Canada's top court refuses to hear appeal on $3M charged by Alberta law firm to First Nation

The Supreme Court of Canada will not be hearing an appeal from Rath & Company and Jeffrey R. W. Rath that the law firm is owed more than $3 million as a contingency fee from work it undertook when Tallcree First Nation received agricultural benefits in 2017 under Canada's Specific Claims process.

The Priddis-based Alberta law firm signed an agreement with Tallcree First Nation in 2015 that set a contingency fee of no less than 20 per cent received in a settlement agreement.

Tallcree First Nation, one of approximately 20 Treaty 8 First Nations at the time negotiating an agreement with Canada, received $57.6 million based on a formula that took into account the number of band members. The settlement was consistent with offers made to other signatories of Treaty 8.

Under the agreement with Rath & Company, the contingency fee would therefore be $11.5 million, but Tallcree put up a fight.

Tallcree sought a review of the fee. The review officer upheld Rath & Company's fee.

Tallcree appealed the decision to the Court of Queen's Bench in Alberta and the judge ruled that the fee was unreasonable and reduced it to $3 million, “inclusive of disbursements.”

Rath appealed that decision to the Court of Appeal of Alberta.

In a split decision of two to one, the higher court upheld the lower court's $3 million contingency fee. However, the appeal court found the lower court's conclusion was “tainted” and therefore conducted a new analysis to determine what constituted a reasonable fee.

Among the errors the appeal court majority said the lower court judge made was in the “hindsight analysis.” The lower court found that Rath could have predicted that the upcoming federal election (of 2015) would result in a government change with a new government that would be more amenable to Indigenous peoples.

The appeal court also took issue with the lower court's conclusion that Tallcree First Nation was under economic pressure to enter into the contingency fee agreement with Rath because of impecuniosity (poverty). The appeal court said the argument wasn't sustained by a financial statement from Tallcree.

And the appeal court found error in the conclusion that Rath & Company, because it was located in a small community, did not have the expertise to handle First Nations' law.

“Since both the Review Officer's and the chambers judge's analyses of the reasonableness of the contingency fee agreement were tainted by reviewable error, it is necessary for this court to conduct a fresh analysis,” wrote Justices Frans Slatter and Kevin Feehan in their 2022 majority decision.

At the time Tallcree signed with Rath, Tallcree felt that their claim was lagging - their smaller claim was being piggybacked on the larger claims - and that their present law firm was not sharing information with them. In light of this dissatisfaction, the First Nation signed with Rath to expedite the process.

Tallcree's business manager had not been briefed about the mandatory statutory timetable for resolving specific claims.

The Treaty 8 claimants had triggered the Specific Claims procedure, which had a specific timeline in place: three years from filing to acceptance for negotiation and a further three years to negotiate settlement. It was expected a per capita formula for the settlements would be put in place.

Tallcree's claim was accepted as “filed” by Canada in 2013, setting 2016 as the end of the research and assessment period.

Canada had already accepted other claims for negotiation so it was highly unlikely that Tallcree's claim would not be accepted.

The contingency fee agreement with Rath was signed 26 months into the 36-month assessment period.

Since a number of claims had already been accepted for negotiations, “the reasonable observer” would not have considered liability seriously contested, would have perceived a settlement in the near future, and would expect Tallcree to receive an offer, held the court of appeal majority opinion.

“The 20 per cent contingency would likely be triggered with minimal additional effort or risk. Given the range of settlement being discussed, the resulting fee would clearly be unreasonable,” said the majority decision.

Rath estimated the hourly rate for work undertaken for Tallcree at $391,900. Rath had conceded before the lower court judge that a fee between $1 million and $2 million would be appropriate. The judge set $3 million as the contingency fee.

The appeal court majority said although the $3 million fee was “based on unsupportable analysis,” Tallcree had not filed a cross appeal, so the $3 million fee stood.

Dissenting Justice Thomas A. Wakeling held that Tallcree First Nation had entered into the contingency fee agreement with Rath & Company “with its eyes wide open” and understood its obligations.

The Supreme Court of Canada dismissed Rath's leave to appeal on March 16, 2023. The Supreme Court does not provide reasons for leave application judgments.