REUTERS | Bob Strong

Group actions offer justice for all

As we all know, the advent of COVID-19 and resulting lockdown have been unprecedented. The effect on people’s health, both physical and mental, has been particularly evident. The financial consequences, equally for individuals and companies, have also been much debated and are slowly becoming clearer. While we all hope that adverse impacts will be mitigated, through government actions, regulatory intervention and corporate benevolence, it seems likely that situations will arise where things could have been done better. Sadly, some corporates will have taken advantage of the situation to trespass on consumer rights. Many individual consumers will be left feeling the pain as a result.

As the summer holidays begin, we are only too aware of our travel limitations with many flights and holidays either being cancelled or postponed. While contractually entitled to a refund, many travellers are being fobbed off with offers of vouchers. Although this may be acceptable to many, what of those whose personal circumstances have changed, and a refund of the money is now much needed? Individually, they stand little or no chance of seeking redress, as the cost of pursuing such an action would dwarf the recovery. However, collectively, things would be different.

Bringing a legal case on behalf of a group is not for the faint-hearted. In addition to needing expertise in the law, a group litigator is required to undertake numerous steps that simply do not present themselves to a single case lawyer.

Building the group

The starting point is usually for a law firm to recognise that their individual client is but the tip of the iceberg of many individuals in a similar situation. Today, with social media and numerous online blogs and commentators, it can be relatively straightforward to identify whether a potentially large cohort of consumer claimants exist. However, this is not always the case; therefore a law firm aspiring to do group cases must have the skill and capability to launch a bookbuild campaign to attract group members and encourage them to subscribe to a collective action. Such campaigns must be tailored to the project; the message must be clear as to what is being offered and how the litigation will work. Bookbuilds are inevitably varied in nature and may require innovative and unusual approaches, which keep a clear line of sight on just how many claimants will be required to ensure that the legal case is viable.

There is also the requirement to implement a vetting system to ensure that all individuals who believe they have a case, in fact, do! This requires a clear understanding of the legal issues and an ability to agree client criteria, which enables the early screening out of those who either do not have a claim or will dilute the potency of the overall action.

Controlling the group

Once identified, members of the group must become clients of the law firm, which again can prove challenging both logistically and strategically.

Most case management systems utilised by law firms are not geared to cope with large scale, multi-party actions. Even simply being able to open thousands of client files in a way that meets a lawyer’s regulatory obligations can prove a challenge. Clients will be required to provide documentation, which must be safely stored pursuant to GDPR obligations. The lawyers must have the ability to communicate with the group and sub-classes within the group.

The very fact that an individual client is joining a group creates a further layer of complexity. Every client needs to know precisely what they are signing up to, not just in terms of the legal case, but the associated costs and how the group will be managed. The lawyer must therefore have a clear legal strategy and be able to communicate this effectively to the group. The lawyer must also put in place mechanisms which ensure that instructions can be taken with relative ease to prevent inevitable delay and dissent among the group. This requires careful consideration of not just issues of commonality, but more specifically potential conflicts of interest. Without technical support, these simple tasks become onerous, costly and time-consuming.

Having identified the trials and tribulations of commencing a group action, there is one factor which has the ability to be a game-changer: funding.

What is funding?

Litigation funders exist to enable access to justice. Typically, funders offer an unusual type of loan to those seeking support for their cases. Put simply, money is offered to cover all the legal and associated costs of an action. This would generally include the costs of lawyers and barristers, any expert advisers, and costs of insurance against adverse cost orders. Such funding is unusual in that it is provided on a non-recourse basis, meaning that claimants would not be required to pay anything, win or lose. The funder would take the risk of the case failing on their balance sheet and if the case is successful, the majority of proceeds go to the group members, with the funder recovering its investment and profit from a portion of the damages paid to them.

How a funder can help

Funders with specialist group litigation experience recognise that collective actions might need additional support. Such funders are regularly asked to fund the work of other litigation support facilities, such as marketing or communications consultants to enact a media campaign to assist the bookbuild initiatives. Similarly, specialist funders recognise the importance of a strong IT position, with a platform in place to cater to the demands of the case and regularly work with various companies capable of providing this service to law firms. Quite simply, litigation funders can turn the tide and ensure that an ambitious law firm, keen to undertake large scale litigation, is not restricted from doing so simply by logistics.

With a class of claimants qualified and signed up, and guaranteed financing in place, a funder can support a law firm to build the appropriate team of experts and advisers to advance the case and build a case strategy and timeline to work towards. The defendant can no longer ignore a lone complaining voice, but rather must deal with the clamour of a group. A group with legal representation, backed by the deep pockets of a funder, can put a defendant under necessary reputational and commercial stress and can bring about appropriate redress.

How a funder recovers

Group cases can be expensive to run, as in addition to the fees of solicitor and counsel, it can be necessary to instruct experts and incur other disbursements. All these costs are paid by the funder, who stands to lose their investment if the case fails. But with a successful outcome, the funder could recover its investment and take a modest percentage of the damages paid to the class. This payment would not only cover the fees it had paid, but also allow a dividend to be provided to its investors who would thereby back it to continue funding meritorious cases going forward. In the context of a funder’s potential to lose substantial sums, their returns are quite reasonable.

In summary

The volatility caused by the pandemic has upended many industries. Sadly, some corporates will seek to take advantage of the situation and will trample the rights of those they consider weaker, whether SME companies in their supply chains, or large volumes of individual end consumers. Some of those that have been wronged will not only be out of pocket as a result, but will also struggle financially due to the wider impact of the crisis. In many situations, the injustices they face will go unanswered as they will be unable or unwilling to finance the legal fees required to pursue action.

Fortunately, the litigation funding industry has grown over the past decade. In many mature markets, there are now a cadre of strong, well managed, highly principled players who stand ready to assist. While many impacts of COVID-19 will never be resolved, class actions with the backing of litigation funders offer claimants some hope in these uncertain times.

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