuneration and fees should be awarded to the lower party. Indeed, the application for approval was not a futile request, and the Applicants' investment in filing the application for approval should not be At the same time, there are two main considerations that tip the scales towards the award of the amount of remuneration and fees on the lower side. The first is the gap that exists between the amount of the alleged damage and the compensation given to the group. The second reason is the respondent's argument that the amount of remuneration and fees should be awarded from the total compensation to the group.
- As to the existence of the gap between the alleged damage and the amount of compensation to the class, while the filing of the application for approval and the settlement agreement reached between the parties are intended to benefit the members of the class, taking into account the Respondent's undertakings, on the other hand, the existence of a significant gap between the amount of the damage claimed in the framework of the application for approval should not be ignored.
- In the framework of the application for approval, the Applicants estimated the damage at NIS 8,250,000, while the amount of compensation given to the group in the framework of the settlement agreement is NIS 2,000,000 in this regard, see Class Action 34961-04-17 Paz Lev Ran v. IDI Insurance Company Ltd. (published in Nevo, March 20, 2019); Class Action (Tel Aviv) 11051-12-15 Yoram Kohol v. Shopmind Ltd. (published in Nevo, April 23, 2020)
- Another reason for awarding remuneration on the lower party lies in the respondent's claim that a condition for approving the settlement agreement is that the remuneration and fees will be awarded out of the amount awarded to the group.
- As detailed above, as part of its summaries, the Respondent argued that the remuneration and fees should be awarded out of the amount awarded to the group. On July 26, 2022, I instructed the Applicants to submit their brief response to this claim. On August 2, 2022, the Applicants filed a response on their behalf.
- According to the Applicants, according to the language of the Settlement Agreement, it was agreed that the remuneration and fees would be paid in addition to the agreed compensation. Thus, in paragraphs 3.3 and 3.4 of the Settlement Agreement, it was stated that the value of the compensation to the group would not be less than NIS 2,000,000 in terms of cost to the consumer. Accepting the Respondent's argument is contrary to this agreement. According to the Applicants, this is a "closed contract", and therefore the language of the contract must be adhered to and there is no need to trace the intentions of the parties.
- The Applicants further argued that even in light of the parties' intentions, the settlement agreement should be interpreted contrary to the respondent's position. It was argued, inter alia, that the parties created a clear distinction between the compensation to the group and the remuneration and the fees, and therefore there is no room to link the compensation to the group and the remuneration, but rather to separate them. It was also argued that the rule in settlement arrangements is that the compensation and fees are paid in addition to the compensation and not from it, both in cases where the parties reach an agreement regarding the amount of remuneration and fees, and in cases where the parties do not reach an agreement, as in the case here.
- Insofar as the respondent wished to act in accordance with the exception to the rule, i.e., to award the remuneration and fees out of the amount of compensation given to the group, it should have clarified this matter explicitly already in the framework of the negotiations between the parties and certainly in the framework of the settlement agreement. It was further argued that accepting the respondent's position would harm the good of the group and the public interest.
- In accordance with my decision of August 21, 2022, the Respondent submitted a reference on its behalf to the Applicants' arguments. The Respondent argued that the rule is that the remuneration and the fees should be awarded from the amount that was awarded in favor of the class. In this regard, she referred to the Shemesh case above. It was further argued that the position according to which the remuneration and fees should be paid was implemented in a series of judgments.
- The Respondents further argued that contrary to the Applicants' position, the parties never agreed and did not express their opinion, explicitly or implicitly, that the remuneration and the fees would be paid in addition to the settlement amount awarded to the class and not from thereof. First, it cannot be inferred from the fact that the parties agreed on the amount of the benefit but disagreed as to the amount of the remuneration and the fees that the intention of the parties was that the remuneration and the fees would be paid in addition to the compensation to the group.
- With regard to the undertaking regarding the value of the compensation to the group, the term "shall not be less than NIS 2,000,000 in terms of cost to the consumer... " does not stem from the intention of the parties to add the remuneration and fees to the value of the compensation, but rather stems from the fact that the amount of compensation to the group will not be paid in marked money, but rather in toys that will be donated in kind to various public bodies.
- Thus, until the actual distribution of the toys is made, the Respondent is unable to determine precisely the value of the donated toys. This ultimately depends on the specific models of the toys to be distributed, as of the date of distribution, availability in stock, the size of the packages, etc. Taking into account the fact that the Respondent could not commit to the value of the toys "on the shekel", the parties agreed that the value of all the toys donated would not be less than NIS 1,950,000.
- Had the Applicants' intention been to determine in the settlement agreement that the fees and remuneration would be paid in excess of the amount of the consideration, they would not have written "the value of the compensation will not be less than NIS 1,950,000, but rather that "the value of the compensation will be in the sum of NIS 1,950,000 and the amount of the fees and remuneration will be paid beyond the amount of compensation". The fact that in the settlement agreement the parties did not express any intention, express or implied, as to the question of whether the remuneration and the fees would be paid in addition to or out of the amount of the settlement, is explicitly learned from clause 7 of the settlement agreement, which is the clause that deals with "remuneration for the class plaintiffs and their counsel". In this clause with all its sub-clauses, there is no indication or hint that the parties agreed that the remuneration and fees would be paid in addition to the amount of the settlement.
- After discussing the arguments of the parties, I found that there is no impediment to the amounts of remuneration and legal fees being awarded out of the compensation that will be given to the group.
- First, as to the Applicants' argument regarding the interpretation of the Settlement Agreement, including the intentions of the parties, I did not find it appropriate to accept this argument.
- Clause 7 of the Settlement Agreement discusses the issue of remuneration and legal fees. In the framework of the Settlement Agreement, the parties stated that there was a dispute between them regarding the amount of remuneration and legal fees, and that summaries would be submitted on their behalf in this regard. On the other hand, the parties stated that they had reached an agreement regarding the manner of payment of the remuneration and fees, including the dates on which it would be paid. In this regard, see clause 7.4 of the Settlement Agreement. Insofar as the parties' intention was indeed that the amount of remuneration and fees would be paid in addition to compensation to the amount of compensation for the group, the parties would have been expected to state this explicitly in the framework of the issues on which they had reached an agreement.
- Second, and contrary to what is claimed by the Applicants, the payment of remuneration and fees out of the total compensation that was awarded in favor of the group does not constitute an exception. Contrary to what is claimed by the Applicants, there is no impediment that the amount of remuneration and fees should be paid out of the total compensation that was awarded in favor of the group. In the Shemesh case, it was determined by the Honorable President A. Grunis (as he was then called) that:
It should be noted that the role of the court as the body that determines the attorney's fees in the class proceeding is unique in terms of weighing all the interests at hand. This is because the parties themselves in the class proceeding have no real interest in opposing the attorney's fee demand. Ostensibly, the members of the represented class may have an interest in supervising the fees. This is because the fees are paid, in fact, out of the amount that was awarded in their favor... [ibid., paragraph 3].
- See also A. Clement's article, Guidelines for the Interpretation of the Class Actions Law, 5766-2006 Hapraklit 49 5767 (165), in which he discusses, inter alia, the question of whether the amount of the remuneration and the fees should be derived from the amount of the settlement or whether the defendant should bear it in addition. In Prof. Clement's opinion, the amount and the remuneration and the fees should be deducted from the amount of compensation to the class, as this can ultimately serve the class:
When the fees are awarded from an amount agreed upon in the settlement, the court may, in accordance with the provision of section 19(f) of the law, 'take into account an agreed recommendation submitted to it by the parties in this matter'. This approach is inappropriate. Even when the defendant agrees to pay the fees as an addition, the amount of the fees affects the amount he will agree to pay to the plaintiffs, as will be explained below. The defendant expects that if he does not reach a settlement, he will have to bear a total cost equal to the amount of the relief that will be awarded in the trial, expenses that will be awarded against him and his expenses. Whether the expenses that will be awarded against him will be awarded out of the relief that will be awarded or in addition to it, in the end there will be a total amount that the defendant will pay and which is the total liability of the defendant in the judgment.