This episode of our “Fierce Competition“ podcast looks at trends across the pond in class actions in the U.K. and focuses on the country’s new tribunal that was created specifically to hear class actions. Antitrust/competition partners Bill Batchelor, Bruce Macaulay and Matt Martino discuss the variety of antitrust class actions active in the U.K., differences between class action in the U.S. and the U.K., and steps companies should take following the class certification stage.
Episode Summary
Until recent years, there was barely a single collective claim in Europe, but now, things have changed. This episode of the “Fierce Competition” podcast features Skadden partners Bill Batchelor, Bruce Macaulay and Matt Martino, who explore class action lawsuits in the U.K. and U.S., focusing on the evolving role of the Competition Appeal Tribunal (CAT), a new collective actions tribunal in the U.K., which is currently handling 48 live proceedings, involving a range of unique claims.
Differences in the certification process in both jurisdictions are analyzed, as well as the impact of funding agreements, and much more. Tune in as this episode serves as a rich resource for understanding the intricacies of class action lawsuits on different sides of the Atlantic.
Key Points
- The Role of the Competition Appeal Tribunal (CAT): In the U.K., the newly established CAT has become a significant platform for hearing class action lawsuits, with creative claims being presented.
- Certification Processes Differ Across Jurisdictions: The process for certifying a class action lawsuit varies significantly between the U.K. and the U.S. While the U.K. has a lower bar for certification, the U.S. requires a more thorough and rigorous analysis, with courts taking a closer examination of the requirements for class certification.
- The Influence of Litigation Funding on Class Actions: Both the U.K. and the U.S. have different approaches to litigation funding. Recent developments in the U.K., particularly the PACCAR decision, have raised questions about the enforceability of some funding agreements, while such agreements are typically private and less scrutinized in the U.S.
Voiceover (00:00):
Welcome to Fierce Competition, a podcast from Skadden’s Global Antitrust and Competition group that explores antitrust policy and enforcement around the world. Join our colleagues from across the continent as we discuss the latest developments and what they mean to you in an increasingly complex legal and regulatory landscape.
Bill Batchelor (00:21):
Hello, good morning, good evening, good afternoon, everyone, and welcome to this episode of Fierce Competition. My name is Bill Batchelor. I’ll be your host today, and this week it is a touch of class, or more to the point, class actions. I’m joined by my London litigator partner, Bruce Macaulay, and from New York City, my litigation partner, Matt Martino, both of whom are experts in their respective jurisdictions on collective claims or class actions. And this episode, it’s a letter from London. So we are talking today about some of the activity before the Competition Appeal Tribunal, a specialist collective actions tribunal that hears cases in the United Kingdom. What then do the British have to teach the Americans about class actions? Surely, the US is a far more established regime for class actions. What could be going on in the UK that merits an episode of Fierce Competition? Well, the answer is quite a lot.
Bill Batchelor (01:19):
The CAT, or the Competition Appeal Tribunal, is a new tribunal for the United Kingdom, but it is one set up specifically to hear class actions, a relatively novel regime in Europe. So up until about five, 10 years ago, you would barely have had a single collective claim in Europe. But now, before the CAT alone, there are 48 live proceedings, and what a docket it is. There are some very creative claims that should be of interest to anybody potentially exposed to the UK. Firstly, you can obtain standing for antitrust class actions in the UK for claims that simply wouldn’t get off the ground in the US, for example. First up that you can make claims for exotic antitrust violations such as excessive or unfair pricing. Now, that’s not something which would sound under the Sherman Act in terms of a claim, but we’ve seen a series of claims in the UK based just on that theory.
Bill Batchelor (02:18):
So one particularly exotic claim is around rail fares. So you have customers who use the railway line in London to go visit places outside London, and some of those already have season tickets for any fare between two London destinations, but when they go out of London, they should have had a discount for that portion of the rail route. Now the claim is that those customers did not receive a discount for that portion of their route, and therefore that’s an excessive price. They’ve been effectively charged the same thing twice. The allegation is that the rail companies are in a monopoly or dominant position of those rail lines, and therefore an abusive, excessive price is being charged. We’re also seeing indirect claims being extremely popular before the Tribunal, something that also wouldn’t have legs in the US. So when you think about a class action, you think about, well, actually, we’d prefer to have the largest number of potential claimants.
Bill Batchelor (03:16):
So we go all the way to the end of the supply chain, and then we try and create a class from that group. So the classic example here is Qualcomm. So that’s a 480 million-pound claim by anybody who port a mobile phone using a Qualcomm chip. The allegation is that the Qualcomm committed a violation upstream, so the supply to the mobile manufacturer, but that all consumers, as a result, were overcharged. So they’ve paid more than they should for the handset, and therefore you’ve created a claim which arguably only one company should have had a right to bring. Now the direct buyer from Qualcomm, you’ve created a claim amongst every consumer in the UK who bought the relevant type of smartphone. So you’re seeing very, very large claims being created over something that really only had an upstream impact. And finally, you’re seeing no end to the creativity of some of the class claims being brought.
Bill Batchelor (04:13):
So things that we would not think of as a pure antitrust violation are being claimed as having an antitrust overlay. And that includes claims against Meta for allegedly taking excessive amounts of data against, water sewage companies for overcharging consumers and not abiding by their sewage treatment duties. And most recently, you have a claim against mobile phone companies for allegedly keeping the tariffs on their contracts being at a too higher rate even after the handset subsidy is being reimbursed, despite the fact that nobody has ever said there could be a monopoly in the mobile phone market in the UK. So that’s just a flavor of the action before the Competition Appeal Tribunal. I’m very pleased to have Bruce and Matt here today to discuss some of the key trends. So, Bruce, is that a fair representation of the amount of activity we’re seeing in London, and what would you say is one of the key themes of what we’re seeing coming out of the CAT at the moment?
Bruce Macaulay (05:15):
Yeah, thanks, Bill. Just a starting point or to start off with, we are seeing a number of claims that are pushing the boundaries of what could be termed a competition breach. So in one recent case, for example, the allegation is that the breach of competition law was based on non-compliance with environmental laws and regulatory reporting obligations. So I think what we’re agreeing is that any one of those is certainly quite a stretch. So the hot topic at the minute in the UK is all around certification and the starting point, and we get this from the Supreme Court case called Merricks. The starting point is that for a claimant to get certified, it’s a comparatively low bar, low that is compared to, say, the US. Now, arguably what The Court of First Instance has done, what the CAT has done is to slightly raise the bar, and it’s introduced an idea from Canadian jurisprudence whereby the claimants are required to advance a carefully considered credible methodology for calculating aggregate damages.
Bruce Macaulay (06:23):
And they’ve got to do that and show that with a realistic chance of it being applied at trial. Now, one justification for the CAT doing this is it’s trying to impose some order on what would otherwise be a very complex and difficult process. So it’s trying to minimize the risk of chaos in front of the tribunal, and it’s trying to minimize the risk of the tribunal wasting its own time and the parties wasting their costs. So where we get to on certification is that while it’s not a mini trial and the CAT’s at pains to say it is not a mini trial, the claimants must be able to show a clear route to get to the trial. So from the defendant’s side, the hope is that the CAT will exercise its fairly extensive case management powers to try to weed out those claims which are either implausible or speculative.
Bruce Macaulay (07:22):
So that’s one way of looking at the certification issue. Another way of looking at the certification process is you could say that the CAT’s approach could be seen from an access to justice perspective. And in this regard, we’ve seen three matters this year, three judgments that have been handed down by the CAT, all three to do with a certification, and it would’ve been open to the CAT in each one of these cases to say, you know what? We’re going to strike out these claims because the claimants have not managed to satisfy the test for certification. But instead, what the tribunal did is it directed the claimants to go away and rework their claims and their methodologies. In other words, it said to them, have another go, go away, and improve what you’ve come up with. And in one case, that involved what they called a root and branch reevaluation.
Bruce Macaulay (08:19):
Now, this actually raises some interesting points from the defendant’s side. Defendants could rightly say, is it right that well-funded and well-advised claimants, having spent months compiling a massive claim, is it right that they can actually be given another go? Which is what’s happening. Then a reply to that, the CAT may well say, well, hang on. The CAT’s job is to find out if there is a claim at the heart of the issue. So what’s the takeaway from this? In our view, it’s certainly the case that defendants can take comfort from the approach of the CAT. The CAT is very hands-on, and in particular, the defendants can take comfort from the rigor that the CAT is applying to an early analysis of the claimant’s claim.
Bruce Macaulay (09:18):
In other words, claimant’s claims must not just be rubber-stamped and will not just be rubber-stamped through the certification stage. So that’s the key takeaway, I think. Now another big area that it’s worth looking at in the context of the UK is whether certification should be on an opt-in basis or an opt-out basis. This is obviously a big area of dispute. Claimants clearly favor the opt-out process because it’s much easier to get funding. The numbers are much bigger, it’s more scary for defendants, and there’s greater scope for potential settlement early on.
Bruce Macaulay (09:56):
Conversely, defendants will press for opt-in certification because, in that context, if there are low individual amounts in dispute, it will be effectively the end of the case. So when you’re looking at this debate, should it be opt-in or opt-out? One school of thought, and this follows from a recent court for appeal case, is that the pendulum has swung in favor of opt-out, in other words, in favor of the claimants. And that’s especially where the claim is not viable on an opt-in basis. So in other words, this opt-in/opt-out debate is not really a debate on the merits or the strength of the case, even though the CAT has the power to do it on that basis, it’s really more a viability assessment. So just on that opt-in/opt-out issue, I wonder, Matt, how the US look at that.
Matt Martino (10:47):
Yeah, so it sounds like the UK’s perhaps getting a little closer to the US regime in that respect because in the US, classes are almost entirely opt-out classes. In fact, many courts have held that opt-in classes are not permitted at all under the rules, even at the court’s discretion. So under the federal rules, all class members are bound unless they opt out of the class. So it’s basically based on the definition that the plaintiff’s counsel uses when bringing the case. And I think for that reason, because they’re predominantly, or almost, I guess maybe you could say always, right, because a lot of courts have found you can’t even bring in on an opt-in basis. Because they’re opt-out cases, the courts will typically take a closer look at the requirements for classification, unlike Canada, and what it sounds like is sort of developing a bit in the UK, the US will, the courts will take a very rigorous analysis at the classification stage and particularly on the predominance requirement of the class action rule.
Matt Martino (11:47):
Now that’s the question of whether issues common to the proposed class predominate over individualized issues. So that’s where the rubber meets the road often on these antitrust cases on class certification. The courts are looking at predominance when it comes to impact and damages. Can those issues be proven on a class-wide basis, or are those more properly individualized inquiries for each specific class member? And as part of that rigorous analysis that the court undertakes, it will examine documents and witness testimony. It will weigh testimony of competing experts who often engage in detailed data analyses to look at impact and damages from the alleged conduct.
Matt Martino (12:30):
And that’s led to this more merits-based inquiry even at the class stage, which again is often focused on whether there has been impact to all the class members and whether that can be shown through the use of common proof. Now that more rigorous analysis can be a bit of a double-edged sword, I’d say, for defendants as it results in more in-depth discovery, which is more costly, earlier points in litigation. But for most defendants antitrust class actions, the higher the bar for class certification, the better, because typically, if the class is not certified, the litigation effectively ends. So it is, like I said, a double-edged sword. It’s more costly, but you can hopefully, if you can defeat the class, you can get rid of that case early on.
Bill Batchelor (13:17):
Oh, thanks very much, both. So one thing that the Europeans are now having to get to grips with, which I think is a common feature of US class actions, is carriage disputes. So if you have the potential for a large claim, it may be that not just one class representative but a number come forward and say, well, actually, we think we’d be best placed to lead this claim; our theories are the best, our prospects of recovery are the best, our economic analysis is going to be the most rigorous, and so we should be allowed to lead this claim. That’s not really a competition we’ve seen play out that much in the UK system, but one we can definitely see on the horizon. But Matt, but perhaps give us a flavor of how that works in the US, and then Bruce can say what we have perhaps to learn in the UK from that.
Matt Martino (14:00):
Sure. So I alluded to this a little bit earlier, but most antitrust class actions in the US are driven by the class action plaintiffs firms themselves rather than by any injured plaintiffs. So the firms will bring those cases with a couple of name representatives who are the injured plaintiffs, but the firms are driving the litigations. And it’s not unusual in the class context for multiple law firms to file similar complaints alleging the same claims against the same defendants and, in fact, proposing to represent the same class. And those firms then must organize themselves, and typically they establish a leadership structure to move the litigation forward in a cost-effective and efficient manner. Now, that appointment of what’s called interim lead counsel for the putative class occurs as early as possible in the litigation within the first few months, often before any other proceedings occur. And it’s frequently done behind the scenes by agreement among the various plaintiffs’ counsel who filed the complaints.
Matt Martino (15:04):
A lot of them know each other from doing this work for many years. And so they’ll come to some agreement behind the scenes that the court’s usually just rubber stamp as long as there’s an agreement that everyone’s happy with on who’s going to take the lead, who will be the interim lead counsel. That’s typically just approved by the court without much analysis. But from time to time, those plaintiffs’ firms may not be able to come to an agreement on a leadership structure. And in that instance, there’s a competing application for appointment of interim lead counsel. So each of the plaintiffs’ firms who is interested in leading the case will apply to the court to be the lead, and the rules provide, the federal rules, provide that when more than one adequate applicant seeking appointment as interim class counsel, the court must appoint the applicant best able to represent the interest of the class.
Matt Martino (15:55):
And so basically, there are a number of factors that courts look at in that instance, the work the counsel’s done in identifying or investigating the potential claims, that’s one. The counsel’s experience in handling class actions and the types of claims asserted in the action. The counsel’s knowledge of applicable law and then the resources that the plaintiff’s counsel will commit to representing the class. And so you’ll make your application, you’ll list all of those factors and how you best satisfy those. Now, sometimes, as part of that effort, the counsel who filed the first complaint, they’ll come in and tout that as a reason why they should be appointed interim lead counsel, arguing that being first in should be considered a very important factor because that counsel conducted the initial work and investigated the claims, et cetera. Now while being first in can be helpful, courts will often take a closer look at the actual value added by first filers and not just assume because they were first that they should be appointed.
Matt Martino (16:55):
Because sometimes the claims are pretty bare bones with the first filer, and they actually do not do a ton of investigation. So in those cases, courts will do a little bit more of an analysis to see what value they’re actually bringing. But as part of that, the competing law firms will often try to discredit the first filer and the investigative efforts they’ve made. In fact, they will frequently attack the theories and sufficiency of their earlier filed complaints. And that, of course, can in order to the benefits of the defendants, who now see, well, if we’re going to move to dismiss and they actually end up winning, these are the various ways we can attack because even plaintiff’s firms themselves agree this is a weak complaint. So that becomes an interesting battle. It doesn’t happen all the time, but it happens once in a while, and it’s something where, at that point, the defendants firms can sit back and watch the fireworks, so to speak.
Bruce Macaulay (17:45):
Matt, interesting. From a UK perspective, we haven’t seen that many carriage disputes, but what we have seen is that the thinking of the Competition Appeals Tribunal has evolved as to when to determine this. This has been quite a big issue. Now the reality is that it’s likely to be heard as a preliminary issue in advance of the certification hearing. Compare that with the first carriage dispute that came before the CAT, where what they did is they rolled this carriage dispute in with the certification hearing. So what we had was in parallel to class representatives and their firms and their funders expending a fair amount of time and money in both competing for certification. And that was found to be quite a time-intensive and quite a costly exercise. So what the CAT’s done is it said in a subsequent carriage dispute, actually more appropriate to hear this as a preliminary issue.
Bruce Macaulay (18:48):
Now, interestingly, from the defendant’s side, defendants could well be concerned by this because it does give the claimants at this carriage dispute stage a chance to road test their case before the CAT even before they’re in front of the CAT on certification. In other words, it’s another chance to have another go before you’ve even had a go. The flip side on that, obviously, is that there is a very compelling argument for the cost saving, which seems to have carried the day so far. So again, what we’re seeing here is the CAT is taking a very hands-on, pragmatic, and sensible approach to try to get to the resolution of these quite difficult claims.
Bill Batchelor (19:32):
Thanks very much, Bruce and Matt. So perhaps one question, which strikes me just as I’m listening to you both about the class certification stage or the collective proceeding certification stages. Okay, so you’ve had a class action claimed against you. You’re worried that they will get certified. It sounds to me from what you’re saying that in the UK the barter certification is relatively low, so your best strategy in response is not necessarily to fight certification or at least not to put your eggs in one basket there. You might be looking to, okay, well, let’s assume they do get certified. What would the next steps be? But Matt, from what I’m hearing on your side of the Atlantic, actually, you definitely want to fight the class. You’d have a number of legal questions and factual questions to attack there. And then after that, you might go on to thinking about other things, like motion to dismiss, for example. How do the next steps after the game play out?
Matt Martino (20:23):
Well, typically, you would bring the motion to dismiss first because the class proceedings are so intensely litigated with respect to documents, and depositions, and whatnot. Your motion to dismiss is based purely on the pleadings. So the first thing we think when we’re looking at a case as a defense attorney is where are our points of potential dismissal, or how can we get rid of this case? And the first thing we think about is the motion to dismiss. And so that’s what it sounds like has been the best avenue in the UK. These claims are not sufficient to withstand.
Matt Martino (20:57):
If the plaintiffs proceed beyond that point and the court says, okay, this complaint is a sufficiently pled complaint, then we would move to, okay, how can we try to attack this class at class certification? Which could happen, could occur a year to two years down the road because typically almost all of the merits-based discovery occurs before class certification because of how ingrained the merits-based inquiry has become as part of that class certification inquiry. So you’ll have almost your entire discovery period will occur before class certification. At that point, if the class is certified, then you could move on to potentially summary judgment, which is like a motion to dismiss, but using the facts that are in the record, and then trial if you’re unsuccessful as a defense attorney to have the case dismissed at that point.
Bill Batchelor (21:45):
And Bruce, turning to tactics in the UK, what would you be looking at when faced with a class action? What would your next step in the chess game be?
Bruce Macaulay (21:53):
Yeah, so the first big fight obviously is going to be certification, but as we’ve said, the bar to certification in the UK is quite low. So the next steps after certification would be, and this is actually assisted by the CAT in its very active case management, would be to drill down as to what exactly the case theories are and what the economic theories are, and to bring the defenses in those contexts. It may be that you’d want to go for a preliminary issue. There may be, for example, time bar issues. It may be you want to go for summary judgment in respect to the firm of certain issues. Obviously, it’s case-dependent, but there is certainly scope for challenging, at every stage, the merits of claims, which otherwise you might say were highly, highly speculative.
Bill Batchelor (22:43):
Understood. Okay. Well, moving on. The other big development in the UK on the class action front has actually been attacking not the system itself, but how it’s funded. So in PACCAR, the UK Supreme Court weighed in on what exactly is permitted by way of funding a collective claim before the CAT. And that’s a big deal because, in the UK, traditionally, there was presumption against claims-based funded system. So to get a share of the benefit, share of the damages, was not something that was generally allowed. Then the law changed and said, okay, well, you are, in order to facilitate litigation, you can have some sort of funding based on how successful the claim is. But that’s quite tightly constrained. And so PACCAR looked at this in the context of collective actions. And the result there was they said what to observers was a pretty vanilla claims funding arrangement turned out to fall within the prescribed type of damages-based agreements under the law, which then rendered it unenforceable.
Bill Batchelor (23:51):
So that gave the litigation funders and the class representatives some serious pause for thought because if you’re not allowed to have a share of the damages, you are constrained to say, well, I might get a fee uplift if I win, but I don’t get a huge payout based on the billions potentially claimed. That’s a real disincentive, not just for that claim, of course, but if you’re thinking as a class representative, you’re likely to work on a portfolio basis. So the one or two super-successful claims pay for the eight or so more speculative ones. So that really had an opportunity drive a coach and horses through some of the class claims model, and we’ve seen that already play out in lower instances. So in PACCAR, is the UK Supreme Court getting involved, in Therium and Bugsby, we have exactly the next stage of the analysis being played out.
Bill Batchelor (24:44):
What parts of the funding is going to be struck out? It’s going to be unenforceable as a matter of law, and how far can you go in terms of funding? So could you have a multiple of your fee, for example, some sort of uplift being permissible? So it’s got to the state that people are so worried about the implications for the collective claims in the business model that potentially the UK Parliament may get involved to legislate around PACCAR. And there’ve been some amendments put forward in the context of a pending piece of competition legislation going through the Parliament that might address that.
Bill Batchelor (25:17):
It’s unclear whether that’s going to get off the ground, and in the meantime, a fertile ground for attack for anybody facing a class action in the UK is going to be to ask, well, let’s see the funding agreements, let’s see whether PACCAR you are on the right side of the line or not. So that’s certainly going to be an early part of your discovery and something that likely the claimants will resist. I don’t know, Bruce, if you had any comments on that, but Matt, I’m sure this has been played out in the US many times, so this must feel like a nostalgic trip down memory lane for the US claims.
Matt Martino (25:49):
And for the most part, it’s not atypical in the US to find these sorts of agreements to just be private contracts, which are often encouraged in the US, and then where the funders are just making a financial investment in litigation and they do have a potential for a cut of the recovery. So here, that’s a fairly typical arrangement. The issues that do arise, that courts have looked at is whether the funders are exerting undue control over strategic decisions, in which case are they exercising any unauthorized practice of law, for example, or are they undercutting the parties and the lawyers? How much influence do the funders have?
Matt Martino (26:28):
And then, as a practical perspective from a defense counsel, especially those funding arrangements can prolong litigation by making reasonable settlements seem less attractive because the share of the proceeds, some will go to the funders and maybe not as much to the actual injured parties. And then just having them there, having funders, the specter of them, often we don’t know whether they’re there, but just having the specter that they could be there as part of the settlement landscape can alter the way you think about how you’re approaching settlement. So those issues do come up from time to time. As a result, a lot of defendants will try to seek any funding agreements as part of discovery, but the law is mixed on whether you can actually get those or not because you have to prove that they’re somehow relevant to the case.
Bruce Macaulay (27:14):
Yeah, and Bill, just one follow-up point, I mean, following the PACCAR decision, funding is certainly front and center in any certification hearing because the extent of a claimant’s funding and their funding arrangements must be an important issue as to whether they get certification. If it transpires that actually their funding arrangements are unenforceable because of the PACCAR decision, you can imagine that that will have potentially a very big impact on whether certification is granted.
Bill Batchelor (27:47):
Well, thanks very much, Bruce and Matt. So that brings us to the end of our half hour. I hope you’ll agree that this episode of Fierce Competition has brought you a touch of class, and not least from our two speakers. So Matt from New York City, Bruce from London, thank you so much for this overview of what’s hot in class actions on both sides of the Atlantic.
Voiceover (28:08):
Thank you for joining us for today’s episode of Fierce Competition. If you like what you’re hearing, be sure to subscribe in your favorite podcast app so you don’t miss any future conversations. Additional information about Skadden can be found at skadden.com.
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