Recent years have seen a significant growth in collective actions in England, with a series of high profile cases increasing awareness of this type of litigation (a continuing trend to which a number of significant cases in the early part of this year have already contributed).
English collective actions are often referred to, generically, as "class actions", but there are marked differences between the typical US class action and the procedures available in England. These differences are not merely technical; they have significant implications on how claims are structured and defended: a litigation strategy that might work well in one jurisdiction, may not work well in another. An awareness of the principal differences between alternative jurisdictions is therefore important.
We explore some key differences between US and English collective action models, and whether the English approach is edging closer to the US model.
Perhaps the most immediately significant difference between the US and English regimes is a structural one: US class actions are predominantly brought on an opt-out basis, meaning that anyone who falls within the class definition, whether they know it or not, will automatically be included in the action and bound by the judgment, unless they take positive steps to opt-out.
Conversely, most collective actions in England are brought on an opt-in basis, requiring putative class members to take proactive steps to be included. Ordinarily, this will involve:
- the legal team coordinating the claim arranging for a number of claims to be brought together in a single action; or
- the court making a Group Litigation Order ("GLO"), which is a mechanism for the efficient management of claims which give rise to "common or related issues of fact or law", so that these common issues can be dealt with together, typically by the selection of one or more test cases.
Proceedings on either basis require the individual class members actively to take part; even if the legal team coordinating the litigation does all the legwork, it is still necessary for class members to agree to opt-in and become named claimants in litigation (with the potential costs and other consequences that flow from that). The need to identify potential class members and persuade them to opt-in may well have had a downward effect on the number of English collective actions, and on the number of claimants pursuing the target defendant, particularly where the value of the individual claims is modest.
However, there have been moves towards opt-out procedures in two respects:
- First, in the fast-developing context of English competition / antitrust litigation, there is a distinct legal regime1 under which private litigants (including both individual consumers and businesses) have the right to bring collective claims for damages before the Competition Appeal Tribunal2. Such collective actions can be brought, subject to satisfying various class certification requirements, either on an opt-in or an opt-out basis. As one might expect, obtaining certification on the latter basis involves additional, more stringent, requirements, including considering the strength of the claim in question.
- Secondly, claimant lawyers are testing whether the representative action procedure3 might be used to structure damages claims on an opt-out basis, essentially with a single named claimant appointed to act as representative all those who have the "same interest" in the claimant, without needing class members' consent to being within the represented class.The traditional view is that this procedure is not suitable for damages claims, as the damage suffered by each claimant will not be consistent across the class. This view is being tested in the context of data privacy claims in particular, as well as more generally.
Although it remains the case that the majority of collective claims in England have to be brought on an opt-in basis, this fundamental structural distinction with the US model is beginning to become blurred, and we should expect claimant lawyers and funders to continue to explore more innovative ways of structuring litigation to increase the class size and therefore aggregate value of claims.
A second distinguishing factor between the two regimes, and one that has acted as a brake on collective claims in England, is the general principle that, in English litigation, the loser pays the winner's costs, including their lawyers' fees; US litigation, on the other hand, generally adheres to what is known as the "American Rule", where each party generally bears its own costs4.
The English approach to costs has traditionally made collective actions much riskier for claimants in this jurisdiction than in the US. Potential participants in opt-in proceedings in England have needed to consider not only the costs of bringing the claim but also the significant downside risk of having to pay their opponent's costs, not only if the claim is ultimately unsuccessful at trial, and also the costs of any interim applications (of which there will likely be many, given the usual complexity of this type of litigation) that are fought unsuccessfully along the way.
However, the introduction of conditional fee agreements (and now damages-based agreements), third party funding, and insurance against adverse costs has given potential claimants the opportunity to hedge against this downside risk – which can fundamentally change the economic dynamics of a case.
With funders and insurers on board, those looking to advance claims on a collective basis have embraced the opportunity to present potential class claimants with an opportunity to participate with little or no upfront outlay and with protection from having to meet any adverse costs award (subject of course to the insurance cover being sufficient to meet the defendant's costs). In addition to those claims where the claimants simply would not have had the resources to fund a claim, there are no doubt other claims which would not have gained any momentum if potential claimants had been asked to underwrite the costs of the litigation.
This is a highly significant development in recent years which, again, is likely to go – indeed, has already gone – some way towards narrowing the gap between the English and US models.
Juries and punitive damages
There is no trial by jury for group litigation in England, whereas it is available as of right in the US, both at federal level and in the majority of States.
The inherent unpredictability of a jury trial can create substantial incentives for parties to settle actions by making the result of a trial all the more difficult to predict. Particularly given the sums at stake in many of these actions, this creates uncertainty that many parties will choose to mitigate by settlement, without risking a trial.
While jury-verdict uncertainty will, of course, impact both sides to class disputes, given that a party with a very strong case may quite conceivably still lose, while a party whose case lacks merit may still prevail, in practice much of the burden of this uncertainty often rests with the defendants. Class plaintiffs and their legal representatives will usually have little to lose (aside from the legal representatives' investment in the case) whereas, conversely, defendants face the real prospect of a very significant adverse award if the case proceeds to jury trial. This often gives defendants a strong incentive to seek to settle such actions, particularly if the plaintiffs succeed in obtaining class certification (see below), which may encourage claims to be brought in circumstances where the merits might not ordinarily justify litigation.
While the impact should perhaps not be overstated, certainly a contributory factor in this uncertainty is the possibility of punitive, multiple and other additional damages in the US system. In contrast, in England any form of damages other than those compensating the claimants' losses are not usually seen. While pre-defined statutory damages, set out in the relevant statute that defines a claim, will often be more important in the class action context (not least because such pre-defined damages make it easier for the class plaintiff to establish common issues among the class members with regard to the existence and amount of harm suffered), the hypothetical risk of an even greater exposure contributes to the uncertainty. That said, how damages will be addressed as English collective litigation develops, and whether the management of large group actions will necessitate taking a more flexible approach than strict adherence to the traditional English compensatory rule, remains to be seen.
Motion to dismiss
Motions to dismiss are an almost universal feature of US class actions, and often occur at a relatively early stage in proceedings – almost always preceding the class certification process (see below), although different scenarios, and timings, can arise.
Defeating a claim on a motion to dismiss will, ordinarily, reduce or remove (depending on whether all, or parts, of the claim are defeated) the damages exposure, as well as the future costs of the litigation, including the costs of discovery. When motions to dismiss are granted, however, they often grant the class plaintiffs leave to replead, or otherwise amend, the complaint, if the court sees a realistic chance that they might succeed in doing so. The amendment process allows plaintiffs the opportunity to improve their pleading to get past the next motion to dismiss and, in many cases, to plead brand-new claims based on discovery or other information that has come to light since the complaint was first filed. As a result, a contested class action will often see several motions to dismiss, each of which results in amendment to the claim. Accordingly, the case that proceeds to discovery may be very different from the case initially pleaded.
The closest English civil procedure comes to the US-style motion to dismiss is the possibility of summary dismissal or strike out; to prevail with such an application requires the defendant to satisfy a high bar in terms of establishing the lack of viability of the claim. However, even where such an application does not deliver a knock-out blow by leading to the dismissal of the entire claim, it can still be a useful tool to narrow the scope of the allegations facing the defendants; this, in turn, reduces the scope of the disclosure exercise and the volume of evidence that needs to be assembled to defend the claim. This can be particularly significant in claims alleging that the defendant published incorrect or misleading market information, where the burden of disclosure and production of witness evidence typically falls heavily on the defendant.
For a class action to be pursued in the US, it is necessary to persuade the court to grant class certification. In brief terms, one or more member(s) of a class may sue or be sued as representative parties on behalf of all members of the class only if:
- The class is so numerous that joinder of all members is impracticable;
- There are questions of fact or law common to the class;
- The claims or defences of the representative parties are typical of the claims or defences of the class (this, and the requirement above, are commonly the focus of attacks on class certification, which often come down to the parties' respective expert testimony as to whether, at a high level, there is a straightforward way to calculate damages and, thus, the fact of harm to the class); and
- The representative parties will fairly and adequately protect the interests of the class (this, too, will commonly be an area of focus for attacks on class certification; for example, it may possible to establish that the representative plaintiff has a disqualifying conflict of interest).
An equivalent in England is found in the Competition Appeal Tribunal regime which requires (amongst other things) an identifiable class of claimants to be defined before granting a Collective Proceedings Order to allow the action to progress. To date, however, the legal standard applicable to the certification of such an opt-out class has not been clear; the Supreme Court is expected to determine the legal test for certification before the end of 2020 or early in 2021, hopefully clarifying the framework for bringing competition class actions in the UK.
But that is not to say that the typical English opt-in collective action procedure does not involve key points which can be pivotal to whether the claim will be viable for the claimants to take forward. For example, the identification of common issues which can be determined as test cases, and the balance between those issues and those which need to be determined on a case-by-case basis can significantly affect the dynamics of a case. It may be in a defendant's interests to try to limit the common issues, but there may be cases where the defendant's priority is to use the GLO structure to keep the management of the litigation as tight as possible. In any event, careful thought should be given to case management of collective claims from the outset.
There have also been a number of claims before the English courts based on overseas torts, where the UK parent company of the local operating subsidiary has been used as an "anchor" defendant to enable the proceedings to be brought in England. These frequently involve a challenge to the jurisdiction of the English court, with the future of the claim turning on whether the entire litigation can be continued in England.
Generally, putative settlements of class actions in the US system must be approved by the court, which is an important safeguard in circumstances where the vast majority of the affected class members will have had no involvement in the claim or the settlement strategy.
Such approval is not required in opt-in High Court actions in England, although the terms on which the claimants agree to take part will often regulate the extent to which individual claimants have input on settlement strategy (for example, by key strategic decisions being delegated to a claimant committee). Settlements in opt-out proceedings before the Competition Appeal Tribunal do require approval.
Approvals aside, High Court collective actions will present unique difficulties, in each case, when it comes to considering how to structure settlements. Calderbank offers, rather than Part 36 offers, will likely be more appropriate (given their far greater flexibility), but careful thought will need to be given to, for example, issues of when, and how, the settlement – with all of the class claimants – will in fact become binding.
As collective litigation continues to grow in England, there is an obvious temptation to look at the more advanced US class actions regime for guidance, in particular in relation to defence strategies that can be deployed in an English context, and the emergence of firms in England which are actively pursuing opportunities for collective claims invites comparisons with the US class actions bar. Although it is important not to lose sight of the significant procedural differences between the two jurisdictions, there is much that UK practitioners and businesses can learn from US experience about the commercial and financial dynamics that drive such claims, and why they are business risk that cannot be ignored.