It is undeniable that dealing with multiple claimants is a challenge. One of those challenges is deciding how to structure the litigation. Do you flood the court and the defendant(s) with separate claim forms for each claimant? Do you choose a claimant who shares the same interests as others in the group to act as a representative? What about bringing a test case?
Since their introduction nearly 20 years ago, group litigation orders (GLOs) have been trumpeted as the English alternative to US class action lawsuits. Indeed, with high-profile cases such as the RBS rights issue, the Volkswagen emissions scandal and the Post Office IT litigation adopting GLO structures, it wouldn’t be wrong to assume that they have become the default option for any group litigation in England and Wales.
The Civil Procedure Rules (CPR) only list a few requirements for GLOs to be sanctioned as such: at least two claimants who seriously intend to proceed with the claim(s) with each claimant having common or related issues of fact or law. On the face of it, GLOs are therefore appropriate for all group actions.
It is worth highlighting at the outset, however, that GLOs are not the English equivalent of US class action lawsuits; there are two major distinctions between the two. First, class action lawsuits are “opt-out” regimes, meaning that they are binding on all persons who are described or defined as being members of that class. A person must opt out of the class action to be able to pursue the claim on an individual basis. GLOs, however, are strictly “opt-in” regimes, meaning that they are binding only on claimants who sign up to the GLO register (discussed further below). Second, the principle of “loser pays” does not exist in US litigation (as it does in England and Wales), meaning that each party bears its own costs in the class action.
The corollary of both factors is that it is much easier to start a class action lawsuit than a GLO. A lawyer in the US need only think of a potential class of defendants and have one client to be able to represent that class in an application for class certification. There is no cost exposure in the event of a negative outcome (apart from the opportunity cost of wasted time) and there is no need to bookbuild the case in advance. It is therefore possible to commence a class action lawsuit within a matter of days. On the contrary, much more effort is required to start a GLO; it involves months or potentially years of bookbuilding and structuring of the issues to be adjudicated (discussed further below) before a potential GLO can be brought before the court.
But what is a GLO?
Simply put, a GLO is a mechanism by which the court manages individual claims linked by common or related issues of fact or law in a coordinated way to expedite the claims by issuing binding judgments on those common issues. However, each claim within the GLO remains an individual claim.
For a GLO to be granted, an application must be brought before the court which outlines the common issues which will be managed and adjudicated by the court. Not every issue relevant to each claimant’s claim will form part of the common issues; only those that pertain to the group as a whole, or to sub-groups within the wider group.
Once the court has approved the common issues and a GLO has been granted, a register is created which contains a list of the names of the claimants who are party to the GLO. This register will remain open for a prescribed period and will be advertised widely during that time. This ensures that potential claimants are aware of their ability to join the proceedings and allows the defendant(s) to assess risk of the litigation and consider settlement.
Judgments, orders and directions of the court will only be binding on those listed on the GLO register at that time. As proceedings develop, claimants may be removed, added or substituted either on the court’s own initiative, or on the application of either party, or a person who wishes to become a party to the litigation. It is therefore imperative that the register is accurate and updated promptly to avoid a situation where a GLO issue is resolved, but some claimants are not beneficiaries of that decision since they were not on the register due to some error or oversight.
It is usually the lead solicitors who are tasked with administering the group litigation, which primarily means maintaining and updating the group register and sanctioning the common issues. The lead solicitors must be approved by the court. They will only get that approval if they are able to demonstrate that they represent the largest number of claimants and have the requisite experience, knowledge and ability to manage the claim. This can lead to what is colloquially known as the “race to the GLO” when several law firms vie to be appointed the lead solicitors in the hope of controlling the strategic and procedural aspects of the claim(s).
GLOs were designed to avoid multiple disparate proceedings and the risk of inconsistent outcomes for claimants who share similar facts or legal issues. Indeed, once the GLO has been granted, it is common for the judge who manages the case to be the same judge who hears the case at trial. This provides a level of consistency and understanding throughout the life of the litigation.
Although it might be tempting to believe that all group cases should be structured as GLOs, they are not suitable for every claim.
A GLO will only be granted when the various issues can be identified and, importantly, their resolution can lead to settlement for all claimants. Approving the common issues is not always straightforward, particularly when each claimant has behaved in a unique way, has been motivated by a different set of circumstances or has suffered different measures of loss. By way of example, claims arising out of the mis-selling of payment protection insurance (PPI), an insurance policy offered to customers when taking out a credit card, loan, mortgage and other financial agreements between 1980 and 2010, would have been unsuitable for a GLO. PPI was sold on a variety of loans by brokers on behalf of banks and by the banks themselves; some customers were sold PPI over just one product, others over a variety of products; and each customer had varying degrees of knowledge of PPI and were therefore mis-sold the product in different ways. A court would have been unable to find any uniformity in the claimant group in light of all these varying factors.
When defining the issues, the court will therefore be careful to ensure that they are defined such that they adequately capture the issues pertaining to the entire group, or to specific subgroups. Should the issues be formulated in such a way as to dismiss consideration of individuals’ circumstances which are relevant, they will be rejected (Tew and others v Bank of Scotland (Shared Application Mortgages)). GLOs were designed to manage and resolve cases on a group basis and should not be used to avoid dealing properly with individual issues. Conversely, the issues should not be constructed too widely as this could unnecessarily increase the scope of the litigation and make it difficult to successfully pursue settlement.
If unsuccessful at trial, in addition to the defendants’ fees and the claimants’ individual costs (costs which are specific to that particular claim, for example, an expert report into loss suffered by that particular claimant only), each claimant will also be liable for common costs, which are those incurred in pursuance of GLO issues (notably, the lead solicitor’s costs). These common costs can be substantial: it took years and cost the parties millions of pounds before the Volkswagen emissions action GLO was granted and the common issues sanctioned by the court.
However, since each claim within the GLO remains an individual claim, the GLOs are severable. For example, in the RBS rights issue litigation, Hildyard J decided at the outset that several liability should be in proportion to the size of each claimant’s investment in the rights issue. This gave the court greater flexibility on cost apportionment and enabled claimants with modest claims to be protected from disproportionate cost orders.
So, no GLO?
GLOs are not the only available option when structuring a group claim. A representative action is an alternative to the GLO: a claim which is brought by one or more person who share the same interest. Like a GLO, the binding effect of a judgment or order by the court in a representative action is binding on all persons represented in the claim, but may only be enforced by or against a person who is not a party to the claim with the permission of the court (CPR 19.6(4)). In addition, like GLOs, should a representative action be commenced, the class of those represented would need to be determined at the outset of the claim. Contrary to a GLO, however, the class would need to have the “same interest”, which has been defined narrowly by the court. In effect, representative actions are allowed only for claimants with near identical fact patterns and loss to be grouped together (Lloyd v Google LLC).
Test cases can also be pursued. The CPR do not specify rules regarding selection of test claimants and it is therefore open to the parties to agree this process. However, the risks in bringing such a claim are usually borne by one claimant only (the one bringing the claim on behalf of others), eliminating any semblance of automatic cost-sharing.
A consolidated action under CPR 3.1(2)(g) can also be explored. But there are no specific rules governing such actions and management of the case is instead reliant on the court’s general duty under CPR 1.4. There are therefore even fewer rules to manage these actions when compared to GLOs, which can lead to uncertainty and possibly inconsistency.
With all these alternatives, the court will query and challenge claimants if a GLO has not been pursued when doing so would have been appropriate, reasonable and proportionate. It is therefore vital to structure any potential claim sensibly and with thought.
Show me the money
GLOs carry significant advantages but, as outlined above, they can be prohibitively expensive for claimants who are self-funding the litigation. Further, it can be logistically difficult for a solicitor to collect the necessary funds from all claimants participating in the GLO. A key consideration when deciding whether to pursue a GLO, therefore, is to decide how the case should be funded.
Litigation funding unlocks the potential for GLOs to be pursued since funders pay all legal costs, disbursements and after the event (ATE) insurance premiums with no recourse back to the claimants in the event of an unsuccessful outcome. This negates the hassle of collecting regular fees from claimants, and encourages claimants to pursue the action once they appreciate that they carry no cost liability and can still recoup the majority of any potential award.
That said, in light of the complications that arise in GLOs, it is imperative that litigation funders with experience in funding GLOs are chosen to fund the action. CPR 19 is notoriously thin; funders with practical knowledge of the unwritten rules and the general landscape of GLOs would therefore provide the needed expertise to ensure that proper bookbuilding has been undertaken, that the common issues have been appropriately considered and that sufficient funds have been allocated to allow the case to proceed. Proper due diligence into the potential funders and their experience in GLOs should therefore be undertaken prior to any funder being selected.