Monday, August 31, 2009

Class actions. Why are we waiting?

... simply to get all the ducks in a row ;-)

The Times
August 27, 2009
Class actions: why are we waiting?
Neil Rose

When is a class action not a class action? When it’s a collective redress scheme or a representative action or basically anything that does not sound like loony American litigation.
Whatever you call it, however, the idea of bringing a case on behalf of a group of consumers who have to opt out of the action — rather than opt in, as now — is slowly gaining ground. But with the business community united in opposition, slow is the operative word.

Last month the Ministry of Justice (MoJ) accepted that “there may be circumstances where cases could be brought more efficiently on a collective basis”, but then promptly rejected the idea of introducing a generic procedure applicable to all cases.

Responding to recommendations from the Civil Justice Council (CJC), the MoJ said that each government department should assess whether there is evidence of need for a collective redress procedure sector by sector, with the help of a policy framework that the MoJ is developing. If so, the department will decide how it will work.

“It may be the Government’s way of kicking the CJC proposal into the long grass,” says John Meltzer, head of the product liability network at Lovells, the City firm. “Unless the ministry is really prepared to drive the process of reform, I doubt other departments are going to have the appetite to do it.”

The council wants only to add opt-out actions to the options for bringing group claims — not replace them — but it is a sign of the controversy they provoke that it counts as progress that the ministry did not shelve the idea entirely.

Robert Musgrove, chief executive of the council, is pleased that the Ministry of Justice accepted most of its recommendations, saying they “should herald considerable improvements in access to justice”. These were based on research that found “overwhelming evidence” that the system is preventing meritorious consumer claims from being pursued. Getting the balance right between developing more effective procedures for people to bring meritorious claims, protecting defendants from non-meritorious claims and ensuring that court proceedings are only ever utilised where there are no more efficient or timely routes to redress, has been challenging,” he says.

Ingrid Gubbay, a co-author of the CJC’s report and consultant in the London office of Hausfeld, the US class action firm, is less diplomatic. She suggests that the Government is worried in part about finding itself on the receiving end of class actions even though, in reality, such cases would be tough to bring, as the Equitable Life action proves.

“The sector-by-sector approach is a way of slowing down almost to a halt any possibility of bringing in any effective procedure,” she says, “and does raise a credibility question as to how far the response may be selfserving.”

With litigation seen as the last resort, the ministry highlighted regulatory action as potentially “a more cost-effective way of dealing with cases involving a large number of small claims”, which Meltzer says is in keeping with the European approach.

It also sounds like a veiled reference to the case Which? brought against JJB Sports over football shirt pricefixing, in which consumers who bought offending strips could claim £20. But Gubbay, who previously worked at Which? and launched the action, says that requires consumer groups, charities and trade unions — as well as regulators — to make private enforcement a priority. Few seem willing or able to do this.

The council has tried to make its proposals look as little like US class actions as possible, despite research indicating that the reality is not as loony as the myths anyway, in an effort to reassure the business community that they would not lead to a mass of speculative claims. To the extent that opt-out is a feature of US class actions, then such cases are US-style, but equally they are Canadian and Australian-style. What makes US class actions scary are contingency fees, punitive damages and no loser-pays rule; and we are a long way from that.

It is also often forgotten that class actions help defendants, too, by consolidating all claimants into one action and offering finality.

Not everyone thinks they will now rest quietly in the long grass. The European Commission is looking closely at collective redress, while an as-yet unpublished report commissioned by the Government Equalities Office calls for opt-out actions to be tried out in employment tribunals to deal with the thousands of group discrimination and equal pay cases clogging up the system.
Tim Strong, a partner at Barlow Lyde & Gilbert, the City firm, believes the present climate provides fertile ground for government departments to get on and examine whether they need such actions. “Lord Justice Jackson’s costs review has focused attention on the high cost of litigation in the UK and issues of access to justice,” he says. “In addition, there are now large classes of claimants with recession-based claims against their financial advisers and others. The issue of collective actions may therefore be near the top of many government departments’ ‘to do’ lists come early 2010.”

1 comment:

Anonymous said...

Here is a database of pending class action lawsuits in the US:

I hope it helps.

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