No Vindication At Certification: Defendant Lawyer’s Request For Substantial Indemnity Costs Denied

For defendants, success is often bittersweet due to the costs of mounting a defence and the reputational harm caused by the plaintiff's allegations. This reputational harm is amplified when the allegations include fraudulent, criminal, unethical or unprofessional conduct. To help compensate for this elevated reputational harm and deter against unfounded accusations of dishonest conduct, plaintiffs that fail to prove such claims may be ordered to pay costs on the substantial indemnity scale to defendants.

Given that reputational harm is further amplified in the class actions context, one might expect that substantial indemnity awards could be made if representative plaintiffs fail to prove allegations of dishonest or fraudulent conduct. However, in Hodge v. Neinstein, Justice Perell held that, in such cases, substantial indemnity awards are not available to defendants that defeat motions for certification.